Legislature(1993 - 1994)

04/06/1993 08:06 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  SENATE BILL NO. 85                                                           
       An Act  extending the  termination date  of the  Alaska                 
       Tourism  Marketing  Council;   and  providing  for   an                 
       effective date.                                                         
  Co-chair Pearce  directed  that  SB 85  be  brought  on  for                 
  discussion and further directed attention to amendments  for                 
  the bill.  She recalled  prior committee discussion relating                 
  to need to shorten the time of sunset and place a task force                 
  on tourism into temporary  law.  The  task force is to  work                 
  during the interim and make recommendations next January for                 
  new methods of funding tourism marketing on a public/private                 
  basis.  The legislature is interested in a  greater private-                 
  sector infusion into the ATMC program.  That is reflected in                 
  the  budget.   Both the  Governor's and  the  Senate budgets                 
  increase the private portion to 20%.  The House budget shows                 
  an increase to 22.5%.                                                        
  Directing  attention  to page  2, lines  21  and 22,  of the                 
  Senate  Labor  and Commerce  version  of the  bill, Co-chair                 
  Pearce noted that,  at the request  of the department,  bill                 
  language removes the  director of  tourism as the  presiding                 
  officer of  the board.   Senate Finance  received a  request                 
  from the Governor's  office through  boards and  commissions                 
  that  the  Governor  be  allowed  to appoint  the  presiding                 
  officer from among board members.                                            
  BILL  PEDLAR,  Princess Tours,  came  before committee.   He                 
  advised that all Alaskan businesses  in the tourism industry                 
  benefit  greatly   from  cooperative   marketing.     As   a                 
  destination, Alaska competes with Canada,  Europe, and other                 
  locations where millions  are spent at the federal  level to                 
  promote those destinations.  Travel to Alaska often ranks as                 
  a foreign vacation rather than travel to another state.                      
  Mr. Pedlar  took exception  to the  perception that  certain                 
  members   of  the   industry--most   notably,  cruise   ship                 
  operators--have    disproportionately     benefitted    from                 
  cooperative marketing.   From 1986 through 1993,  the cruise                 
  industry in  Alaska has grown  from 201,000 beds  to 320,000                 
  beds.  That  represents over  a 60% increase.   During  that                 
  time, pleasure vacations and visits to friends and relatives                 
  grew only 43%.  The cruise  market outsupplied growth in the                 
  vacation  pleasure/visitor market.  That was accomplished by                 
  two things:  marketing and supply.  The cruise industry is a                 
  supply based segment of the industry.   It will find a price                 
  that will clear the supply in  the marketplace.  If inherent                 
  demand is not there  for the destination, the  industry will                 
  find a way of  liquidating its product at a  price that will                 
  fill  its  assets.   From  1986  to  1993, Princess  Cruises                 
  increased  its  marketing budget  from  $6.1 million  to $13                 
  million to market  $383 million worth of  assets deployed in                 
  the trade.  That  represents $63 million worth of  assets in                 
  the State of  Alaska, including hotels, motor  coaches, rail                 
  cars, and  an equivalent investment of $320 million worth of                 
  Alaska  is the only trade in  which Princess Cruises markets                 
  the destination first and the mode of transportation second.                 
  During  the   time  that  Princess   Cruises  increased  its                 
  marketing  budget 113%,  funding  for cooperative  marketing                 
  increased from  $4.5 million to $6.2 million.   The industry                 
  contribution increased from  $1.2 million  to $1.4  million.                 
  The Division of Tourism budget  increased from $2 million to                 
  $3.2 million in that same period.                                            
  Mr. Pedlar voiced  his contention  that the cruise  industry                 
  has  not  disproportionately  benefitted   from  cooperative                 
  marketing.   It has benefitted  from application of  its own                 
  resources to an  expanding market.   He noted that in  1993,                 
  Alaska  has  no  more  market  share  of  the  world  cruise                 
  deployment than it had in 1986.  The cruise growth in Alaska                 
  has maintained its position since that time.                                 
  The  council  does an  excellent job  with  the funds  it is                 
  given.    While  the  21  members  have  not  always  worked                 
  harmoniously, eleven of the 21 must  agree upon how to spend                 
  state funds and the private industry match.   It is the best                 
  check and balance  the state  has to ensure  that funds  are                 
  spent in an intelligent manner.  No one person or one entity                 
  on the council  can expend funds.   There is no  subterfuged                 
  In  his  closing  remarks,  Mr.  Pedlar voiced  support  for                 
  continuation of the  council, reiterating  that there is  no                 
  disproportionate benefit  to  any one  entity  from  generic                 
  marketing.    He  again  attested  to the  effectiveness  of                 
  existing  checks   and  balances  associated   with  council                 
  expenditures.    Mr.  Pedlar  urged  committee  support  for                 
  continued and increased funding for the council.                             
  Co-chair Pearce asked if the marketing increase from $6.1 to                 
  $13 million represents Princess Cruise marketing  for Alaska                 
  or for  the  entire  company.    Mr.  Pedlar  answered  that                 
  marketing is tracked by trade.   The Alaska trade has grown.                 
  Marketing  the  Alaska  destination in  light  of  worldwide                 
  global competition has required additional funds.                            
  In response  to a question  from Co-chair Frank,  Mr. Pedlar                 
  acknowledged that  he was in  favor of expanding  year round                 
  television at the expense of "some  of the travel planners."                 
  The last 100,000 distribution of travel planners may  not be                 
  the most cost  effective advertising.  Mr. Pedlar  voice his                 
  belief that  "One of  the things  that .  . .  has hurt  the                 
  growth in other segments is  the overall, generic appearance                 
  of  Alaska  in  the  marketplace."   When  Princess  Cruises                 
  markets Alaska, it  has a vested  corporate interest in  the                 
  minds  of  consumers.    When  the  state  produces  generic                 
   television  ads  featuring the  beauty  of Alaska,  there is                
  great  credibility   that  builds   consumer  interest   and                 
  awareness.   That  part  of the  budget has  constantly been                 
  eroded since 1981.   When faced with impending  budget cuts,                 
  the  council  reassessed  its  efforts  and felt  there  was                 
  greater  need  for   consumer  awareness  of  Alaska   as  a                 
  destination, via increased  television advertisements.  That                 
  meant  sacrificing,  in   the  short  term,  "a   couple  of                 
  distributions of travel planners."   That was done with  the                 
  hope that the  planner could again go  forward once consumer                 
  awareness was built.                                                         
  Responding to comments by Senator  Kerttula, Mr. Pedlar said                 
  that  the  general  fund allocation  to  the  Alaska Tourism                 
  Marketing Council was  approximately $6.2 million  for 1993.                 
  Advertising  and  distribution  associated with  the  travel                 
  planner comprises $4.5 million of that total.  The remainder                 
  is for  public  relations, fam  trips, administration,  etc.                 
  What  is  left  over  is   utilized  for  network  or  cable                 
  television.  Market  place rating  points for  1993 are  not                 
  even close to those of 1983 and 1984.                                        
  Co-chair  Pearce  directed attention  to  packet information                 
  (copy  on  file  in  the  original  SFC  bill  file  at  the                 
  Legislative Finance Division) demonstrating  distribution of                 
  funds since 1989.                                                            
  Co-chair  Frank asked  if  domestic  marketing includes  the                 
  Alaska  Highway.   Mr.  Pedlar  answered affirmatively.   He                 
  explained that  the Division  of Tourism  has commenced  the                 
  Tourism  North project.  It funds a strategic market focused                 
  on highway travel.                                                           
  Co-chair Frank spoke  to criticism  that marketing does  not                 
  focus on Alaskan-owned  businesses and  is dominated by  the                 
  cruise ship industry.   He then  suggested that it would  be                 
  worthwhile  for  generic   advertising  to  include  various                 
  methods of getting to Alaska.   Mr. Pedlar said that generic                 
  marketing,  through  distribution  of  the  travel  planner,                 
  features different methods  of traveling to the state.   The                 
  other  impression  attempted to  convey  through ads  is the                 
  myriad of  interesting things in  Alaska.  He  conceded that                 
  perhaps  a  picture  of  an  R.V.  should   be  worked  into                 
  advertising.  Mr.  Pedlar next spoke to  problems associated                 
  with attempting to target marketing for a specific region or                 
  type of travel under a  generic banner, indicating that such                 
  an approach means that there is usually not enough money "to                 
  do anything really well."                                                    
  End, SFC-92, #53, Side 1                                                     
  Begin, SFC-92, #53, Side 2                                                   
  Mr. Pedlar acknowledged that cruise ship marketing sometimes                 
  supplants  state   marketing  in  the  minds   of  potential                 
  travelers.   He further acknowledged that pricing calculated                 
  to  fill  ships  often  makes  highway  travel  appear  less                 
  Co-chair  Frank  voiced  his   belief  that  many  potential                 
  visitors do  not even know that  it is possible to  drive to                 
  Alaska.    He  noted  that the  recent  Alaska  Highway 50th                 
  anniversary   celebration   would  have   provided   a  good                 
  opportunity to focus on that type of travel.                                 
  Senator  Sharp suggested that  most state advertising moneys                 
  have been channelled to benefit those who can most afford to                 
  advertise,  at  the expense  of  others.    There should  be                 
  opportunity  to  channel  funding toward  a  broad  scope of                 
  advertisement that benefits many.                                            
  Senator Kerttula spoke to the value of the vacation planner,                 
  advising of support  from constituents.   He voiced  concern                 
  over reduced distribution  and attested  to need to  promote                 
  rural  wilderness  experiences.   Increases  in  the  budget                 
  should be dedicated to destination tourism.                                  
  Senator  Jacko questioned support for expenditure of general                 
  fund  moneys  for   tourism  in   light  of  resistance   to                 
  expenditure of general funds for seafood marketing.                          
  Co-chair  Pearce  directed  attention to  Amendment  No.  1,                 
  requested by the  Governor's Office,  and explained that  it                 
  would add the following language at page 2, lines 21 through                 
       the  governor shall  appoint a  presiding  officer from                 
       among board members;                                                    
  Senator  Kelly   MOVED  for  adoption.     Senator  Kerttula                 
  OBJECTED,  inquiring  concerning  the  reasoning behind  the                 
  change.   Co-chair Pearce explained that the director of the                 
  division  of  tourism  currently serves  as  chairman.   The                 
  director did not  feel it appropriate that  he automatically                 
  be  designated.    The  board  consists  of  21 members  (10                 
  appointed  by the  Governor, 10  appointed  by AVA,  and the                 
  director  of  tourism).    The  Senate  Labor  and  Commerce                 
  Committee included  language requiring that the  board elect                 
  the chairman.   The Governor's  Office indicated that  since                 
  the state  is funding  77.5%  of the  marketing effort,  the                 
  administration should select the  chairman from among  board                 
  members.   Senator  Kelly  noted that  the  director of  the                 
  division of tourism  would continue  to sign all  contracts,                 
  regardless of whether he serves as chairman.   That provides                 
  additional protection.                                                       
  Co-chair Frank voiced  his preference  for retention of  the                 
  director of tourism as chairman.   That arrangement provides                 
  integration  between  domestic  and international  marketing                 
  efforts.   He also  attested to  the benefits  of having  an                 
  individual   working  full  time  in  tourism  do  necessary                 
  background work and form the agenda.  To expect a lay person                 
  to fill that role is unrealistic.                                            
  TINA LINDGREN, Executive Director,  Alaska Tourism Marketing                 
  Council,  and  WENDY  MULDER,  Special  Assistant,  Dept. of                 
  Commerce   and  Economic   Development,  next   came  before                 
  committee.   Ms. Lindgren  concurred  in foregoing  comments                 
  that the director  of tourism  asked that he  be removed  as                 
  presiding officer  of the  council.   She explained  that at                 
  times  he  has been  put  in  an awkward  position  when the                 
  Governor's  viewpoint  is  in conflict  with  the  council's                 
  Senator Sharp  raised  questions  concerning  the  following                 
  explanation associated with Amendment No. 1:                                 
       This board approves  millions of dollars each  year for                 
       state  funded tourism  promotion.   It would  certainly                 
       injure the public  perception of the  ATMC to have  the                 
       AVA-dominated board selecting their own  chair.  At the                 
       least, the chair  should be accountable to  the public,                 
       not  just  one  private  organization.    Allowing  the                 
       governor to appoint the chair will accomplish this.                     
  He noted that the governor could appoint a representative of                 
  a  strong  private  organization  as   chairman.    He  then                 
  suggested  that  Amendment  No.  1  would not  preclude  the                 
  situation warned of in  the above language and  advised that                 
  he  could  not  support  the   amendment.    Co-chair  Frank                 
  concurred in lack of support.                                                
  Co-chair Pearce called  for a show  of hands on adoption  of                 
  Amendment  No. 1.  The motion  carried on a vote  of 4 to 3,                 
  and AMENDMENT NO. 1 was ADOPTED.                                             
  Co-chair Pearce directed  attention to  Amendment No. 2  and                 
  explained that it would establish, in  temporary law, a task                 
  force  on tourism.  She attested  to concern regarding long-                 
  term funding for  generic marketing and past  utilization of                 
  those moneys.   Senator Kerttula asked  if Senate Labor  and                 
  Commerce  could   undertake  the  effort  if   provided  the                 
  necessary funding.  Senator Kelly  said that as chairman  of                 
  Senate Labor and  Commerce Committee, he was  not interested                 
  in performing the work.  He then suggested that there should                 
  not be great  expense associated with  the task force.   Co-                 
  chair  Pearce  concurred, advising  that  no staff  would be                 
  involved.   Travel would be  paid from  leadership funds  in                 
  both houses of the legislature.                                              
  Senator Kelly MOVED  for adoption  of Amendment No.  2.   No                 
  objection having been raised, AMENDMENT NO. 2 was ADOPTED.                   
  Co-chair Pearce  directed attention to Amendment No. 3.  She                 
  explained that the bill currently has a sunset date of 1997.                 
  Because of concerns surrounding ATMC and the task force, the                 
  proposed  amendment   would  replace  June  20,  1997,  with                 
  December 30, 1994.   That date was chosen since  the council                 
  markets on  a seasonal  bases rather  than the state  fiscal                 
  year.  The task  force could thus return to  the legislature                 
  with  recommendations prior  to  sunset.   Senator  Kerttula                 
  voiced support and  MOVED for adoption  of AMENDMENT No.  3.                 
  Senator Kelly OBJECTED.   He said he  saw no reason for  the                 
  one-year  extension.   While  voicing  support for  the task                 
  force, he advised that the council "does a fine job."  There                 
  is  no need  to  hold the  extension  over council  members'                 
  heads.   Co-chair Pearce spoke to concern that extension may                 
  not be forthcoming  from the House.   It is  hoped that  the                 
  shortened  time  frame  and  interim  task force  would  aid                 
  passage and avoid impending sunset of the Council.                           
  Co-chair Pearce called  for a show  of hands on adoption  of                 
  Amendment No. 3.   The motion carried on a  vote of 5 to  1,                 
  and AMENDMENT NO. 3 was ADOPTED.                                             
  Co-chair  Frank  suggested that  the  following language  be                 
  added at page 2, following Line 17:                                          
       including the promotion of Alaska  as a destination and                 
       all form of travel to Alaska, including travel by  air,                 
       highway, water                                                          
  Co-chair Pearce designated the foregoing as Amendment No. 4.                 
  She then directed  that action on  the amendment be held  in                 
  abeyance  pending  formal  presentation of  the  language in                 
  written form.                                                                
  Senator Kelly referenced title language at page  1, line 12,                 
  and  spoke  to   need  to  remove  the   word  "substantial"                 
  therefrom.    He explained  that  Senate Labor  and Commerce                 
  Committee  action  deleted a  requirement that  certain ATMC                 
  board  members  be substantially  involved  in a  visitor or                 
  recreation industry business.  Such  language should also be                 
  removed from the title.                                                      
  Co-chair Pearce directed that discussion of SB 85 be HELD IN                 
  ABEYANCE pending formal presentation of Amendment No. 4.                     
  [See pages 22-23 for continued discussion of SB 85.]                         
  SENATE BILL NO. 85                                                           
       An Act  extending the  termination date  of the  Alaska                 
       Tourism  Marketing   Council;  and  providing   for  an                 
       effective date.                                                         
  (Remaining minutes reflect tape transcription.)                              
  Co-chair Pearce directed  that discussion  revert to SB  85.                 
  Co-chair  Frank distributed  Amendment No.  4 and  explained                 
  that the intent is  to place in statute, under  ATMC duties,                 
  direction that the  council promote Alaska as  a destination                 
  in all forms  of travel, including air, highway,  and water.                 
  He suggested that the new directive would send a signal that                 
  the  legislature  is  concerned  about  all aspects  of  the                 
  tourism market.                                                              
  TINA LINDGREN, Executive Director, Alaska Tourism  Marketing                 
  Council, again came before committee.   She advised that the                 
  council  is  attempting to  accomplish  the intent  embodied                 
  within  the  proposed amendment,  noting  that  the vacation                 
  planner contains information on  different modes of  travel.                 
  Ms.  Lindgren  voiced  concern  that  the   amendment  might                 
  restrict the  marketing of  highway travel  per se  since it                 
  might  preclude  the  council  from  conducting  a  specific                 
  promotion.   Co-chair Frank advised that he  did not foresee                 
  that becoming a problem.                                                     
  Senator Kelly reiterated  earlier comments  (see page 20  of                 
  these  minutes)   regarding   need  to   delete   the   word                 
  "substantially"  from  title language.    He then  MOVED for                 
  adoption of that  technical amendment.  No  objection having                 
  been raised, IT WAS SO ORDERED.                                              
  [NOTE the  drafter subsequently  determined  that since  the                 
  legislation  would  delete  the   requirement  that  certain                 
  members  of  the  council  be  substantially involved  in  a                 
  visitor or recreation  business, it was necessary  to retain                 
  "substantially" within  title language.  That  retention was                 
  cleared  with Senator  Kelly's  office, and  "substantially"                 
  remained within the title of CSS 85 (Finance).]                              
  Co-chair Frank MOVED for  adoption of Amendment No. 4.   Co-                 
  chair Pearce initially OBJECTED to allow time  for review of                 
  specific wording by members.   Following review of amendment                 
  language, Tina Lindgren advised  that she did not foresee  a                 
  problem.  Wendy  Mulder voiced support for  the amendment on                 
  behalf of the  Dept. of  Commerce and Economic  Development.                 
  Co-chair  Pearce   REMOVED  her  OBJECTION  to  adoption  of                 
  Amendment  No. 4.   She then called  for further objections.                 
  None were forthcoming, and Amendment No. 4 was ADOPTED.                      
  Senator  Jacko  MOVED  that  CSSB  85  (Finance)  pass  from                 
  committee with  individual recommendations.   Senator  Sharp                 
  OBJECTED.  Co-chair Pearce called for a show of hands.   The                 
  motion CARRIED on  a vote of 5  to 1, and CSSB  85 (Finance)                 
  was REPORTED OUT of  committee with a zero fiscal  note from                 
  the Dept. of  Commerce and Economic Development.   Co-chairs                 
  Pearce  and  Frank  and Senators  Jacko,  Kelly,  and Rieger                 
  signed the committee report with a "do pass" recommendation.                 
  Senator Sharp  signed "Do not  pass."  Senator  Kerttula had                 
  left the meeting and did not sign.                                           
  The meeting was adjourned at approximately 11:15 a.m.                        

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