Legislature(2003 - 2004)

02/10/2004 01:31 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 273-ASMI BOARD/ SEAFOOD TAXES & ASSESSMENTS                                                                     
CHAIR CON BUNDE  announced SB 273 to be up  for consideration. He                                                               
asked Senator  Stevens if he  wanted to make  additional comments                                                               
on his bill.                                                                                                                    
SENATOR  GARY STEVENS  responded that  the  goal was  to find  an                                                               
adequate  way to  fund ASMI  in the  future, realizing  there had                                                               
been  substantial reductions  to its  funding because  of reduced                                                               
salmon price and  catch. SB 273 is an attempt  to see the funding                                                               
continue for  the good  work that ASMI  does in  marketing Alaska                                                               
seafood products.                                                                                                               
A question was raised about  whether the seafood marketing tax is                                                               
unconstitutional and  Senator Stevens  referenced a  letter dated                                                               
February 4,  2004, from George  Utermohle, Legislative  Legal and                                                               
Research Services, which basically answers no.                                                                                  
The  second  question raised  is  what  ASMI  would do  with  the                                                               
additional  $2,610,000 in  revenue from  the proposed  .3 percent                                                               
tax  on  non-salmon  species.  He   wanted  Laura  Fleming,  ASMI                                                               
representative to address that.                                                                                                 
MS.  LAURA FLEMING,  Director, Public  Relations, Alaska  Seafood                                                               
Marketing Institute (ASMI), said she  was asked to answer several                                                               
questions  and  would begin  with  the  shortest answer.  The  .3                                                               
percent tax on  other species, if it were  enacted, would restore                                                               
ASMI's funding  to where it  was three  years ago and  that would                                                               
allow  them to  restore their  programs to  what they  were three                                                               
years  ago  and  put  an additional  emphasis  on  whitefish  and                                                               
shellfish varieties.  The current board has  many representatives                                                               
of whitefish interests, both harvesters  and processors. Very few                                                               
processors  confine  themselves  to one  species  and  processing                                                               
whitefish varieties  has been  very lucrative,  keeping a  lot of                                                               
companies, which  have formerly processed salmon,  on their feet.                                                               
She said:                                                                                                                       
     Whitefish  varieties include  pollock, sole,  black cod                                                                    
     and halibut  and are an  integrated part of  all ASMI's                                                                    
     marketing  activities.  They  are part  of  the  Alaska                                                                    
     seafood  basket of  products that  are associated  with                                                                    
     the brand.  We leverage that  brand equity in  the U.S.                                                                    
     and overseas.  The overseas market  is probably  of the                                                                    
     greatest  interest  to  the pollock  industry.  We  are                                                                    
     paying  for most  of the  activities  in those  markets                                                                    
     with  federal  dollars,   because  our  federal  export                                                                    
     activities  are   paid  for  through   an  agricultural                                                                    
     service.  We  provide   year-round  assistance  to  the                                                                    
     surimi industry  and to the  pollock industry  in those                                                                    
     key  overseas markets.  We have  market representatives                                                                    
     in  those  overseas  markets.  We  do  promotions  that                                                                    
     retail and do food service with restaurants.                                                                               
     A lot of  the surimi processing and so  on involves our                                                                    
     educating the trade  about availability and superiority                                                                    
     of our  products - that  means the people who  take the                                                                    
     raw  product  and  turn  it   into  wide  varieties  of                                                                    
     products  that  you  see in  their  magazines.  I  just                                                                    
     brought along  an example [indicates  pamphlet].... The                                                                    
       French and Germans use huge amounts of surimi. The                                                                       
      market in France has grown three times in ten years.                                                                      
     It's tripled in 10 years. So, it's a huge part of it.                                                                      
CHAIR BUNDE asked what role ASMI has had.                                                                                       
MS. FLEMING replied that ASMI has  had trade seminars for the big                                                               
importers and  exhibits at the  European Seafood  Exposition, the                                                               
biggest seafood tradeshow  in the world, where  $70 million worth                                                               
of  business was  done  last year.  A lot  of  that business  was                                                               
whitefish. Also, she  noted the shrinking of  Atlantic cod stocks                                                               
has opened up big opportunities  for Alaska and ASMI. Pacific cod                                                               
and  pollock are  being  used  in place  of  Atlantic cod,  until                                                               
farming operations ramp up.                                                                                                     
ASMI  organizes promotions  for food  service suppliers  that use                                                               
Alaska seafood to  make their products and then  brand it Alaskan                                                               
in  their  catalogues.  They  also do  promotions  in  Spain  and                                                               
Portugal where fish fillet sandwiches are a huge growth market.                                                                 
MS.  FLEMING  said  she  is   not  surprised  that  some  pollock                                                               
fishermen don't  know about ASMI's  efforts, because  even though                                                               
they  sell  fish at  the  dock,  they  don't sell  the  processed                                                               
product.  Sometimes the  product is  used just  as a  value-added                                                               
ingredient and ASMI also promotes those.                                                                                        
ASMI  helps  the  Genuine  Alaska   Pollock  Producers,  a  trade                                                               
organization,  in setting  up  exhibits in  the  U.S and  Europe.                                                               
Membership in that  organization has a lot of  crossover with the                                                               
whitefish  committee  of  ASMI.  She noted  a  newspaper  with  a                                                               
circulation of 8 million readers that  had an article in it about                                                               
the benefits of  adding fishing to the diet. About  60 percent of                                                               
seafood in  the U.S. is consumed  in restaurants and ASMI  does a                                                               
lot  of promotions  with restaurants  and Sysco,  a food  service                                                               
distribution company.  For instance, there are  56 Alaska seafood                                                               
items in  Sysco's food catalogue;  of those items, a  big portion                                                               
are made with  Alaska whitefish varieties. "So,  about 60 percent                                                               
of  our  promotions with  those  Syscos  of  the world  are  with                                                               
pollock and cod."                                                                                                               
CHAIR BUNDE asked  her for rough numbers on the  time, effort and                                                               
money  ASMI puts  into  salmon compared  to  whitefish and  other                                                               
MS. FLEMING replied:                                                                                                            
     We always  do all-species  marketing for almost  all of                                                                    
     our promotions.  Some might be  specifically benefiting                                                                    
     halibut or cod  or salmon, but we always  bring a whole                                                                    
     basket  of products  to the  table. So,  it's a  little                                                                    
     tricky to  split out exactly  the dollars, but  I would                                                                    
     say...in the  past, it  has been  about half  and half,                                                                    
     but  now the  balance  is shifting  and  the amount  of                                                                    
     money from  salmon is less. So,  the whitefish industry                                                                    
     has been  asking us to  demonstrate that we  are giving                                                                    
     them  their fair  share. We  have on  several occasions                                                                    
     tried  to break  out for  them  what we  are doing  for                                                                    
     whitefish. So  far, they have  always been  satisfied -                                                                    
     all the people on our  board and on our committees have                                                                    
     been  satisfied  with  the results  we  are  obtaining,                                                                    
     especially since we leverage  every industry dollar and                                                                    
     leverage a lot of value out of it....                                                                                      
CHAIR  BUNDE  asked  if  she  is saying  that  if  the  whitefish                                                               
industry  is paying  for a  larger portion  of their  funds, ASMI                                                               
would provide them an equal effort.                                                                                             
MS. FLEMING replied that so  far industry has been satisfied with                                                               
ASMI's promotion  of the species.  She pointed out that  the ASMI                                                               
chairman of the  board fishes for whitefish and the  board is the                                                               
entity that tells staff what to do.                                                                                             
CHAIR BUNDE said  this would be a good time  to bring Mr. Stinson                                                               
in to the conversation.                                                                                                         
MR. JAY  STINSON, Chair, ASMI,  added that the apparent  needs of                                                               
various industries create  a different dynamic from  year to year                                                               
and there is no hard and  fixed number for what ASMI's promotions                                                               
do   every   year.   Its  allocation   efforts   revolve   around                                                               
equitability within  the industry and  where the money  is coming                                                               
from.  Currently, the  board  has 25  members,  but counting  ex-                                                               
officios,  there  is  a  total   industry  representation  of  80                                                               
CHAIR BUNDE asked Mr. Stinson if he favors SB 273.                                                                              
MR. STINSON replied  that the board has  long-term concerns about                                                               
stable funding  for ASMI and  supports that portion of  the bill.                                                               
However, it supports  a board of 15 members, not  the nine in the                                                               
proposed language.  He rationalized  that part of  ASMI's charter                                                               
is to  represent the  interests of  the fishing  organizations as                                                               
well  as  to  maintain  a certain  fiscal  responsibility  and  a                                                               
certain tension needs to be maintained.                                                                                         
SENATOR STEVENS  countered that whatever  the size of  the board,                                                               
representation  of the  whole industry  is always  a concern.  He                                                               
asked  Mr. Stinson  to comment  on how  non-salmon fishermen  and                                                               
processors are currently represented on the standing committees.                                                                
MR. STINSON replied that there are seven standing committees.                                                                   
3:07 p.m.                                                                                                                       
TAPE 04-8, SIDE A                                                                                                             
MR.  STINSON  continued saying  that  there  is a  Canned  Salmon                                                               
Committee,  a Salmon  Marketing Committee,  an Export  Promotions                                                               
Committee, a  Seafood Technical Committee, a  Shellfish Committee                                                               
and a  Whitefish Committee. The committees  have approximately 90                                                               
individuals  representing  the  various aspects  of  the  seafood                                                               
industry. Current  by-laws say the  board has to have  12 members                                                               
that are involved in commercial  fishing and nothing prevents the                                                               
governor   from    including   whitefish   harvesters    in   his                                                               
appointments. Any segment that wants  to be involved is more than                                                               
welcome to come  to the table. "Basically, we try  to maintain an                                                               
equitable representation, both  by region and by  species, in the                                                               
entire Alaska fishing industry."                                                                                                
CHAIR  BUNDE asked  Senator Stevens  to respond  to a  communiqué                                                               
from  a  gillnetting  association  about its  concerns  with  the                                                               
hatchery cost recovery tax.                                                                                                     
SENATOR STEVENS  said a letter  from the United  Southeast Alaska                                                               
Gillnetters  is  supportive of  the  1  percent salmon  tax,  but                                                               
opposes  applying  it  to the  hatchery  cost  recovery  program,                                                               
because of  double taxation -  an issue that should  be discussed                                                               
CHAIR  BUNDE encouraged  him to  address that  issue as  the bill                                                               
moves through the process. He closed public testimony.                                                                          
SENATOR STEVENS  recapped that  they had  heard from  Ms. Fleming                                                               
what ASMI would do with additional  revenue and noted at the last                                                               
board meeting  Executive Director Riuta indicated  that whitefish                                                               
was also facing problems in the  future with fish farming. So, it                                                               
was important to know what ASMI intended to do about that issue.                                                                
Figures  from the  Commercial Fisheries  Entry Commission  (CFEC)                                                               
show that of the 6,848  non-salmon permit holders, 22 percent are                                                               
non-resident.  The  National   Marine  Fisheries  Service  (NMFS)                                                               
report on federally licensed fisheries  indicates 20 percent out-                                                               
of-state addresses.                                                                                                             
SENATOR  STEVENS  said  the  issue of  the  future  of  whitefish                                                               
farming  had not  been  discussed  by Ms.  Fleming,  but ASMI  is                                                               
prepared to deal with it.                                                                                                       
CHAIR BUNDE quipped  that he assumed ASMI would  not advocate for                                                               
SENATOR STEVENS agreed  and added that he felt he  could defend a                                                               
nine-member  board since  most boards  work best  with a  smaller                                                               
number and  this measure maintains  and enhances funding  to ASMI                                                               
at  previous levels.  With that,  he moved  to pass  SB 273  from                                                               
committee  with  individual   recommendations  and  the  attached                                                               
fiscal note.                                                                                                                    
Senator Stevens,  French and  Bunde voted yea;  and SB  273 moved                                                               
from committee.                                                                                                                 

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