Financing for Community Fisheries
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Transcript of Financing for Community Fisheries
Financing Community Access to Atlantic Fisheries
May 2013
Contents1. About this project2. The lobster fishery in Atlantic Canada3. Problem definition4. Identifying problem causes5. Potential solutions6. Our current initiatives
About this projectWork stream that accompanies Valuing our
Fisheries work‘Social Finance for Sustainable Fishing
Communities’ April 2013 workshopNow looking for feedback on
proposed steps forward andsuggestions
Atlantic Canada’s Lobster FisheryBackbone of coastal economiesLimited entry fishery38 LFAsTrap limits and short seasons10,000 licenses$550 million landed / year
Supreme Court Saulnier v. Royal Bank of Canada 2008 ‘Fishing license is property’
Owner-Operator and Fleet Separation Policies
Have protected and maintain the inshore fishery as an economic driverLicense holders must fishProcessors cannot own fishing licenses
Essential policies, but:Limited role for producer coopsNo incorporate financial partnerships
Identifying THE ProblemFishing licenses are leaving communities
Fishermen retireNew entrants don’t buy licensesLicenses get consolidated by corporate
interests Not based in geographic communities Business based on reducing number of harvesters
through capital-intensive production Larger volume operations creates ‘efficiencies’ that
allow more offshore processing, low-value export
Example: Grand MananPopulation of 2,500 with 130
active lobster licenses
Approximately 1.5 hours by ferry
In 2012 temporarily won protection of residency requirements
Currently ~5 licenses at risk
Some current license pricesLFA 31 (Eastern NS) $ 525,000LFA 32 (Eastern NS) $ 540,000LFA 33 (Shelburne) $ 300,000LFA 34 (SW Nova) $ 475,000LFA 36 (Fundy Bay) $ 495,000LFA 36 (Fundy Bay ) $ 450,000
Why is this a problem?1) License costs do not reflect enterprise
revenues2) Upfront cost is prohibitive to individuals3) Corporate interests are willing to pay more
for licenses
Problem Drivers (1/3)1) License costs do not reflect enterprise
revenuesa) Inflated by government ‘buybacks’b) Retirement needs not built into current
business plansc) Uncertainty in fishing
i. Price fluctuationsii. Regulatory environmentiii. Uncertainty about catch rates
Problem Drivers (2/3)2) Upfront cost is prohibitive to individuals
a) No formal way to ‘graduate’ ownership of a license
b) Loans made with personal guarantees
Fisheries Loan Boards offer loans for ~20 years @ 6%
Very low default rate Limited funding available and difficult to
access
Problem Drivers (3/3)3) Corporate interests over-value licenses
a) High premium on supply control and predictability
b) Longer time horizonsc) Management leverage from well-organized
interest groups
What kind of solutions?1. License banks
2. Loan funds
3. Policy changes
4. Distribution system changes
1. License BanksCooperative ownership that pools licences and quota that is
leased back to members at "fair“ rates
OpportunitiesCommunity investment in productive resourceAllows long time horizons and better access to capital
ChallengesDetermining ‘fair’ rates Securing licenses at fair costMatching with owner-operator principlesMost existing examples are annual rotating lease structures
2. Loan FundsFund to facilitate new entrants as patient capital to assist in
finding other funding
OpportunitiesCan offer business planning / mentoring and strengthen
fishing associationsCan support good types of ‘trust agreements’Could be funded through community platforms like CEDIFs
ChallengesMatching with owner-operator principlesFisheries risk factors are enormousWill not address fundamental issue of license cost
3. Policy ChangesTo allow formal graduated license ownership To allow fishing associations to ‘own’ licenses
in license banks
ChallengeAvoiding making the situation worse by diluting owner-operator protections
4. Distribution Model DevelopmentDeveloping a ‘Seafood Hub’ to redirect
products away from commodity marketsPartners:
Small and medium processorsFarmers markets, local retailers and
restaurants‘Regional’ wholesalers
Regional markets provideprice premiums and reduceduncertainty
Next Steps1) Building Financial Model with Common
Good Solutions Financial questions – what should a license
costs? Retirement costs, revenue expectations, financing
options
2) Seeking community partners to design details of a small license bank (~6 licenses) Potential to fund through a Nova Scotia CEDIF
3) Value chain work to improve regional distribution – September 2013 ‘launch’