Legislature(2003 - 2004)
04/02/2004 07:05 AM House W&M
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 537-TOURISM SALES AND USE TAXES TAPE 04-21, SIDE B Number 4360 CHAIR HAWKER announced that the next order of business would be HOUSE BILL NO. 537, "An Act relating to the levy, collection, and administration of sales and use taxes on tourism services; and providing for an effective date." CHAIR HAWKER opened public testimony on HB 537. He said that since the last meeting the committee has received the governor's transmittal letter of March 16, 2004, and Mr. Shively's letter. Number 4241 JOHN SHIVELY, Vice President, Government and Community Relations, Holland America, said that most of his points are made in his letter to the committee. He noted that the governor's transmittal letter and [DOR] have indicated that $19 million will be raised [from the tourist tax] this fiscal year and $49 million thereafter, and he said that has not seen those calculations. He said that is something the committee and the cruise industry need to see because, "We don't know how they calculated those amounts." He emphasized that it is important for the committee to get answers [from DOR] to the questions he raised in the letter. MR. SHIVELY stated that some of the problems raised are unique to the cruise industry because it sells about 90 percent of the cruises through travel agencies. "We don't know everything that they collect. In addition, the way this bill is written, if they bundle services like airline fares from Chicago to Seattle or Vancouver, and transfers and busses, all of that would be part of the tax. So you're really taxing things that are taking place out of the state," he said. MR. SHIVELY emphasized that Alaska is in a very competitive position right now. The market share peaked in 1996 at about 9.5 percent and is under 8 percent, currently, due to competition from the Caribbean, Eastern Canada, Mexico, Hawaii, and Europe, he said. He noted that many people can now drive to a cruise and price is an issue. He opined that this tax will make the cruise more expensive, and that is not exclusively a "cruise bill", as mentioned earlier. CHAIR HAWKER thanked Mr. Shively and said he would stand corrected if he did refer to it as a cruise bill, saying it would affect the whole travel industry in Alaska. Number 4040 REPRESENTATIVE GRUENBERG, referring to the letter from Mr. Shively, asked about the paragraph on page 4, after question 11, which says, "These questions are not meant to be all-inclusive as we have not had enough time to thoroughly analyze the bill. He said that indicates that Mr. Shively may have further issues with the bill. Representative Gruenberg requested that Mr. Shively send the remainder of his concerns to the committee. MR. SHIVELY said he would. Number 3939 KAREN REGINA, President and Chief Executive Officer, Alaska Hospital Alliance, which includes the Alaska Hotel and Lodging Association, and the Alaska Restaurant and Beverage Association, shared her organization's reasons for opposing HB 537. She said she opposes targeted taxes on [the tourist industry] which are not earmarked exclusively for tourism marketing. She noted that the industry does contribute significantly to the state's economy, and should be part of the solution to solving the budget deficit. "To achieve that, we believe a broad-based solution is necessary, rather than an approach that unfairly targets specific industries and businesses. We also believe that a broad-based solution is achievable, in fact, to that end we support the governor's POMV [percent of market value] plan," she related. MS. REGINA spoke of the bill's utilization of a tax mechanism that local regions rely on for tourism marketing, economic development, and local government. Tourism enhances the quality of life in Alaska in many ways, both directly and indirectly, and a bill such as this sends the wrong message, she opined. She pointed out that the tax is targeting businesses that are already paying local taxes. The hotel and lodging industry paid more than $46 million in tax to local municipalities in 2002, she said. The cumulative impact of an additional 5 percent tax would bring the tax on hotels in many regions up to 13-17 percent. She repeated her organization's opposition to HB 537 and urged the committee to consider other more broad-based solutions. Number 3628 JACK REISS, Vice President for Operations, Aramark Parks & Resorts, said his company operates the concessions and tours in Denali National Park and Preserve, as well as two lodges in the Denali corridor. He related that visitations to Denali are approximately 80 percent cruise line related, and over the past three years, visitation has been going down approximately 5 percent a year. He said that fewer tourists are venturing into the interior of Alaska for a variety of reasons. He stated his belief that this tax targets the tourism industry and will continue to deter travelers from going into interior Alaska. He called it, "Shooting the goose that lays the golden egg." Denali only operates about 120 days a year and most businesses rely on cruise line tourism, and this bill jeopardizes all business management in the Denali corridor, he concluded. Number 3430 JOHN BINKLEY, Owner, Sternwheel Riverboats; Eldorado Gold Mine, said his businesses employ about 150 people. He said he has been very supportive of Governor Murkowski's drive to develop the resources in Alaska. Tourism is also a resource, he said, and he stated his opposition to HB 537 because of the effect that it has on the development of this resource. He compared tourism to other resources that bring new dollars from outside of the state into its economy. He urged the committee to not pass this legislation. Number 3124 STEVE FRANK said that he is the owner of a small tourism business consisting of a hotel, restaurant, and RV park in Fairbanks. He stated that he is almost entirely dependant on visitors to support his business and the 100 jobs created by his business. He opined that HB 537 would cost jobs because less people will come to his business, and it does not seem appropriate to tax an industry that supports general government. He stated his support for a mechanism to enhance the economic development of tourism through SB 254, which is an industry self-assessment that would put money back into tourism marketing. A 5 percent tax, added to an 8 percent hotel tax, would make for a 13 percent tax, which will discourage people from booking tours to Alaska, he said. Number 2657 GARY MENDIVIL, Business Manager, Eaglecrest Ski Area, spoke about his concerns with the definition section of HB 537. The language leaves a number of things open to interpretation, specifically in the definition of guided activities, which might be determined to include ski and snowboard lessons or field trips operated by local community groups or schools, he said. He described the ski industry in Alaska as one destination resort, Alyeska, six community ski areas, and four ski areas located on military bases. Number 2452 KEVIN BATTERS, General Manager, Hilton Hotel, in stating his opposition to HB 537, said that his hotel relies on convention and tour business for the majority of its business throughout the year. This tax will make it extremely hard to continue to run the business effectively, he said. If there is a decrease in any of these areas, it will prevent Anchorage from becoming a year-round destination and it will decrease jobs, he opined. CHAIR HAWKER closed public testimony. [HB 537 was held over.]
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