Legislature(2009 - 2010)BARNES 124

02/05/2009 08:00 AM House COMMUNITY & REGIONAL AFFAIRS


Download Mp3. <- Right click and save file as

Audio Topic
08:02:04 AM Start
08:02:33 AM Overview(s): Office of Economic Development, Department of Commerce, Community & Economic Development
09:10:32 AM Alaska Seafood Marketing Institute
10:00:18 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overviews: TELECONFERENCED
DCCED, Office of Economic Development
by Joe Austerman, Director
Alaska Seafood Marketing Institute (ASMI)
by Ray Riutta, Executive Director
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                        February 5, 2009                                                                                        
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bob Herron, Co-Chair                                                                                             
Representative Cathy Engstrom Munoz, Co-Chair                                                                                   
Representative Charisse Millett                                                                                                 
Representative Sharon Cissna                                                                                                    
Representative Berta Gardner                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative John Harris                                                                                                      
Representative Wes Keller                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW(S):  OFFICE OF ECONOMIC DEVELOPMENT, DEPARTMENT OF                                                                     
COMMERCE, COMMUNITY, & ECONOMIC DEVELOPMENT; ALASKA SEAFOOD                                                                     
MARKETING INSTITUTE                                                                                                             
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOE AUSTERMAN, Manager                                                                                                          
Anchorage Office                                                                                                                
Office of Economic Development (OED)                                                                                            
Department of Commerce, Community, & Economic Development                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided an overview of the Office of                                                                    
Economic Development.                                                                                                           
                                                                                                                                
CARYL MCCONKIE, Tourism Development Manager                                                                                     
Juneau Office                                                                                                                   
Office of Economic Development                                                                                                  
Department of Commerce, Community, & Economic Development                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During overview of OED, answered questions.                                                              
                                                                                                                                
RAY RIUTTA, Executive Director                                                                                                  
Alaska Seafood Marketing Institute (ASMI)                                                                                       
Department of Commerce, Community, & Economic Development                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided an overview of ASMI.                                                                            
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:02:04 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  BOB  HERRON  called the  House  Community  and  Regional                                                            
Affairs  Standing   Committee  meeting  to  order   at  8:02  a.m.                                                              
Representatives  Herron, Munoz,  and Gardner  were present  at the                                                              
call to order.   Representatives Millet and Cissna  arrived as the                                                              
meeting was in progress.                                                                                                        
                                                                                                                                
^Overview(s):    Office  of Economic  Development,  Department  of                                                            
Commerce, Community & Economic Development                                                                                    
                                                                                                                                
8:02:33 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON announced  that the first order  of business would                                                              
be an overview  of the Office of Economic  Development, Department                                                              
of Commerce, Community & Economic Development (DCCED).                                                                          
                                                                                                                                
8:03:00 AM                                                                                                                    
                                                                                                                                
JOE  AUSTERMAN,  Manager,  Anchorage Office,  Office  of  Economic                                                              
Development (OED),  Department of Commerce, Community,  & Economic                                                              
Development,  explained  that  he  hopes  this  presentation  will                                                              
provide  the committee  with a  better understanding  of the  work                                                              
OED is doing  on behalf of  Alaskans.  Mr. Austerman  related that                                                              
the  formal mission  of OED  is to  promote and  advocate for  the                                                              
industries  of  film,  minerals,  tourism,  commercial  fisheries,                                                              
forestry,  and small  business development.   However,  internally                                                              
that [mission]  has been broadened  to be  for the benefit  of all                                                              
Alaskans.   The OED has a  unique position in state  government as                                                              
it serves as a conduit between industry and government offices.                                                                 
                                                                                                                                
8:05:34 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON  inquired as to  the situation prior to  2004 when                                                              
OED was established.                                                                                                            
                                                                                                                                
MR. AUSTERMAN  related that  prior to [2004]  there was  an entire                                                              
department  of economic  development, and  reminded the  committee                                                              
that  several years  ago the  Department  of Economic  Development                                                              
and the Department  of Commerce were merged.   Essentially, OED is                                                              
what's left of  the former Department of Economic  Development, he                                                              
said.    He  then  opined that  OED,  although  it's  one  of  the                                                              
smallest divisions, has one of the largest missions.                                                                            
                                                                                                                                
8:06:31 AM                                                                                                                    
                                                                                                                                
MR. AUSTERMAN,  returning  to his overview,  highlighted  that OED                                                              
has  a  focused  tool  set  as   economic  development  covers  an                                                              
extremely broad spectrum.   The OED has industry  specialists that                                                              
are focused  on developing specific  aspects of Alaska's  economy.                                                              
The OED  is very  actively involved  in the  analysis of  Alaska's                                                              
economy  and its  development.    Mr. Austerman  then  highlighted                                                              
that   OED  serves   as   a  resource   as   illustrated  in   the                                                              
organizational chart  entitled "OED: WHO WE ARE."   At this point,                                                              
OED has a  staff of 17 with  which it produces information  in the                                                              
form of  reports such as the  "Alaska Economic Performance  Report                                                              
and  Net Rate  of Return."   The  aforementioned  report offers  a                                                              
snapshot of the  health and well being of the  state's industries,                                                              
including oil and  gas.  Although OED doesn't have  an emphasis of                                                              
developing  oil  and  gas, the  Department  of  Natural  Resources                                                              
(DNR) has meet  with OED regarding  its model.  He noted  that the                                                              
aforementioned report  also includes the Net Rate  of Return which                                                              
provides analysis  of the  impact of  industry, specifically  on a                                                              
general  fund perspective.   He  reviewed other  reports that  OED                                                              
publishes, including  the Film Office  annual report that  will be                                                              
available in  a couple of weeks.   Mr. Austerman related  that OED                                                              
has become  a focal  point for information  gathering, which  is a                                                              
role  that  Commerce   hasn't  historically  played   very  often.                                                              
However, it's  a great fit  for OED.  He  noted that last  year an                                                              
economic  analysis  component  was  added.   Within  OED,  it  has                                                              
become  apparent that  Alaska is  lacking  in timely  information,                                                              
which he  attributed to the  lack of administrative  mechanisms in                                                              
Alaska.  Alaska  doesn't have an income tax or a  sales tax, which                                                              
are mechanisms that  other states use to gather  reliable economic                                                              
data   quickly.      Therefore,   OED  is   working   with   other                                                              
organizations  to   gather  data  since  there  isn't   a  central                                                              
warehouse  of information,  which  is an  initiative  that OED  is                                                              
working  on  currently.    The  OED  is  working  to  broaden  its                                                              
economic  expertise  and  analysis capabilities  largely  for  the                                                              
benefit of the legislature.                                                                                                     
                                                                                                                                
8:12:39 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN  then  turned  to  tourism  and  relayed  that  the                                                              
economic  indicators predict  that there's  going to  be a  severe                                                              
drop in tourism  this summer.  He informed the  committee that OED                                                              
put together  an analysis regarding  how in-state  marketing money                                                              
might impact Alaska.   The aforementioned was prepared  in about a                                                              
week and  was provided to legislators  who are interested  [in the                                                              
use of in-state marketing funds].                                                                                               
                                                                                                                                
8:13:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER recalled  that last  year the  legislature                                                              
changed  the  funding  formula  for  the  Alaska  Travel  Industry                                                              
Association (ATIA)  and provided for a state match.   She inquired                                                              
as  to how  the aforementioned  has  changed  the fundraising  for                                                              
ATIA and how it looks for the coming year.                                                                                      
                                                                                                                                
MR.  AUSTERMAN   said  that  OED,   which  has  a   large  tourism                                                              
component,  administers  that  contract.   Last  year  the  cruise                                                              
industry,  which   was  a  large  component  of   ATIA's  matching                                                              
component,  pulled  out  as  a result  of  the  cruise  head  tax.                                                              
Therefore, ATIA  has lobbied  and petitioned  for a change  in the                                                              
state's matching  funds such  that ATIA  would produce  30 percent                                                              
of its overall  budget and the state  would match 70 percent.   He                                                              
clarified  that  it's  an independent  contract  that  OED  merely                                                              
administers and thus ATIA lobbies on its own behalf.                                                                            
                                                                                                                                
8:15:33 AM                                                                                                                    
                                                                                                                                
CARYL  MCCONKIE,  Tourism  Development   Manager,  Juneau  Office,                                                              
Office   of   Economic  Development,   Department   of   Commerce,                                                              
Community,  &  Economic  Development, specified  that  she,  along                                                              
with Mr.  Austerman, manages the  tourism marketing  contract with                                                              
ATIA.    In  response  to  Representative  Gardner,  Ms.  McConkie                                                              
informed the committee  that last year ATIA would've  raised close                                                              
to $5 million.   However, early on in the legislative  session the                                                              
anticipation  was that there  would be  difficulty in  meeting the                                                              
match.   The official end  of the year  match was $4.2  million to                                                              
match the  state's appropriation.   She  explained that  last year                                                              
there  was a  decrement in  the  supplemental budget.   This  year                                                              
ATIA is on target  to raise $2.7 million, which  will allow access                                                              
to  the state's  appropriation  of $9  million.   The  legislation                                                              
changing the  match that  passed last year  had a three-year  life                                                              
span.   Therefore, if the appropriation  stays the same,  she said                                                              
she anticipated that ATIA will raise $2.7 million in 2010.                                                                      
                                                                                                                                
8:18:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA   expressed  concern  with   including  the                                                              
independent  traveler in tourism  efforts.   She then  inquired as                                                              
to whether  Alaska is  comparing itself to  other states  in terms                                                              
of the  [ATIA] arrangement  and making  assessments regarding  how                                                              
the state can help the industry while providing good oversight.                                                                 
                                                                                                                                
MS. MCCONKIE  noted  that she worked  [in this  field] in  another                                                              
state  and is  well aware  that  every state  studies the  funding                                                              
source  of other  states.   About 10  years ago  Alaska was  quite                                                              
behind  in [tourism]  spending as  compared to  other states,  and                                                              
thus the  intent with the change  was to increase spending.   With                                                              
respect to  the independent  traveler, the  current model  directs                                                              
the marketing  organization to  do a  broad marketing  program, an                                                              
image campaign, which  creates awareness of Alaska  as a desirable                                                              
destination.   In  fiscal  years 2007-2008,  independent  traveler                                                              
grants  were  used  to target  independent  travelers,  but  there                                                              
wasn't a  move in  the market  as a result  of the  aforementioned                                                              
campaign.   However, it's  difficult to  measure the full  effects                                                              
of  a  campaign   so  immediately.    Furthermore,   the  economic                                                              
environment  has an  impact.   Although  there  is  room for  some                                                              
focused  efforts,  the  primary  directive  of  ATIA  is  a  broad                                                              
marketing campaign.                                                                                                             
                                                                                                                                
8:23:50 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MUNOZ  inquired as  to  whether  there's a  strategy  to                                                              
target the yacht sector of the tourism market.                                                                                  
                                                                                                                                
MS.  MCCONKIE  related that  OED  has  a Developing  Alaska  Rural                                                              
Tourism  Program with  the  communities of  Petersburg,  Wrangell,                                                              
and Coffman  Cove.  The OED  staff working with that  program felt                                                              
the  yacht sector  has some  real  potential.   While OED  doesn't                                                              
work with  ATIA on that  particular issue,  OED does work  with it                                                              
through development  programs.   The way  the various  segments of                                                              
the  market are  targeted is  primarily  through public  relations                                                              
and  press  releases.    To  reach  each  specific  segment  would                                                              
diminish  the ability  to send out  a broad  message.   Therefore,                                                              
it's  nearly impossible  to target  each specific  product in  the                                                              
different regions.   She relayed  that typically it's  the state's                                                              
role  to  bring  everyone  in while  it's  the  region's  role  to                                                              
develop the products  and bring people to the area.   Ms. McConkie                                                              
highlighted  that OED  works with  a number  of rural  communities                                                              
through a federal grant and it's a state/federal partnership.                                                                   
                                                                                                                                
8:26:59 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HERRON  asked if  the  $2.7  million industry  match  is                                                              
historically high, low, or about the same.                                                                                      
                                                                                                                                
MS.  MCCONKIE  related  that  in  the early  1990s  there  was  an                                                              
infusion of marketing  funding, which was likely  the high period.                                                              
In  comparison  to  states  such   as  Colorado,  [Alaska's  state                                                              
contribution to tourism]  is on the lower scale.   She pointed out                                                              
that  Hawaii  is identified  as  a  competitor of  Alaska  because                                                              
Hawaii  and   Alaska  are   often  competing  with   international                                                              
destinations.    She  pointed  out that  in  most  states  tourism                                                              
funding is on the line.                                                                                                         
                                                                                                                                
8:28:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLETT  related her  assumption  that the  cruise                                                              
ships are doing their own marketing campaigns.                                                                                  
                                                                                                                                
MS. MCCONKIE replied  yes, and clarified that they've  always done                                                              
their own marketing.   She recalled hearing that  the cruise ships                                                              
have  spent  $70  million  or  more   collectively  on  marketing.                                                              
Therefore, they aren't dependent on the state's marketing.                                                                      
                                                                                                                                
REPRESENTATIVE  MILLETT  asked  if ATIA  coordinates  with  cruise                                                              
ship  destination  marketing  in  order to  avoid  overlapping  or                                                              
duplicate marketing efforts.                                                                                                    
                                                                                                                                
MS.  MCCONKIE  responded that  she  didn't  believe there  is  any                                                              
coordination.   In fact,  ATIA and the  cruise ship  campaigns are                                                              
distinct and separate  from each other.  The  primary coordination                                                              
has been  that there are two-three  members of the board  from the                                                              
cruise  industry who  sit on  the board  of directors  as well  as                                                              
participate  in the marketing  committee.   However, ATIA  doesn't                                                              
market  directly to  the  cruise industry,  which  returns to  the                                                              
broad brush  campaign.  Ms.  McConkie opined that  it's inevitable                                                              
that the  same visitors are  being reached through  advertising in                                                              
the same publication.                                                                                                           
                                                                                                                                
8:32:07 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON  inquired as to  how Alaska can take  advantage of                                                              
Governor  Palin's  celebrity  status   to  encourage  visitors  to                                                              
Alaska.                                                                                                                         
                                                                                                                                
8:33:15 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN  highlighted   that  one  of  OED's   roles  is  to                                                              
compliment ATIA.   He further highlighted that  OED doesn't manage                                                              
marketing  budgets  but rather  programs  such as  the  Developing                                                              
Alaska  Rural  Tourism  (DART)  project,  the  Tourism  Mentorship                                                              
Assistance  Program, and  the Alaska  Visitor Statistics  Program.                                                              
The DART  project is a partnership  between OED and  U.S. Economic                                                              
Development  Administration (EDA)  that has  been going  on  for a                                                              
couple of  program cycles.   He said that  a well known  result of                                                              
the  DART program  is  the Chevak  bird  watcher.   Mr.  Austerman                                                              
related  that  tourism  is  the   low  lying  fruit  to  diversify                                                              
Alaska's  economy  and  the  state  is  just  now  scratching  the                                                              
surface  of what  tourism can  do to  stabilize Alaska's  economy.                                                              
Tourism offers a lot of potential, he opined.                                                                                   
                                                                                                                                
8:36:06 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN, in  response to  Representative Cissna,  explained                                                              
that the  DART program offers workshops  to help people  flesh out                                                              
their  business plan.    Since it's  difficult  to  cover all  the                                                              
scenarios  with  a  staff  of  three,   [OED]  addresses  that  by                                                              
producing publications,  such as  how to run  a bed  and breakfast                                                              
in  Alaska,  to   provide  assistance  in  entering   the  tourism                                                              
business.                                                                                                                       
                                                                                                                                
8:38:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER   related  her  understanding   that  ATIA                                                              
largely  focuses  on reaching  independent  travelers,  which  she                                                              
opined is to the benefit of local Alaskan-owned businesses.                                                                     
                                                                                                                                
MR. AUSTERMAN  said he believes  that's correct.  He  related that                                                              
independent  travelers drop more  money in  the state  than almost                                                              
any other traveler.                                                                                                             
                                                                                                                                
8:39:23 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN,  returning  to   his  presentation,  informed  the                                                              
committee that  last week OED staff  was in Nome providing  a DART                                                              
workshop,  which  was  very well-attended.    He  reiterated  that                                                              
tourism is one  of the most underdeveloped aspects  of the state's                                                              
economy.   Mr.  Austerman then  moved on  to forestry  development                                                              
for which  OED has  one industry  expert who  has been  around for                                                              
some  time.     After  working  with  a  very   large  value-added                                                              
hardwoods  manufacturer  in the  Lower  48, OED  staff  introduced                                                              
birch as  a replacement hardwood  for veneers  and the like.   The                                                              
manufacturer has  recently committed a sizable amount  of money in                                                              
Petersville  to develop a  hardwoods plant,  primarily to  provide                                                              
feedstock to its Lower 48 operation.                                                                                            
                                                                                                                                
8:42:09 AM                                                                                                                    
                                                                                                                                
MR. AUSTERMAN,  in response  to Representative Gardner,  confirmed                                                              
that  the initial  intent  was to  take the  raw  resource to  the                                                              
Lower  48.     However,  now   this  Lower  48   manufacturer  has                                                              
[coordinated] with  a mill that has value-added  potential.  There                                                              
is the prospect  of developing a more efficient  business model in                                                              
which the  value-added portion  could occur in  Alaska.   There is                                                              
the  possibility of  wood floor  plank  and veneer  coming out  of                                                              
this arrangement, he relayed.                                                                                                   
                                                                                                                                
8:43:18 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MUNOZ  asked  if  OED works  with  small  businesses  to                                                              
obtain capital.                                                                                                                 
                                                                                                                                
MR.  AUSTERMAN replied  yes, adding  that OED  works closely  with                                                              
agencies  such as  the Alaska  Industrial  Development and  Export                                                              
Authority  (AIDEA).   In fact,  OED staff  is evaluating  Seward's                                                              
pellet proposal in  terms of whether Seward's reliance  on Chugach                                                              
Electric and  Matanuska Light  & Power (ML&P)  for power  could be                                                              
augmented by  pellets.  The two  agencies that may be  involved in                                                              
the  aforementioned are  AIDEA and  the  Division of  Investments.                                                              
The Division  of Investments provides  low income loans  for small                                                              
business  development,  especially  with  a rural  emphasis.    In                                                              
fact, OED  steers a lot of  its tourism business people  that need                                                              
capital to start a project to the Division of Investments.                                                                      
                                                                                                                                
CO-CHAIR MUNOZ recalled  meeting with a Ketchikan  resident who is                                                              
developing a  wood chip product  to use as an  alternative heating                                                              
source.                                                                                                                         
                                                                                                                                
MR. AUSTERMAN  said  that OED has  knowledge  of that project  and                                                              
has offered  its resources.   He  explained that  OED through  its                                                              
industry experts  and its economist  offers its economic  analysis                                                              
to the public  and steers those interested in  starting a business                                                              
to available resources.                                                                                                         
                                                                                                                                
CO-CHAIR  MUNOZ  pointed  out that  the  Alaska  Energy  Authority                                                              
(AEA)  energy  funding  criteria   is  narrowly  focused  to  just                                                              
government  and  government-supported  enterprises,  which  leaves                                                              
out businesses.   She requested comment  on that and asked  if OED                                                              
has a  position regarding  expanding the  eligibility criteria  to                                                              
promote entrepreneurs making significant impacts on energy.                                                                     
                                                                                                                                
MR.  AUSTERMAN  said  that  although   OED  sees  opportunity  for                                                              
private  involvement  in  addressing  some of  the  energy  issues                                                              
throughout the state,  the criteria, or program  guidelines of the                                                              
renewable energy  fund is a  question for  AEA staff.   He offered                                                              
to  obtain that  answer [from  AEA] for  the committee.   He  then                                                              
commented  that  OED  believes  the private  sector  can  be  more                                                              
efficient  in  solving some  of  these  problems than  the  public                                                              
sector,  and  therefore  [the  state]   should  be  aggressive  in                                                              
helping  those  with   ideas  that  would  address   some  of  the                                                              
challenges to energy in rural Alaska.                                                                                           
                                                                                                                                
8:47:14 AM                                                                                                                    
                                                                                                                                
MR. AUSTERMAN, continuing  his presentation, moved  on to minerals                                                              
development, which  has a staff  of two.   He emphasized  that OED                                                              
is  an  industry  advocate  to  the  extent  that  it's  good  for                                                              
Alaskans.  The  OED offers it's expertise to  industry with regard                                                              
to  developing a  certain deposit  in  a particular  area, to  the                                                              
permitting   process,   to   the   licensing   process,   to   the                                                              
environmental process, and the tax model.                                                                                       
                                                                                                                                
8:48:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER inquired  as  to what  tax  loading is  as                                                              
referenced  on  the  document  in   Mr.  Austerman's  presentation                                                              
entitled "Minerals."                                                                                                            
                                                                                                                                
MR.  AUSTERMAN   related  that   currently  there's   a  community                                                              
evaluating  an extraction  tax  and OED  staff  is evaluating  the                                                              
impact  such  may  have  on  industry  and  its  decisions.    The                                                              
evaluation also  takes into  account what it  will really  take to                                                              
administer  the  tax  as  well  as  what  it  will  bring  to  the                                                              
community.   In  further  response,  boroughs have  severance  tax                                                              
ability and  thus can add  a tax  on top of  the state tax  if the                                                              
land is in the borough.                                                                                                         
                                                                                                                                
8:49:26 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN,   continuing  his  presentation,   said  that  OED                                                              
performs  a  lot  of  outreach  regarding  minerals  in  order  to                                                              
encourage  Alaska as  a favorable  location for  investment.   Mr.                                                              
Austerman opined  that there's a fine line between  advocating for                                                              
industry  and ensuring  [development] is  good for  Alaskans.   He                                                              
noted  that  OED   strongly  encourages  local  hire.     He  then                                                              
suggested  that   one  way  to  address  local   hire  and  obtain                                                              
information would  be the  imposition of a  small income  tax tied                                                              
to the permanent  fund dividend (PFD) such that  those who qualify                                                              
for  the  PFD get  the  tax  back  while those  who  don't  won't.                                                              
Alaska is  essentially a reverse tax  state as people are  paid to                                                              
live here,  he pointed out.   The PFD  application should  be used                                                              
as  a  tool  to  gather  better   information  about  the  state's                                                              
economy.                                                                                                                        
                                                                                                                                
8:51:28 AM                                                                                                                    
                                                                                                                                
MR. AUSTERMAN moved  on to fisheries development,  and pointed out                                                              
that OED works  a lot with the Alaska Seafood  Marketing Institute                                                              
(ASMI).    Although  there  are   lots  of  areas  of  concern  in                                                              
fisheries, it continues  to have much potential as  well.  The OED                                                              
attempts to  help with  policy so  that local fishing  communities                                                              
can keep more of  the fishing dollars at home.   The OED staff has                                                              
been  working on  the  Regional Seafood  Development  Associations                                                              
(RSDAs),  which bring  fishermen  together to  tax themselves  and                                                              
allow  the state the  ability to  re-appropriate  the tax  back to                                                              
the region so  that it can use it  as it sees fit.   He pointed to                                                              
the Copper River  Seafoods region as an example  of good promotion                                                              
of regional  advantages of seafood.   For example, Bristol  Bay is                                                              
looking   at  more   icing  and   cooling   capability  with   the                                                              
aforementioned  self-assessed tax.    Cook Inlet  is just  looking                                                              
into becoming an RSDA while Aleutia is a new RSDA.                                                                              
                                                                                                                                
8:54:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  recalled that the fishing  industry was the                                                              
second highest  employer in  the state.   She then inquired  as to                                                              
whether there's a ranking of the state's industries.                                                                            
                                                                                                                                
MR.  AUSTERMAN explained  that without  administrative  mechanisms                                                              
that other  states have, OED has  to rely on surveys.   He pointed                                                              
out  that often  these  surveys  are industry  centric.   He  then                                                              
reiterated  that  the PFD  provides  a  mechanism that  the  state                                                              
could use.                                                                                                                      
                                                                                                                                
8:56:38 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   MILLETT  congratulated   OED  on   some  of   the                                                              
expansion in the tourism industry.                                                                                              
                                                                                                                                
8:56:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  related that she has received  a flurry of                                                              
e-mails regarding  farmed salmon in Alaska.   She then highlighted                                                              
the  wild  and  free  marketing  of  Alaska's  salmon,  which  she                                                              
suggested would be impacted by farmed salmon.                                                                                   
                                                                                                                                
MR. AUSTERMAN  informed the committee  that OED has  been involved                                                              
in evaluating  the potential of  shellfish aquaculture  in Alaska.                                                              
With  regard to  fish farming  versus wild  stocks, Mr.  Austerman                                                              
deferred to the ASMI representative.                                                                                            
                                                                                                                                
8:58:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MUNOZ  related  that  she has  recently  been  asked  to                                                              
intervene and advocate  on behalf of residents  from other nations                                                              
who want  to establish  a business.   She encouraged  some thought                                                              
in  regard   to  whether  OED  could   play  a  role   in  helping                                                              
individuals  with  communication  difficulties in  establishing  a                                                              
business.                                                                                                                       
                                                                                                                                
MR. AUSTERMAN  acknowledged that  OED does  have a Small  Business                                                              
Assistance Center  web site and  perhaps there could be  review of                                                              
how  to  address  those with  cultural  challenges  in  navigating                                                              
business development in Alaska.                                                                                                 
                                                                                                                                
9:00:31 AM                                                                                                                    
                                                                                                                                
MR.   AUSTERMAN,   continuing   his   presentation,   turned   the                                                              
committee's  attention  to  film   development,  which  is  a  new                                                              
initiative.   He opined  that the film  industry seems  to respond                                                              
to incentives.   The regulations  to support this new  program are                                                              
just being  rolled out.   He noted that  the intent was  to ensure                                                              
[the program]  is Alaska centric  and good  for Alaska.   In doing                                                              
so, the regulations  were crafted tightly.  He  explained that OED                                                              
will  issue tax  credits  for  30 percent  to  44  percent of  the                                                              
qualifying expenditures.   The  intent with the  tax credit  is to                                                              
ensure that  Alaska receives  twice the amount  of the  tax credit                                                              
in  new  money.   Although  the  regulations  are  in  the  public                                                              
comment process,  the effective  date of  the initiative  was last                                                              
September.   A  prequalifying  process  was established  and  four                                                              
production  companies  have  [qualified].   In  fact,  Disney  has                                                              
already done  work in Sitka  and about  $5 million will  be coming                                                              
to Alaska.  The  estimated tax credit for the  aforementioned four                                                              
productions is about  $1.5-$2 million, but the  exact amount won't                                                              
be  known  until  the  productions   are  complete.    Disney  has                                                              
completed its  production and is  waiting for OED to  finalize its                                                              
regulation process  to further define what will qualify  for a tax                                                              
credit.                                                                                                                         
                                                                                                                                
9:04:05 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MUNOZ inquired as  to what  kind of  tax credit,  in the                                                              
absence of a sales tax or income tax, it is.                                                                                    
                                                                                                                                
MR.  AUSTERMAN, using  Disney as  an example,  explained that  OED                                                              
would issue a certificate  to Disney with a value  of $150,000 and                                                              
Disney  would  broker   those  funds  to  entities   that  have  a                                                              
corporate tax  obligation and  sell it at  a discounted rate.   He                                                              
characterized  the  aforementioned  as  a  win-win  situation  and                                                              
acknowledged that  most of the  production companies won't  have a                                                              
tax obligation as their taxes are realized in California.                                                                       
                                                                                                                                
9:05:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER surmised  then that  basically it  doesn't                                                              
cost the state  dollar-for-dollar in terms of  loss from corporate                                                              
income tax  because the funds  spent benefit the  local community.                                                              
Therefore,  she   characterized  the  tax  credit   as  the  state                                                              
subsidizing  the benefits  to whatever  community the  [production                                                              
company] is working.                                                                                                            
                                                                                                                                
MR. AUSTERMAN  replied yes.  He  explained that the  Department of                                                              
Revenue (DOR) will  administer this tax credit in the  same way as                                                              
oil tax  credits for exploration.   He  noted that there  are also                                                              
commercial   fisheries  tax   credits   for  equipment   upgrades.                                                              
Although  this  program is  developed  in  a manner  to  hopefully                                                              
broaden Alaska's economy, it's a net cost to the general fund.                                                                  
                                                                                                                                
9:06:14 AM                                                                                                                    
                                                                                                                                
MR.  AUSTERMAN,  continuing  his  presentation, moved  on  to  the                                                              
Alaska  Regional Development  Organization  (ARDOR)  program.   He                                                              
explained  that the  ARDOR program  provides economic  development                                                              
outreach  opportunities   to  the  various   regional  communities                                                              
throughout  the  state.    Therefore,  [those  communities]  would                                                              
benefit  from OED's  industry expertise  in identifying  resources                                                              
that could  be developed  in the  area.  There  is also  the Small                                                              
Business  Assistance  Center  (SBAC),  which  serves  as  a  great                                                              
resource for  those interested in  doing business in Alaska.   The                                                              
OED also  administers the Made  in Alaska  program.  In  fact, the                                                              
Made in Alaska  logo was just legally trademarked,  which provides                                                              
some legal teeth  to enforce its use as there's a  lot pirating of                                                              
the logo.   A recent survey  of those who  pay the fee to  use the                                                              
Made in  Alaska logo  related that they  definitely see  the value                                                              
in  that  logo.   He  noted  that the  Alaska  Product  Preference                                                              
Program is an important program.                                                                                                
                                                                                                                                
9:07:26 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HERRON then  requested  that Mr.  Austerman provide  the                                                              
committee with any  legislation that's of interest to  OED as well                                                              
as some  of OED's  budget observations.   He  noted that  he would                                                              
ask Mr.  Austerman back for  a future meeting  to fully  flesh out                                                              
[OED and what it offers].                                                                                                       
                                                                                                                                
9:07:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA expressed  interest in  regard to  the cost                                                              
of  fuel  and   how  AIDEA  provides  assistance.     She  further                                                              
expressed  interest  in  ensuring   a  competitive  or  equalizing                                                              
advantage  since the  costs  are  often so  much  higher in  rural                                                              
Alaska, although  the products of  rural Alaska are what  those in                                                              
urban Alaska live off of.                                                                                                       
                                                                                                                                
^Alaska Seafood Marketing Institute                                                                                           
                                                                                                                                
9:10:32 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON announced  that the final order  of business would                                                              
be  an  overview  from  the  Alaska  Seafood  Marketing  Institute                                                              
(ASMI).                                                                                                                         
                                                                                                                                
9:11:31 AM                                                                                                                    
                                                                                                                                
RAY   RIUTTA,  Executive   Director,   Alaska  Seafood   Marketing                                                              
Institute (ASMI),  Department of  Commerce, Community,  & Economic                                                              
Development,  began by  informing  the committee  that  ASMI is  a                                                              
public  private   partnership  similar  to  the   Alaska  Railroad                                                              
Corporation.  He  explained that ASMI is guided  by a seven-member                                                              
board of  directors who are appointed  by the governor.   The ASMI                                                              
is affiliated  with DCCED.   He noted that  one of  the ex-officio                                                              
members  of the  ASMI  board is  the commissioner  of  DCCED.   By                                                              
statute,  ASMI is  the official  seafood promotional  arm for  the                                                              
state.  The  current mission of  ASMI is to increase  the economic                                                              
value  of   the  Alaska  seafood   resource  and  ASMI   has  been                                                              
relatively  successful  with that  mission.   Mr.  Riutta  related                                                              
that ASMI's  role is  to reposition  the [seafood]  industry  as a                                                              
competitive  and  market driven  organization.    The increase  in                                                              
seafood products  produced in Alaska was made  possible through an                                                              
infusion of  funds and tax incentives  from the state  and federal                                                              
government.   The  aforementioned  has dramatically  improved  the                                                              
market  position of  the  Alaska seafood  industry  over the  last                                                              
four to five years.   In 2002 salmon was in deep  trouble, but now                                                              
it's in a better position.                                                                                                      
                                                                                                                                
9:14:51 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA,  referring to a  chart labeled "Funding,"  pointed out                                                              
that  ASMI has  experienced  some  erratic funding  from  Outside,                                                              
mainly federal,  sources.  He highlighted  the [dark] blue  bar on                                                              
the chart  that illustrates  the large  amount of federal  funding                                                              
that was  received  in 2005, which  was parsed  out over  numerous                                                              
years in order to  have a multi-year marketing campaign.   He then                                                              
highlighted the  red bar  on the chart  that illustrates  what the                                                              
industry  has  provided.    As   the  value  of  the  harvest  has                                                              
increased  and the  industry  has increased  its  self-assessment,                                                              
the  industry  contribution  has steadily  grown.    Additionally,                                                              
because of  the additional  funds from  the industry and  recently                                                              
from  the state,  ASMI has  been  able to  attract federal  Market                                                              
Access Program  funds.  The federal  Market Access Program  is how                                                              
the overseas marketing  for seafood is funded.   He explained that                                                              
for  every $1  [ASMI] provides,  the  federal government  provides                                                              
$2.  Therefore,  ASMI is buying money from the  federal government                                                              
in order to perform  the federal overseas marketing  activity.  He                                                              
explained that ASMI's  budget line is flat because  it has managed                                                              
to utilize  some of  the funding.   However,  in fiscal  year (FY)                                                              
2010  the  federal   funding,  save  the  Market   Access  Program                                                              
funding,  will  be gone.    Therefore,  ASMI  is asking  for  some                                                              
general funds (GF) to offset some of those lost federal funds.                                                                  
                                                                                                                                
MR.  RIUTTA  then  referred  to  a  recent  report  from  Northern                                                              
Economics,  which  specifies  that Alaska's  seafood  industry  is                                                              
worth  $5.8  billion  in  direct  and  indirect  induced  economic                                                              
output to the state.   That $5.8 billion worth  of output includes                                                              
$84 million  in tax  revenues, which  includes  a number of  self-                                                              
assessments.  Some  of the self-assessments that  are included are                                                              
ASMI, hatchery enhancement,  and RSDA funds.  This  direct revenue                                                              
to  the state  goes  into  the treasury  to  be dispersed  as  the                                                              
legislature  sees  fit.    The amount  of  revenue  going  to  the                                                              
boroughs  and municipalities  is in  the $14  million range.   Mr.                                                              
Riutta  emphasized  the  importance   of  understanding  that  the                                                              
aforementioned amount  of funds is  left to the discretion  of the                                                              
boroughs  and the  municipalities to  spend on  whatever it  deems                                                              
necessary.    According  to the  Northern  Economics  report,  the                                                              
seafood industry  is the number  one employer in the  state, which                                                              
employs 54,000.   He indicated that [the seafood  industry] is the                                                              
number three industry in overall economic value.                                                                                
                                                                                                                                
9:19:12 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA  then turned  attention to  the salmon fishing  sector,                                                              
which is the  largest sector that employs Alaskans,  although it's                                                              
not the most  valuable part of  the industry in terms  of dollars.                                                              
In  fact, nearly  three-quarters  of all  active salmon  fishermen                                                              
are Alaska  residents.  The  ex-vessel value, the  price fishermen                                                              
receive at the dock,  was $1.6 billion in 2007 of  which salmon is                                                              
about  a quarter  of  that total  while  pollock  and Pacific  cod                                                              
account for  about 37 percent.   He noted that  the aforementioned                                                              
is  by value  not volume,  but the  volume of  the ground  fishery                                                              
represents about three-quarters of the total.                                                                                   
                                                                                                                                
9:20:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA  expressed  interest  in  having  the  data                                                              
available  over  time  in  order  to review  the  changes  in  the                                                              
fisheries growth and production.                                                                                                
                                                                                                                                
MR. RIUTTA offered to make that information available.                                                                          
                                                                                                                                
9:21:28 AM                                                                                                                    
                                                                                                                                
MR.   RIUTTA  moved   on  to   slide   entitled  "Alaska   Seafood                                                              
Accomplishments",  and opined that  although the seafood  industry                                                              
has some good news,  it faces some challenges in  the coming year.                                                              
Mr.  Riutta  then   highlighted  that  the  wholesale   value  for                                                              
seafood,  the value  when the seafood  leaves  the state,  is $3.6                                                              
billion.   That wholesale  value is  calculated after  the harvest                                                              
and with the  in-state value added prior to further  processing or                                                              
distribution  outside   of  the  state.     He  then   turned  the                                                              
committee's  attention to  the chart  that  illustrates the  price                                                              
paid  to fishermen  for Alaska's  seafood  harvest, the  ex-vessel                                                              
value, has  risen from  $1.2 billion  in 2003  to $1.6  million in                                                              
2007.   Although there have been  some very large  harvests during                                                              
that time, the value  has increased more than the  increase in the                                                              
harvest.   He then  turned to  the graph  entitled "Alaska  Salmon                                                              
Value Growth:  Ex-Vessel and  First Wholesale," which  illustrates                                                              
that the higher  the wholesale value of the  product, particularly                                                              
with salmon, the  more the fishermen can keep.  In  fact, when the                                                              
first  wholesale was  around $900  million for  salmon, nearly  46                                                              
percent of that  went to the fishermen themselves.   Therefore, if                                                              
the price  can be kept  up, more money  goes to the  fishermen and                                                              
increases  the  ex-vessel  value,  which also  increases  the  tax                                                              
return  to the  state.   Mr.  Riutta  highlighted  that [ASMI]  is                                                              
active in  the U.S. as  well as the  overseas market.   He related                                                              
that the  growth in overseas  sales has  been about 34  percent in                                                              
value from  2003-2007.   The aforementioned  is important  since a                                                              
little over half of Alaska's products go to the overseas market.                                                                
                                                                                                                                
9:24:50 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA  opined  that ASMI has  been successful  in making  the                                                              
Alaska  brand well  known.  He  informed the  committee that  ASMI                                                              
has been  in business  for  well over  25 years and  serve as  the                                                              
brand  managers for  the state's  seafood.  The  ASMI, he  further                                                              
opined, has  placed Alaska  seafood on  the menus  of most  of the                                                              
restaurants in  the U.S.   In fact, Alaska  seafood is  the number                                                              
two most menued brand among the top U.S. restaurant chains.                                                                     
                                                                                                                                
9:25:38 AM                                                                                                                    
                                                                                                                                
MR.  RIUTTA,  in  response  to  Co-Chair  Herron,  specified  that                                                              
Alaska's  seafood  is  in  [competition]   with  beef,  pork,  and                                                              
chicken.   However, Alaska's seafood  is also in  competition with                                                              
Oreo  cookies,  Haagen Dazs  ice  cream,  and other  such  popular                                                              
branded items found  on menus.  He noted that  some recent surveys                                                              
of restaurants  found that  77 percent of  those surveyed  who see                                                              
the  Alaska seafood  brands in  restaurants have  a very  positive                                                              
impression.  A  recent survey regarding farmed  versus wild salmon                                                              
revealed  that 84  percent  will choose  wild  Alaska salmon  over                                                              
farmed Atlantic salmon from the menu of U.S. restaurants.                                                                       
                                                                                                                                
9:27:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON asked  if Alaska seafood is competing  well in the                                                              
foreign markets.                                                                                                                
                                                                                                                                
MR. RIUTTA  replied yes, but  he highlighted that  Alaska competes                                                              
as  a state  against countries.   Therefore,  Alaska is  competing                                                              
against the  Norwegian Seafood Export  Council that has  a $40-$50                                                              
million  budget and  has  fewer products  to  market than  Alaska.                                                              
Alaska is  also competing  with the  Chileans, the Spaniards,  the                                                              
Canadians, and any other country who sells seafood overseas.                                                                    
                                                                                                                                
9:28:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  surmised then that if Alaska  was to break                                                              
its  own farmed  salmon  rules, there  would  be a  few who  would                                                              
benefit while  the salmon industry  as a  whole would take  a huge                                                              
hit.                                                                                                                            
                                                                                                                                
MR. RIUTTA  confirmed that  such would  undercut ASMI's  marketing                                                              
message, which  is based  upon salmon from  Alaska being  wild and                                                              
never  farmed.   If  farmed salmon  were  allowed  in Alaska,  the                                                              
entire marketing program would have to be changed.                                                                              
                                                                                                                                
9:28:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA remarked  that  responsibilities come  with                                                              
popularity, in  terms of making  a name for  a product.   She then                                                              
recalled  being  in  Paris  in  the  1970s  and  seeing  beautiful                                                              
Norwegian  fish  in  the  markets  and messy  Alaska  fish.    She                                                              
inquired as to what  is being done to help fishermen  maintain the                                                              
value that has been assured.                                                                                                    
                                                                                                                                
MR.  RIUTTA informed  the committee  that  quite a  few years  ago                                                              
ASMI  started a  quality program  that  provides tools,  training,                                                              
and information  from the  point of harvest  through to  the point                                                              
of  sale.   Moreover, ASMI  has developed  the seafood  university                                                              
that  evolved from  a seafood  training program  with Kroger's,  a                                                              
grocery store  chain on  the East Coast.   The aforementioned  was                                                              
such a  success that it evolved  into an on-line  training program                                                              
for counter staff.   He noted that there is a  similar program for                                                              
wait  staff.   While  there  are  still  cases of  mishandling  of                                                              
Alaska's  seafood, he  opined that  the  presentation of  Alaska's                                                              
seafood in the market place has vastly improved.                                                                                
                                                                                                                                
9:33:47 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MUNOZ  asked if ASMI  has considered marketing  low value                                                              
good  quality Alaska  salmon, such  as pink  salmon, to  countries                                                              
with a major consumption of seafood.                                                                                            
                                                                                                                                
MR.  RIUTTA informed  the committee  that in  the last  three-four                                                              
years industry  has decreased production  of pink salmon in  a can                                                              
from 70  percent to about 50  percent with the  remainder produced                                                              
as frozen  filets.   The industry itself  has changed  the product                                                              
form of pink  salmon and raised  its value, although the  value of                                                              
pink  salmon still  isn't as  high as  sockeye.   There is also  a                                                              
U.S. Department  of Agriculture  food aid  program that  ASMI took                                                              
over.  The  aforementioned program looks for  opportunities in the                                                              
U.S. food  aid program  to provide canned  salmon, and  other less                                                              
saleable products,  to various countries in order  to provide more                                                              
protein  in   those  markets.     Through  this   program  private                                                              
volunteer   organizations   can  place   orders   with  the   U.S.                                                              
Department  of Agriculture  which then  go out  to the  industries                                                              
for  bids.   In answer  to Co-Chair  Munoz,  Mr. Riutta  confirmed                                                              
that ASMI  has explored  marketing low  value good quality  Alaska                                                              
salmon,   but   the  aforementioned   avenue   has   been   found.                                                              
Furthermore,  the industry itself  has also taken  on the  role of                                                              
trying to raise  the value of pink salmon through  new value-added                                                              
products.                                                                                                                       
                                                                                                                                
9:36:59 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA,  continuing his  presentation, turned the  committee's                                                              
attention to  the "Cook  it Frozen"  program, which has  dispelled                                                              
the myth  that frozen  seafood is  bad.  Much  work has  been done                                                              
with  chefs  in  order  to show  them  how  good  Alaska's  frozen                                                              
seafood  products  can  be  through   the  Culinary  Institute  of                                                              
America  and  other  culinary  schools.    In  fact,  ASMI  has  a                                                              
curriculum  that it provides  to culinary  schools throughout  the                                                              
U.S.   Mr. Riutta opined  that the Cook  it Frozen program  is one                                                              
of  best programs  in  terms of  changing  attitudes and  allowing                                                              
Alaska's frozen  products to  demand a  higher price because  most                                                              
of the seafood leaving the state does so in frozen form.                                                                        
                                                                                                                                
MR. RIUTTA  then showed  a slide from  the Brussels  Seafood Show,                                                              
which is  the largest  seafood show  in the  world.  In  Brussels,                                                              
Alaska competes  against countries.  However, the  Alaska pavilion                                                              
has the  same footprint  as the  rest of the  U.S. pavilion.   The                                                              
aforementioned  stand to  reason since Alaska  produces over  half                                                              
of  the seafood  in  the U.S.    Most of  the  major companies  in                                                              
Alaska  are  present  at the  show  as  are  many of  the  state's                                                              
smaller seafood  companies.  The  result of the investment  in the                                                              
three-day show  in Brussels was  $31 million in on-site  sales and                                                              
$125  million  in  follow-on  sales.    He  then  highlighted  the                                                              
various  tactics   used  to  work  with  consumers,   including  a                                                              
tremendous amount of promotional materials                                                                                      
                                                                                                                                
9:40:19 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HERRON inquired  as to  what ASMI  has found  to be  the                                                              
most favored advertisement by those in the business.                                                                            
                                                                                                                                
MR. RIUTTA  answered that  the most  popular advertisement  was an                                                              
insert in  various cooking magazines  that had facts  about Alaska                                                              
seafood as well  as a similar advertisement with  chefs.  Although                                                              
there was  a popular television  advertisement with Ben  Stein, it                                                              
didn't  receive  nearly  the positive  feedback  as  the  one-page                                                              
inserts.   In  further  response to  Co-Chair  Herron, Mr.  Riutta                                                              
related that  the wild Alaska salmon  image and wild  Alaska image                                                              
is  huge in  the marketplace.   He  pointed out  that the  reasons                                                              
people want  to visit Alaska are  the same reasons people  want to                                                              
eat   Alaska  seafood,   which   is   because  it's   a   pristine                                                              
environment.                                                                                                                    
                                                                                                                                
9:43:21 AM                                                                                                                    
                                                                                                                                
MR.   RIUTTA,  returning   to  his   presentation,  informed   the                                                              
committee that  ASMI works  with almost  every retail  chain, food                                                              
service  distributor, and  restaurant chain  in the  country.   He                                                              
then presented  a slide illustrating  the advertisement  with Jack                                                              
in the  Box in  which pollock  is promoted.   This  past summer  a                                                              
sustainability  forum  was  held  in Anchorage;  all  of  Alaska's                                                              
fisheries  managers  were brought  together  to talk  with  ASMI's                                                              
major  customers.    He  noted that  although  there's  a  growing                                                              
interest in  the market place  about sustainability,  there's also                                                              
some  confusion with  regard to  third party  certifiers who  have                                                              
begun to espouse  what is and isn't sustainable.   Work began last                                                              
year to clarify  sustainability.  He explained that  ASMI wants to                                                              
ensure that  everyone understands  that seafood from  Alaska comes                                                              
from  a   sustainably  managed   resource.    Sustainability,   he                                                              
emphasized, is specified  in the Alaska State Constitution  and is                                                              
fundamental  to  the way  business  is  done  in Alaska.    Still,                                                              
organizations  such  as Green  Peace  have  said that  all  Alaska                                                              
pollock  should   be  taken  off   the  shelf  because   it  isn't                                                              
sustainable  by  its  criteria.   However,  ASMI  doesn't  believe                                                              
that, he opined.                                                                                                                
                                                                                                                                
9:45:42 AM                                                                                                                    
                                                                                                                                
CO-CHAIR   HERRON   characterized  [what   some   non-governmental                                                              
organizations  (NGOs) are  saying in  relation to  sustainability]                                                              
as a  form of  outside of  Alaska influence  that sends  the wrong                                                              
message about Alaska.                                                                                                           
                                                                                                                                
9:46:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  opined that quality  is a hard  standard to                                                              
maintain and  the best thing  to do with  critics is to  listen to                                                              
ensure that  nothing is being missed.   She then  highlighted that                                                              
in tourism  marketing there are  different niches.   She suggested                                                              
that  there  should be  a  gourmet  fish  tourism niche  in  which                                                              
people learn how to cook Alaska's seafood.                                                                                      
                                                                                                                                
MR.  RIUTTA   informed  the  committee  that   the  aforementioned                                                              
already exists.   The ASMI has worked with Holland  America, which                                                              
has  an onboard  Iron  Chef-type  of  cooking demonstration.    In                                                              
Juneau,  there  is a  company  that  does celebrity  chef  cooking                                                              
events  with Alaska  seafood.   Mr. Riutta  related his  agreement                                                              
with  Representative   Cissna  regarding   taking  criticism   and                                                              
realizing that  quality is  key to the  marketplace.   The problem                                                              
is that the  premise of some of the nongovernmental  organizations                                                              
(NGOs) is that government  can't be trusted, and thus  the NGO has                                                              
to  be  hired  to  ensure  government  is  doing  its  job.    The                                                              
aforementioned is objectionable, he said.                                                                                       
                                                                                                                                
9:50:02 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON  requested that Mr. Riutta share  his observations                                                              
with regard  to the following:   the recent community  development                                                              
quota (CDQ) groups  with tax consequences on  unrelated businesses                                                              
[realized] with  the profits of  fishing; the Yukon king  run that                                                              
looks to be  in trouble next year;  and the new rural  advisor who                                                              
has strong ties to the fishing industry.                                                                                        
                                                                                                                                
9:50:55 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA,  continuing his  presentation,  pointed out that  ASMI                                                              
works a  lot with  celebrity chefs.   For  example, ASMI  has been                                                              
working  with Alton  Brown who  has  become a  champion of  Alaska                                                              
seafood  and  sustainability.   He  then  presented a  slide  that                                                              
shows ASMI  doing cooking  frozen demonstrations, which  generates                                                              
much interest.   He  informed the committee  that ASMI  works with                                                              
the  university system.   In  fact, ASMI's  food service  director                                                              
and  technical  director  gave   presentations  to  University  of                                                              
Massachusetts students  and food service  staff.  In terms  of the                                                              
number of meals  served annually, the University  of Massachusetts                                                              
is one of the  largest campuses.  At this point,  wild Alaska week                                                              
is part of  the aforementioned university's menu.   Most recently,                                                              
ASMI  has  reached out  to  Stanford.    He mentioned  the  Alaska                                                              
seafood university  that's located  on ASMI's  web site.   He then                                                              
reviewed the national  campaigns, which were discussed  earlier in                                                              
regard to  magazine inserts.   However, in  order to fit  into the                                                              
2009  budget, ASMI  moved  away from  the  $3-$4 million  domestic                                                              
[magazine]  campaign  to  about  a  $1  million  public  relations                                                              
campaign.    Given  last  year's  numbers  with  public  relations                                                              
marketing,  this  year's  budget,  a no-growth  budget,  seeks  to                                                              
maintain  that marketing.   Mr.  Riutta said,  "But we think  that                                                              
we're really at  bare bones level with our budget  to maintain our                                                              
brand position."   The rule  of thumb  in advertising is  that for                                                              
every year a brand  isn't in the market, 25 percent  of that brand                                                              
power  is  lost  each  year.    Mr.  Riutta  then  turned  to  the                                                              
international   program,   which  he   characterized   as  a   big                                                              
component.  He  reviewed the overseas contract  offices, and added                                                              
that  ASMI  actively  markets  in all  of  the  overseas  markets.                                                              
Although Japan  continues to be  the largest customer  of Alaska's                                                              
seafood,  it has  decreased  dramatically over  the  last four  to                                                              
five years.   The  markets in Europe  and China  are growing.   In                                                              
fact,  China  is  the  largest  seafood  consuming  and  producing                                                              
nation.   He highlighted that ASMI  translates its materials.   He                                                              
also highlighted the  Mr. Fish campaign in Japan.   Moreover, ASMI                                                              
does  media  tours  both domestically  and  internationally.    He                                                              
pointed out  ASMI's overseas efforts  to educate and  attend trade                                                              
shows.  He noted  that ASMI has discovered an  emerging roe market                                                              
in Russia.                                                                                                                      
                                                                                                                                
9:57:53 AM                                                                                                                    
                                                                                                                                
MR. RIUTTA  opined that ASMI  has built  up a very  powerful brand                                                              
and  enviable position  in the  market  over the  last few  years.                                                              
One of the  largest threats facing [Alaska's seafood  industry] is                                                              
the credit  crunch.  He explained  that many who want  to purchase                                                              
Alaska's seafood  products need lines  of credit to do  so.  Since                                                              
there's not  much that can be  done about that, hopefully  it will                                                              
resolve  itself.     The  credit  crunch  is   resulting  in  some                                                              
stagnation  and price pressure.   He  said that  ASMI will  try to                                                              
work with  the industry  to dampen  that in  the months  and years                                                              
ahead.   Mr. Riutta  said that since  [Alaska's seafood  industry]                                                              
is facing uncertain  and challenging times, he  encouraged keeping                                                              
Alaska's  name out  there  to encourage  purchase  of the  state's                                                              
seafood products at a higher price.                                                                                             
                                                                                                                                
10:00:18 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Community  and Regional  Affairs  Standing  Committee meeting  was                                                              
adjourned at 10:00 a.m.                                                                                                         

Document Name Date/Time Subjects
ASMI Overview2.5.9.PDF HCRA 2/5/2009 8:00:00 AM
2.5.09 OED Presentation- FINAL - Legislature.ppt HCRA 2/5/2009 8:00:00 AM