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Tax time for frontier fishermen.

Two controversial commercial fishing taxes will pour a little sea bounty into state coffers.

Commercial fishermen who enjoy the bounty of Alaska's waters will have to pay more for it after the Alaska Legislature approved a pair of new taxes last spring. One tax is aimed at the hundreds of factory vessels working in the 200-mile zone of federal waters off the state's coast and will charge them for community services they receive but never before purchased. The other tax targets salmon fishermen and pays for increased domestic marketing of their product. Combined, the levies will tap fishermen for nearly $15 million every year. While most of the money is dedicated for services they already get -- such as dock fees, water and garbage disposal -- the two new taxes will swell the Alaska treasury by several million dollars annually.

New Trawler Tax

The Seattle-based offshore fleet of factory trawlers, freezer longliners and crab catcher-processors lands about $1 billion worth of pollock, cod and shellfish from the Bering Sea and Gulf of Alaska every year. Technically, those resources belong to the United States and not to Alaska. But state politicians and community leaders have long contended that the fleet should contribute more to state coffers.

"The fact is, the offshore fleet impacts Alaska's coastal communities," says assistant commissioner of revenue Rod Mourant. "It causes them to have larger than normal police forces, hospital facilities, waste disposal, and there ought to be a way for those communities to mollify that impact."

Though that fleet buys groceries, fuel and services in Alaska, it doesn't pay the state's 5 percent raw fish tax because it doesn't deliver its catch to Alaska's shore. On the other hand, the small boat fleet that delivers to shoreside processing plants in Dutch Harbor, Kodiak and elsewhere is tapped for 5 percent every delivery.

This disproportionate taxation set the stage for the biggest rift ever to hit the American fishing industry, known as the inshore/offshore allocation ("Groundfish War Heats Up in North Pacific," Alaska Business Monthly, August 1992, Pg. 48). But even after the shoreside industry won a fixed percentage of the pollock and cod quotas, it didn't "level the playing field," according to the pro-Alaska forces, because shoreside fishermen still paid the raw fish tax while factory vessels "fished free."

Offshore Fleet Must Pay

Rather than eliminate the raw fish tax, the legislature imposed a 3.3 percent landing tax on the offshore fleet. Whenever vessels transfer their products in state waters -- within three miles of shore -- they pay the tax. Because it is more profitable to use the vessel for fishing rather than transportation, and because the transshipment must be done in calm, protected waters near shore, state officials expect about half the factory vessels' annual catch will be taxed.

Effective Jan. 1, 1994, the tax should raise almost $10 million annually, Mourant says. Half the levy will return directly to the affected coastal communities in the form of municipal grants. Unalaska and Kodiak will receive the lion's share. The rest of the tax revenue -- more than $4 million a year -- goes into the Alaska General Fund, adds Mourant, and will help defray the costs of managing offshore resources.

The three-tenths portion of the 3.3 percent tax should raise almost $1 million a year for whitefish marketing through the Alaska Seafood Marketing Institute (ASMI).

The offshore fleet was split over the landing tax. Some companies supported it, Mourant says, while others lobbied hard against it.

Arctic Alaska Inc., which has a large fleet of factory vessels, will be hard hit by the tax, says spokesman Phil Chitwood. The state's legal analysis was flawed, he says, and the tax probably will be challenged in court because states may not restrict interstate or international commerce.

Furthermore, the offshore fleet already pays plenty, Chitwood says. "We don't get anything free. We pay for water, we pay to dock, we pay for garbage disposal. We donated to the (Unalaska) medical clinic and we pay every time we use it. We dumped $120 million in those (coastal) towns last year."

Nor does he expect those services to be free when the landing tax goes into effect -- the fleet will simply pay twice.

While Chitwood and others believe the offshore fleet has been dealt yet another unfair blow, the state believes the war in the North Pacific is over, says Clem Tillion, fisheries advisor to Gov. Walter Hickel. "If you want a say, you've got to pay," and the offshore fleet now has an open ear in the governor's office, he said.

Another potential victim of the new tax is the Bering Sea Commercial Fisheries Development Foundation, a nonprofit community development agency formed in 1992 through donations by the offshore fleet. Many in the industry believe the new tax will reduce their contributions to the foundation, which has provided job training and start-up loans and grants for small Bering Sea communities.

Foundation executive director Dewey Schwalenberg said he was disappointed in the legislation. Lawmakers refused to give the factory trawlers tax credit for their contributions to his foundation, at the same time allowing tax credits for other nonprofits. And the bulk of the tax money will go to the communities that are booming already, leaving villages like Mekoryuk and Chevak with less opportunity than before.

Still, he was hopeful for his agency's future. "I think people see there's something here. Even if funding from the (fishing) industry dries up, the foundation has a life of its own."

Slap 1 Percent on Salmon

With the other new tax, salmon fishermen began paying an additional 1 percent to the state on July 1. Detractors of the new marketing assessment say the pinch will be painful, but supporters see it paying a future dividend.

After the debacle of 1991, when salmon prices fell through the floor and strikes paralyzed much of coastal Alaska, "marketing" was the buzz word heard in every dockside conversation and cafe. The problem wasn't too many fish, fishermen said, but too few buyers. But with pinks fetching 20 cents a pound and Bristol Bay reds less than $1, few fishermen volunteered to pay for more marketing.

Legislators took the matter into their own hands, however, and in 1993 even the hot issue of taxing the fishing industry wasn't too contentious to tackle. Competing bills and amendments rose and fell, shot down by party politics or regional disputes. The final bill was voted down initially, then reconsidered, amended and approved in the final days of the session.

It drastically changes the makeup of the Alaska Seafood Marketing Institute's board of directors, which always has been dominated by processors -- and often derided by fishermen. Adding seven fishermen now gives the two groups equal say in how ASMI spends its funds. The total of 12 fishing seats will be filled according to how much tax each area raises, giving Bristol Bay dominance.

The expanded board will have a dramatically bigger budget for domestic marketing, to an estimated $5 million per year. State funding in the past had hovered around $1 million, according to Keith Whitehead, ASMI's in-state coordinator, but was eliminated with passage of the new tax.

"This may help us solve the all-our-eggs-in-one-basket syndrome," Whitehead says, referring to the fact that Japan is the predominant buyer of Alaska seafood. "By developing stronger domestic markets, it should create opportunities for Alaska salmon to broaden its market base and enhance the value of our products."

Ten percent of the assessment can also be spent on market information. Supporters of that idea, such as fisheries lobbyist Kate Troll, contend that fishermen will be better businessmen if they know current prices, canned and frozen salmon inventories, and the costs of processing and transportation.

The ASMI information service is a step in the right direction, Troll says, but a staff economist is also necessary to translate the raw data into useful information. "The concept (in the legislation) is there," she says. "Now it's up to the ASMI board to make it happen."

All salmon fishermen pay the state raw fish tax, and many are levied an additional 2 percent to 3 percent for hatcheries in their regions. Thus the additional 1 percent marketing assessment did not have universal approval. Southeast Alaska Seiners Association asked the legislature for permission to reduce their hatchery tax from 3 percent to 2 percent, citing the low value of pink salmon these days. The request was denied, however.

Fishermen in Alaska and elsewhere around the nation have historically paid little for the fish they catch, but that is changing. The offshore fleet fishing in federal waters caught $1.9 billion worth of product in 1991, for which it paid just $10,000 in fees, according to the National Marine Fisheries Service. This year, however, Congress will reauthorize federal fisheries law and has already put user fees on its agenda.

Alaska's near-shore fleet -- salmon, herring, shellfish, halibut and groundfish fishermen -- were a fount of wealth in comparison, paying nearly $50 million to the state for the $1.2 billion worth of fish they caught in 1992. The two new laws approved this spring suggest that Alaskans believe it's time for fishermen to pick up more of the tab.
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Title Annotation:Alaskan fishermen and those who fish in Alaskan waters
Author:Gay, Joel
Publication:Alaska Business Monthly
Date:Aug 1, 1993
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