An Act authorizing the CFAB to make loans relating to tourism and development or exploitation of natural resources.

Posted: February 10, 2000
Contact: Representative Eldon Mulder, at (907) 465-2647.

HB 339 expands the lending authority of the Commercial Fishing and Agriculture Bank (CFAB) and enables it to make loans to Alaskan small business enterprises involved in natural resource development and tourism. Presently, CFAB may make loans to Alaska residents engaged only in commercial agriculture or fishing. The bank seeks expanded authority to provide financing opportunities to small Alaskan business entrepreneurs who generally have trouble obtaining commercial loans because of their relative small size and lack of financial experience.

The Alaska State Legislature created CFAB in AS 44.81 in 1980. This statute governs CFAB's operation and provides for its accountability to the Legislature and Administration. Because CFAB is incorporated under this unique and specific statute, it requires legislative approval for any changes in operational authority.

Twenty years ago, limited access to commercial financing by resident Alaska commercial seafood harvesters, processors and farmers stimulated the need for of CFAB as a private cooperative. The State of Alaska responded by providing CFAB's initial capital through the purchase of $32.0 million of Special Preferred Stock in 1980. CFAB began making monthly payments in 1991 to the State of Alaska, repurchasing increments of the stock. In September of 1998, the stock repurchase agreement was completed as specified in statute and today CFAB is owned solely by its past and present borrowing members.

In 1986, The Alaska Supreme Court identified CFAB as a private entity. AS44.81 states it is not subject to the Alaska Cooperative Corporation Code or the Alaska Banking Code. It pays federal and state corporate income tax, state auditing fees and is subject to legislative audits. In short, CFAB is now a private lender operating within the free enterprise system with limited ties to the State of Alaska.

CFAB's auditors, from both the public and private sector, give the bank favorable reviews but consistently note the concentration in agricultural and fishing industry loans results in an unusual level of risk exposure and vulnerability to the ups and downs of these industries.

HB 339 recognizes these underlying concerns and resolves the issue by allowing CFAB to go beyond the present restrictions found in AS 44.81.215 and expand its customer base to other Alaskan industries needing loan assistance.