Legislature(1993 - 1994)
04/06/1994 01:40 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATOR TAYLOR introduced SB 370 (ALLOW GAMBLING ON CRUISE SHIPS) sponsored by the Senate Transportation Committee and asked SENATOR SHARP to review the bill. (Due to a malfunction in the taping of the first tape of the committee meeting, the minutes for SB 370 have been compiled from the log notes, Sponsor Statement, the Sectional Summary, and correspondence from Princess Tours, Royal Cruise Line, Regency Cruises, Cunard, and Crystal Cruises, all in support of SB 370.) SPONSOR STATEMENT: "Senate Bill 370 authorizes to the Department of Commerce and Economic Development to license cruise ships to conduct gambling outside of three nautical miles of state ports. Casino gambling on cruise ships has been a well established practice for over twenty years, but state laws prohibit the practice on waters under state jurisdiction. By allowing limited gambling activities in these waters, the state benefits from the collection of annual licensing fees of $5,000 to $15,000 depending on the size of the ship. Casino gambling on cruise ships has no impact whatsoever on Alaskan communities, and polled residents have approved of the established cruise ship gambling by a significant majority (more than 5 to 1). In the interest of taking advantage of this potential resource of revenue, I urge your support of SB 370. SENATOR SHARP disputed the fiscal note from the Charitable Gaming Division which projected the need for two additional positions with operating expenses of $140.4 thousand. In addition, the analysis was, "Based upon the licensing fee structure in SB 370 and the scheduled number of vessels sailing in Alaska waters in 1994, total program receipts should equal $295.0 thousand." There was some discussion as to whether it would exclude the state ferries, and SENATOR SHARP said it would. DON STOLWORTHY, Director of the Charitable Gaming Division defended the fiscal note for the Department of Revenue, and he referenced subsection (d) on page 2, lines 8 through 11. There was general discussion among the committee members about the administration of the provisions, the amount of money involved, taxing provisions, and exemptions. TOM DOW, Vice-President of Princess Tours read his letter of support for SB 370: (Somewhat abbreviated) "This letter is offered in support of SB 370. This legislation would allow gambling aboard cruise ships within Alaskan waters for ticketed cruise passengers. Cruise ships within Alaskan waters would be required to pay a fee to the state for a license prior to conducting gambling under this legislation. Cruise ships have offered gambling as an ancillary entertainment activity for their passengers in Alaska for over twenty years. Alaska Competes in the international marketplace. Onboard gambling has become generally accepted as one of the variety of activities offered by cruise lines in all the major cruising destinations. The public policy concerns related to gambling are not compromised by the passage of SB 370. There is no impact to Alaskan families or communities or to the "peace and tranquility" of any area of Alaska as a result of these activities aboard cruise ships. Research clearly shows that Alaskans appreciate the importance of tourism to the economy of the state. It also shows that Alaskans don't favor prohibiting the traditional operation of casinos aboard and never have. Although gambling has never been a primary reason to choose an Alaskan cruise, both passengers and travel agents have come to expect gambling as a part of the package of activities, which they would find in a world class cruise vacation. Eliminating gambling within Alaskan waters would mean that Alaskan cruises would offer something less than that which is available to passengers on the same ships when they are sailing in other locations. ... " SENATOR TAYLOR decided to hold the bill for now. SENATOR TAYLOR returned SB 370 (ALLOW GAMBLING ON CRUISE SHIPS) to committee to hear testimony from JERRY REINWAND, owner of the Alaska Peddler gift shops, protesting the practice by the Costa Cruises of promoting gift shops that have participated in the promotion of their shops for a fee to cruise lines. MR. REINWAND explained the cruise lecturers reinforce their recommendations by handing out copies of the shopping maps showing the location of local participating stores, and he had copies of the 1993 Juneau, Alaska recommended stores. He also presented an article about the practice in Nassau, the Bahamas, from the May 23, 1993 issue of the FORT LAUDERDALE SUN-SENTINEL outlining the problems between the Nassau's Bay Street merchants and the cruise lines. SENATOR LITTLE asked how the shops were selected and how much was paid for the promotion. MR. REINWAND indicated it was a "hefty" amount. SENATOR TAYLOR moved the following Amendment #1: Page 1, line 3, after " ports; ": Insert " requiring certain disclosures in connection with promotions s on board cruise ships and making violation of that provision an unfair trade practice; " Page 1, line 12: Delete " and" Insert " (2) the operator of the cruise ship agrees to comply with all state laws, including those related to unfair trade practices; and " Renumber following paragraph accordingly. Page 3, after line 1: Insert the new bill sections to read: " *Sec. 3. AS 45.50.471(b) is amended by adding a new paragraph to read: (37) violating AS 45.50.474 (on board promotion). *Sec. 4. AS 45.50 is amended by adding a new section to read: Sec. 45.50.474. REQUIRED DISCLOSURES IN PROMOTIONS ON BOARD CRUISE SHIPS. A person may not conduct a promotion on board a cruise ship that mentions or features a business in a state port that has paid something of value for the purpose of having the business mentioned or featured, unless the person conducting the promotion clearly and fully discloses orally and in all written materials used in the promotion that the featured businesses have paid to be included in the promotion. A violation of this section constitutes an unfair trade practice under AS 45.50.471. In this section, "cruise ship" has the meaning given in AS 11.66.275." After some discussion among the committee members with MR. REINWAND the motion was passed. Next, SENATOR TAYLOR invited SUSAN BURKE, representing the Princess Tours to testify, and she suggested some solutions. TAPE 94-31, SIDE A Number 001 MS. BURKE suggested the title should be CRUISE SHIP EXEMPTION. Line 8, page 1, delete " LICENSING " and insert "EXEMPTION " in the the title of the statute. Line 8 and 9, page 1, delete "The department shall license" and begin the sentence with "A cruise ship ..." Delete the word "to" and insert the word "may", and she explained the changes including paying their money. On page 2, line 1, instead of calling it the "licensing fee" you would call it the "exemption fee". Finally, she said to address the concerns about enforcement, inspectors, and administrative regulation simply delete subsection (d) lines 8 through 11 on page 2. MS. BURKE explained she had conceived of the bill as being along the lines conceptually that SENATOR HALFORD indicated, but it will also address the concerns from the Department of Revenue. SENATOR TAYLOR asked if the committee understood the amendments, but SENATOR LITTLE expressed a concern about problems with the cruise ships and the recourse by the State of Alaska. MS. BURKE answered that any of the actual conditions for the exemptions are set out in Section 2 which is part of the criminal code, and the permission to conduct gambling activities applies only if the cruise ships conform to the paragraphs in Section 2. She explained this was supported by criminal authority. SENATOR TAYLOR asked about several problems in state interest that might arise. MS. BURKE said no one has a fundamental right to gamble, and she explained the lest amount of connection between the purpose and the achievement of the purpose. She thought it was easy to demonstrate that an inability to open the casinos during Alaska cruises outside of port creates a competitive disadvantage for the Alaska cruise market. She suggested there was a potential for Alaska to lose out in visitor destination competition and should be limited to exemptions to cruise ships in a constitutional sense. SENATOR HALFORD offered the testimony from MS. BURKE as a conceptual amendment. SENATOR LITTLE questioned whether or not this was doable under our constitution and regulations. SENATOR TAYLOR thought it was, but probably unique. SENATOR DONLEY suggested the conceptual committee substitute be drafted and shown to the legal department for comment. SENATOR LITTLE it could be addressed in the Finance Committee. There were no further objections to the conceptual amendment, the amendment was passed. SENATOR DONLEY asked about some concerns from the Department of Revenue, and MR. STOLWORTHY described a visit last summer from the IRS on the taxation of the activity. He said there was no way to know how much money is gambled in Alaska waters. He thought the payoffs in the casinos are not as high as those in Los Vegas so the overhead is not nearly as high, and he explained the adjusted gross income. He indicated there was no real way to conjecture on the amount of taxes that might be due. SENATOR TAYLOR suggested these concerns should be discussed in the Finance Committee. SENATOR DONLEY asked MR. STOLWORTHY about his recommendation on taxes on the gross, and the discussion indicated it would be a complicated process. SENATOR LITTLE moved to pass CS FOR SENATE BILL NO. 370(JUD) as amended (ALLOW GAMBLING ON CRUISE SHIPS) from committee with individual recommendations. Without objections, so ordered.
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