Legislature(2003 - 2004)
02/12/2004 01:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 254-TOURISM & RECREATION ASSESSMENT
CHAIR CON BUNDE announced SB 254 to be up for consideration.
MR. JOE BALASH, Staff to Senator Therriault, sponsor, said:
SB 254 is an effort to generate and identify a source
of funding for cooperative marketing for the State of
Alaska. For years, the tourism industry has been
asking for an increase in state marketing money.
However, due to the lack of general fund dollars, the
Legislature, as a general rule, has been reluctant to
provide those dollars unless the industry identifies
some means to pay for that effort.
This legislation was developed at the request of the Alaska
Travel Industry Association (ATIA) and is intended to be a
fairly broad based tax within the tourism industry, intended to
affect tourists and only affecting residents when they behave
like a tourist. Surveys conducted by the state and industry show
that non-cruise visitors to the state have been declining over
the past couple of years and the businesses that depend on those
numbers are suffering as a result.
MR. BALASH noted a proposed committee substitute, but he hoped
to have a better one available by next week. He offered to
answer questions.
CHAIR BUNDE asked committee members to not deal with specifics
since a committee substitute was being prepared. He asked Mr.
Balash to address the dedicated funds issue.
MR. BALASH responded that generated funds would be deposited
into a sub-account in the general fund, although the Legislature
is not bound to appropriate the funds for the purpose stated in
the bill.
SENATOR GARY STEVENS asked how the money would be spent. Would
it go to an association or a board?
MR. BALASH replied:
Under current statute, the state enters into a
marketing contract with a qualified trade association.
In this instance, that is the Alaska Travel Industry
Association. That contractual relationship will
continue. Whatever funds the Legislature appropriates
for marketing would be appropriated to the Department
of Community and Economic Development for the purpose
of entering into a contract under the existing
statutes for that purpose.
SENATOR STEVENS asked if industry had any oversight as to how
the money is spent.
MR. BALASH replied that statutes governing the qualified trade
association say that expenditures must be broadly based and
representative of the industry within the state. The current
board of directors for the association does that quite well.
SENATOR HOLLIS FRENCH said this is essentially a 2 percent tax
that will be added on to the bill a tourist will pay.
MR. BALASH replied that is essentially correct and the committee
substitute will identify which activities the assessment will be
collected from. The legislation calls this the Sustainable
Tourism and Recreation Assessment Act and it is recognized that
some of the activities are going to be conducted by residents of
the state. The ATIA is charged with developing instate marketing
- to get people from the Interior to come to Anchorage and to
get people from Anchorage to go to the Kenai, etc.
SENATOR FRENCH asked if this leaves the cruise ship industry
alone.
MR. BALASH replied that is correct and added that it is very
difficult to assess intrastate transportation activities.
Airline passengers, for instance, can't be charged for flying
over a state.
MR. RON PECK, President and Chief Operating Officer, Alaska
Travel Industry Association (ATIA), supported SB 254. He said
that Alaska needs to double its marketing budget to $20 million
and have a strong presence in the marketplace.
He said that tourism is down to flat in most of Alaska and that
independent travel has decreased for the past two years. Border
crossings have decreased by 8 percent from 120,000 passengers to
109,000 and airport arrivals and departures at the four major
airports have decreased by 3.5 percent (115,000 passengers) in
the summer. The Legislature has asked ATIA to come up with a
plan for more funding and SB 254 identifies the funding sources.
The sources are broad based and impact a variety of tourism
industry sectors including tourism-related activities and
attractions. It does not ask for increased general funds.
MR. PECK explained that the assessments in SB 254 are based on
the Alaska Seafood Marketing Institute (ASMI) model, which has
previously been adopted by the Legislature. Adopting this
assessment is a good business decision and a good investment for
state tourism. Federal statutes do not allow assessments to
apply to transportation via air or cruise ship, but ATIA has
estimated that over 40 percent of the activities being assessed
are attributable to the cruise ship passengers.
MS. BETTYE ADAMS, owner, Alaskan Hotel and Bar, opposed SB 254.
She declared:
It would be harmful to my business, because the cruise
ships are just floating hotels. They are not going to
have a tax placed on them; I already have 12 percent
on me. This is going to be 14 [percent] and who knows,
some more might be put. If you do pass it, please
exempt hotels so that it makes the playing field
level.
MS. ADAMS said there is no guarantee that any of the assessment
would be used to advertise for small independent businesses like
hers and cruise ships are already spending $70 million on
advertising. Further, she asserted:
I do not believe that it is a lack of advertising that
is causing our decline. I think it is because the
cruise ships are up 9 percent and we're down.... I
think cruise ships are our competition and are sucking
our business over because they are a better deal. We
can't compete with them fairly.
My second point is I don't believe it is
constitutional. I got this memorandum from Legislative
Services. It was asked for by [Senator] Ben Stevens on
November 18, 2003 on the model they are forming, which
is the ASMI model.
MS. ADAMS explained that the memo makes two points about why
this type of assessment is unconstitutional and that, "The power
of taxation shall never be surrendered."
Assessment is just another word for taxes imposed by the state,
she said, and the memo indicated it might constitute an invalid
delegation of the Legislature's taxing powers. Under the
Constitution, you can only delegate taxing authority to a
borough or city. The Alaska Supreme Court in State v. Alex
(1982) says that the Legislature did not have the authority to
authorize regional associations to approve or disapprove the
imposition of assessments.
MS. ADAMS said the dedicated funds issue applies in this case.
The memo from Legal and Research Services Division said that the
use of the phrase "may be appropriated back", which is in the
bill:
Potentially misleads constituents to believe that the
money from the taxes and assessments that they pay
will be used only for certain purposes. Therefore, it
creates a moral obligation on the part of the
legislators to appropriate the money for the specific
purpose, which may, in effect, violate the prohibition
against dedicated funds.
MS. ADAMS also remarked that she is an ATIA member and was not
ever asked if she approved of the assessment, which was approved
at a convention, which she and a lot of other members did not
attend.
MR. CHIP THOMA, Juneau resident, said that tourism taxation has
been very successful for the last five years, especially in
Southeast Alaska. He remarked:
There has been a dramatic increase in the number of
passengers traveling on the largest of cruise ships.
What was recently projected as a 9 percent increase in
passenger numbers for 2004 was actually a 15 - 20
percent increase just a few years ago. Soon, as we
reach 1 million passengers coming into this town, a 5
percent increase will be huge and this occurs on a
yearly basis.
MR. THOMA related how Juneau voters authorized a $5 individual
passenger fee that helped upgrade downtown Juneau. The use of
the fee for these capital improvements on the waterfront has
been a huge success for residents, businesses and the 800,000
cruise ship tourists who visit here. However, he said:
I respectfully disagreed with SB 254 that there is a
need to further market tourism to Southeast Alaska.
Summer tourism here is not wild Alaska salmon. The
state does not need to help sell the product. The big
tour companies, cruise lines, airlines and local
visitor bureaus already promote travel here on a daily
basis - and newspapers, magazines and commercials
nationwide. The individual passenger fee on the other
hand, also known as the cruise ship head tax, is
passed on directly to the passenger, just like the
surtax for an airport rental car. No one complains,
it's easy to collect and easy to explain...
However, SB 254, a statewide sales tax on local Alaska
businesses to pay for generic come-visit-Alaska
advertising, does not address the local needs to
provide clean, safe and beautiful waterfronts for all
these folks to visit. I urge you to reexamine the
purposes of this assessment in the bill, as well as
the target tax group of local mom and pop tourist
businesses....
MR. SCOTT REISLAND, campground owner at Denali National Park,
said four generations of his family have worked at his
campground and he supported SB 254. He felt that it was very
important to have marketing dollars to help bring people into
the state. The Alaska Campground Association polled all the
small campgrounds over the state and found that numbers were
down 17 percent for the last three years. He felt this bill
would help many small businesses throughout Alaska, especially
in the Interior.
MR. DALE FOX, Alaska's Best Birdy, said that tourism is on the
decline in Alaska except for the cruise ship market. He said his
business failed as a direct result of not getting enough
th
independent visitors. He said that Alaska is 39 in the nation
in terms of dollars spent for marketing. "We've got a long-haul
destination, an expensive destination and we need to be out
there in the marketplace."
MR. FOX said he found another job, but he had five employees who
are now out of work because his business didn't make it. He
proclaimed:
This bill is the right vehicle; there is some work to
be done in terms of some of the wording and
definitions, but it is the answer for independent
businesses all over the Interior....
MR. ALAN LEMASTER, Gakona resident, said in the mid-80s, Alaska
had a good marketing technique and had the money to do it with.
We became leaders in the world. We were gaining
visitors at the rate of 10, 11, and 12 percent a year.
Then the dollars started to go away.... The marketing
went down and so did the customers.... Until the last
three or four years, instead of gains, we've seen
losses in the number of visitors. My business is in
rural Alaska and I am very much affected by what comes
across the Canadian border....
TAPE 04-10, SIDE A
MR. LEMASTER concluded that there was no doubt in his mind that
ATIA would raise to the challenge with additional funding. His
concern was that $20 million might not be enough.
MR. JOHN KREILKAMP, Vice President, Operations, Cruise West,
said his company has been doing things a bit differently in
Alaska in terms of cruising with seven small ships plying the
inside passage visiting small communities, as well as larger
ones. He said they have experienced a 15 percent decline in
business in the last two years and he has had to lay people off.
He lamented:
Much of this is because we are not in the marketplace
in terms of being competitive with other destinations
whether they are communities, states or international
destinations. Cruise West benefits from the fact that
there [are] marketing dollars out there....
MR. KREILKAMP concluded by saying that he supports SB 254.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
said that everyone is aware that visitation to Alaska has been
diminishing because it is not competitive in the world tourism
marketplace. She applauded the industry for taking this bold
step to assess itself and supported SB 254.
CHAIR BUNDE thanked everyone for their testimony and said SB 254
would be held for further work. There being no further business
to come before the committee, he adjourned the meeting at 3:15
p.m.
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