Legislature(2009 - 2010)BELTZ 211
03/19/2009 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB138 | |
| SB97 | |
| SB149 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 138 | TELECONFERENCED | |
| *+ | SB 97 | TELECONFERENCED | |
| *+ | SB 149 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 138-TAX CREDIT FOR STATE TOURISM PROGRAM
1:35:37 PM
CHAIR PASKVAN announced the consideration of SB 138.
SENATOR MEYER, sponsor of SB 138, moved to adopt CS for SB 138,
labeled 26-LS0626\P, as the working document. There were no
objections and it was so ordered.
CHRISTINE R. MARASIGAN, staff to Senator Meyer, sponsor of SB
138, explained that each year the Alaska Travel Industry
Association, which is the non-profit, member-based visitor
industry trade association that conducts marketing on behalf of
the State of Alaska, makes a request for funds to promote an
Alaska tourism marketing program. Last year the legislature
applied a three-year sunset clause to the match requirement,
which currently has a 70/30 split with the State of Alaska and
private industry. Currently the state-wide car rental tax brings
in about $9 million and is combined with $2.7 million of private
industry match to make a total tourism marketing budget of $11.7
million for FY09.
Last year the legislature requested the travel industry come
back to the table with a long-term tourism marketing funding
growth plan. So, the committee substitute (CS) would establish a
tourism marketing tax credit towards the recently approved
water's edge corporate cruise income tax. This tax is one
portion of the state's estimated tourism revenues and language
on page 2, line 2, makes sure that any other contributions can
not be included in this tax credit. This also does not allow the
credits to carry over from year to year.
MS. MARASIGAN said this tax is a very specific and would be
reinvested to promote the State of Alaska as a tourism
destination.
SENATOR BUNDE asked if the fiscal note for the original bill
applied to the CS.
MS. MARASIGAN answered yes.
SENATOR BUNDE asked if the maximum potential liability would be
something under $16 million.
MS. MARASIGAN answered yes.
SENATOR MEYER said in his previous life as co-chair of Finance
he worked with the Alaska Tourism Association (ATA) to find a
long-term funding mechanism for the tourism industry, and this
is a good match. The dollar amount may go up as more tourists
come in; so he suggested looking at establishing a cap.
1:42:26 PM
BRETT CARLSON, Northern Alaska Tour Company, said he is the
volunteer chair for the Tourism Marketing Association, and
supported CSSB 138(L&C). Tourism plays a big part in Alaskan
economy and has a record of proven economic development as
indicated in the pie chart. Last year it brought in $122
million. He said the travel industry provides amazing
opportunities for small businesses to participate at the
ownership level. Research shows that the tourism marketing
program works in Alaska as well as around the world.
1:45:18 PM
Chart 12 shows what in 1990 inflation-adjusted dollars, the
state's contribution to the tourism marketing program was just
over $24 million. Over time, it went into decline and small
businesses were hurt the most. They engaged with the legislature
on ways to come up with a long-term tourism marketing funding
model and the legislature adamantly said if they come up with a
model, those dollars need to come from travel industry generated
revenues.
The first step was reinvestment of the vehicle rental tax. That
is essentially a flow of revenue coming into the state from
independent travel and the legislature. This tax credit is the
second part of the solution - that also comes from travel
industry generated taxes.
MR. CARLSON said the economic crisis is affecting the travel
industry, and this plan will help the state's ability to balance
the budget. Travel intention studies indicate a decline of 30-60
percent in bookings for Alaskan businesses. As you get further
away from the water those numbers become "most scary." This tax
credit is one more tool that will help small businesses help
themselves.
1:48:35 PM
SENATOR BUNDE remarked that the maximum project amount if all
taxes were claimed as credit would be $15 million and he has
heard anecdotally that cruises are seriously discounted now. How
low could this go?
MR. CARLSON replied that the tax credit could go up and down
year to year. "Next year we may be able to determine what the
floor on this tax credit is going to be....One thing about it is
that tax credit is not going to grow unless tourism marketing
works."
1:50:05 PM
RON PECK, President, Alaska Travel Industry Association (ATIA),
explained that the most recent information indicates that cruise
bookings are increasing, but the yields for Alaska are still
down by 20-30 percent.
SENATOR THOMAS said the only concern he has heard is the concept
that when the cruise ship head tax was put in place that it was
charged back to the customer as an actual charge of $50 on their
ticket. Prior to that, the cruise ship industry had been
contributing a couple million dollars to the tourism marketing
effort on an annual basis. So, now they would be getting a
credit for the couple million they had been contributing on
their own prior to the implementation of the cruise ship tax.
MR. CARLSON responded that any time you increase taxes on
businesses in Alaska, whether it's shown to the customer above
the line or below the line, it has to be passed on to them
because there is no other place to get it from. Last year the
legislature moved away from that model to a new one based on
reinvestment of a portion of travel industry revenues. It seems
to make sense that both independent and cruise travel have a
revenue stream.
MR. PECK added if this bill is passed, it would generate $10
million to $12 million, and the cruise industry still buys into
ATIA programs in the amount of $500,000 to $600,000 annually.
Prior to this new plan, their maximum annual contribution from a
donation standpoint was $1.9 million to $2 million. Their
contribution could grow substantially.
1:54:35 PM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue (DOR), added that the commercial passenger vessel excise
tax is charged above the line to passengers. This particular tax
credit doesn't offset that tax, but rather it offsets the
corporate income tax that the cruise ships are required to pay.
Normally those types of taxes get passed on below the line to
the customers in the industry.
SENATOR THOMAS said that information helps.
1:55:53 PM
SENATOR BUNDE said a few years ago he asked the Department of
Revenue to give the legislature a report on the net return to
the state by various industries. He asked if her shop did that
report.
MS. BALES said she remembered a report about uncollected
corporate income tax, but didn't recall doing this particular
report.
1:56:51 PM
DEBORAH KAY, representing herself, said she made her living in
tourism for the last 20 years, and this bill will help to
continue the growth of the state's tourism industry because of
the marketing dollars it will have. It will allow her to
continue to support herself and her family.
1:57:48 PM
ETHAN TYLER, CIRI Alaska Tourism Corporation, said with a
shrinking world-wide economy, it's more important than ever for
Alaskans to have a strong and competitive presence in the market
place. He supported SB 138.
1:58:56 PM
DAVID KASSER, Vice President of Tourism, Anchorage Convention
and Visitor Bureau, said he is also a small business owner and
supported SB 138. He sees a lot of alarm and concern in just
about every industry. He knows that Alaska could work to be more
welcoming to this industry, especially the cruise industry which
is being "wooed" globally.
2:01:18 PM
DEB HICKOK, President and CEO, Fairbanks Convention and Visitors
Bureau, supported SB 138. She said that entrepreneurialism is
one of the hallmarks of the Alaska visitors' industry. Tourism
has a ripple effect throughout the communities in terms of
construction, transportation, and countless other life benefits
to our communities.
She reminded them that winter tourism is promoted by ATIA and
she listed some of the businesses that could benefit. The beauty
of a state destination campaign is that it reaches a depth and
breadth of potential customers that is far beyond the reach of
most small businesses.
2:04:22 PM
MARY RICHARDS, President, State Bed and Breakfast Association,
Fairbanks, said the Association has 211 members, and they are
all small business owners that depend on the help that they
receive through ATIA for destination marketing. There is no way
they, as small business owners, can market independently to the
domestic, European or Asian markets. Passing this bill would
help each of them to reach a market and be able to continue to
sustain the living they make. "If tourism ended tomorrow, a lot
of us would be in a world of hurt."
2:07:12 PM
CHAIR PASKVAN closed public testimony.
SENATOR BUNDE pointed out that there could possibly be
unintended consequences and said there is no such thing as a
free lunch. Businesses have to worry about their bottom line and
he wants them to succeed, but the legislature's job is to worry
about the state's bottom line. The bottom line for the state is
that tourism generates $25 million for the general fund, but
with this bill that will decrease to about $15 million. Everyone
needs to be aware of that, because in two or three years the
state would be hurting for money. He was hoping they weren't
robbing Peter to pay Paul. This model is sustainable only as
long as the cruise industry stays in Alaska.
2:09:29 PM
SENATOR THOMAS moved to report CS for SB 138, version P, from
committee with individual recommendations and attached fiscal
note(s). There were no objections and it was so ordered.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 138 Bill Packet.pdf |
SL&C 3/19/2009 1:30:00 PM |
SB 138 |
| SB 149 Bill Packet.pdf |
SL&C 3/19/2009 1:30:00 PM SL&C 3/31/2009 1:00:00 PM |
SB 149 |
| SB 97 Bill Packet.pdf |
SL&C 3/19/2009 1:30:00 PM |
SB 97 |