Homer Alaska - Business

Story last updated at 1:31 PM on Wednesday, April 25, 2012

Legislature approves $20 million in loan pools for fishing industry

By Andrew Jensen
Morris News Service - Alaska

The operating budget passed April 15 by the state Legislature includes $20 million in spending to fund four new loan pools designed to benefit local fishing economies in Alaska.

House Bill 121, which was introduced in 2011 by Gov. Sean Parnell, creates four new revolving loan pools with a total of $22.5 million for charter halibut permits, mariculture, Community Quota Entities, or CQEs, and business microloans.

Loans will be available through the state Department of Commerce, Community and Economic Development when the new fiscal year begins July 1.

The operating budget capitalized the loan pools with $5 million for charter halibut permits, $5 million for mariculture projects, $10 million for CQEs and $2.5 million for microloans.

CQEs were created in 2004 to allow eligible coastal Alaska communities with less than 1,500 people to purchase permits and harvest quota for halibut and sablefish. The CQE holds the permits and/or quota with the requirement that only that community's residents may lease and harvest the fish.

However, unlike the Community Development Quota program, or CDQ, that awards 10.7 percent of the Bering Sea harvest annually to six groups representing 65 western Alaska communities, there was no allocation of quota or startup funding to CQEs.

So while there are 42 CQE-eligible communities, only 28 have actually formed the nonprofit organization required to purchase permits and quota, and only a couple — Ouzinkie and Old Harbor — have acquired fishing privileges. (Ouzinkie is on Spruce Island north of Kodiak; Old Harbor is on the southeast coast of Kodiak Island.)

Finally securing funding to allow CQEs to purchase quota and permits is an important accomplishment, according to Chuck McCallum, the executive director of Gulf of Alaska Coast Communities Coalition, or GOA C3.

"We've been working hard for several years now for the loan program," McCallum said. "The organization GOA C3 has been working on the broader issue of rising above the challenges imposed by them through the IFQ (individual fishing quota) and other similar programs to help sustain their traditional access to the natural resources they've always been based on.

"It's a major issue and an important piece of legislation to assist these communities to re-establish their historical access."

McCallum said a grant to CQEs would have been appropriate based on the fact that CDQ groups and fishermen were awarded quota without cost, "but given a chance to buy on terms that make sense over a longer period is a good step."

The CQE loans under HB 121 are capped at $1 million with repayment terms not to exceed 25 years.

McCallum said the belief when CQEs were created was that Alaska Native corporations would be a natural source of funding for permit and quota purchases, but legal issues have prevented involvement.

CQE rules require community residents to participate in the fishery, and the rules for corporations prohibit programs that would advantage one group of shareholders over another. Because many shareholders do not live in the community represented by their corporation, they would not be eligible to participate in the CQE program.

"It's been a major, major block to what was seen as a natural funding relationship," McCallum said. "So consequently, the program has failed to jump out of the starting block with the success that many people expected, and that's why legislation like this gives stable terms to communities trying to reestablish some of the lost elements of their fisheries based economies."

Charter loans

When Parnell introduced HB 121 last year, he sought the charter halibut permit loan pool based on the implementation of limited entry in the charter sector that reduced the number of charter permits by about 30 percent in 2011.

The loan pool would allow loans not to exceed $100,000 in a year with repayment terms not to exceed 15 years for either the purchase of halibut charter permits or the refinancing of existing loans more than a year old that were used to purchase a charter halibut vessel or gear.

Heath Hilyard, executive director of the Southeast Alaska Guides Organization, said he was "very encouraged" by the legislation passing.

Hilyard said his members haven't been following the legislation closely, but he sees it as a potential vehicle in the future to create a common pool for charter operators to purchase halibut from the commercial sector, or for financing the leasing of guided angler fish, or GAF, under the proposed catch sharing plan.

The North Pacific Fishery Management Council is scheduled to take final action in October to implement the catch sharing plan, or CSP.

The GAF provision, which allows charter operators to lease pounds from commercial shareholders to offer their clients additional fishing opportunity, has been unanimously opposed by the charter sector as unworkable, but the council has signaled its intent to keep that part of the halibut plan in place.

One issue raised by Hilyard with the GAF provision is that it may disadvantage smaller charter operators who cannot afford to lease GAF or whose business model wouldn't accommodate raising prices on clients.

Loans under HB 121 are only for charter halibut operators who cannot qualify for loans from commercial lenders, which could allow for smaller operations to lease GAF.

However, the current legislation does not provide for GAF leasing as one of the eligible uses, but that could easily be amended before the catch sharing plan takes effect.

Even with final action this October, the catch sharing plan couldn't be in place until 2014. That would allow for the loan pool to be amended to include loans to fund GAF leasing.

"That would give us time to go back to the Legislature and expand the original provisions of HB 121," Hilyard said. "We're not asking for more money, we'd just be expanding the options."

Andrew Jensen is a reporter for the Alaska Journal of Commerce in Anchorage.

He can be reached at andrew.jensen@alaskajournal.com.