Legislature(1993 - 1994)
05/04/1994 03:00 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 370 - CRUISE SHIP GAMBLING & PROMOTIONS CHAIRMAN PORTER announced the next bill to be SB 370. Number 690 KEN RYFKOGEL, Juneau resident, said he has looked over SB 370, and does not have a problem with the bill; however, he would like to see a couple of additions, particularly when it comes to the disclosure of the promotions on board the cruise ships. The cruise ship operator should be required to publish fees charged and paid by those businesses that have been included in the on-board promotion to allow all businesses access to those promotions. The second item is, the cruise ship operator may not discriminate by only promoting ports of call that have businesses which subscribe or have paid for on-board promotions. He gave a couple of examples where that has happened in the past. Last year, there was a businessman that came into his jewelry store here in Juneau, who told him of a situation where he was on a cruise ship, where in Sitka, the cruise ship line did not have any businesses that were paying for on-board promotions. As a result of that, they were told, but they put it in such a way that it is not called "promotion" or "infamercial", if you want to call it that; it is called "guaranteed shops." And we do not have any guaranteed shops in Sitka. As a result of that, some people were very reluctant about shopping in Sitka. It sets a mind set that 1) maybe we should not shop at all and 2) it will affect places like Haines, or Seward, or wherever the cruise ship lines may go, or wherever the cruise ship lines do decide to do promotions on board, and get fees for. He thinks this will force businesses to pay to join. Number 753 CHAIRMAN PORTER asked Mr. Ryfkogel what he meant by there were no guaranteed shops in Sitka. He asked if he was correct in saying that they have not established a guarantee whereby they will indemnify the purchase with any of these shops. Is that not the arrangement? MR. RYFKOGEL replied that was the arrangement. CHAIRMAN PORTER said that while they are not saying "Don't shop there," they are saying they will not indemnify the purchase. Is that correct? MR. RYFKOGEL said they call it guaranteed shopping. CHAIRMAN PORTER said what that amounts to is when they return home, if they find out that for some reason their item is broken, or it was not the value that they thought, the cruise line will guarantee that purchase price? MR. RYFKOGEL said that was right. CHAIRMAN PORTER asked MR. Ryfkogel if he did not think that was a fair arrangement. MR. RYFKOGEL thought it to be a fair arrangement, and is not opposed to that guarantee at all. Neither is he opposed to the promotion, because we are going to be faced with that; however, we are the only community in the United States that has that. He thinks Alaska is the first place to be tested on that in the United States. Norwegian Cruise lines is a heavy hitter. He said he was not saying they were not going to live with promotions on board ships, but what they were saying is there is some discrimination in certain communities whereby the cruise ship line makes it known that they do not have any shops in those communities. That is a concern for those communities whereby the merchants say, "I do not want to participate." REPRESENTATIVE JAMES stated that in Chicago they used to call it insurance. Number 788 REPRESENTATIVE KOTT asked for clarification. He asked Mr. Ryfkogel if he believed that if the cruise lines knew there were no shops in that particular community, that they would not offer that particular community as a stop, per the cruise arrangement. MR. RYFKOGEL said they would stop in different ports, and they would continue to stop in different ports. His concern is that they would stop in Sitka, as an example, and say that we do not have any guaranteed shops in Sitka, and as a result of that, it would have a damaging effect on the town of Sitka, as an example, by using this guaranteed shop promotion idea, if you want to call it that. Call it whatever you want, or "ads" or advertising or whatever. The point is they have a way of forcing the merchants in Sitka to join in this scheme. You would have to know this scheme in order to understand it. It is a scheme where they come to you, and there is no published fees. It is whatever a business can pay, or whatever they decide a business can pay, and they pick the businesses. You do not pick them, they pick you. That is the way it is and it is a problem, and if we do not address it today, we are going to be addressing it sometime in the future. Number 806 REPRESENTATIVE DAVIDSON asked Mr. Ryfkogel if his business had been picked, or approached, or if he knew of any businesses in Juneau that have been approached, and asked him to explain. Number 809 MR. RYFKOGEL said his business has not and will not be picked. He did know of others who had been approached. Based on the meeting at the Chamber of Commerce, that the man from Norwegian Cruise Lines attended, they could not actually talk fees. There were different fees for different businesses, and there were different arrangements for different businesses. He thought there should be a fee schedule that someone could look at to determine if it is equitable. Number 834 REPRESENTATIVE KOTT asked if Mr. Ryfkogel had noticed a difference in the amount of traffic between his shop and other shops in Juneau. Number 840 MR. RYFKOGEL said he had not. Number 841 REPRESENTATIVE KOTT said he always tried to avoid stores mentioned by cruise ship directors, because he felt like there was some type of inclusion cost built in; so to avoid that cost, he went elsewhere, taking just the opposite approach. TAPE NO. 94-67, SIDE B Number 000 REPRESENTATIVE DAVIDSON asked how the illegality could be measured. By what measurement could enforcement take place as a result of the illegality of this commercial discrimination? MR. RYFKOGEL thought the fees needed to be published, and the cruise ships should be told they cannot talk down a community because they do not have people who have signed on with the cruise ships. TOM DOW, Vice President of Hotels for Princess Tours explained that the bill would allow ships to operate on- board casinos while traveling throughout the inside passage as part of the entertainment packages offered to passengers. He said, "essentially we've determined through fairly extensive public research that there is very little public opposition to this because there is a recognition that this activity is offered only to passengers who are paying for a cruise vacation and that it is come to be accepted as part of a normal offering of this type and that it never has any impact on the citizens or communities of Alaska because it all takes place offshore. MR. DOW stated, "We have no objection, I will hasten to add, to a restriction on on-board promotion of gift shops. When this came up in the Senate Judiciary Committee I testified that Princess does not support or participate in those kinds of promotions, nor do the vast, vast majority of the other permanent, long-term operators, certainly not the ones that have the kinds of investments landside that Princess and Holland America have. Two years ago (indiscernible) tried to initiate a program like this. They were widely criticized within the cruise line industry in Alaska. They're not back this year. So the only guys that have ever done it, aren't here. Norwegian Cruise Lines came in a few weeks ago with a promotion. This is the first year that they will sail in Alaska, so I think it's --I don't want to say that there's no threat as a result of this and that it shouldn't be something of concern to business owners in coastal communities in Alaska, because I think there's always the threat that it could appear because it's fairly prevalent in the Caribbean and some other trades. But we certainly recognize the difference in Alaska - we want to support Alaskan businesses. I understand the very complex nature of restraint of trade and so on, but I'm not a lawyer, so I won't try to decipher all of that. I just say that we would support restricting it or disclosing it. We don't intend to participate in it on behalf of my company, and neither do most of the other big companies in Alaska." Number 150 REPRESENTATIVE DAVIDSON asked what kind of gambling they have on ships. Number 152 MR. DOW answered they have crap tables, roulette wheels, poker tables, blackjack tables, and slot machines. Number 156 REPRESENTATIVE DAVIDSON asked what percentage of clientele come to them primarily for the gambling. Number 158 MR. DOW would say it is zero. His intuitive reaction is that it is not a primary reason why people choose to take a cruise to Alaska. If they are hard core gamblers, they can do it a lot cheaper elsewhere than they can on a cruise to Alaska. It has become accepted that the large cruise ships with over 500 passengers have certain amenities on board, including a theater with live musical Broadway shows, and that type of thing - a health spa, a casino, some kind of swimming pool. A lot of them have golf driving off the back end, and skeet shooting, and other activities as well, in combination with port calls and other shore excursion activities. REPRESENTATIVE DAVIDSON asked what parameters were in place around the gambling aboard ship. MR. DOW said the casinos are not open in port, and beyond that it is based on traffic. Casino activity is heavier in the Caribbean trades, in Mexico and the Mediterranean where there is a little bit younger crowd, and people are more interested in nightlife activities. He presumed most of the committee members have been in a port where one of their ships has pulled into port and seen that most of these people are not late night party animals, for lack of a better term. REPRESENTATIVE KOTT asked if there was an age requirement to enter the casinos. MR. DOW said yes, there is. REPRESENTATIVE PHILLIPS commented on how much money she had lost in cruise ship casinos and stated these fees seemed to be pretty low. MR. DOW responded that "Well, we have one basis of comparison in the United States and I guess I would say that we have kind of a unique situation here. Most of the other cruise operators in the United States are either going out - a few out of the mid-Atlantic coastal areas, mostly though Miami and Southern California. They go straight out three miles and then there out, and it doesn't matter. The same thing, by the way, applies to us when we're in Canadian waters, when we're coming across the Gulf of Alaska on the way to Seward, in other areas when we're outside three miles. So we're talking about inside passage, basically Ketchikan to Skagway, Haines is the area that's impacted, so it's not the entire cruise even under the AG's ruling last year. The one real comparable geographic location in the United States is the Chesapeake Bay of Maryland, where you're in inside passage surrounded by state lands on both sides. Maryland just passed an exemption which was heavily promoted by the Port of Baltimore to encourage cruise ships to call there and we just obtained a license - in fact, it was the first license obtained under this new law this year. Twenty-five dollars is what it cost. So our proposition is that per ship, Princess will be paying each year, under this scenario, $30,000 for most of our ships and $20,000 for some of them with our fleet deployment plans that are already out there and available, most of ours will be in the $30,000 - $40,000 class." REPRESENTATIVE PHILLIPS questioned if that was per ship. MR. DOW responded per ship per year. REPRESENTATIVES PHILLIPS asked if they paid anything for the transporting section through Canada. MR. DOW responded no. REPRESENTATIVE KOTT asked how many ships they had coming to Alaska. MR. DOW commented that Princess has six ships deployed to Alaska at this time. Number 275 DON STOLWORTHY, Director of the Charitable Gaming Division, Department of Revenue came forward for questions. Number 282 CHAIRMAN PORTER said there were questions about the fees. MR. STOLWORTHY said their records show that in 1994 there were 19 ships calling. If everybody participated and paid the fee, that would be $590,000. In 1995, Princess will be adding a ship, and there is another ship or two scheduled to come on line after that. So he would say $600,000 - $700,000 if everybody participates. Number 293 REPRESENTATIVE PHILLIPS asked if the money was earmarked for anything specifically, other than going into the general fund. Number 295 MR. STOLWORTHY said his knowledge, under this draft, was that it goes to the general fund. Number 302 REPRESENTATIVE DAVIDSON asked what kind of costs would be associated with this exemption certificate. Number 308 MR. STOLWORTHY explained that the fiscal note attached stated $38.6 to be the annual cost for a part-time investigator. That person would probably come in March to process the exemption certificates the cruise ships submitted, file the reports, get their paperwork back to them, be available to answer questions regarding complaints, et cetera. Number 328 REPRESENTATIVE NORDLUND asked if these funds would be separately accounted for. MR. STOLWORTHY said they could say exactly how much was received, but once it made it into the general fund, you would not be able to determine where the specific funds were spent. REPRESENTATIVE NORDLUND stated that the Department of Revenue, at some point may want to use these funds for tourism promotion. Perhaps the committee would like to adopt a letter of intent to that effect. CHAIRMAN PORTER said he would certainly consider it. Number 345 REPRESENTATIVE JAMES asked about the fiscal note. As a seasonal investigator, what would be the amount of time this person would be working? Number 350 MR. STOLWORTHY stated that without knowing the amount of effort that would be involved, he estimated one person full time for five months, March through September. He did not know if that would be too little or more, he could not tell. He said Investigator II's make about $63,000 including benefits. Number 365 REPRESENTATIVE DAVIDSON made motion to adopt HCS for CSSB 370 (JUD). CHAIRMAN PORTER asked if there was any objection to adoption. There was no objection. Number 375 JERRY LUCKHAUPT, Legislative Council for the Division of Legal Services. He said he could explain what the HCS was doing that passed the Senate. There were two changes he made, working with Daniella. The first change is on page three, lines 13 - 14. We added a provision that says "the cruise ship is not to conduct gambling in, or within three miles of a state port visited by the cruise ship." That was in the bill as it proceeded through the Senate Transportation and Judiciary Committees, and was taken out in the Senate Finance Committee. Adding that provision back in just does what it says. We are not going to allow any gambling to occur in port or within three miles, as the ship is approaching the port. The second change is on page two, line 23. It clarifies a provision in the definition "cruise ship" as to what a cruise ship would be. Line 23 explains that a cruise ship provides on board, overnight accommodations and meals for those passengers. The words "on board the ship" were added by Mr. Luckhaupt to clarify that these accommodations must be provided on board the ship. There was a concern that a little gambling junket vessel would possibly leave from Juneau or some port, traveling up to Skagway, allow gambling all the way up, and then put the passengers off the boat, so they would then be accommodated in the Great Northern Hotel, or something like that; and then they would get back on the next day, and proceed to the next port, letting folks off. He was trying to carve a narrow exception for these large cruise ships that provide these accommodations on board the ship. REPRESENTATIVE PHILLIPS said that was a point that she wanted to address because out of Homer, there are tour boats, that are fairly large and have overnight accommodations, that feed people and take them out on fishing trips. With everything that has been stipulated, there is nothing to exempt them from applying for one of the permits to have gambling on board those boats. They go outside the three-mile limit for fishing, they have overnight accommodations, they stay over the weekend or easily stay 72 hours. So we are opening up a whole new arena of possibilities in Alaska. These are small ships - small boats. MR. LUCKHAUPT responded "That is a possibility to the extent that they operate 120 days a year and do go on cruises of at least 72 hours, it would be possible for that to occur. I've come up with a few possibilities for the committee, if the committee were to choose to maybe tighten up that exemption a little more. I see two basic areas where you can do something with that. Susan Burke, who represents - who's doing some work from the law firm of Av Gross and Susan Burke, presented me with a copy of the Maryland statute a little while ago that Mr. Dow referred to that Maryland recently adopted along this subject. The Maryland statute provides that these cruises must originate or terminate in a foreign port outside the United States. And that's a possibility. That approach has been broached to me yesterday evening and today. I have some serious concerns about doing that on equal protection grounds. In Alaska, the Alaska Supreme Court doesn't really run their equal protection analysis under the U.S. Supreme Court's analysis - the way the U.S. Supreme Court analyzes equal protection issues. The Alaska Supreme Court has recognized that our equal protection clause is stronger than the federal equal protection clause, and the Alaska Supreme Court uses a sliding scale approach to determine whether or not a violation of equal protection has occurred. And the courts identifies a point on this scale - identifies the interest that's being invaded by the state or the classification that the state uses and then slides up and down that scale to find a point where they'll then require a greater or lesser showing from the state to justify that classification. My concern is that this classification that the cruise begin or end outside of the United States, is that why has the legislature chosen that classification? I can't see a real strong distinction when I look at it as to why the legislature should choose that distinction. The rationale for it is, as it's been explained to me, is that for the most part, if you have the cruise beginning or ending outside of the state of Alaska, in this case, that you will draw in most of the customers for that cruise from out of state and you'll be encouraging tourism within the state, but you'll be drawing from people outside of the state. Now, the trouble with that analysis as I see it is that we have a number of cruise ships, they're different kinds of cruise ships, that do operate from - work out of Juneau here. They begin and end their cruise here in Juneau and go out for seven days and then come back. For the most part, those ships - well my understanding is that none of those ships offer gambling right now - but they do draw the vast majority - 99 percent or 100 percent - of their passengers from outside the state also. And I don't necessarily see a distinction that we'll only be drawing people from outside the state if the cruise begins or ends outside the state. Now that's a possibility, but I also see some other possibilities. "This Maryland statute also provides that the cruise ship must provide overnight accommodations - overnight cabin accommodations - for at least 300 passengers. And that's an attempt to get at these larger cruise ships and eliminate the possibility that we can have these small gambling junkets - a different way to use the term floating crap game or something like that - than the normal understanding of the word, you would be able to attack those smaller operations. A gambling junket that had to provide overnight accommodations for 300 or 400 or 500 people probably is not going to be able to do that just on the basis of gambling alone. That the primary purpose of the cruise would have to be scenic cruising and port visits, as we require in this bill already. So that would be one approach. "Tying in with that, this committee could increase the length of the tour - that would be longer than 72 hours, but we would have to be careful of that to determine that the cruises from Vancouver say up to Juneau that they will do that in greater than 72 hours or 96 hours or whatever the legislature were to provide, because there are people that do - it's my understanding there are people on the big cruise lines that do join the cruise in Juneau on occasion, especially earlier in the year and the end of the year, they have little deals that down in Seattle they advertise for a little cheaper amount of money to get people to get on those legs of the cruise. "Another possibility would be to require a minimum number of..." CHAIRMAN PORTER commented that this wording wouldn't preclude somebody from getting on a ship in one port and getting off in another port that was not 72 hours in duration. But what we're talking about was that the cruise itself was over 72 hours in duration. MR. LUCKHAUPT said "We also get involved when we get involved with people getting on in one Alaska port, say in Juneau, and getting off in Ketchikan, or something like that. If it's a foreign vessel, they cannot - foreign vessels are prohibited from transporting domestic passengers from one domestic port to another without stopping in a foreign port. CHAIRMAN PORTER said he understood that, but setting the Jones Act stuff aside, if that were not the law this still would not preclude someone getting on in one port and getting off in another and that not being 72 hours, but still the exemption would still be valid because the cruise itself was 72 hours. MR. LUCKHAUPT said "Technically, that possibility might be true. The way this is worded, this exemption, is that they have to provide these cruises for at least 72 hours in length for their ticketed passengers. But the cruise ship exemption says that the gambling is conducted by the cruise ship for its ticketed passengers, so potentially a passenger has to be ticketed for the cruise and the cruise then would be 72 hours. There could be situations where someone does get off early because of some problem, but I don't think that would be a problem. But the cruise itself would have to be greater than 72 hours and the passengers would have to be ticketed for the cruise, is the way I understand the meaning of the bill. So technically, all the passengers would be ticketed for at least 72 hours, I would think." REPRESENTATIVE PHILLIPS said unless we add a provision as to the number of passengers or passengers boarding out of state and having to return out of state or something like that, she could see a whole new arena of halibut charter business in Homer that is going...the charter operators are going to be able to offer gambling because these boats do go out, they have berths for people, they take them out on cruises, but they're fishing trips, and they're going to be able to offer gambling as an incentive for people to come on that - I can just see we're opening up a whole new arena of businesses or industry or something -- are we ready to get into that? REPRESENTATIVE JAMES asked if we want to disallow fishing charters from doing this and asked if that couldn't be included. MR. LUCKHAUPT said "We had defined in cruise that the purpose of the cruise must have as its main purpose scenic cruising and port visits at maritime communities in the state." REPRESENTATIVE PHILLIPS said that a boat going out of Homer and traveling to Seldovia - that's a very scenic cruise. REPRESENTATIVE DAVIDSON said that people are going to do what they want to do and didn't see how the concerns of Representative Phillips were directly affected by this. He said it could be tried and if there are too many loopholes, the law can always be changed. CHAIRMAN PORTER said we do have severability in this. If we adopt a couple of these extra added attractions and someone were to take the legislature to task and win that this was somehow unconstitutional, we have not affected the rest of the bill. He said he was not opposed to putting in these kinds of restrictions, because we're trying to accommodate one particular tourist industry and promote that industry in the state. We're not trying to develop an industry in Homer. MR. LUCKHAUPT said "Adding in a requirement that a cruise ship provide accommodations for at least 300 passengers, I don't necessarily see the challenge occurring (indiscernible) if there was one. What I think Chairman Porter was alluding to was a requirement that the cruise begin and end outside of the state - begin or end in a port outside the state. It would be listed as one of the requirements and under our general severability section in Title 1, the legislature has set forth that statute that says that if any part of a statute is found to be unconstitutional that it is therefore severed from - the court shall make every opportunity to severe it - to delete that section and make the rest of the act still apply. That can occur and the courts have applied that analysis to separate out those (indiscernible) portions of an act of the legislature. So that could occur. There is not general agreement with my analysis - well, with attorneys you can have a difference of opinion and....Susan Burke is not as upset about this provision as I am. Meanwhile, I talked to a representative of the Department of Law who shared my concerns about the equal protection problem. We may never ever have a problem because of equal protection because we'll have to have someone come forward and challenge that. To challenge that it's going to have to be somebody who wants to bring a very large cruise ship up to Juneau and start their cruises in Juneau or something like that and then operate throughout the state for a week at a time, return to Juneau without leaving the state. It's not a very likely thing. The nitch for Juneau in in-state cruises has been for the most part, smaller cruise ships coming up to Juneau and operating and grabbing a nitch that the large cruise ships do not occupy --trying to get a more personal cruise and one that's - like I said, a more personal cruise, getting in closer to the local communities possibly, is a way to describe those cruises. And so we may not ever see a challenge on those equal protection grounds, but it's something that you should be aware of and I personally, do not see the justification the state will have when the Department of Law has to defend that provision. But that doesn't mean that we won't lose it or that we won't be challenged on that, that it won't become an issue or may not ever become an issue. Also, the state of Maryland has enacted such a provision and as of, as far as I know and I just saw the law today, as far as I know, it hasn't been challenged and struck down as unconstitutional. The state of Maryland probably does not have an equal protection clause that is as strong as the Alaska equal protection clause and does not have a court -- well they possibly might have an Alaskan Supreme Court that has sometimes been classified as judicially active in this area. So I guess I could offer those two provisions as being the two main ones that you might want to look at to basically solve this potential problem. "Mr. Chairman, Representative Nordlund had earlier asked about program receipts and separate accounting. In 1991 - 1992, the legislature adopted a general program receipts language that provides for all money that comes into the state - into the state coffers - that's received by any state agency, must be separately accounted for. And so that money is. It's AS 37.05.142 is one of the citations. The money is separately accounted for now. All money that comes into the state. There is an account number given to that money and we can identify that money, even when it gets deposited in the general fund. We can identify the program source of that money. The term program receipts gets confusing at times because of the way we think of it and the way its used in the budget on the front pages, is the way we appropriate the money out and it's usually to the same program. For example, fees that are received by DMV (Division of Motor Vehicles), a certain amount of that gets appropriated back to the Department of Public Safety to run DMV operations. But it's not a program receipt just when it gets sent back to that same program that collected the money. It's a program receipt when its collected by the state and some program - it gets identified with that particular program that collected the money. The legislature, then, can without doing anything else, they can just say that they'll appropriate it back to the agency that it received it, if they wanted to. There's a way to ease the pressure on the legislature when they're appropriating these program receipts. The legislature doesn't have to do that though. But the money will be separately accounted for. There was a proposal, I believe, that was discussed for a little while that had this money be separately accounted for and then have it be appropriated -- or for the legislature, basically, to be putting in a little bit of intent language into the bill to say that the legislature may use this money every year to partially fund the operations of ATMC (The Tourism Marketing Council). And that's not in the bill, at this time. But there's nothing to stop the legislature from doing that, if they chose to. There's no way for the legislature to require the legislature in the future to do that either, because that would be a dedicated fund and we'd also have problems with one legislature trying to tie the purse strings of a future legislature." Number 730 CHAIRMAN PORTER suggested adopting these two issues separately, but conceptually, and move two conceptual amendments. One that would include the requirement as Maryland has for a capacity of 300 people and foreign port, and another one that would include the wish that the legislature may appropriate funds. REPRESENTATIVE DAVIDSON commented that because it was getting late in the session, and the committee had not done well with conceptual amendments, as well as conceptual letters of intent, and since these are separate issues questioned why they couldn't come back to the board next year with these things so they could get this on its way. REPRESENTATIVE PHILLIPS stated there was not reason why someone couldn't prepare these amendments overnight and the committee could meet the next morning to adopt them. CHAIRMAN PORTER said the committee could adopt what he had previously stated, conceptually, and pass them and pass it along tomorrow. REPRESENTATIVE KOTT thought the committee and heard some good comments on how to tighten up the language on the definition and he particularly liked the overnight cabin accommodations for a minimum of 300. He asked if Mr. Dow from Princess could give the committee a brief overview as to who might be applying for these permits within the parameters -- who could have applied previously. Number 747 MR. DOW explained who could have applied for these permits under previous law, per Representative Kott's request. He said he thought the 300 people limit would resolve the problem of charters to nowhere from coastal communities. As far as originating and terminating in a foreign port, all of the large vessels operating in Alaska right now, are by definition, doing that. There have been American bottom vessels operating between Alaskan ports for years and years in Alaska, coming in and out of Juneau, and so forth, that could have operated casinos on board for the last 20 years. None of them ever have. There was no known prohibition until this Attorney General's Opinion last fall. He believed it to be a potential or theoretical problem. He thought the likelihood of it occurring is almost zero. There is a three year sunset on this bill, and it would take that long for somebody to purchase and get a vessel in place and operate it anyway, but the 300 person rule would take care of a majority of the problems. He is not against small ship operators going between Alaskan ports on behalf of Princess. He thinks they certainly have a place in the trade. There are certainly passengers and customers that want that kind of an experience, and they deliver a valuable asset to the industry and to Alaska. Number 781 REPRESENTATIVE PHILLIPS moved an amendment. She put it as number 4, under line 16, if nobody has a problem with it going there. The amendment would read, "This exemption applies only to cruise ships whose passenger capacity is 300 or greater, and to those whose port of call is outside the state of Alaska." Number 786 MR. LUCKHAUPT said he would split those up in two different spots. He would say, "If the cruise ship operates under an itinerary that either originates or terminates in a foreign port outside of the United States," (that is what Maryland says). Then he said he would take the 300 cabin accommodations language, and using some language that Susan Burke likes, on page three, line 20, where we currently say, "provides on board the ship overnight cabin accommodations," he would replace that language with the following language: "Cruise ship provides on board the ship overnight accommodations, for at least 300 passengers, and provides meals for those passengers." Number 798 REPRESENTATIVE PHILLIPS clarified, "overnight accommodations and meals for at least 300 passengers." MR. DOW commented that there are several ships that operate to Alaska that cruise round-trip San Francisco or round-trip Seattle. They don't originate or terminate in either Vancouver, Seward, Anchorage, or Homer or wherever. He didn't believe it was Representative Phillips' intent to exclude those ships that are coming from San Francisco, going all the way up, and then going back to San Francisco, because the Jones Act or more specifically, the Passenger Service Act, allows for if they're originating and terminating in the same port, the foreign bottom vessels can do that. He knew that Princess had one of those vessels, but they don't let passengers off until they get the passengers back to San Francisco, so it's a 10 or 14 day round trip cruise. So if the language were to read "originates or terminates outside Alaska"... REPRESENTATIVE PHILLIPS inquired if that would replace "port of call outside the state." MR. LUCKHAUPT clarified, after a brief discussion, that the language should state, "...the itinerary of the cruise originates or terminates in a port outside of the state of Alaska." REPRESENTATIVE DAVIDSON asked if all of the ships for which we are seeking exemption are at least 300 passenger vessels, and if there were any that would be smaller in size. Number 823 CHAIRMAN PORTER said they were all at least 300 passenger vessels, and in the past 20 years, there have not been smaller vessels in that category of boats originating and terminating outside of Alaska. CHAIRMAN PORTER asked Mr. Luckhaupt for an explanation of the amendment, so they could make a motion to move it. Number 830 MR. LUCKHAUPT said on page 3, following line 16, a new paragraph four would read, "The cruise ship operates under an itinerary that either originates or terminates in a port outside of the state." Number 844 MR. LUCKHAUPT explained that the second amendment would occur on page two, page three, and on page four. The definitions of cruise ship would be amended on page three, line 20 to read, following the word "provides", delete through the end of the line, and insert this language: "...on board the ship, overnight accommodations for at least 300 passengers, and provides meals for its passengers." Number 858 REPRESENTATIVE PHILLIPS asked why you could not just say that it provides meals and overnight accommodations for more that 300 passengers. That is a lot better. Number 860 MR. LUCKHAUPT stated his concern he had with Susan Burke about that is that sometimes the vessels will not be full, and we want to say they have accommodations for 300 people. But, for example, especially earlier and later in the year, the cruise ship may not be full, and so, it may only have 250 people on the cruise, but they have accommodations for 300; so we want to word it in that sort of nebulous way. TAPE NO. 94-68, SIDE A Number 000 CHAIRMAN PORTER thought it should say, "overnight accommodations for at least 300 people." He then asked if the committee understood the amendment. Number 013 REPRESENTATIVE DAVIDSON said no, he did not understand it. Number 015 CHAIRMAN PORTER went through the amendment again, explaining that under line 16 and number 4, on page three; the amendment would say, "The cruise ship operates under an itinerary that either originates or terminates outside the state of Alaska." For the definition of cruise ship, which appears on three different positions in the bill, we are adding to the definition, "provides on board ship overnight accommodations for at least 300 people." We are adding "at least 300 people" wording to that definition. Number 035 REPRESENTATIVE DAVIDSON said he suspected they were hoping that cruise ships will never begin their cruise from Alaska, and go to San Francisco, and come back to Alaska. This may never occur, but what are we really discouraging by inclusions of these kinds? Things change quickly. Number 069 MR. DOW said he understood the concern, but the language, as it is presently proposed in the amendment, if it either originates or terminates at a voyage, then you could originate a voyage in Alaska, and terminate it someplace outside the state, or vice versa. There is nothing that precludes somebody beginning a voyage in Alaska. About half of ours do, now. We bring up people and drop them off and then we bring another load south, so we are doing that most of the time. We only have one vessel that cruises round trip. He thought this language would accommodate that. Number 090 REPRESENTATIVE KOTT moved the amendment as described. There being no objection, the amendment was adopted. Number 105 REPRESENTATIVE NORDLUND moved amendment number 2. He described it to state, as we talked about previously, the fees collected under this section may be appropriated for tourism promotion, and he did put in the language "...separately accounted for." He said he knew that was redundant, and we already have it in law, and do not need to say it, but he thought it would help people understand what the intent is here. He suggested they put it in the section right behind what the fee schedule would be and then the sections would be renumbered after that. Number 120 MR. LUCKHAUPT said when we have attempted to do some language like this, it is probably best for us to say "the annual estimated balance in the account maintained for this." Again, it is sort of this technical, in order to give some leeway to make that change, because he knew Dave Dierdorf would tell him it is all wrong if he tried to do it this way. We will then put at the end of the amendment, "Nothing in this section constitutes a dedicated fund," because when we have used the language -- the last time this issue reached the Alaska Supreme Court, when we used the language "may" in regards to the Alaska Marine Highway Fund, the argument was made to the court by saying "may", the legislature meant "may only" be used. By using the term "may", that is what the legislature meant. The court did not find for the state on that issue. The court looked elsewhere in the Marine Highway Fund Act, and they had some language that said, "Nothing in this Act creates a dedicated fund." That is what they hung their hat on, so what we are now doing to deal with that problem, is every time the legislature sets up one of these funds that looks like a dedicated fund, we now say that this is not a dedicated fund. He asked the committee to allow him to add that, too. Number 160 SUSAN BURKE, Attorney representing Princess Cruise Lines, said that substantively, she did not think any of the cruise lines would have a problem with what Representative Nordlund wants to do, but a flag went off in her mind about whether or not the title of this bill is broad enough to cover funding. Number 173 REPRESENTATIVE PHILLIPS suggested sending along a Judiciary letter of intent. Number 175 MR. LUCKHAUPT said that would be fine, and they recommend a letter of intent be included, since this language cannot be mandatory in future legislatures. We are providing an exemption. We are not really saying in the title of the bill what we are going to do with these fees. He said he would have some hesitation on whether or not this amendment could fit in. The only clause it could fit in is the one saying that we provide an exemption from gambling laws for gambling conducted by cruise ships for their ticketed passengers. Is that something that would fit in there? Honestly, it does not fit really well. Number 193 REPRESENTATIVE JAMES said her concern is that this amendment says nothing. It has no affect, except filling up more space in the statutes, and for that reason, even though she supports the intent, and she would support that we recognize it as so, she felt there is no place for this in the statute when it has no affect. She thinks the statutes are to be showing us what we do and how we do it, and not what someone thinks we might ought to look into. For those reasons, she thought we should try to get our statutes smaller instead of bigger, and for that reason she would object to it, even though she does not have any real problem with the content of it, as a statement. Number 213 REPRESENTATIVE DAVIDSON said we were unnecessarily cluttering up our statutes, and he thought it was important to keep in mind they have just a few days remaining. If they get back to the other body with some of these issues, this bill could easily get lost in the shuffle, and we may not get a bill like this through in time. He objected to the amendment and he certainly wanted to support tourism, but not like this for right now. Number 227 REPRESENTATIVE NORDLUND withdrew his amendment, not necessarily because he thought it cluttered the statutes, but only because it would probably require a title change, and a concurrent resolution, and it is getting late here. He hoped the committee would adopt a letter of intent. Number 235 CHAIRMAN PORTER asked if there was any objection or further discussion on the amendment. Number 236 REPRESENTATIVE PHILLIPS wanted to discuss the federal law issue on this bill. Number 237 CHAIRMAN PORTER asked Mr. Luckhaupt if he was correct in summarizing in the following manner: One of the concerns expressed peripherally to this bill, is its potential affect relating to the Indian land gaming issue. The gaming issue, if it exists in Alaska, is already open, because of that amount of gaming that the state does allow, and this would have no affect one way or another on that issue. Number 255 MR. LUCKHAUPT agreed that basically that was his opinion, but this bill will open the door for sure. He thought there was some debate as to whether or not the door is currently open for class three casino type gambling, under the Indian Gaming Reform Act, the federal law. There are basically two levels of Indian gaming you have to worry about under the Indian Gaming Reform Act. One is bingo, pull-tabs and lottos. The other is full scale casino gambling that happens to include lotteries. The federal law says that if the state allows any person to conduct casino gaming in the state, then they have to allow the Natives or the Indians, in the case of the term used in the Act, to conduct casino type gambling on Indian lands. Currently, in Alaska, the only casino gaming we allow at this time are those conducted by charitable organizations who are allowed to conduct one casino night a year. The question was presented that at those casino nights you do not receive money in return; you receive script in return, and then you can use that script to purchase prizes at the end of the evening. It is not really casino gaming, and so there is the a possibility that the state could have an argument to preclude casino gaming by Indians on Indian lands, under that argument. The problem with that ties in with the fact that the federal government classifies lotteries as being the same thing as casino gaming. They do allow lotteries in the state of Alaska currently by charitable organizations and municipalities; the Nenana Ice Classic is a perfect example, to the extent that it opens the door to full scale casino gaming, the door is already open. Number 300 CHAIRMAN PORTER said that having had some degree of exposure to gaming regulations and laws, the [inaudible] met by Monte Carlo night. It is like sitting down to a commercial poker game. You walk in with your money, and you buy the chips, and you play poker with the chips, and then you take your chips and return them to money. You walk into a charity night at the soroptimist club, you buy the script, you go play all these games with the script, and then you turn the script into something of value, albeit, donated prizes, it is something of value. That is gambling. We already allow it. Number 320 REPRESENTATIVE DAVIDSON said he would like to move the bill. Number 325 REPRESENTATIVE KOTT asked about section six under required disclosures, since it might come close to infringing on the first amendment, commercial speech is now protected. He asked if this particular section was a reasonable regulation of speech. Number 368 MR. LUCKHAUPT said this is what the first speaker was talking about; the total about face the bill does, basically to deal with promotions. He said in his personal view, his office has not had a problem with this. This would be something reasonable by the state to protect the interest of the local businesses, and prevent those businesses from being somewhat unfairly labelled during these on-board promotions, or being unfairly classified as being untrustworthy, or something like that. The argument has been that these promotions, by mentioning certain businesses, that even though in your mind, it did not work, it leaves the impression that other businesses that are not mentioned are not trustworthy; that they have had problems with those businesses. He did not see this as being, under the first amendment analysis, that the U.S. Supreme Court has articulated, he did not necessarily see a problem here. Again it would be one of those issues that, if it was presented to the court at some time, potentially, it would live and die on its merits, and would basically be severed from this total Act at some point in time. In his review he could not see this as an unreasonable restriction by the state on first amendment speech. It can include commercial speech. He did not know of any other state that had a similar restriction. He said this type of promotion has not occurred in any other state yet. Cruise ships have used this in other foreign ports, but have not attempted to use it in the U.S. yet, except last year when Coastal Cruises used it, and they received a lot of grief about using it. Number 378 REPRESENTATIVE JAMES commented there is not a state in the lower 48 who would let them get away with this. She said she felt whatever advertising program the ships have should have to include anybody that wants to be in it, not selectively. She said those were just her comments, and she was not going to make an issue of it. Number 390 MS. BURKE wanted to make one brief comment on the Indian Gaming Act issue. She agreed with Chairman Porter that we are long past the issue of whether Alaska allows class three gaming activities, and therefore whatever is in this bill is going to have no affect whatsoever on Indian gaming. However, much more important than her opinion, but less important than Chairman Porter's, is that of the Attorney General's Office. She had spoken with Vince Usera that morning about this issue. They have already flatly come to the same conclusion that you, yourself have, and that is that they are not even going to make an issue out of the class three's, so he gave her permission to pass that on to the committee. Number 410 REPRESENTATIVE DAVIDSON moved with unanimous consent HCS CSSB 370(JUD) out as amended, with individual recommendations, and fiscal note as attached, as amended. There being no objection, the bill was moved from committee. Number 420 CHAIRMAN PORTER said there was one more bill, and introduced David Skidmore.
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