Review mandated, but with no clear rules
Source: CDQ groups’ 2010 annual reports
The state of Alaska is tasked by a 2006 federal law to conduct a review of the Community Development Quota programs. But so far the only part of the process that has been determined is that the effort will take place in 2012.
As the state struggles to construct a process from scratch to review the program with an unfunded mandate from Congress, CDQ groups have never been stronger in the Bering Sea fisheries and their increasing clout is drawing fire from the Pacific Northwest states of Washington and Oregon, where some allege preferential treatment for Alaska communities is crowding out private business.
The CDQ program was created in 1992 through the North Pacific Fishery Management Council — which regulates the federal waters from 3 miles to 200 miles off Alaska’s coast — to stimulate economic development in impoverished Western Alaska communities that have historically not participated in Bering Sea fisheries such as pollock and crab.
Communities within 50 miles of the coast were made eligible for the program, which encompasses 65 communities represented by six CDQ groups. The groups are given 10 percent of the Bering Sea harvest each year, and from that revenue they are charged with providing social and economic benefits to their member communities.
For the most recent year available, the six CDQ groups reported a cumulative $210.9 million in gross revenue in 2010, with net income of $33.2 million and net assets of nearly $737 million.
Some $32 million in payroll was paid in 2010, though not all of those jobs are held by CDQ residents or are located in CDQ communities.
Another $24.7 million was paid to commercial fishermen at the various CDQ buying and processing operations in 2010, mainly for halibut and salmon.
Over the years, CDQ groups have used their earnings to invest in their member communities. Central Bering Sea Fishermen’s Association, the CDQ group for St. Paul, contributed $6 million of the $20 million cost for the new small boat harbor on the island.
Bristol Bay Economic Development Corp. spent $2 million and Copper River Seafoods matched with another $2 million to open Togiak Seafoods in 2009 in a vacant 30,000-square-foot building.
Yukon Delta Fisheries Development Association has been operating Kwik’Pak Seafoods since 2001, buying more than 1.3 million pounds of salmon in 2010 and paying $1.6 million to fishermen. YDFDA also has started Yukon Marine Manufacturing and Yukon River Towing.
Yukon Marine Manufacturing has constructed 173 skiffs at its Emmonak facility since 1999, and Yukon River Towing had nearly $3 million gravel sales in 2010.
Coastal Villages Region Fund is the first and only of the CDQ groups to own its entire fleet, with some 24 vessels that include tugs, barges, tenders, crab boats, longliners and a 341-foot pollock factory trawler.
New rules
The six CDQ groups initially received 7.5 percent of the total pollock harvest and were subsequently awarded quota in halibut, cod and crab among some 36 target and non-target species in the Bering Sea.
That total was bumped up to 10 percent in the 2006 Coast Guard reauthorization bill, with amendments to the CDQ program authored by Alaska U.S. Rep. Don Young. Since then, several CDQ groups have used revenue from their annual allocations to acquire additional fishing rights, as well as expand into vessel ownership.
The 2006 Coast Guard bill contained a number of changes to the CDQ program, not the least of which was the removal of state oversight of day-to-day operations. The end of state oversight came with greater annual reporting requirements to increase transparency at the nonprofit, tax-exempt groups. (The parent CDQ organization is tax-exempt while any for-profit subsidiaries are not.)
The bill also required the state conduct a review of the program in 2012 and every 10 years after.
It also created the Western Alaska Community Development Association, a six-member governing panel made up of representatives from the CDQ groups, typically the executive directors. It was to encourage the CDQ groups to work together.
Previous state oversight had allowed for the reallocation of fishing quota among the groups based on performance as determined by the state, a provision of the program that often served to set the groups against each other. The 2006 Coast Guard bill requires that any actions by WACDA be unanimous.
The 10-year review also allows for reallocating quota from one group to another based on the state determination, but no more than 10 percent of a group’s fishing rights can be shifted. CDQs could appeal to the federal level.
The National Marine Fisheries Service is working to write regulations to govern such an appeals process. However, NMFS generally enforces fishing regulations; it does not evaluate community or social development programs such as CDQ groups.
Oversight questions
WACDA drafted rules governing how annual reports are to be presented based on recommendations from a 2005 panel appointed by then-Gov. Frank Murkowski. The organization also has come up with standards for how CDQ groups would evaluate themselves as part of the state review process.
However, the state has not yet come up with regulations on how the review process will take place.
“What we’re working to determine from a state perspective is what our appropriate role is, and how to address that within the context of what has been delegated to us from the federal statute,” said Wanetta Ayers, who is the Economic Development Division director for the state Department of Commerce, Community and Economic Development.
Ayers was the executive director of WACDA for three years before taking her position with the state in 2010, and said she would likely not take part in the formal review based on conflict of interest standards.
The state Commerce Department was the lead agency in charge of oversight of CDQ groups prior to 2006 and is likely to head the 10-year review, but that is not official yet, nor has a lead staff person been assigned.
Among the issues the state is grappling with are what would appear to be the simplest questions.
The 2006 bill states that “after the evaluation required by clause (i), the State of Alaska shall make a determination, on the record and after an opportunity for a hearing, with respect to the performance of each entity participating in the program for the criteria described in clause (ii).”
The state has not yet determined how to interpret what “opportunity for a hearing” means.
“It’s not clear as we’re working way through this — is it that there is a review process and determination is made, and if a CDQ group does not agree then it has right to public hearing, or is the whole review process public?” Ayers said. “There needs to be some legal clarification with regard to that. In general, the statute is fairly direct and clear about the meaning. The state will determine internally what we feel we can legally do with regard to our authority and that process.
“We’ve looked at more specific timing, but the only thing definitive right now is that it will take place during calendar year 2012.”
Ayers also said that the state may need to hire an independent expert to evaluate to information provided by CDQ groups. At that point, the Commerce Department or whichever state agency is the lead on the review would have to request funding in the upcoming legislative session.
An appropriation wouldn’t be available until the next fiscal year begins July 1, though. Prior to 2006, oversight costs were billed to the CDQ groups and that is another option being considered, Ayers said.
Another key part of the review is the four criteria by which the CDQ groups will be evaluated. The 2006 amendments defines the criteria as:
• changes during the preceding 10-year period in population, poverty level and economic development in the entity’s member villages;
• the overall financial performance of the entity, including the fishery and non-fishery investments by the entity;
• employment, scholarships and training supported by the entity;
• achieving the goals of the entity’s community development plan.
The 2006 amendments allow the CDQ groups to individually assign different weights to the criteria, and to determine whether they have “maintained or improved” performance in the four areas.
According to the rules adopted by WACDA, the CDQ groups will assign weight to each criteria “at its own discretion,” and, “In the event the decennial review performed by a CDQ entity demonstrates that the CDQ entity has maintained or improved its overall performance, then WACDA shall advise the State of Alaska that the allocations made to such entity should continue without adjustment for the next 10 year period.”
It would be unlikely that any of CDQ groups would recommend a reduction in its quota, but Ayers said allowing the groups to weight the criteria themselves didn’t make the process a rubber-stamp of the program.
“There is some wisdom in that approach because not all CDQs are created equal,” Ayers said. “They don’t all have the same assets, the needs and demands of their communities are different, some have found greater level of success with certain levels of programs. Some will have substantial assets and be able to report on overall financial performance of the entity at a very high level. Others may feel it’s just adequate, but they’ve excelled in employment, scholarships and training, whatever the circumstance may be. There are also things in the criteria that are not 100 percent in control of the CDQs.”
A determination by the state of a “failure to maintain” would be the precursor to the reallocation of quota from one group to another.
Aggie Blandford, the current executive director of WACDA, wrote via email that the CDQ groups have agreed internally to document their findings so as to be verifiable by the state.
Though there is some confusion on the state side regarding how it will exercise its oversight responsibility and the degree of its independence allowed under the federal statute, both WACDA and Rep. Young agreed that the state is free to disagree with a CDQ group’s self-evaluation.
“Congressman Young certainly believes the state of Alaska has an oversight role as they are responsible for advising the Secretary of Commerce on potential changes to the program,” according to a statement from his office. “With that being said, it’s hard to generate a conclusive opinion without first seeing what the state’s regulations are governing this review.”
Although she said she’s read the CDQ amendments line by line for years and still isn’t sure about some aspects, such as whether the review of groups are public hearings, Ayers said the state is trying to keep it simple.
“The plain meaning is the direction we’re headed,” she said. “It’s an important process.”
Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.
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