5.1 The Application for Transfer
All transfers or leases of QS must be reviewed and approved by NMFS. Persons involved in the transfer or lease of QS are required to complete and submit a transfer application form to the RAM Division. Part of this application is to be filled out by the transferor and part of it is to be filled out by the transfer recipient. In some cases, brokers who are the market makers for the transactions help complete these forms.
The transfer application form asks some basic questions to help NMFS monitor changes under the halibut IFQ program. Page three of the form contains questions about the transfer, including: the prices paid for the QS and any current year IFQ associated with the transfer; the reasons for the transfer; the method by which the QS or IFQs were located; the relationship between transferor and transfer recipient; and the methods of financing the transfer. The questions on the transfer application form are discussed in more detail in the sections that follow. A copy of Page 3 of the form is contained in Figure 5.1-1.
The chapter discusses the following topics on 1995 transfers:
The prices at which QS was sold. (Section 5.2)
The relationship between block status and QS prices. (Section 5.3)
The prices at which QS was leased. (Section 5.4)
The extent to which QS was transferred through gifts. (Section 5.5)
The sources of QS financing. (Section 5.6)
The relationship between the parties to the transfer. (Section 5.7)
The extent to which transfers were made within resident types and across resident types. (Section 5.7)
5.2 QS "Priced" Sale Transfers
This section covers a subset of QS transfers which represent "priced" sales transfers. The focus of the section is to use the information on 1995 transfers to provide estimates of average prices for halibut QS by area, and by vessel category within an area.
There are several caveats associated with these statistics. For example, there is some ambiguity on the information provided on the NFMS transfer application forms. The form does not explicitly differentiate between sales transfers and gift transfers. Sales transfers used in the tables in this section were selected by the presence of some pricing information.1 The reader should be aware that there were other sales transactions for which no price information was provided.
The transfer application form contains spaces for the transferor to provide the price received for the QS in terms of dollars per unit of QS and/or in terms of dollars per pound of 1995 IFQ. On RAM's computer file, the price was most commonly recorded in terms of dollars per pound of 1995 IFQ.
The reader should also be aware that there is ambiguity as to the meaning of some reported prices, apparently due to confusion on how to complete a question on the transfer application form. Transferors were first asked if they were using a broker to transfer the QS, and, if so, how much they were paying in broker's fees. Finally, they were asked: "What is the net price you are receiving for the QS/IFQ?" The implicit question then is: "What was the price of the QS after deducting the costs of broker's services?" If the question had been answered in this fashion, it would be possible to reconstruct the gross price by adding back in any payment to brokers.
However, a RAM staff person familiar with the data collection process has suggested that the "net" price data may often be more accurately interpreted as "gross" price data. This person has talked with brokers and believes they tend to put in gross sales prices. This person also checks odd looking prices reported on the transfer application form by going back to copies of sales documents which must be submitted with the transfer form. If errors were made on the form, the staffer enters gross price information from the sales documents. This staffer believes that most reported prices are gross but that some of the prices reported are net prices as originally requested on the survey.2 Because of this confusion over what the prices mean, the authors used the reported prices to develop the estimates in this section without adding or subtracting brokerage fees.
The prices at which QS and IFQs are bought, sold, and leased are considered confidential information by NMFS. In this report, summary information on average prices have not been reported if there are fewer than four observations in the category. This was done to preserve the confidentiality of the underlying data. Such cases have been indicated by a "C" in the tables.
The sale of QS may occur with or without the associated current year IFQs, or with only part of the current year's IFQs. Each of these different types of QS transfers has to be treated differently in order to properly interpret the prices associated with them.
Table 5.2-1 provides annual average 1995 prices for QS sold with all accompanying 1995 IFQs. These data are provided by management area and vessel class. The table includes data on average price per unit of QS transferred and the average price per unit of 1995 IFQ transferred. It also includes some information on the transactions used to generate these prices. This information includes the amount of QS transferred, the amount of IFQ transferred, the number of transactions, the average QS per transaction, and the average IFQ per transaction. Note that these latter totals are only totals for transactions used to calculate the prices. Many transfers are not sales, and prices are not supplied for some transfers that appear to be sales. Thus, the total QS and IFQs transferred are greater than the totals shown in these tables. Table 5.2-2 shows the same information on a quarterly basis.3
A visual inspection of these tables suggests that the average QS price per unit of 1995 IFQ within an area tended to vary positively with the size of the catcher vessel category during 1995. Average prices tended to be highest for the large catcher vessel category.
The tables also suggest that the average QS price per unit of 1995 IFQ declined from Area 2C westward to Area 4A (because 4B is confidential). The reader should note that the average price per unit of QS cannot be easily compared between two areas since the IFQ value of the QS varies by area. Note that Areas 4C, 4D, and 4E are not included in these tables because there were no QS priced sales transactions with accompanying 1995 IFQ in these areas.
Table 5.2-3 shows 1995 annual average prices for QS sold with no accompanying IFQs. The table is otherwise similar to Table 5.2-1 except that to avoid confusion no price per unit of 1995 IFQ was calculated. A comparison of the average prices per unit of QS between the Tables 5.2-1 and 5.2-3 suggest that the average price per unit of QS within an area tended to be higher when the 1995 IFQ associated with the QS was included in the transaction. Table 5.2-4 provides quarterly information on sales transfers of QS with no accompanying IFQs. Note that Areas 4B, 4C, 4D, and 4E are not included in Tables 5.2-3 and 5.2-4 because there were no priced sales transactions without 1995 IFQ in these areas.
No reports were prepared for transfers of QS with only a portion of the associated 1995 IFQ. There were very few of these observations and the information they provide is too scant and idiosyncratic to present in a table, as each transaction has a different portion of 1995 IFQ included in the transaction.
5.3 Blocking and the price of QS
A feature which the NPFMC added to the halibut IFQ program was the "blocking" of all initial allocations of QS that translated into less than 20,000 pounds of a hypothetical IFQ for an area.4 Under the program rules, blocked halibut QS must be sold as a unit and catcher vessel blocked QS often cannot be leased because of the 10% leasing restriction. In addition, a person is only allowed to hold two blocks of QS in an area. If a person holds any unblocked QS in the area, then the person is only allowed to hold one block of QS.
The tables in this section examine the impacts of the blocking provision on the price of QS. The data indicate that blocked halibut QS tended to sell for less per unit than did the same type of unblocked QS during 1995, and that smaller blocks of halibut QS tended to sell for less than larger blocks of halibut QS.
The purpose of the blocking provision, as expressed by the proponents, was to make a portion of the QS relatively unattractive to persons who wanted to put together more full- time halibut operations. They hoped the block provisions would ensure there would always be QS available to a part-time fleet of small operators. The proponents felt this would help maintain some of the diversity of the fleet that existed under open access and thereby make the IFQ program less disruptive to isolated Alaska fishing communities. Proponents also predicted that the blocked QS would sell for a lower price per QS unit and hence would be more affordable for a fleet of small part-time operators, as well as new entrants to the fishery.
Tables 5.3-1, 5.3-2, and 5.3-3 show blocked and unblocked QS prices for sales of QS with all associated 1995 IFQ, sales of 1995 QS with no IFQ, and for leases of QS. These tables provide data by management area, vessel category, and block status. In every instance where enough data are available to report blocked and unblocked average QS prices, the blocked QS has a lower price. These price differentials are often substantial with blocked QS often selling for more than 10% less than unblocked QS for the same area and vessel category.
Tables5.3-4, and 5.3-5 show price and transfer information for blocks of different sizes in sales of QS with all associated 1995 IFQ, and for sales of QS with no 1995 IFQ. These tables do not have any information on the prices of unblocked QS. The information available on these tables suggests that smaller blocks have lower prices than larger blocks, that prices tended to vary systematically with the size of the block, and that the price differentials can be substantial.
Table 5.3.4, which reports on sales of blocked QS with all accompanying IFQ, provides good examples of these points. For example, in the 36 to 60 foot vessel class in management area 2C, blocks less than or equal to 1,000 QS units had an average price of $5.66 per pound of 1995 halibut IFQ while blocks between 10,000 and 15,000 QS units had an average price of $8.15 per pound of 1995 IFQ. Thus, the smallest block category in thisexample had a 31% lower price than the larger block category.
This section provides further information on 1995 QS lease prices. As noted elsewhere in this report, there were not many formal leases during 1995. Table 4.4-1 in Chapter 4 showed that there were only 31 halibut lease transactions during 1995 and most of these were for freezer vessel QS rather than for catcher vessel QS.
Table 5.4-1 provides information on the 16 lease transactions for which prices were available. Due to confidentiality restrictions, lease pricing information is only provided for freezer vessels in Areas 2C and 3A. The average QS lease price per pound of 1995 IFQ was $1.04 for freezer vessels in Area 2C, and $.80 for freezer vessels in Area 3A. The decline in prices moving from Area 2C to 3A is consistent with other information in this report, but should be treated with caution due to the paucity of lease transactions.
Table 5.4-2 combines available information on the relationship between "implied" lease prices from QS sales data with QS lease prices from lease transactions. The table provides data by IFQ area and vessel category. Note that these prices have been reported in dollars per QS unit and these prices will naturally vary by area because the 1995 IFQ value of a unit of QS varied by area. Again, in some areas pricing information is missing or is marked as confidential because there were not a sufficient number of observations.
The table shows the annual prices for the sale of QS with all the associated 1995 IFQs, the annual price for the sale of QS with no 1995 IFQs, and the difference between these two prices. The difference between these two prices is an "implied" price for the 1995 IFQ included in the transaction. Thus the difference is an "implied lease price" for the 1995 IFQ. Table 5.4-2 also provides 1995 QS lease prices from the small number of lease transactions.
As can been seen from the table, a comparison of a calculated "implied lease price" with actual listed lease prices cannot be made for any management area since many observations are confidential.
5.5 Sales, Gifts, Trades, and Other Transfers
The 1995 transfer application form did not specifically ask if a QS transfer was a sale, gift, or trade. Absent this, the authors had to use available information and some decisional criteria to decide how transactions should be classified.
For example, on the transfer application form, persons involved in the transfer often indicated whether or not a transfer was a gift in their answer to one of the open ended questions. These answers were most commonly made in the answer to the question: "What is your reason for transferring the QS and/or the IFQ...?" and as an explanation to the other response option for the question: "If this is a purchase of QS or IFQ, how are you financing the purchase...?" Respondents would often answer these questions by writing in gift , gift transfer," "gift to son," or similar answer.
Using this and other information, the transfer transactions were classified into one of five categories:
"Priced Sales" includes all transfers where a price for the QS transferred could be obtained from the transfer application form.
"Other Sales" includes transfers where some monetary exchange occurred but where one could not calculate a price for the QS based on the available information.
"Trades" includes transfers where something was traded for the QS.
"Gifts" includes transfers noted as gifts where there was no immediate evidence of a reciprocal exchange.
"Unknown" includes transfers where no information was provided or insufficient information was provided to classify the transaction.
Table 5.5-1 provides data on the amount of QS transferred in 1995 by management area and the type of exchange. As can be seen, "priced sales," as measured by amount of QS transferred, were the most likely type of exchange during 1995 in Areas 2C through 4B. The percentage of transferred QS that was transferred in priced sales ranged from 42.4% in Area 4B to 74.1% in Area 2C.
The percentage of QS transferred as "gifts" ranged from 0 % in Area 4B to 14.4% in Area 2C. Similarly, the percentage of QS transferred in "other sales" transactions ranged from 1.9% in Area 2C to 27.7% in Area 4B.
Table 5.5-2 provides data on the number of transfer transactions during 1995 by IFQ area and nature of the exchange. The table provides a somewhat similar story to Table 5.5-1. "Priced Sales," as measured by the number of transactions, were the most likely type of exchange during 1995 in Areas 2C through 4B.
5.6 Finance Source on Priced Sales Transfers
The transfer application form contains questions about the source of financing for transfer transactions. Possible sources listed on the form include personal, bank, Alaska Department of Commerce and Economic Development (ADCED), Commercial Fishing and Agriculture Bank (CFAB), seller, processor, and other. In many cases persons indicated more than one source of financing. In other cases transfer application forms had missing information.
Table 5.6-1 provides information on the sources used to finance 1995 "priced sales" transactions. The table provides data on the quantity and percentage of priced QS transfers under each finance method. These data are reported by area. Again, since some reported more than one finance method used, the row percentages in the table total more than 100%.
The data in the table indicate that the finance source was not reported for a substantial amount of the QS transferred in each area. The amount of QS transferred with a "missing" finance method type ranged from 5.5% in Area 4A to 23.7% in Area 4B. There were no priced sales transfers in Areas 4C, 4D, and 4E.
Personal resources were the most common finance source indicated on the transfer application form. A majority of the QS transferred through priced sales indicated personal resources as a finance method in all IFQ areas where these type of transfers occurred. "Commercial Bank" or "Seller" were the next most common method of finance used. "ADEC/CFAB" and "processors" were not indicated as a large source of QS financing for these 1995 priced sales.
Table 5.6-2 provides similar information but substitutes the number of transfer transactions for the amount of QS under each source of financing. This table provides similar information although there are notable differences in percentages. For example, the number of transactions that did not indicate a source of financing ranged from 8.8% in Area 2C to 43.8% in Area 4A. Otherwise, the relative importance of each finance source is roughly comparable to Table 5.6-1.
5.7 Relationship of Buyer and Seller on Permanent Transfers
The transfer application form asked buyers to indicate their relationship with the seller of the QS. Buyers were able to select from one of four possibilities: "business partner," "personal family member," "other relative or friend," and "no relationship." Respondents were asked to select only one of these possibilities.
These categories were designated as "partner," "family," "friend," or "none," respectively in the tables in this section. Note that friend includes "other relative" and that "none" means "no relationship".
Table 5.7-1 provides a summary of the responses to this question for all QS transfers recorded as transfer, sweep-up, and court transactions on the RAM database. The data are provided by management area and show the amount of QS involved in transfers based upon the relationship between the buyer and the seller. The table should be read cautiously because the relationship question was not answered for many transfers. The percentage of QS involved in transfers where the relationship between the buyer and seller was not provided ranged from 7.6% in Area 2C to 24.7% in Area 4B.
Table 5.7-2 provides similar summary data but focuses on the number of transfer transactions rather than the amount of QS involved in the transactions. The results are similar to Table 5.7-1. The number of transfers with "missing" relationship information ranged from 7% in Area 2C to 40.2% in Area 4A.
"None" or "no relationship" was the most likely response in IPHC Areas 2C through 4B, among the transfer applications where the relationship question was answered. This is true if one looks at the number of transactions or at the amount of QS involved in those transactions. This may indicate the rapid development of businesses serving as market- makers who are facilitating transactions among buyers and sellers who are not related and who may be living in quite different locations.
5.8 Intra-cohort and Cross-cohort Transfers
Table 5.8-1 provides 1995 QS transfer patterns by area and resident type. The resident type categories are the five used earlier in the report, namely Alaska Rural Locals (ARLs), Alaska Rural Nonlocals (ARN), Alaska Urban Locals (AULs), Alaska Urban Nonlocals (ARN), and Nonresidents (N). These categories are described in more detail in Section 3.5.3.
The table places all of the transferred QS into categories which indicate the resident type of both the transferor and the transfer recipient. The table allows one to see if transfers tended to be between persons of the same resident type (intra-cohort) or between persons of different resident types (cross-cohort).
For each area, the data provide the amount and percentage of QS transferred from a particular resident type to persons of the same resident type and to persons of other resident types. For example, in Area 2C, 1,238,040 units of QS were transferred from ARLs to AULs during 1995. This represented 40.4% of the QS transferred from ARLs in Area 2C during 1995.
The data indicate that the vast majority of QS transferred by ARNs in 1995 went to other resident types.
In contrast, the majority of QS transferred by AUNs went to AUNs except in Area 2C.
The majority of QS transferred from ARLs during 1995 went to other resident types, with the exception of Area 3B where the majority of QS went to ARLs.
In contrast, the majority of QS transferred by AULs in 1995 went to AULs. The majority of QS transferred by nonresidents during 1995 also went to other resident types except in Area 3B where the majority went to nonresidents.
Table 5.8-2 provides similar data on the number of QS transfer transactions by area and resident types. The transaction data provide a roughly similar story although the percentage of transfer transactions that went from one resident type to another can vary from the percentage of QS that went from one resident type to another because the amount of QS in a transaction can vary widely.
The high percentage of cross-cohort transfers again may be an indication that the rapid development of businesses serving as market-makers helped facilitate transfers among parties who had no prior relationship.
