Attendance:
William Burt, Leo Byrnes, Howard Crise, Lee C. Davis, Richard Dickey, Frank Dutra, Pat Eldridge, Mark Forest, Cliff Goudey, Harlyn Halvorson, Rollin Johnson, Kent Lage, Dale Leavitt, Sandra Macfarlane, Chrystal Mancuso, Link Murray, Stephan Nofield, John O'Brien, Dee Osinski, Mark Simonitsch, Ronald Smolowitz, Tobin Storer, Bud Tackett, Richard Taylor, Jim Tiernan, John Winslow, Rick York

Welcoming Remarks:
John O'Brien opened the meeting and reported on the appointment of Bill Burt and Michael Collins to the Hard Clam Training Program. The group is going to talk to Senator Rauschenbach, who has been very supportive, in order to try and obtain some state funding for this program. He hopes to have some positive word on this by the end of the day. This program will involve about 28 people from the industry who are economically stressed at this point in part because of the conservation measures that are being taken. There was a similar program at WHOI last May that was highly productive. They hope to link research and development with academics. He feels that this is a great opportunity with major possibilities for the towns (i.e. providing seed, aiding shellfish wardens, etc.). Ideally this will lead to a regional approach, at the same time elevating this arena from the often parochial viewpoint.

Harlyn Halvorson then briefly touched on the activities from the Public Hearings on Amendment #6 held in Danvers, MA the day before. He has, therefore, added a report on the New England Fisheries Management Council (NEFMC) to today's agenda. He also brought up a document received from the Massachusetts Audubon Society which will be addressed later on during the meeting. He asked people to go around the room and introduce themselves.

Leo Byrnes, an attorney who has worked with commercial lending institutions as well as people involved in the aquaculture business, spoke next on the financing packages put together by the speakers here today. He has been examining the legal requirements for shellfish aquaculture such as Section 52; chapter 130 which states that before you can apply for a shellfish grant you must obtain a commercial license (see Appendix I). Commercial shellfish licenses must be obtained from the town. However, such licenses are only given out to town residents therefore this is a highly restrictive area. This impacts a person's ability to get financing and other types of technical services. They are working on different measures to pool resources to make financing and other technical services available to the independent growers. They are looking at other states to see what they do. To restrict licenses to residents is really radical agrarian reform. He wanted to find out if there are ways around this potential roadblock.

NEFMC PUBLIC HEARINGS ON AMMENDMENT #6
Ron Smolowitz discussed using the government funding program SK to obtain funds for commercial fisherman in New Bedford to go out and scallop. Four years ago the fishermen were planning to go ahead and aquaculture sea scallops without trying to obtain any sort of permission to do so. They were in Federal waters therefore technically they didn't need permits. At the time, Ammendment #4 was the most recent one. He and Cliff Goudey tried to talk the fishermen out of this and to go about getting formal permission to do so.

They submitted an SK proposal. The initial SK proposal was for $400,000 and was rejected. They finally got a proposal approved for $157,000 of Federal funds with match funds of $120,000 in vessel time and labor. Their goal is to take an identified site and conduct 18 month-long field experiment demonstrating hardware, new technologies and also determine different growth rates, etc. This is the first time ever that anyone tried to get a space in Federal waters (a total non-proprietary experiment). They do have an Army Corps of Engineers Permit. Their intent was to maintain experimental integrity by keeping tow gear out of the area which would require an ammendment to one or more Fishery Management plans, usually a 3-4 year progress.

In August 1994 they were asked to write their own ammendment (also a first time event). They wrote Ammendment #6 to the Scallop Fisheries Management Plan which gives them the rights to conduct an experiment in a specific 9 sq. mile site off of Martha's Vineyard and to exclude gill-netters and commercial tow gear from the site. They have decided to allow lobster fishing and hand digging in the area as long as they receive notice. Finally the council was supposed to vote yesterday to approve the ammendment but they have voted to approve the plan in concept (17 in favor, 1 opposed and 1 abstentia). What needs to take place now is that letters of support must be in by January 30th. The next council meeting will take place on February 27. They are currently working with the NMFS staff to write the regulations for that plan. After going to the council, the regulations will be sent to the Federal registry for final approval. This is the first time ever that the council has voted to allow aquaculture in Federal waters. He feels that this would not have been accomplished were it not for the efforts of this group. Right now this project (called Seastead) SK applicants are made up of the Westport Scallop Corp. and 8 commercial scallop draggers with room for about 4 smaller vessels to be part of the project. They hope to get many more researchers to experiment in the area in order to obtain the most information possible during the 18 months that they have control of the site for to develop a site history and demonstrate the benefits of the project.

BACKERS PROSPECTIVE OF FUNDING FOR AQUACULTURE
Jim Tiernan of Fleet bank and formerly a commercial lobsterman, spoke about his personal committment to create the neccessary infrastructure for bank lending. For a while, people must turn to municipal and federal monies but hopefully later on they will be able to go to the larger financial institutions for backing. He has seen as the greatest failing for the larger institutions such as Fleet to get into the financing picture is because of reasons such as lacking a pool of assets to use as viable collateral, unproven cash flow, etc.

A problem faced by people living in MA is the "Home Rule". What they need to do is pool their resources and seek core expertise. Tiernan remarked that the entrepreneurial spirit of fishermen, operating as individuals, will simply not cut it with large-scale conventional bank financing. You need to have a main storage area, be able to provide the bank with historical data, etc. He feels that one of the greatest hinderances right now is the uneducated banker.

The question was put to him by Ron Smolowitz, about what should be done when a person has economic studies from other countries and some federal monies to back up his project but needs more money from a bank to finance the project. Tiernan's answer was that it would hinge on the people involved, the culture methodology used, and a fairly good amount of capital invested up front. The bank would first want to see some success stories before stepping in.

The subject of crop insurance and whether or not it could be used to convince a loaning institution that the company was worth the risk was then brought up. Tiernan said that although the insurance does exist it costs a lot of money. Whether the company is new or already established will play a part as well. While a lending institution may take this into consideration, it would be the least attractive option. What banks really want to see is the ability to repay on a periodic basis.

The question of the value of "live inventory" was asked. A problem with assessing a company's worth is that fresh product does not have value according to the bank. Bud Tackett explained that what they are really talking about here are moving assets. For example, the fresh product may be quite valuable but if the company folds it isn't worth anything. With others, an inventory "out of water" i. e. frozen gets valued at a fairly high value. Link Murray added that for some banks overseas for instance, value is added by examining your cash balance, accounts receivable, fixed assets, etc. Tiernan reminded the audience that pooled asset value can be thought of as the pooled ability to pay.

Tiernan closed his talk by remarking that whatever else happens, the first tow must be successful. Bankers don't always understand that the market for these products does exist or that the demand is there. It is much more difficult to show a banker an aquaculture project than it is a land based one. Also, it could easily take years for a project to become profitable. The likelihood of a large bank being willing to wait that long is not realistic. If anyone would like to contact him, he can be reached at (401) 278-6544.

PAST EXPERIENCES IN FUNDING THE AQUACULTURE SYSTEM: GROWERS, FOOD PROCESSORS AND DISTRIBUTORS
Link Murray of Blue Gold Mussel spoke on his experiences farming mussels both in the US and in Ireland. He began by conceeding that organized financing can be difficult with the entire process seeming like a waste of time. The first step is to create a plan, not simply a proposal. A proposal is what you write so that other people can make sense of what you are doing. A plan is someting that makes sense to you and the team you are working with. It will help you stay focused on what you are trying to do. A good plan should leave plenty of "fall-back" room in the event of unanticipated problems. Once you are well-organized, the financing possibilities should come out. Once you have a decent plan then you can work on your proposal. Your proposal should really be a function of both the plan and your target audience.

At the first stages of development, you should be thinking small-scale. Use your savings or earnings from other businesses to get started. However, be sure to not ignore your primary source of income. Be creative in your structure but remember that if you are working on a small-scale project you don't stand to lose as much. Murray also agreed with the idea of pooling your resources to end up with a pooling of people.

A possibility is to look for "non-bank" financing by finding a "development bank" or corporation that is trying to develop their expertise in one area such as aquaculture. You should also look outside of your industry to see what's being done. One avenue that Jim Tiernan brought up was contract-growing funding. A unified corporate entity provides credit or equity to growers on a contract basis. There are contracts between the hatcheries and the grower. However, Tiernan does not believe this would work well on the Cape. Murray also mentioned that restaurants want farmed raised species because they need to be able to depend on a steady supply. Therefore it isn't the marketing end, but rather the production end, that will cause the problems. If anyone would like to contact him he can be reached at (508) 993-2635.

STATE LOANS TO PROTECT INDUSTRIAL WORKERS IN FOOD PROCESSING
Bud Tackett started by stating that ISP was established 10 years ago to help the manufacturing companies maintain and create jobs. He looks at about 50-60 business plans each year, of those funded about 5-7 loans, also resulting in 10 - 15 consulting projects. He wants to help companies find commercial loans. The three question he says everyone should be ready to answer:
o What business are you in? Reply: show how unique you are and how enthusiastic, give a history of your company and where it is going, etc.
o How do you make your money? Reply: demonstrate, financial projections (you may find that you really aren't making money at all).
o How do you intend to pay back me, your vendors, etc.?

What financers are interested in are things such as your leadership qualities, character, etc. They will also look at where you are and where you are headed. To develop alliances you need to decide what is feasable. Find a way to turn what's in the water into cash or an asset. Tell lenders how many jobs you will create. Higher priority will be given to endeavors that will target a large section of those people currently unemployed such as fishermen. There are federal and state funds that are on their way. You must develop your plan by taking areas such as technical assistance, marketing, financing and business plan that are required all into consideration. Get used to thinking of it as a business. If you can develop a packaged product than you have an edge. There are all types of production jobs that will be created. ISP has a book full of agencies for funding in this state that are targeted for the economc development of this industry in Massachusetts.

SUBCOMMITTEE PROGRESS REPORTS
Cliff Goudey spoke on Bill Brennan's interpretation of the New England Fisheries Management Council's role in aquaculture in the EEZ (Exclusive Economic Zone). He feels it is appropriate that this workgroup makes recommendations since that council will be deciding He has put together a summary (see Appendix II) and is drafting a letter of response to the council. Dale Leavitt brought up the point that the states lacked the manpower and the facilities to identify important areas. He is working with Dr. Bob Egdgar from UMASS-Dartmouth and Frank Dutra on an attempt to identify important areas for shellfishing. They are compiling a reference library focused on sea scallops. They are also gathering data on the physical environmental parameters of various locations. They hope to use geographic information software (G.I.S.) to map out potential sites. Another thing they are trying to accomplish is generating a map of the site with the appropriate conditions overlaid.

POSITION STATEMENT ON AQUACULTURE FROM MA AUDUBON SOCIETY
Harlyn Halvorson discussed the letter he received from the Massachusetts Audubon Society (see Appendix III). Their position statement raises issues that need to be addressed by the aquaculture industry. This group should inform the MA Audubon group of the positive aspects of sea scallop aquaculture to alleviate the Society's concerns. Ron Smolowitz added that the group needs to constructively point out what needs to be done as far as bird predation is concerned because the Society has a great deal of influence.

NEXT MEETING
The next meeting was originally scheduled for March 8, 1996, but subsequently we learned of a conflict. Therefore, the next meeting will be held on March 15, 1996 from 9:30 am to noon at the CCEDC. This will be followed for some by a meeting from 1 pm to 3 pm of the Seastead Technical Advisory Panel also at the CCEDC.

Appendix I: Draft Memorandum by Leo A. Byrnes
Appendix II: Summary of Report by William J. Brennan
Appendix III: Massachusetts Audubon Society position statement

minutes taken by Chrystal Mancuso