Legislature(1993 - 1994)
04/06/1993 08:06 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 ships. 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 control. 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 economical. 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 23: 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 position. 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. ADJOURNMENT The meeting was adjourned at approximately 11:15 a.m.