CDQ group battles delegation over quota

Alaska’s Congressional delegation is reluctant to talk about changes in the new Magnuson-Stevens Act until they’ve heard more from the state, but one thing is certain: they have no intention of changing the Community Development Quota allocations in the Bering Sea.

That isn’t stopping Coastal Villages Region Fund, or CVRF, from continuing its campaign for more fish. Coastal Villages isn’t happy with the response it has gotten from the Alaska Congressional delegation, said spokesman Dawson Hoover.

“For the delegation to hide behind the blanket of the CDQ program is an illusion,” Hoover said.

Now, the CDQ group is rallying residents in the Western Alaska communities it represents.

“The delegation is underestimating the power of the people in our region and they aren’t taking them seriously,” Hoover said.

The MSA is the federal law that dictates much of fisheries management throughout the country, including in Alaska, in waters from 3 to 200 miles offshore. It’s up for reauthorization, and a new version could become law next year.

The Community Development Quota, or CDQ, program is authorized in the MSA and was established in 1992.

Through that program, six community entities receive a combined share of about 10 percent of several Bering Sea fisheries. Together, the groups represent 65 communities within 50 miles of the Bering Sea.

The allocations to each group were fixed in 2006. Prior to that, they were often subject to political maneuvering and fights.

Now, CVRF has launched that fight again, asking that the fish be reallocated by population.

CVRF, which is the Kuskokwim-area group, represents the largest number of people, about 9,300 in 20 villages.

Now it has launched a “Just Fix CDQ” campaign, arguing that it isn’t treated equitably. Population-based allocations would mean more fish for CVRF, and less for other, much smaller, groups, including Central Bering Sea Fishermen’s Association, the CDQ group for the village of St. Paul, and the Aleutian Pribilof Island Community Development Association, or APICDA.

Those groups aren’t interested in losing their fish. All five of the other CDQ groups signed a letter opposing the changes in 2012.

“For Coastal Villages to be doing this now, it’s very immature. It’s very shortsighted. It’s very mean-spirited. It’s very greedy,” Larry Cotter, APICDA’s executive director, told the Journal in 2012.

CVRF makes no apologies for its campaign, as its Executive Director Morgen Crow — who has been paid an average of nearly $700,000 per year since 2006 — wrote in the 2011 annual report.

“Not everyone is interested in our success story, in fact some seem unwilling to believe or acknowledge it,” Crow wrote. “The other CDQ groups bristle at our brashness and do not want to give up the extra CDQ fish they enjoy at our expense.”

Alaska’s delegation has said they don’t want to get in the middle of such a fight. Any change will require unanimity, the full delegation wrote in a written response to CVRF in July.

Sen. Mark Begich and Rep. Don Young reiterated that recently in discussions about the MSA reauthorization in visits to the Journal office.

Young said the CDQ allocations will stay as-is.

“I’m not going to take it away from other organizations within the Native community,” he said in an Aug. 14 meeting with the Journal.

Young called CVRF’s push “greed and avarice,” and said CVRF representatives have told him their residents will vote against him if he doesn’t support an additional allocation for their group.

“If Coastal wants more quota, they ought to go to Seattle,” he said, referring to where much of the Alaska fishing fleet is based.

He also noted that the groups all agreed to the 2006 allocations. But Hoover said that CVRF only agreed to those because it was the lesser of two evils. The proposed change, at the time, would have reduced CVRF’s allocations in some fisheries.

Begich, who has been holding listening sessions around the state to gauge what Alaskans are looking for in the revised MSA, said the state needs a unified positions on changes, otherwise other regions will try to overpower Alaska.

“We must have a unified Alaskan position on these things,” he said in an Aug. 13 meeting with Journal staff.

Hoover said CVRF doesn’t have a specific strategy for changing the delegation’s mind beyond rallying residents.

This summer, Hoover and others from CVRF held meetings in 18 villages, talking to more than 1,700 residents. In each community, they talked about the CDQ program, and why CVRF wants more quota. They painted it as an issue of fairness.

Alaska’s Congressional delegation, and other CDQ groups, were seen as the problem.

“We’re letting the residents know that the delegation is not supporting the change,” Hoover said.

CVRF has not explicitly told residents not to vote for the delegation, but the group clearly hopes that a rising tide of local frustration will prompt a different action.

Clips from several meetings are compiled into a “Just Fix CDQ” video.

The film was clearly meant to make an emotional case. Kids were visible at every meeting, while adults talked about how their communities aren’t being treated fairly. CVRF evidently told the attendees that they deserve more quota, that they were getting slighted.

In one clip, a man in Nightmute told people to ask Don Young why he doesn’t support CVRF. In another, a speaker talked about how the region is dependent on food stamps and more fish would mean a better economy.

In a few, the kids spoke up about “fairness.” Quinhagak youth even addressed greed.

“They say we’re greedy, but they don’t want us to be equal, they’re most likely greedy,” one girl said.

CVRF’s campaign has also raised allegations of corruption.

In the video, a speaker suggests that corruption is at play, and that Western Alaska villagers aren’t getting their fair share because other CDQ groups have ties to the decision makers or are paying them off.

Hoover said that during a discussion about the allocations, Young asked CVRF to show him that a change wouldn’t hurt APICDA.

His use of APICDA specifically, Hoover said, shows that he is tied to that organization in a corrupt fashion. CVRF has told residents about that incident, Hoover said.

Young is not the only subject of CVRF’s campaign. In the video, a speaker also calls on residents to make it clear to the Alaska Association of Village Council Presidents, and specifically, that organization’s President Myron Naneng, that people in the region support CVRF.

In the past, Naneng, on behalf of the AVCP, has made public statements criticizing the pollock fleet’s bycatch, and CVRF’s efforts in 2012 to force residents into signing statements that hold the pollock fleet blameless for diminishing king salmon returns in exchange for fishing nets.

CVRF wants everyone to support its call for more pollock quota before worrying about bycatch, and has convinced some area residents that the allocation issue takes priority who are now making those wishes known to Naneng and AVCP.

Complicated finances

CVRF isn’t just the CDQ with the most people. It also has the most debt.

In 2009, CVRF took part in a New Market Tax Credit, or NMTC, transaction to fund construction and operations of its Goodnews Bay seafood plant in Platinum.

After paying for most of the plant construction from pollock royalties from 2007 to 2009, Coastal Villages and its subsidiaries received about $41 million in loans from three NMTC transactions.

In a NMTC transaction, loans are incentivized through a tax credit that can be taken over seven years worth 39 percent of the loan. For the Platinum plant loans, American taxpayers funded about $17 million total in tax credits to subsidize the loans.

Goodnews Bay Seafoods LLC, a wholly-owned subsidiary of CVRF, is the borrower in the transaction and CVRF is the “leveraged lender” in the transaction.

“It helped us finish the plant,” Hoover said.

About $8 million was needed to finish the project. Hoover said the cost overage was because it was the first time CVRF built a seafood plant, and because high costs are “just how it is in Western Alaska.”

The rest of the loan, or more than $30 million, has gone to funding overall operations. The plant, and CVRF’s salmon processing business, operate at about a $2 million loss annually.

New Market loans have an initial length of seven years. By then, CVRF must have either repaid the loan, or must refinance the debt.

CVRF holds a note receivable from its subsidiary Goodnews Bay Seafoods for about $31 million, and reported mortgages owed of about $42 million, according to its 2011 IRS form 990.

Because of the note receivable from its subsidiary, the CDQ’s payable and receivable lines reduce CVRF’s overall liabilities to about $10 million on its books even though the Goodnews Bay Seafoods loan is money the company owes to itself.

Hoover said CVRF essentially owes no money on the transaction.

“The only debt is on the building,” he said.

When pressed to explain how owing $40 million to three community development entities could be construed as “no debt,” Hoover said that it was a complicated financial transaction that didn’t need to be explained, and likely couldn’t be understood by the general public.

“At the end of the term, we have zero debt,” Hoover said.

According to Hoover, when the loan is due, CVRF will receive about $6.4 million from the lenders in interest payments in an “off the books” transaction.

Hoover said the debt has nothing to do with CVRF’s push for extra quota.

“This is not even related to the allocation issue,” he said.