SD19 - Security Interests in Farm Products
Executive Summary: The joint subcommittee held two meetings in 1986, on October 14 and December 15. The first meeting was intentionally postponed to see if efforts to have the effective date of the federal legislation, December 23, 1986, delayed by Congress were successful and to see what other states had done in the area. During these meetings the joint subcommittee heard a great deal of testimony from representatives of the following organizations: the Virginia Bankers Association, the Virginia Agribusiness Council, the State Corporation Commission, the Virginia-Carolina Peanut Growers' Association, Continental Grain Company of Norfolk, Virginia, the Virginia Farm Bureau Federation, the Farmers' Home Administration, Dominion Bank and Sovran Bank. At its October 14 meeting the joint subcommittee found that, as in the previous year, those representing banking interests and those representing farming interests disagreed in regards to the most appropriate action the Commonwealth should take in light of Congress' action which eliminated the farm products exemption from the Uniform Commercial Code. Those representing banking interests indicated that the establishment by the State Corporation Commission of a central filing system where liens for farm products would be filed and such information would be available to potential buyers would be the most appropriate action. Those representing farming interests indicated that a pre-notification system whereby banks would notify potential buyers of any liens on the products would be the most appropriate action. In regards to a central filing system, the State Corporation Commission testified that they did not have all of the information needed to determine the costs of such a system, such as the volume of loans for all agricultural purposes, how such loans are secured, etc., and felt that a survey would provide this information. The joint subcommittee determined that since a survey might help them in determining the most appropriate action Virginia should take they would sponsor one, a copy of which appears as Appendix 1, which would be sent to commercial banks, farm credit associations, the Farmers' Home Administration, the Commodity Credit Corporation, feed, seed and supply dealers, etc. They also requested that legislation, similar to a Michigan statute that established a pre-notification system, be drafted for discussion at the next meeting. At its December 15th meeting, the joint subcommittee learned that attempts to postpone the effective date of the federal legislation were unsuccessful, heard from the State Corporation Commission regarding the results of the survey, and went over the legislation establishing a pre-notification system that they had requested at the October 14 meeting. A representative of the State Corporation Commission testified that although the results of the survey were not complete nor totally reliable, they obtained some valuable information from them. From the results they were able to estimate that a central filing system would handle somewhere between 68,000 and 104,000 liens, cost somewhere in the range of $600,000 to $800,000 to set up, including the software costs and computer time rented from the Department of Information Technology for system development, and take twelve months to implement. The joint subcommittee then reviewed the legislation they had requested at the previous meeting, which, modeled after a Michigan statute, set up a pre-notification system. After making various changes to it they decided to recommend that the legislation be adopted by the 1987 General Assembly. They also decided to recommend the passage of a resolution continuing the study so that the subcommittee could monitor the progress of the pre-notification system and any federal legislation that might be passed in 1987. They determined that a meeting would be held in 1987 only if problems arose with the newly enacted federal legislation or if the pre-notification system was not progressing as expected. |
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