04/05/2005 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB2 | |
| HB49 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 2 | TELECONFERENCED | |
| += | HB 28 | TELECONFERENCED | |
| += | HB 36 | TELECONFERENCED | |
| += | HB 49 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 5, 2005
8:11 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Co-Chair
Representative Bill Thomas, Co-Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 2
"An Act relating to taxes regarding certain commercial passenger
vessels operating in the state; and providing for an effective
date."
- HEARD AND HELD
HOUSE BILL NO. 49
"An Act relating to municipal aid grants; and providing for an
effective date."
- MOVED CSHB 49(CRA) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 2
SHORT TITLE: TAX ON COMMERCIAL VESSEL PASSENGERS
SPONSOR(S): REPRESENTATIVE(S) GATTO
01/10/05 (H) PREFILE RELEASED 12/30/04
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) CRA, TRA, FIN
03/29/05 (H) CRA AT 8:00 AM CAPITOL 124
03/29/05 (H) Heard & Held
03/29/05 (H) MINUTE(CRA)
04/05/05 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 49
SHORT TITLE: MUNICIPAL AID GRANTS
SPONSOR(S): REPRESENTATIVE(S) ROKEBERG
01/10/05 (H) PREFILE RELEASED 1/7/05
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) CRA, FIN
03/03/05 (H) CRA AT 8:00 AM CAPITOL 124
03/03/05 (H) Heard & Held
03/03/05 (H) MINUTE(CRA)
04/05/05 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
JOHN PEARSON
Hyder Board of Trade, Inc.
Hyder, Alaska
POSITION STATEMENT: Testified in support of HB 2, with two
modifications.
CODY RICE, Staff
to Representative Carl Gatto
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke on behalf of the sponsor of HB 2,
Representative Gatto.
MIKE WINDRED
Alaska Travel Adventures
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 2.
DON HABEGER, Regional Vice President
Government & Community Affairs
Royal Caribbean Cruises
Juneau, Alaska
POSITION STATEMENT: Expressed concerns with HB 2.
SUSAN BURKE, Attorney at Law
Gross & Burke, PC
Juneau, Alaska
POSITION STATEMENT: Representing the North West Cruiseship
Association, expressed legal concerns with HB 2.
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 49.
ACTION NARRATIVE
CO-CHAIR BILL THOMAS called the House Community and Regional
Affairs Standing Committee meeting to order at 8:11:15 AM.
Representatives Olson, Thomas, Kott, LeDoux, and Neuman were
present at the call to order. Representatives Kott and Cissna
arrived as the meeting was in progress.
HB 2-TAX ON COMMERCIAL VESSEL PASSENGERS
CO-CHAIR THOMAS announced that the first order of business would
be HOUSE BILL NO. 2, "An Act relating to taxes regarding certain
commercial passenger vessels operating in the state; and
providing for an effective date." [Before the committee was
CSHB 2, Version 24-LS0003\G, Kurtz, 2/17/05.]
8:12:10 AM
CO-CHAIR OLSON moved to adopt CSHB 2, Version 24-LS003\L, Kurtz,
4/1/05, as the working document. There being no objection,
Version L was before the committee.
8:12:30 AM
JOHN PEARSON, Hyder Board of Trade, Inc., informed the committee
that Hyder, an unincorporated community of about 130 residents,
is located at the Canadian border at the end of the Portland
Canal. Hyder has a unique relationship with British Columbia.
The community, while isolated, is directly linked to the Lower
48 by a paved highway. Tourism is the primary industry of
Hyder. In fact, the U.S. Forest Service recorded 56,000
independent visitors who came to view the bears at Hyder. Last
year was also the first year that Hyder was actively engaged in
the cruise tourism industry. Next year, Hyder will increase
port calls by about 300 percent. Mr. Pearson related support
for HB 2 with the following two modifications. Mr. Pearson
requested an exclusion of the Portland Canal because it is
recognized as an international waterway similar to those waters
that Alaska Marine Highway vessels travel from Bellingham to
Ketchikan.
8:15:10 AM
REPRESENTATIVE NEUMAN inquired as to the location of the
language in the legislation.
CO-CHAIR OLSON specified that the language [to which Mr. Pearson
is referring] is "marine waters of the state", which is located
on page 2, line 2 of Version L.
8:16:44 AM
MR. PEARSON informed the committee that the Portland Canal is
flanked by British Columbia on one side and Alaska on the other
side. Any vessel traveling between Prince Rupert, British
Columbia, and Stewart, British Columbia, without ever making a
port call in Alaska would be required to pass through Alaska
waters, which is similar to the situation when the Alaska Marine
Highway operated between Hyder, Alaska; Stewart, British
Columbia; and Ketchikan, Alaska. Therefore, the request is to
only exclude Portland Canal. He pointed out that only two U.S.
communities are exempt from the Jones Act: Hyder, Alaska and
Savannah, Georgia. Mr. Pearson related his belief that any
vessel making landings at Stewart would be considered the same
as any other community in Alaska.
MR. PEARSON announced that the Hyder Board of Trade, Inc., also
seeks the inclusion of unincorporated communities while
requiring documentation that indicates that there is a port
call. This legislation, he related, provides unorganized
communities the ability to do some economic development, in the
area of tourism, that hasn't done before. He noted that for a
community such as Hyder to meet the federal standards and
mandates of homeland security is a major task.
8:20:17 AM
REPRESENTATIVE NEUMAN asked if British Columbia presently has a
head tax.
MR. PEARSON replied no. In further response to Representative
Neuman, Mr. Pearson clarified that he isn't requesting an
exemption from taxation for Hyder. However, Hyder would like to
share in the proceeds. Mr. Pearson, in response to
Representative Neuman, specified that Hyder is an unorganized
borough and wouldn't receive funds under this legislation.
However, Hyder anticipates incorporating in the next five years,
he related.
8:22:05 AM
CODY RICE, Staff to Representative Carl Gatto, Alaska State
Legislature, confirmed that he and Mr. Pearson spoke on this
issue. The sponsor's and Legislative Legal and Research
Services' interpretation of HB 2 is that no matter whether a
community is identified as organized or not if the community is
identified as a port of call, that community will be considered
one of the five ports of call and receive funds. The
legislation only refers to an incorporated city within a
borough, in which case the intention was to split the revenue
because of shared port and harbor costs. With regard to vessels
traveling between Canadian ports without stopping in an Alaskan
port, under MTSA applying this tax would be illegal. He
mentioned that the committee should have an amendment that would
exempt vessels that don't stop at an Alaska port of call in
order to provide some clarity.
8:24:26 AM
CO-CHAIR THOMAS related his understanding that the smaller
vessels that anchor outside the port would be exempt from this
proposed tax. However, he said he thought the idea was to [tax]
those who impact Alaska.
MR. RICE said whether [such vessels are exempt from this
proposed law] would depend upon the Department of Revenue's
interpretation of the law. However, he suspected that anchoring
wouldn't meet MTSA standards for taxation purposes and that
passengers would actually have to be off-loaded.
CO-CHAIR THOMAS interjected that passengers are off-loaded from
these vessels that are anchored [outside the port].
MR. RICE suggested then that in such a situation, it would
likely be considered a port of call.
8:26:06 AM
MIKE WINDRED, Alaska Travel Adventures, spoke in opposition to
HB 2. He characterized the proposal in HB 2 as a punitive tax
with limited spending potential. Furthermore, the proposed tax
doesn't tax the intended target, the cruise line, rather it
taxes the visitor. Mr. Windred recalled the previous
presentation on HB 2 from which he understood one of the reasons
for the tax is that cruise lines make a lot of money, and
therefore the state should receive a portion of it. However,
that doesn't seem to be the correct avenue, he opined. Mr.
Windred pointed out that there has been no risk sharing when the
cruise industry has built a $600 million ship. In fact, there
have been several small cruise lines, such as World Explorer
Cruises, that stopped coming to Alaska after [the terrorist
attacks of September 11, 2001] because it couldn't make enough
money. Mr. Windred informed the committee that the cruise ship
industry prefers a broad-based tax rather than a targeted tax.
He highlighted that the other taxes mentioned: timber, mining,
and oil taxes are industries that actually extract something
from the state. However, the visitor industry is one in which
the visitors leave something, money, when visiting. The
aforementioned money is left with [the state's] businesses,
which then in turn spend money in the state.
MR. WINDRED turned to the limited spending potential of the
proposed tax revenues, which are directly tied to the ship and
its cargo. This tax won't allow money to be deposited into the
general fund to be distributed to outlying communities, which
will be hurt the most by this proposed tax. This tax taxes the
visitor rather than the industry, he highlighted. Furthermore,
visitors already pay a substantial amount in port fees and dues.
For example, a visitor to Juneau will pay about $20 for ship
pilotage fees, $5 for Juneau's local head tax, $1.18 for a port
development fee, $1 for a docking fee, and a $.50 tonnage tax.
Therefore, before a visitor has even left the ship he/she pays
about $28.00. In Juneau visitors also pay a sales tax, a
loading permit fee, a land use fee, and an airport fee. The
aforementioned doesn't include the expenses of goods a [tourism]
company buys and on which it pays sales tax, not to mention
corporate income taxes. Therefore, he charged that the visitor
is already paying a substantial fee.
MR. WINDRED posed a scenario in which a family of four taking a
$1,000 per person cruise would face $200 in taxes under this
proposal. He informed the committee that surveys have shown an
additional charge of $50 would deter 17 percent of visitors from
coming to Alaska. Moreover, 48 percent, including the
aforementioned 17 percent, say the decision to visit Alaska
would be marginal [with a $50 tax]. Even those who come to
Alaska will decide what not to do or spend when visiting Alaska.
He suggested that those things cut first are the expensive back
country/rural area tours, the extended tours, and the shore
excursions. Mr. Windred said he can relate this with much
certainty due to the experiences Alaska Travel Adventures has
had.
8:36:06 AM
REPRESENTATIVE NEUMAN related his understanding that although
the cruise ships make a substantial profit, they don't pay
corporate taxes to the state.
MR. WINDRED agreed, but added that some of the subsidiaries of
the cruise ships do [pay corporate taxes to the state], such as
Gray Line of Alaska.
REPRESENTATIVE NEUMAN turned attention to Mr. Windred's earlier
example of a cruise that costs $1,000 per person, and pointed
out that the $200 tax for a family of four would be in relation
to $4,000 for a cruise for four. Representative Neuman recalled
that Mr. Windred had said that a sales tax is charged on all the
tours that Alaska Travel Adventures offers.
MR. WINDRED agreed.
CO-CHAIR THOMAS interjected that the sales tax is at the local
level.
REPRESENTATIVE NEUMAN asked if [Alaska Travel Adventures]
transfers the local level sales tax or does the company charge a
fee on top of that local level sales tax.
MR. WINDRED clarified that Alaska Travel Adventures collects the
appropriate sales tax for that local community and it's returned
to the community.
REPRESENTATIVE NEUMAN characterized this proposal as a user fee.
He related the burden that the tourism industry creates on local
communities, which is a substantial cost to the local
communities. He noted his disagreement with Mr. Windred's
earlier suggestion that this proposed tax is to support the
general fund (GF).
MR. WINDRED said that he couldn't think of an instance in which
the individual or company using the [local] services didn't pay
for the services directly. For instance, Bartlett Regional
Hospital (BRH) does fairly well from the visitor industry. He
suggested that BRH provides services to locals that it wouldn't
be able to otherwise due to the [profit] made from the tourists.
Therefore, he opined that most of the services are paid for by
the visitors to the state. "I would have a hard time believing
... that there are places where there's a large burden on the
state, where those people aren't paying for those services," he
opined.
8:41:12 AM
REPRESENTATIVE CISSNA recalled Mr. Windred's earlier comment
that the cruise lines bring something to the state.
Representative Cissna pointed out that the cruise lines bring
garbage and pollution. After talking with different communities
about their local economy, she has discovered that the tourism
industry is up. However, tourism isn't necessarily beneficial
because it brings in many summer workers and those who build an
industry for the summer are left with no income in the winter.
The aforementioned people will rely on state services in the
winter and thus it's a [burden] for the state and the local
communities. With regard to medical services, she pointed out
that medical services are already stretched in smaller areas.
Representative Cissna concluded by opining that the proposal
embodied in HB 2 sounds like a user tax because it pays for many
of the services that have built up for the cruise line industry.
MR. WINDRED agreed, but said the issue with this legislation is
in regard to how to tie the money to the [rural areas] when the
tax collected has to be tied to the cruise ship and its cargo.
At some point, the money can't be spent in a rural community
because it isn't tied to the cruise ship. However, a 2 percent
sales tax, even if it were seasonal, could be spent anywhere in
Alaska, including rural communities.
8:45:20 AM
REPRESENTATIVE LEDOUX surmised that if the cruise ship tax
revenue goes specifically to the directly impacted communities,
then there would be more money in the state treasury to go to
the more remote communities.
MR. WINDRED opined, "I think within the area that you'd be
offsetting ... the state isn't spending a lot right now, that
most of that is already either offset through the visitor or
there isn't a very high cost there, at this point."
REPRESENTATIVE LEDOUX related her understanding that Mr. Windred
had just testified that there are significant costs to the
outlying areas, but those areas wouldn't be impacted by the
cruise ship tax.
MR. WINDRED specified, "The place you'd have to offset to spend
... the general fund money elsewhere would be within the core of
where the ship is traveling. So, that wouldn't include that
rural community."
REPRESENTATIVE LEDOUX surmised then that the tax revenue from
the cruise ships places more money in the state treasury and
it's spent on the communities directly impacted. Once those
communities are addressed with the [cruise ship tax revenues],
more GF is left for other areas.
CO-CHAIR THOMAS explained that the first five ports receive the
revenue generated from the tax, and the remainder of the money
is placed in the GF. The question then becomes how to get money
to Point Barrow when the cruise ship visitors departed in
Skagway and traveled by bus to [Point Barrow]. The chances that
the money left in the GF is dispersed to rural areas is more
difficult.
8:48:23 AM
REPRESENTATIVE LEDOUX recalled Mr. Windred's speculation that
imposing a head tax would have ramifications for other land-
based industries. Therefore, she asked whether Mr. Windred had
a study illustrating that people visiting Juneau, with its $5
head tax, have reduced their spending on land-based [tours] by
$5 a person.
MR. WINDRED replied no. However, during the same timeframe [as
the $5 tax was imposed in Juneau] several other large factors
occurred, such as [the terrorist attacks of September 11, 2001]
and the economic decline. Therefore, such a study would be
difficult to perform.
REPRESENTATIVE LEDOUX asked if Mr. Windred would be able to
prove that everyone spent $5 less during a time when there
aren't other factors to consider.
MR. WINDRED opined that a $5 port tax wouldn't have nearly the
impact as a $50 port tax. However, $200 in tax for a family of
four is an impact on where that family spends its money. Mr.
Windred said he would prefer the money be spent with [local
businesses] that can then spend that money with the state, which
helps the economy much more than the proposed tax revenue that
goes directly to the GF. In fact, a statewide sales tax would
encourage travel throughout the state.
8:51:44 AM
REPRESENTATIVE SALMON asked if other states charge a tax such as
that proposed in HB 2.
MR. WINDRED replied not to his knowledge, although there are
port fees in other states. The State of Alaska already has port
fees for each community visited. He indicated that there aren't
any specific head taxes to enter the state due to some
interstate commerce laws.
REPRESENTATIVE SALMON asked if Alaska's port fees are comparable
to those charged on the West Coast.
MR. WINDRED deferred to Mr. Habeger.
8:53:17 AM
REPRESENTATIVE CISSNA turned to independent travelers to Alaska,
and asked if there have been studies regarding whether cruise
ship visitors take a separate trip to outlying areas that aren't
part of the [cruise].
MR. WINDRED confirmed that there are some studies regarding the
number of individuals who, post cruise, take trips [to outlying
areas]. He informed the committee that part of Alaska Travel
Adventures is a recreational vehicle (RV) business. He further
informed the committee that since [the terrorist attacks of
September 11, 2001] people weren't willing to spend money on a
package [that included a cruise and RV trip]. Mr. Windred said
there is a huge tie in all the visitors that come to Alaska
because of the marketing of the state. Cruise lines, he
related, spend well over $70 million on marketing Alaska, which
creates an image of Alaska. Largest portion of the state's
match [in marketing] amounts to about $10 million spent on
marketing in Alaska in the travel planner. One of the primary
focuses of the travel planner is independent travel. He
highlighted that the cruise ship industry is a huge portion of
making the travel planner happen.
8:57:35 AM
MR. WINDRED, in response to Representative Cissna, explained
that the travel booklet is put out by the Alaska Travel Industry
Association, which is a private marketing group.
REPRESENTATIVE CISSNA interjected that the aforementioned
private marketing group receives state assistance. She then
pointed out that although Mr. Windred has used the RV business
as an example [of tourism reaching outlying areas], the real
outlying areas aren't on the road system.
MR. WINDRED agreed, but pointed out that the booklet provides
names and advertisements for direct bookings [to outlying/remote
areas].
8:59:17 AM
REPRESENTATIVE NEUMAN recalled that the governor cut the tourism
marketing funds quite a bit last year. He inquired as to how
much the state pays [for marketing].
MR. WINDRED estimated that the state pays a little over $4
million to match the funds the [tourism industry] puts forth
[for marketing]. The total [funds for marketing] amounts to
almost $10 million.
9:00:43 AM
CO-CHAIR THOMAS pointed out that page 24 of the McDowell Group
report in the committee packet may answer some of Representative
Cissna's questions regarding the number of travelers to the
Interior and what those travelers spend there. The report
specifies that $100 million was spent [by passengers and crew]
in Southcentral and $28 million in the Interior.
9:01:11 AM
MR. WINDRED referred to the January 27, 2004, letter from
Michael Tibbles, Legislative Director, Office of the Governor.
The aforementioned letter specifies that about $115 million in
state spending is [potentially] attributable to the cruise
industry. However, the McDowell Group performed a study [dated
April 22, 2004], which shows that instead of the $155 million in
state funds there was only about $900,000 most of which came
through the Division of Sport Fish and the fish and wildlife
protection [division]. He said that both of the aforementioned
are based on a percentage. From having run sport fishing
businesses, Mr. Windred related that not many extra personnel
are hired for enforcement, which seems to happen "because it's
already there." In a situation in which the cruise ship
industry disappeared and the charter boats no longer existed,
the impact to the Division of Sport Fish would mainly be to its
revenue side rather than its cost side. Therefore, he indicated
his agreement with the McDowell Group's estimate of the cost to
the Division of Sport Fish of $600,000.
MR. WINDRED then directed attention to the McDowell Group's
packet of information entitled, "The Economic Impacts of the
Cruise Industry in Alaska, 2003" dated October 2004.
The committee took an at-ease from 9:04 a.m. to 9:21 a.m.
9:22:03 AM
DON HABEGER, Regional Vice President, Government & Community
Affairs, Royal Caribbean Cruises (RCC), first addressed the
uniqueness of HB 2 by pointing out that no other state has any
kind of head tax such as proposed in HB 2. Although one might
say Hawaii has a head tax, there are some major differences.
One of which is that all of Hawaii's harbors are state-owned,
and therefore it's all controlled by Hawaii's department of
transportation. He explained that Hawaii does have a per
passenger wharfage fee for the use of the dock, which ranges
from $.35-$5.00. Hawaii does have other fees such as those
based on the length of the vessel and the number of lines. Mr.
Habeger then turned to the challenges [HB 2 would create for]
Alaska businesses. He then provided a handout entitled, "Alaska
Businesses Will Pay" to the committee. The aforementioned
document includes a pie chart, which addresses the potential
economic impact of a $50 or $100 head tax on consumers coming to
Alaska. The response was that there would be a definite impact
on the tourist's spending once he/she arrives in Alaska. Mr.
Habeger opined that as "we get" further away from the core
economic activity, Alaska's businesses are placed in more
jeopardy. For example, one of the ground presidents of RCC
visited Nome. While that individual likes Nome, it was
determined that [offering tours] in Nome would be more
challenging if the cost increased, such as would be the case
with this proposed tax.
MR. HABEGER then turned to the [cruise ship] industry's own
municipal revenue sharing. The earlier mentioned McDowell Group
report discusses the over $30 million that the industry pays for
its usage of docks, including some private docks, bed taxes, and
airport fees. Therefore, Mr. Habeger said [RCC] believes that
the cost to the state and municipalities isn't as much as the
industry brings to the state. Mr. Habeger then recalled an
article regarding a Florida lawsuit that the sponsor referenced
during his presentation. He informed the committee that the
aforementioned lawsuit was dismissed without prejudice. The
lawsuit was a class action suit that alleged that RCC was in the
practice of overcharging customers through taxes and fees.
However, investigation showed that, in fact, RCC is under
charging and thus the case was dismissed.
9:30:28 AM
REPRESENTATIVE LEDOUX related her understanding that at the end
of a cruise, the passengers are given envelopes suggesting how
much to tip employees on the ship. Therefore, she asked whether
the cruise ship industry is worried that tips would detract from
the on shore [revenues].
MR. HABEGER answered that it's not an area that has been
considered. He highlighted that the cruise ship industry is a
service industry, which often includes a tip portion of an
employee's wage. Although the [cruise ship industry] provides
suggested amounts, it's left to the discretion of the consumer
of the service.
9:32:36 AM
SUSAN BURKE, Attorney at Law, Gross & Burke, PC, representing
the North West Cruiseship Association (NWCA), informed the
committee that HB 2 involves three areas of law: the tonnage
clause of the U.S. Constitution; the MTSA; and the privileges
and immunities clause of the U.S. Constitution. She explained
that the privileges and immunities clause specifies that
residents of one state enjoy the same privileges of immunity
when they travel to another state. The aforementioned is
referred to as the right to travel between and among the states.
Furthermore, the equal protection clause of the U.S. and Alaska
Constitutions specifies that similarly situated people can't be
treated differently without a valid reason. Ms. Burke
highlighted the language in the federal statute that restricts
the proceeds of passenger fees to only provide services to the
vessel. She said she understood the concerns of Representatives
Neuman and Cissna regarding impacts from tourism to communities,
but she pointed out that some of those impacts aren't from
cruise ship tourists.
MS. BURKE reiterated that, by law, the proceeds [of the proposed
tax] can only be used for services to the vessel. However,
under the Commerce Clause the aforementioned have been limited
to marine pilot fees, harbor only police, harbor fire
protection, docking facilities, wharfing facilities, and the
like. Under HB 2, $5 of the $50 fee goes to the municipalities
in which each of the first five ports of call are located.
Under HB 2, 25 percent [of the $50 fee] is set aside for
regional impacts for Prince William Sound and Southeast Alaska.
However, if it's not a port, she didn't see how, practically,
the entity could provide a service to the vessel that enhances
safety and efficiency. She said she couldn't think of anything
on which the state, since it doesn't own any of the docks, could
possibly spend the money. Therefore, she questioned the point
of this proposal. Ms. Burke recalled Representative Gatto's
remarks at a prior hearing in which he indicated that the
purpose of the head tax is to compensate the state for its
contributions to the industry. However, that's not a service to
vessel. Therefore, she suggested that a broad-based sales tax
that everyone has to pay is preferable to the proposal embodied
in HB 2. Although the revenue going to the five ports of call
comes close to meeting the requirements of MTSA, Juneau, a
community that already charges $5 per head, already finds itself
in a difficult position finding projects that fall under the
MTSA. The farther away from the port the project that uses
these funds, the less likely the head tax is legal, she opined.
9:39:39 AM
MS. BURKE turned to the constitutional provision regarding the
right to travel. In an old U.S. Supreme Court case, Crandall v.
Nevada, the State of Nevada imposed a $1 fee on anyone leaving
the state by stagecoach or train. The case rose to the U.S.
Supreme Court, which ruled that such a fee can't be imposed
because people have to be able to travel freely between states.
She emphasized that the U.S. Constitution doesn't allow such
fees to be charged to residents of sister states. Furthermore,
there are difficulties with regard to determining whether an
individual is traveling on business or pleasure. She
highlighted that the Commerce Clause specifies that one can't
discriminate against nonresidents with regard to commerce.
Therefore, Ms. Burke characterized [HB 2] as having a serious
constitutional impediment even if one believes the matter can
get past the tonnage clause and the federal statute issues.
9:42:09 AM
MS. BURKE moved on to the concept of user fees, and stated that
there's no question that user fees are constitutional. However,
there are limitations. For instance, user fees can only be
charged to those who are actually using the service for which he
or she is being charged. The aforementioned isn't the case with
HB 2 because an individual that doesn't get off the cruise ship
is charged the $50 tax, and therefore the proposed tax isn't a
user fee in that sense. "It's not a user fee in the sense that
cruise ship passengers are a peculiar source of the impact that
may be perceived by communities," she stated. She highlighted
that people from Anchorage who might travel to the Mat-Su
Borough for summer recreational activities cause impacts. Ms.
Burke explained that a legal user fee has to be
nondiscriminatory and charged to residents and nonresidents
alike, which this proposed tax doesn't do. In conclusion, she
recalled Representative Gatto's testimony from a prior meeting
in which he suggested that the courts could work out whether the
legislation is constitutional or not. However, Ms. Burke opined
that the legislature does have an obligation to be concerned
about these constitutional issues.
9:45:04 AM
REPRESENTATIVE NEUMAN asked if there is any middle ground on
this issue and the legal concerns raised by Ms. Burke.
MS. BURKE replied that for a passenger head tax the answer is
no. Again, she suggested that a broad-based sales tax might
work. This proposed tax won't work because of the federal
statute specifying that the proceeds of this tax can't be used
for anything other than a service to the vessel and the right to
travel.
9:46:28 AM
REPRESENTATIVE LEDOUX referred to the memo from Mr. Tibbles,
which highlights that many communities charge embarking or
disembarking taxes. She asked if those taxes have been
challenged constitutionally and if so, she inquired as to the
outcome of such challenges. If there has been no constitutional
challenge, she inquired as to why not.
MS. BURKE clarified that she hasn't researched each of those
municipal taxes. However, she emphasized that those are
municipal taxes and [those are all charged in municipalities]
with ports. She further clarified that she hasn't researched
whether the amount charged is reasonable in relation to the
amount of services provided, although she assumed that the
municipalities are providing services to vessels because they
are ports. Ms. Burke reminded the committee that these vessels
pay a head tax in Juneau and substantial port fees at every
place they go in Alaska and elsewhere. Under the tonnage clause
those are permissible. In further response to Representative
LeDoux, Ms. Burke confirmed that the Interstate Commerce Clause
would apply to municipalities as well as to the state.
9:48:04 AM
REPRESENTATIVE KOTT inquired as to how the related initiative
would dovetail with HB 2.
MS. BURKE said that although she hasn't had an opportunity to
review Version L, Version G is fairly similar to the initiative.
Ms. Burke said that she didn't know what would happen if both HB
2 and the initiative were to pass.
CO-CHAIR THOMAS announced that HB 2 would be held over.
9:49:37 AM
REPRESENTATIVE KOTT asked if there is any data showing how many
Alaskans actually participate in the cruise ship industry versus
visitors.
MR. HABEGER answered that he didn't believe such research has
been done. Although there is often review of market shares from
various regions, he didn't believe the data is refined down to
states. He said he would have to check into whether such
information could be obtained.
REPRESENTATIVE KOTT turned to the transitional language in HB 2,
which makes the legislation effective immediately. He inquired
as to when families planning a cruise do so [in relation to the
time of the cruise].
MR. HABEGER highlighted that consumer purchasing habits have
changed since [the terrorist attacks of September 11, 2001] such
that there was a shrinking of time before the decision-making
process. However, that timeframe is expanding again. Mr.
Habeger estimated that people plan a cruise about a year to six
months in advance of the cruise.
REPRESENTATIVE KOTT surmised that if HB 2 takes effect on its
effective date, there will be a large number of visitors who
would've probably purchased tickets prior to November.
Therefore, the cruise ship industry would be obligated to pay
whatever tax is in place, although it hadn't passed it on to the
consumer who purchased the ticket prior to the transitional
date.
MR. HABEGER replied yes, adding that the industry would be faced
with whether to seek the money from the consumer as an add-on or
to pay for it from the cruise line's profit.
REPRESENTATIVE KOTT asked if it would be legal to seek the funds
[for the newly implemented tax] from a consumer that has already
purchased his or her ticket.
MS. BURKE said she wasn't sure of the answer, but she supposed
it has to do with the incidence of the tax. Normally, a tax is
imposed at the moment the object of the tax takes place. This
proposed tax is more like an arrival tax, she opined.
Therefore, in terms of traditional taxing concepts, the
passenger would be obligated to pay it. In further response to
Representative Kott, Ms. Burke specified that it wouldn't be
retroactive if the tax is imposed on the act of arriving in
Alaska.
REPRESENTATIVE KOTT suggested that there is some advertising by
the cruise ship industry that would specify a price, but [upon
passage of HB 2] the consumer would be asked to pay an
additional tax.
MS. BURKE pointed out that this would be the state government
imposing the tax and it would be the law. In further response
to Representative Kott, Ms. Burke said that it would be a
business decision whether to refund an individual's ticket [who
didn't want to pay the additional tax]. She stated that she
didn't believe the cruise line would be legally obligated to
[refund tickets].
10:00:04 AM
CO-CHAIR THOMAS reminded the committee that HB 2 would be held
over.
HB 49-MUNICIPAL AID GRANTS
CO-CHAIR THOMAS announced that the final order of business would
be HOUSE BILL NO. 49, "An Act relating to municipal aid grants;
and providing for an effective date."
10:00:27 AM
REPRESENTATIVE NORMAN ROKEBERG, Alaska State Legislature,
sponsor, noted that he has reviewed an amendment, labeled 24-
LS0192\G.1, Cook, 4/1/05, from Representative Salmon.
Representative Rokeberg said that he wants to move the
legislation so that he can request a hearing in the House
Finance Committee. Representative Rokeberg related his
understanding that the aforementioned amendment would add some
$10,000 for unincorporated areas. Representative Rokeberg
recalled that before revenue sharing was not funded at all,
[unincorporated communities] were granted funding that had
decreased to the $3,500 level. He left [whether to adopt the
amendment] to the committee to decide, but noted that he's
trying to manage the fiscal note rather than increase it.
10:01:56 AM
REPRESENTATIVE SALMON moved that committee adopt Amendment 1,
labeled 24-LS0192\G.1, Cook, 4/1/05, which read:
Page 1, line 1, following "grants":
Insert "for municipalities and certain
unincorporated communities"
Page 1, line 7, following "subsection.":
Insert "Each fiscal year the department shall pay
a municipal aid grant of $10,000 to each community.
The department with advice from the Department of Law
shall determine whether there is in each community an
incorporated nonprofit entity or a Native village
council that will agree to receive and spend the grant
for the benefit of the community. If there is more
than one qualified entity in a community, the
department shall pay the grant to the entity that the
department finds most qualified to receive and spend
the money. The department may not pay the grant to a
Native village council unless the council waives
immunity from suit for claims arising out of
activities of the council related to the grant. A
waiver of immunity from suit under this subsection
must be on a form provided by the Department of Law.
If there is no qualified incorporated nonprofit entity
or Native village council in a community that is
willing to receive the grant, the grant for that
community may not be paid. Neither this subsection
nor any action taken under it enlarges or diminishes
the governmental authority or jurisdiction of a Native
village council."
Page 1, lines 10 - 11:
Delete "equal grants in the reduced amount to all
municipalities"
Insert "grants reduced by an equal percentage to
all municipalities and eligible communities"
Page 1, line 12, following "section,":
Insert
"(1) "community" means a place in the
unorganized borough that is not incorporated as a city
and in which 25 or more persons reside as a social
unit;
(2)"
REPRESENTATIVE KOTT objected for discussion purposes.
10:02:10 AM
REPRESENTATIVE SALMON explained that Amendment 1 would provide
$10,000 to each municipality. He opined that it's unfair to the
unorganized and smaller communities that wouldn't receive
anything under HB 49. He commented that the $10,000 was
[randomly selected], and therefore returning to $3,500 would
even be acceptable.
10:03:07 AM
REPRESENTATIVE SALMON moved to amend Amendment 1 such that the
grant amount of $10,000 would be changed to $3,500. There being
no objection, the amendment to Amendment 1 was adopted.
Therefore, Amendment 1, as amended, was before the committee.
REPRESENTATIVE KOTT maintained his objection to Amendment 1, as
amended.
10:04:00 AM
REPRESENTATIVE ROKEBERG, in response to Representative Neuman,
confirmed that the legislature did pass legislation that added
some $6 million for fuel assistance to organized communities
throughout the state.
CO-CHAIR THOMAS noted a House floor amendment to the
aforementioned legislation that would've provided $3,500 to
unorganized communities failed.
10:04:57 AM
REPRESENTATIVE ROKEBERG interjected that the legislation wasn't
intended as fuel assistance but rather [to provide assistance]
with no strings attached.
10:05:26 AM
A roll call vote was taken. Representatives LeDoux, Neuman,
Cissna, Salmon, and Thomas voted in favor of the adoption of
Amendment 1, as amended. Representatives Kott and Olson voted
against it. Therefore, Amendment 1, as amended, was adopted by
a vote of 5-2.
10:06:09 AM
REPRESENTATIVE NEUMAN moved to report HB 49, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 49(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 10:06:27 AM.
| Document Name | Date/Time | Subjects |
|---|