Legislature(2009 - 2010)BARNES 124
03/29/2010 03:15 PM LABOR & COMMERCE
Download Mp3. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 419-COMMERCIAL FISHING & AGRICULTURE BANK 4:12:19 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 419, "An Act relating to the board, investigations, and examinations of the Alaska Commercial Fishing and Agriculture Bank; and providing for an effective date." 4:12:24 PM JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State Legislature, on behalf of the prime sponsor of HB 419, offered a brief explanation of the bill. This bill would eliminate the designation for a "resident farmer" to be required as a board member. She explained that the Commercial Fishing and Agriculture Bank (CFAB) created by the legislature came at a time when the emphasis was on agriculture. When the Agriculture Revolving Loan Fund (ARLF) was later established, the loan market for the number of people who qualified as "resident farmer" has dwindled. The removal of the "resident farmer" requirement also demonstrates the extent to which the program has evolved. Additionally, HB 419 would require the CFAB financial records be examined by the Department of Commerce, Community, & Economic Development (DCCED) at 36 month intervals. 4:14:27 PM SENATOR JOHN COGHILL, Alaska State Legislature, in response to Representative Neuman, answered no. He stated that this bill does not apply to the ARLF. 4:15:26 PM REPRESENTATIVE NEUMAN asked whether the CFAB falls under the same umbrella as the ARLF. SENATOR COGHILL provided a brief history of CFAB. He explained that CFAB is a private organization authorized to loan based on value of a commercial fishing permit. The AFRL is based on whole different system, he stated. At the time CFAB was established, Alaska contemplated agriculture as an industry, but the possibilities have not grown to the extent that fishing has grown. The agriculture loan portfolio is quite small compared to the fishing loan portfolio. The initial requirement was to have a "resident farmer" participate. He read the definition. A "resident farmer" means a person who is a resident of the state and who is engaged in commercial agriculture in the state." He related that the state envisioned the CFAB as a coop limited to agriculture and fishing. The ARLF provided an infusion of cash managed by the state in a manner quite different than a private organization. The state envisioned that Alaska would have a vibrant agriculture industry. The proposal to take the requirement for "resident farmer" out of statute recognizes that the pool of people engaged in agriculture has diminished. Thus, it is more difficult to fulfill the board role of "resident farmer." 4:19:04 PM SENATOR COGHILL related that the Agriculture Revolving Loan Fund (ARLF)'s purpose is to promote the development of agriculture as an industry throughout the state by means of moderate interest rate loans. Quite often the fund has been managed based on "state policy" decisions. The CFAB is a private cooperative serving and owned by Alaskans and makes investments based on "private decisions." 4:19:31 PM REPRESENTATIVE NEUMAN asked if the Agriculture Revolving Loan Fund (ARLF) is autonomous and does not fall under the state government. He assumed the CFAB is autonomous. SENATOR COGHILL agreed the CFAB is a totally private enterprise. He explained an annual audit is currently conducted. This bill would allow the state to examine CFAB every 36 months. He agreed it is a "very different creature" than the ARLF. The only commonality shared between the ARLF and CFAB is agriculture needs. 4:20:55 PM REPRESENTATIVE NEUMAN stated he did not want ARLF to be "rolled into" CFAB and assumed that the bill would not accomplish any merge. 4:21:06 PM REPRESENTATIVE T. WILSON asked why farmers would not want be part of CFAB. SENATOR COGHILL explained it is not a matter of desire, but rather that only a handful of commercial agriculture farmers currently exist. Thus, the loan portfolio is so small that it has become much more difficult to fill the position of "resident farmer." 4:22:16 PM LEILA KLINGER, Chief Executive Officer, Commercial Fishing and Agriculture Bank (CFAB), introduced herself. 4:23:27 PM MS. KLINGER explained that when CFAB was created in 1979 and in 1980 that considerable emphasis was placed on developing agriculture in the state. The CFAB made many agricultural loans, but few new agricultural loans have been made in the past 10 years. Since CFAB's elected directors are elected by its membership and the number of farmers has dwindled, it has become less necessary to have a farmer serve as a director. The role of CFAB has shifted, she stated. It is critical for CFAB to reach into its broad pool of members, consisting of not only fishers and farmers, but tourism operators and other resource- based businesses to maintain viability of and service to its constituencies. MS. KLINGER stated that it may seem odd to seek oversight, but the CFAB represents a collection of diverse but related fiduciary responsibilities. It operates as a cooperative corporation with a fiduciary relationship and obligation for past, current, and future borrowers. It also has a fiduciary responsibility to the state since it is a financial investment of the state. Additionally, CFAB is the only private enterprise with the authority to encumber a Commercial Fishing Limited Entry (CFEC) permit with a consensual lien. Thus, CFAB's board remains sensitive to its diverse fiduciary responsibilities. While CFAB is subject to an annual audit by a professional firm, the audits tend to focus on quantitative values and accounting protocol, but only touch on the qualitative aspects of lending, policies, practices, and results. However, the state's bank examiners are trained and prepared to evaluate the likelihood of repayment of loans. The examiners have the results of the experiences of other financial institutions and can establish norms or guidelines by which CFAB's effectiveness can be measured. The CFAB's Board of Directors and management are enthusiastic in their support of HB 419, she stated. 4:26:15 PM REPRESENTATIVE T. WILSON related her understanding that a farmer must have a loan to serve on the CFAB Board of Directors. MS. KLINGER agreed. 4:26:28 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 419. 4:26:44 PM REPRESENTATIVE T. WILSON moved to report HB 419 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 419 was reported from the House Labor and Commerce Standing Committee.