Legislature(1999 - 2000)
03/29/1999 05:10 PM House EDT
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT
AND TOURISM
March 29, 1999
5:10 p.m.
MEMBERS PRESENT
Representative Gail Phillips, Chair
Representative Norman Rokeberg
Representative Fred Dyson
Representative Andrew Halcro
Representative Sharon Cissna
Representative Beth Kerttula
MEMBERS ABSENT
Representative Ramona Barnes
COMMITTEE CALENDAR
* HOUSE JOINT RESOLUTION NO. 20
Urging the Congress to amend the Internal Revenue Code of 1986 to
eliminate the marriage penalty by providing that income tax rate
bracket amounts, and the amount of the standard deduction, for
joint returns shall be twice the amounts applicable to unmarried
individuals.
- MOVED OUT OF COMMITTEE
* HOUSE BILL NO. 136
"An Act relating to tourism and tourism marketing; eliminating the
Alaska Tourism Marketing Council; and providing for an effective
date."
- HEARD AND HELD: ASSIGNED TO SUBCOMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 20
SHORT TITLE: FEDERAL INCOME TAX MARRIAGE PENALTY
SPONSOR(S): REPRESENTATIVES(S) PHILLIPS, Green, Grussendorf,
Kohring, Dyson
Jrn-Date Jrn-Page Action
2/26/99 323 (H) READ THE FIRST TIME - REFERRAL(S)
2/26/99 323 (H) EDT, FINANCE
3/03/99 350 (H) COSPONSOR(S): KOHRING
3/17/99 (H) EDT AT 5:00 PM CAPITOL 124
3/17/99 (H) SCHEDULED BUT NOT HEARD
3/19/99 519 (H) COSPONSOR(S): DYSON
3/29/99 (H) EDT AT 5:00 PM CAPITOL 106
BILL: HB 136
SHORT TITLE: ABOLISH TOURISM MARKETING COUNCIL
SPONSOR(S): REPRESENTATIVES(S) THERRIAULT
Jrn-Date Jrn-Page Action
3/12/99 438 (H) READ THE FIRST TIME - REFERRAL(S)
3/12/99 438 (H) EDT, L&C, FIN
3/29/99 (H) EDT AT 5:00 PM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE GENE THERRIAULT, Sponsor
Alaska State Legislature
Capitol Building, Room 511
Juneau, Alaska 99801
Telephone: (907) 465-4797
POSITION STATEMENT: Introduced HB 136 as the bill sponsor.
DEBORAH SEDWICK, Commissioner
Department of Commerce and Economic Development
P.O. Box 110800
Juneau, Alaska 99811
Telephone: (907) 465-2500
POSITION STATEMENT: Testified on HB 136.
NANCY LETHCOE, Owner
Alaska Wilderness Sailing and Kayaking
P.O. Box 1313
Valdez, Alaska 99686
Telephone: (907) 835-5175
POSITION STATEMENT: Testified on HB 136.
BILL COPELAND, Owner
Raven Sailing Charters
P.O. Box 2581
Valdez, Alaska 99686
Telephone: (907) 835-5663
POSITION STATEMENT: Testified on HB 136.
CAROL KASZA, Owner
Arctic Treks
P.O. Box 73452
Fairbanks, Alaska 99707
Telephone: (907) 455-6502
POSITION STATEMENT: Testified in opposition to HB 136.
BARBARA WINKLEY, Owner
Bed and Breakfast [name not specified]
8120 Rabbit Creek Road
Anchorage, Alaska 99516
Telephone: (907) 345-1954
POSITION STATEMENT: Testified in opposition to HB 136.
KEN LEGHORN, Owner
Alaska Discovery Incorporated
5449 Shaune Drive
Juneau, Alaska 99801
Telephone: (907) 780-6505
POSITION STATEMENT: Testified on HB 136.
STEVE BEHNKE, Executive Director
Alaska Wilderness Recreation and Tourism Association (AWRTA)
P.O. Box 22827
Juneau, Alaska 99802
Telephone: (907) 463-3038
POSITION STATEMENT: Testified on HB 136.
MIKE MCBRIDE, Owner
Kachemak Bay Wilderness Lodge
P.O. Box 956
Homer, Alaska 99603
Telephone: (907) 235-8910
POSITION STATEMENT: Testified in opposition to HB 136.
TINA LINDGREN, Executive Director
Alaska Visitors Association (AVA)
3201 C Street
Anchorage, Alaska 99503
Telephone: (907) 561-5733
POSITION STATEMENT: Testified on HB 136.
TODD BUREAU, Small Business Owner
[business name not specified]
Hope, AK 99605
Telephone: (907) 782-3725
POSITION STATEMENT: Testified in opposition to HB 136.
BOB DINDINGER, Vice-President of Government Relations
Alaska Visitors Association (AVA); President,
Alaska Travel Adventures (ATA)
9085 Glacier Highway
Juneau, Alaska 99801
Telephone: (907) 789-0052
POSITION STATEMENT: Testified on HB 136.
DEROTHA FERRARO
Homer Chamber of Commerce
P.O. Box 541
Homer, Alaska 99603
Telephone: (907) 235-7740
POSITION STATEMENT: Testified on HB 136.
ANN CAMPBELL, Vice-President
Alaska Village Initiatives
1577 C Street
Anchorage, Alaska 99501
Telephone: (907) 274-5400
POSITION STATEMENT: Testified on HB 136.
ACTION NARRATIVE
TAPE 99-4, SIDE A
Number 0001
CHAIR GAIL PHILLIPS called the House Special Committee on Economic
Development and Tourism meeting to order at 5:10 p.m. Members
present at the call to order were Representatives Phillips,
Rokeberg, Dyson, Cissna and Kerttula. Representative Halcro
arrived at 5:12 p.m.
HJR 20 - FEDERAL INCOME TAX MARRIAGE PENALTY
CHAIR PHILLIPS announced the first order of business was House
Joint Resolution No. 20, urging the Congress to amend the Internal
Revenue Code of 1986 to eliminate the marriage penalty by providing
that income tax rate bracket amounts, and the amount of the
standard deduction, for joint returns shall be twice the amounts
applicable to unmarried individuals.
REPRESENTATIVE ROKEBERG requested clarification on whether the
resolution is intended to level the playing field or allow married
couples to pay more or less than a single person.
CHAIR PHILLIPS explained that the resolution proposes that a
married couple will have the same deductions as two single people.
Number 0138
REPRESENTATIVE CISSNA made a motion to move HJR 20 out of committee
with individual recommendation. There being no objection, HJR 20
was moved out of committee.
HB 136 - ABOLISH TOURISM MARKETING COUNCIL
Number 0173
CHAIR PHILLIPS announced that the next order of business was House
Bill No. 136, "An Act relating to tourism and tourism marketing;
eliminating the Alaska Tourism Marketing Council; and providing for
an effective date."
REPRESENTATIVE GENE THERRIAULT, Sponsor, stated that he is
introducing HB 136 with the intent of kicking off the debate, in
the legislature, on an idea that was debated at length last year
with SB 350. HB 136 is based on a plan that was brought forward
last year by the tourism industry in similar legislation. It
proposes to consolidate the state's tourism marketing efforts,
reduce the size and function of the Division of Tourism and allow
the state to reduce its contributions to tourism marketing and
realize a general fund savings.
REPRESENTATIVE THERRIAULT further stated that currently Alaska's
statewide tourism marketing efforts are carried out my three
organizations: Alaska Tourism Marketing Council (ATMC), Alaska
Visitors Association (AVA), and the Division of Tourism. These
efforts will be consolidated into a single marketing function that
is broadly representative of the various sectors of the industry.
The organization will put together a marketing program to address
media advertising, visitor inquiries, publishing and distribution
of information regarding vacation planning and establish and
maintain Internet sites that provide tourism information.
REPRESENTATIVE THERRIAULT continued, saying that the Division of
Tourism will continue to provide inquiry assistance, administer the
information centers and plan and advocate for tourism and tourism
development in coordination with the private sector. It will enter
into a contract with a single qualified trade association for the
purpose of planning and executing the destination tourism marketing
campaign. The contract may include promotion of distinct segments
of the tourism industry: highway, seasonal, cultural, regional,
rural, and eco-tourism. This would take the state out of marketing
and reduce the number of employees. The association awarded will
be required to match the state's effort with 30 percent of its own
money. It is expected that the association will grow; therefore,
the match from industry will rise to 60 percent by the year 2002,
and that's where the state can gradually reduce its general fund
contribution to the marketing effort.
REPRESENTATIVE THERRIAULT concluded that the consolidation of
overall marketing in the Division of Tourism is a responsible
approach to reduce the state's monetary contribution without
harming the growth of the industry. Furthermore, the trade
association will involve those people who have the most to gain or
lose by the effectiveness of the marketing, those being, the people
in the industry itself.
Number 0448
CHAIR PHILLIPS pointed out that the committee members should have
in front of them a copy of the comparative analysis of SB 350, from
last year, and HB 136, from this year.
REPRESENTATIVE THERRIAULT referred to the comparison piece that
Representative Phillips pointed out, and said that the people from
the tourism industry will probably have comments on the accuracy of
that comparison. He added that it is very likely that
Representative Mulder will ask that the overall marketing effort be
removed from the operating budget and that the overall state
contribution to the marketing effort will be reflected in a fiscal
note on HB 136. He noted that a lot is riding on HB 136 and he
hopes the committee, which only meets every two weeks, will not act
speedily as they are under a time crunch.
CHAIR PHILLIPS explained that the committee is not set to the two
week schedule and it can meet as often as necessary.
REPRESENTATIVE THERRIAULT informed the committee that the Division
of Tourism will be writing up a contract and how the different
segments of the industry are marketed will have to be evaluated and
whether the organization that gets the contract is following
through. Keep in mind that the legislature and the Division of
Tourism will be hearing from constituents, representing the
different segments of the market, if they are being slighted. From
year to year, in a continuing review, both the legislature and the
Division of Tourism will be able to make changes if certain
segments of the industry feel they have been left out.
Number 0671
REPRESENTATIVE HALCRO pointed out that the goal is to raise a
minimum of $10 million with $6 million coming from the private
sector and $4 million coming from the state's general fund. He
asked if the private sector is unable to raise the $6 million
whether the state would still have to come up with $4 million.
REPRESENTATIVE THERRIAULT explained that the Division of Tourism
would be able to continue the marketing effort if the industry was
unable to match the funds.
REPRESENTATIVE HALCRO referred to a letter from Skagway in which
the residents of Skagway voiced their concerns with regards to the
costs they would have to bear in order to participate in the
program and that they didn't think they would be able to
participate. He said that this means some of the smaller
communities may not have the resources to participate and it may be
difficult to reach the $6 million. He asked how that would affect
the program.
Number 0727
REPRESENTATIVE THERRIAULT responded that in order for the contract
to continue the awarded trade association would have to come up
with the required match.
REPRESENTATIVE CISSNA expressed concern with regards to Alaska's
underdeveloped tourism sector in the individual small concessions
and those opportunities that haven't been realized yet may be
overlooked by the association that receives the contract.
REPRESENTATIVE THERRIAULT pointed out that if a particular niche
market is identified it could be negotiated into the contract.
Number 0855
REPRESENTATIVE KERTTULA wondered if any other states run their
tourism with contracts.
REPRESENTATIVE THERRIAULT replied that he is not aware.
REPRESENTATIVE KERTTULA requested clarification on whether the
original contract, when awarded, will require matching funds of 30
percent, and if extra things are done thereafter whether matching
funds will still be required.
REPRESENTATIVE THERRIAULT responded that he is not sure what is
meant by "extra things". He used the ferry incident in Canada as
an example of where the state could do something extra and require
a match from the trade association, although, the state can't
require a match of the trade association and not require a match by
some other means which could also address that need.
Number 0943
REPRESENTATIVE ROKEBERG expressed concern about the prohibitions in
HB 136. For example, in Section 6, AS 44.33.120 is amended by
adding a new subsection which prohibits the Division of Tourism
from entering into any other campaign or contract. It seems that
there could be contract provisions that the division could put
together that perhaps the qualified trade association (QTA)
wouldn't want to entertain. He asked if the division would be
allowed to reserve a percentage of those funds to have another
contract and then the association is protected because there is the
first right of refusal provisions in subsection (b) of HB 125.
There are two sections of the bill that seem to be at odds with
each other; the prohibition of contract and the first right of
refusal.
Number 1030
REPRESENTATIVE THERRIAULT explained that with Section 6 the main
issue is whether the entire marketing effort is going to be pulled
together in one spot with one entity doing it. He referred to the
language on page 4, lines 9 and 10, where it reads, "If the
qualified trade association refuses a contract offer, the state may
not award the contract to another person under substantially
different terms." This is the language, he believes, that
Representative Kerttula was alluding to earlier.
REPRESENTATIVE ROKEBERG requested clarification on the language in
Section 6. He wondered if it prohibits another contract from being
offered without there being a first right of refusal.
REPRESENTATIVE THERRIAULT explained that the additional contracts,
referred to on page 4, lines 9 and 10, are for other than general
marketing.
REPRESENTATIVE ROKEBERG asked, "Is that defined in the bill here?"
Number 1119
REPRESENTATIVE THERRIAULT pointed out the language on page 4,
subsection (b), where it reads, "the right of first refusal for
every other tourism related contract."
REPRESENTATIVE ROKEBERG asked how there can be other contracts if
other contracts are prohibited in Section 6 of the bill. He stated
that it seems there is a technical problem with the bill.
REPRESENTATIVE THERRIAULT explained that it comes down to marketing
versus other efforts of state money. He agreed that the language
was confusing initially, and he thought that the language on page
4, subsection (b) should have said, other tourism marketing related
activities, but realized that is not the way it is intended to
work. The language only refers to other non-marketing efforts.
Number 1178
REPRESENTATIVE HALCRO offered a scenario. If the state, after the
contract date, receives money to promote a specific tourism
function, say the Alaska Marine Highway System, he wondered if this
legislation would prohibit the state, without taking money away
from the tourism effort, from promoting the Alaska Marine Highway
System.
REPRESENTATIVE THERRIAULT responded, "I'm not sure of the answer."
He was thinking that the general fund spending level would be set
on a yearly basis.
Number 1275
DEBORAH SEDWICK, Commissioner, Department of Commerce and Economic
Development(DCED), introduced Jeff Bush, the Deputy Commissioner,
and Ginny Fay, the Legislative Liaison, from the DCED, both of whom
have worked hard over the past year on this legislation. She said
that the hope was to work with the AVA on a piece of legislation
that everyone could live with, but unfortunately the DCED cannot
support HB 136 as written. She stated:
We agree that the elimination of the Alaska Tourism Marketing
Council [ATMC] is necessary with the industry. We also agree
with the industry that more dollars need to be spent on
tourism marketing. We have also told the industry from the
very beginning that any reorganization should be guided by the
following principles: that there be strong oversight of state
marketing funds, that marketing performed be beneficial to all
Alaska tourism businesses and communities, and that any
changes made have the support of the entire industry in
Alaska.
The current purposes of the Division of Tourism include, among
other things: to ensure the economic benefits are retained in
state to the maximum extent possible, to maximize resident
employment, to ensure consideration of local community goals
and impacts, and to promote tourism opportunities along the
highway system, including the Alaska Marine Highway System
[AMHS] and in rural areas.
These purposes that specifically pertain to ensure benefits go
to all Alaskans, and are dispersed throughout the state and
retained in Alaska, are deleted in HB 136. These goals are at
the heart and the mission of all activities of the Department
of Commerce and Economic Development [DCED]; we are committed
to long-term sustainable growth in tourism and that those
benefits flow from the urban centers to the rural areas.
Under this bill the state is expected to turn over public
money to private industry without any assurances that Alaskans
or Alaska businesses will benefit. Because there is only one
qualified trade organization [association] [QTA], there will
be no competition for the contract. The state cannot contract
out with anyone else. This is not privatization, it is
outsourcing, something that is typically not done when there
is only one entity capable of bidding or doing the work. the
state needs the flexibility of more than one contract if the
association is not willing or able to conduct all the pieces
of the marketing plan developed jointly with the industry.
It is in our interest to have one contract with a qualified
trade organization [association] because it will leverage
their money. So, to the extent possible we want as much money
from the state coffers to go to be leveraged. However, it is
worth noting that the Division of Tourism cooperative program
with the Yukon government currently leverages other funds to
a greater extent than will be required under this legislation.
The ability to have more than one contract also helps ensure
that the qualified trade organization [association] is
responsive to all the players in Alaska. AVA members are
currently 10 percent of the Alaska tourism businesses and
membership is disproportionately skewed toward large, outside
companies. The "no other contract" section is borne out of
the fear that disgruntled local Alaskan players would leverage
state funds for other marketing efforts that they believe
would provide them with greater benefits. While we agree that
marketing should be consolidated and intend to do just that,
we do not believe that restricting the use of state funding
and contracting should be used to force Alaska businesses to
participate in or rely on a program if they do not believe it
benefits them.
It is poor public policy for us to turn over the money and not
have the ability to have the kind of control/responsibility
that should flow. There is a match requirement from industry,
but no commitments have been made, so the money that would go
to the qualified trade organization -- association, would be
the contribution from the state at this point and that state
only.
The bill also removes the ability of the Division of Tourism
to conduct research to evaluate the effectiveness of the
marketing being done by the organization [association]. In an
era when the legislature is adding more requirements for
performance measures, why would we give out millions of
dollars and not be able to hold the recipients accountable to
the state?
All that being said, I support SB 350 from last year, a hard
fought compromise between the industry and the administration
that protected Alaskans, Alaska businesses and Alaska jobs.
It also gave the Division of Tourism the ability to retain the
authority to conduct direct marketing for new market
development or niche markets for small businesses, communities
in rural Alaska as directed by the administration or
legislature and allowed the division to retain the authority
to evaluate marketing effectiveness and the performance of
marketing contractors. That bill was passed 20-0 by the
Senate and 28-9 by the House. We have not heard any
persuasive arguments why that compromise bill is unacceptable
today.
We have spent the last three years consolidating our overseas
trade and tourism offices. We have worked closely with the
Alaska Marine Highway System and other departments to market
our state assets. We hope to work this year with the Alaska
Railroad on similar projects. The qualified trade
organization [association] does not see the need to find every
opportunity to partner with state agencies to get the job
done. We think such partnering is completely reasonable and
necessary and that anything less is poor public policy. We
support this reorganization, we are not opposed to contracting
with a qualified trade organization [association] for tourism
marketing in Alaska, and we certainly hope that the millennium
plan will raise the necessary dollars from the private sector.
It is certainly in the state's best interest to contract out
as much money as possible, as I said before, in order to
leverage the private sector match. But while public and
private interests have much in common, they don't completely
coincide. The state needs to continue to take a strong
oversight and leadership role in tourism marketing. It is
essential to any agreement that we honor the state's role.
Number 1579
REPRESENTATIVE ROKEBERG asked if Commissioner Sedwick, in her
negotiations with people in the industry, has worked on an outline
for the contract. He stated that if the terms and conditions of
the contract were being discussed concurrently with HB 136, it
would relieve a lot of fears.
COMMISSIONER SEDWICK responded that the Division of Tourism put
together a menu, so to speak, of things that it felt were
important. One concern that the industry has is that the Division
of Tourism will try to micro-management the account, but its real
intention is to give broad goals and then evaluate them.
REPRESENTATIVE ROKEBERG said that it seems the Division of Tourism
would feel more comfortable entering into a new organization if it
knew what was stated in the contract which guides the organization.
Number 1651
COMMISSIONER SEDWICK replied absolutely. She feels that the
industry folks are trying to do good things, but if there is a way
to look out for the small player and protect the state's interest
at the same time, it is worth it.
REPRESENTATIVE KERTTULA asked if there are any other states that
Commissioner Sedwick knows of that operate their tourism this way.
COMMISSIONER SEDWICK responded that Colorado did it for a year and
found out that it didn't work for them, because it didn't address
the needs of the smaller players.
REPRESENTATIVE KERTTULA wondered why SB 350, which was worked out
last year and seemed to be a good starting place, was not being
used this year.
Number 1715
COMMISSIONER SEDWICK explained, "The industry came to us and ...
expressed concern and I thought we were rolling down the path of
taking a look at 350 and looking at the changes that maybe we could
make to that particular bill, which is why we didn't ask for
introduction of 350 again. I felt like it would be the
administration acting in bad faith to propose that legislation when
I knew that the industry had some concerns and some questions about
it. ... Obviously we didn't move forward and weren't able to come
to you with something intact, or something more like 350, which
would be acceptable to us."
COMMISSIONER SEDWICK continued, stating that she wanted to answer
the question, possibly Representative Halcro's or Representative
Cissna's, about the match. It is her understanding that if more
funds became available, the Division of Tourism would be required
to give that money to the qualified trade association and they
would not have to match it.
NANCY LETHCOE, Owner, Alaska Wilderness Sailing and Kayaking,
testified via teleconference from Valdez. She thanked Commissioner
Sedwick for her remarks, as they address many of her own concerns
with HB 136. Her business is interested in seeing a version much
closer to that of SB 350 reintroduced and it are also very
supportive of Senator Elton's bill, SB 122. She expressed
concerns with giving of a contract to an association that doesn't
exist yet, because it is unknown how the board, that claims to have
technical expertise in marketing, is going to be represented. Six
years ago she looked at the efforts of the AVA and ATMC marketing
program and found that the efforts were aimed at an age group that
was ten years older than the average age of Alaskans. The
percentage of independent travelers visiting the state had
significantly declined, while packaged tours went up. They were
not marketing to the independent traveler, and it is the
independent traveler that brings the most business to bed and
breakfasts, charter boat operators and back country tours. All
over the state these type of businesses benefit from the
independent traveler, not from the packaged tours which benefit the
cruise ships, airlines and hotels. She stressed the importance of
the reintroduction of the language that Commissioner Sedwick
referred to which was deleted that said that the economic
investments derived from tourism in the state are retained in the
state and that they ensure that consideration is given, in the
development and implementation of the tourism program, to local
community goals and objectives.
Number 1936
BILL COPELAND, Owner, Raven Sailing Charters, testified via
teleconference from Valdez. He said that there are many small
business owners, including himself, who are concerned with how they
will be represented in the association that eventually develops.
It doesn't seem that HB 136 is aiming toward the kind of
representation that benefits small businesses, particularly by the
funding structure, which tends to lean toward the entities with a
lot of money and not small businesses. He is also interested in
the funding provisions in SB 122, by Senator Elton, where it seems
to spread the funding source over a larger area and lends itself
more towards small businesses that collectively make up a large
portion of Alaska's businesses.
REPRESENTATIVE HALCRO asked if Mr. Copeland is currently a member
of the Valdez Convention of Visitors Bureau.
MR. COPELAND replied yes.
REPRESENTATIVE HALCRO asked if Mr. Copeland is a member of AVA.
MR. COPELAND replied that he is not sure, because his wife deals
with those arrangements.
Number 2012
REPRESENTATIVE HALCRO referred to Mr. Copeland's comment on SB 122
and wondered if he was talking about Senator Elton's Visitor
Industry Stabilization Act (VISA) [SB 121 - Excise taxes on
transient lodging].
MR. COPELAND responded yes and that the funding structure seems a
lot more palatable.
REPRESENTATIVE HALCRO requested clarification on whether the
funding structure in that piece of legislation [SB 121]
specifically targets hotels, motels, transient travelers and
overnight stays by cruise ship passengers.
Number 2042
MS. LETHCOE interjected, stating that it [SB 121] also targets her
and Mr. Copeland's clients, meaning that their clients would also
be paying.
Number 2074
CAROL KASZA, Owner, Arctic Treks, testified via teleconference from
Fairbanks. She thanked Commissioner Sedwick for expressing all of
the same concerns that she has with HB 136. She feels that the
goals of the Division of Tourism are essential to the survival of
small businesses. She stated that she is opposed to HB 136. The
funding formula is very likely to fail because it relies heavily on
support by the tourism industry, which there isn't much of right
now, especially from small businesses. It is a voluntary
contribution, so people who are paying will be paying for the
people who aren't. With regards to the question about whether
another state has tried this approach to tourism, a business
consultant from Canada said that a similar privatization plan
implemented in Alberta failed miserably. Senator Elton's bill, SB
122, seems like a much more viable plan, especially in terms of the
statewide marketing that small businesses really need.
REPRESENTATIVE HALCRO asked Mrs. Kasza how she currently markets
her business.
Number 2174
MS. KASZA replied that they used the Vacation Planner, but it
proved to be ineffective, so now they use the Internet primarily.
REPRESENTATIVE HALCRO asked what the difference is between the
current state expenditure for tourism and the proposed plan if Mrs.
Kasza is targeting her specific niche market on her own.
MS. KASZA responded that the situation seems to be going from bad
to worse. She doesn't see how small businesses will benefit at all
from this legislation and the power is going to be consolidated in
the hands of one organization with no oversight, no checks and
balances and no other ways of thinking about how to attract
tourism.
BARBARA WINKLEY, Owner, Bed and Breakfast [name not specified],
testified via teleconference from Anchorage. She thanked
Commissioner Sedwick for her comments on HB 136. She stated that
she is in favor of the state keeping control over the state tourism
industry and she doesn't feel that the small businesses in Alaska
will receive any benefits from HB 136; therefore, she is opposed to
it.
KEN LEGHORN, Owner, Alaska Discovery Incorporated, and member of
the AVA, Juneau Convention and Visitors Bureau and three-year
member of the ATMC. Alaska Discovery has seven year-round
employees, 60 seasonal employees and is approaching $2 million
dollars in sales. He stated that he is frustrated with HB 136
because it seems to be misleading in four ways. One, it is not
similar to SB 350, which was hammered out last year. The devil is
in the details and the details are a long ways from SB 350. Two,
it is misleading in purporting to lead to an increased funding
level. The voluntary contributions are very unlikely to reach the
levels that are being projected.
TAPE 99-4, SIDE B
MR. LEGHORN continued, three, it is misleading about the role of
the Division of Tourism. The new millennium plan that was
circulated to the AVA membership had a role in tourism policy for
the Division of Tourism, and HB 136 guts the Division of Tourism
and almost eliminates it. Four, it is misleading in terms of
industry support that AVA has gotten on HB 136. Most people are in
agreement on the marketing consolidation concept, but not in
eliminating the role of the Division of Tourism to the extent that
is happening in HB 136. He is supportive of SB 350, where it ended
up last year. He referred to Representative Halcro's question
about how the marketing is going to differ if it was bad in the
past. The program elements that people have been complaining about
are ones through the ATMC and none of the testimony today has been
in support of retaining the ATMC, so there is a pretty widespread
agreement that the ATMC needs to go. The Division of Tourism is
the one entity that has really been supporting independent travel,
small business development, rural tourism, native tourism, cultural
tourism, winter travel and international travel, not the ATMC. A
lot of the ideas that the Division of Tourism comes up with come in
the middle of the year, so it is not necessarily preplanned, but,
as Representative Halcro mentioned earlier, as opportunities arise
the Division of Tourism is flexible in entering into quick
opportunistic contracts.
MR. LEGHORN further stated that the committee would find more
support in going back to SB 350, and also the committee is probably
going to find increasing support for a tourism taxation bill. He
informed the committee that he has sat in on many industry meetings
where they have talked about having a tax, and they always say, no,
there can't be a tax, let's just try this voluntary payment plan.
From the point of view of a business who would pay the tax, it is
broad based because it hits every single visitor that pays to spend
the night in Alaska, which means the day trips do not pay, and
since it is not a tax on the business itself, but only on the
clients, he said that he supports it.
Number 2175
REPRESENTATIVE ROKEBERG noted that there have been comments in
previous testimony, from other small tourism businesses, about the
lack of effectiveness of the Vacation Planner. He asked Mr.
Leghorn if he had any remarks with regards to that.
MR. LEGHORN replied that what drives the ATMC is the need to
generate names based on a business reply card that potential
visitors send in. Those names can be bought and then become a part
of a direct mail program, which large businesses benefit from
because they can afford it. In order for the direct mail program
to work a business has to be sending out a large volume of
promotional material. The only thing that is really available
through the direct mail program for small businesses is the
Vacation Planner, but now that there are so many businesses in the
Vacation Planner, it is not very effective. For most small
businesses the program of the ATMC is not producing enough direct
benefits, but they are producing good public relations for all of
Alaska on independent travel and adventure travel, and that is what
is beneficial to the small businesses.
Number 2086
STEVE BEHNKE, Executive Director, Alaska Wilderness Recreation and
Tourism Association (AWRTA), explained that AWRTA, founded in 1992,
is a statewide trade association that consists of approximately 300
members and most of the AWRTA members are small Alaskan owned and
operated tourism businesses. The mission of AWRTA is to support
the state's highest potential market in the tourism industry, which
is the independent traveler. AWRTA has worked closely with AVA and
the Division of Tourism and has come to the decision that HB 136 is
not going to work. AWRTA has consistently supported a new
consolidated tourism marketing organization as long as it really
represents the full range of Alaska's businesses and provides a
strong role for the Division of Tourism in establishing a tourism
development policy. It seems really short-sighted if the industry
pushes for something that appears industry dominated, but doesn't
reflect the public interest and those things need to be
incorporated into the plan. HB 136 doesn't retain a strong role
for the Division of Tourism in the state. Some of the key purposes
that are in existing legislation, such as, the benefits derived
from tourism are retained in the state, but have been dropped from
this legislation and that is a mistake. For a lot of the reasons
outlined by Commissioner Sedwick, AWRTA believes that HB 136 ties
the state's hands in doing the things that are appropriate and
necessary for the state to be doing. Also, HB 136 doesn't outline
what the new organization is going to look like, and if the public
are going to turn the roll over to a private group there needs to
be more specifics about them.
MIKE MCBRIDE, Owner, Kachemak Bay Wilderness Lodge, testified via
teleconference from Homer. He noted that Commissioner Sedwick's
testimony was very eloquent and advised the committee to study her
comments carefully. He added that the testimony given by Nancy
Lethcoe from Valdez, Carol Kasza in Fairbanks, Ken Leghorn and
Steve Behnke consisted of the same points that him and his wife
would like to make. He also is opposed to HB 136 and supports the
concepts outlined in SB 350 and SB 122. His business, started 30
years ago, operates about 6 months out of the year and there are 5
or 6 year-round staff people and about 15 seasonal employees. His
business receives approximately 300 clients per year, who usually
add other trips onto their stay in Alaska. It is clear that the
grassroots of the tourism economic structure that is the most vital
part of the economic picture. He has not been involved with or
supportive of AVA and many of the state's tourism programs, because
they don't seem to do much good for small businesses. He
determined that in order to survive as a small business you have to
do it yourself. He referred to Representative Halcro's question
about belonging to the AVA and use of the Vacation Planner, and
said that a lot of things put out to small businesses as
appropriate ways to participate really end up being blind leaps and
bad advice. He encouraged the committee to seriously take into
consideration the testimony that was given by AWRTA, because it was
reasonable and carefully put forth.
Number 1791
REPRESENTATIVE HALCRO asked Mr. McBride how he has kept his
business alive without the help of the AVA or the Department of
Tourism.
MR. MCBRIDE responded that they have done it on their own. He did
not intend to disparage the efforts of those organizations, because
clearly they serve a purpose. They just aren't as effective in
serving the grassroots of the state's tourism economic structure as
they are in serving the mass market.
REPRESENTATIVE HALCRO stated that in 1989 the state spent $15
million on marketing Alaska and this year it's $6.5 million, so we
are talking about a $4 million match from the state. He asked how,
if you're not satisfied with the results and direction of the
program when the state is spending $15 million, are you going to be
satisfied when the state is only matching $4 million.
MR. MCBRIDE replied that the answer to that is in the testimony
given previously today, specifically, that the money is not
targeted to grassroots efforts which are more important to the
economic structure than people realize.
Number 1702
TINA LINDGREN, Executive Director, Alaska Visitors Association
(AVA), stated:
I'm partly responsible for the fiasco that you've heard about
so far. In reality, this is the charge that the legislature
has given to the visitor industry and especially to AVA over
a number of years, which was, find a way to fund this because
the state government is no longer going to step up to the
plate to the level it has in the past. That was your specific
charge to us, and over a number of years we've brought forward
a proposal. It hasn't been easy, and as you can clearly see,
it's still not easy. We did over a years worth of research on
different funding mechanisms, on different tax proposals, on
different alternatives. We surveyed the industry twice, not
AVA members, but the entire industry. The most recent mailing
was to 6,000 businesses to find out what they wanted to do and
how they wanted to come forward and turn around this back
slide in marketing. I think that many of the speakers that
you've heard from have legitimate concerns about what happens
when you go from $15 million down to the kind of budget level
we have today, because you can't do nearly as much as you
should be able to, and it's especially hard on the small
businesses because the large ones have enough money that they
can effectively market their own businesses, while the small
businesses are totally reliant on some kind of a program that
bring visitors to the state in general.
There are some misconceptions I would like to clear up though.
AVA is 90 percent small members today, it's not primarily made
up of large members. The bill that you see before you is
based on 350. One major change, there are several minor ones
that are technical that were thought to be a way to clean up
some of the things that were in there, but the major change is
that it calls for all marketing to be consolidated rather than
the ability to have multiple contracts. The original plan
that was mailed out to the industry called for all marketing
to be consolidated. The legislation that was introduced last
year left the ability to have more than one marketing
contract. That was legislation which we supported, but at the
end of the day did not pass, did not make it through the final
hours, and there were some legislators that voted against it
for that very reason. We have been working with the
department, over the last year, to try and figure out a way to
build in enough safeguards that it was comfortable with having
all the marketing in one place and unfortunately we have not
figured it out, but that's the it central difference. What's
in the contract or what's in HB 136 really sets up the
mechanism for getting money to operate with the private
sector. It doesn't set up the funding mechanism of how the
industry comes up with money and it doesn't outline some
things that are not in the legislation that you may want to
know about, which is the new organization will only have one
vote for one business. So the best way that people can insure
their representation is to be a part of that organization.
It is very difficult to do something that makes everyone
involved and makes everyone happy, but I do feel that with the
state having the contract with the department having control
of that contract that they certainly have the opportunity to
build in enough safeguards to feel comfortable. ... There is
one clause in there that allows additional funds to be added
throughout the year, and you were asking about that earlier,
if a market need arises. There really isn't necessarily time
to go out to the industry and raise the marketing funds if
there's an emergency, but that does allow the state or the
department to add money to that contract if there is a market
need that arises.
I don't know that there is a perfect formula out there. I
don't know that there is a perfect plan, but I know that we
have done our best to come to the table with a plan that we
think will work and that 90 percent of the people that we've
heard from have said that we should move forward with this
plan and we're going to continue to work on where the problems
are and when the new organization is constituted; I'm sure
they will do the same.
Number 1498
CHAIR PHILLIPS asked Ms. Lindgren if she would repeat the
percentage of small businesses in AVA.
MS. LINDGREN replied that 90 percent of the businesses in AVA are
small, as is reflected throughout the Alaska tourism industry.
REPRESENTATIVE CISSNA wondered how many members are in AVA and what
their profile is and how the members participate in the AVA
negotiations.
Number 1451
MS. LINDGREN explained that AVA has approximately 650 members and
they are business organizations not individuals. Those businesses
employ about 25,000 Alaskans total. They are statewide and consist
of everything from bed and breakfasts to airlines to cruise
companies. The businesses that were referenced in the surveys
consisted of, not only AVA members but AWRTA's members and every
standard industrial classification code that has to do with
tourism, so that way it wasn't only input from AVA members.
REPRESENTATIVE CISSNA wondered what kind of response AVA got from
the surveys.
MS. LINDGREN replied that there were several different surveys with
different response levels, meaning, not everybody responded to
every survey.
REPRESENTATIVE CISSNA asked what the cost is to be a member of AVA.
MS. LINDGREN responded that it starts at $300 in its voluntary
level and the new plan has a $200 entry level for the smallest
businesses which includes an advertisement in the Vacation Planner.
Presently, to have an AVA membership and an advertisement in the
vacation planner the cost is $500. She added that AVA is not
relying solely on the survey responses. They have also had public
discussions and other organizations have held their own meetings as
well. AVA has a contract presently with the DCED that sets up the
ATMC and those contract negotiations have gone well. She suspects
that with the new organization it would be similar.
Number 1313
REPRESENTATIVE HALCRO pointed out that part of the concern of the
department is that it is chipping in $4 million and there's no
accountability for it. He asked Mr. Lindgren if she would discuss
accountability.
MS. LINDGREN explained that any time public money or state funds
are received there has to be accountability, first to the
legislature. As it is now, the legislature appropriates money
every year to both the Division of Tourism and the ATMC. She
presumes that the legislature would have no less accountability
with the appropriation then they have currently. In addition, she
expects that through the contract the legislature would have some
goals that the Division of Tourism would set forth and hopefully
the industry is in agreement as to what they want to pass. The
Division of Tourism, currently, does not send out to the ATMC a
list of guidelines nor does the industry have any control or say
over what the Division of Tourism does.
Number 1250
REPRESENTATIVE HALCRO stated that there are a lot of small
businesses in the state that feel they are going to be overlooked,
indicated by the testimony today, and small businesses in this
state, where there are niche markets, are going to get overlooked
unless they're out there banging the drum themselves. He asked Ms.
Lindgren if she would talk about how HB 136 addresses the needs of
the small businesses.
MS. LINDGREN replied that the biggest need of the small business is
to get people to come to Alaska. First, there needs to be an
overall increase in marketing and, second, there needs to be an
organization that the small business can participate in with one
vote. The hope, by AVA dismantling itself, is that more people
will step up and help decide what the marketing message needs to
be.
Number 1182
REPRESENTATIVE ROKEBERG referred to Ms. Lindgren's comment about a
new organization. He asked if she was talking about a qualified
trade organization (QTA) and how the new organization is going to
be created.
MS. LINDGREN referred to "The New Millennium Plan" where it states
that a new organization will be created. She informed the
committee that a transition team has been appointed and the hope is
that the three existing organizations will remain in place while
the new organization becomes established.
REPRESENTATIVE ROKEBERG indicated that the biggest impediment, in
terms of the industry and the Division of Tourism coming to an
agreement, seems to be a control factor.
MS. LINDGREN agreed.
REPRESENTATIVE ROKEBERG asked, "What do you think the biggest
problem is, within the industry, of trying to generate a comfort
level to make the match; is it control factor again, or what?"
Number 1112
MS. LINDGREN responded that she does believe that the control
factor is a part of it. The industry has said that if they are
required to come up with a certain amount of money then they
believe that the plan should be industry led. She continued, "It's
also true that if we try to get more money into the state now we
can't necessarily even give more money, because you're not wanting
to show an increase on the program receipt side. ... Some of the
problems stem from, number one, change is hard; people are afraid
of change. Number two, they're afraid of will I be represented in
the end; are my interests going to be looked out for and whose
going to control this. ... I think those are the things people are
worried about."
Number 1064
REPRESENTATIVE ROKEBERG pointed out that some of the provisions in
HB 136 seem to be out of sync, because there are prohibitions on
what the state can't do, not on what the new organization would do.
It doesn't seem to represent the spirit of negotiation, but on the
other hand if the Division of Tourism wants some control isn't the
new organization going to grant some of the requests of the
division.
MS. LINDGREN pointed out that HB 136 had many changes that were
requested by the Division of Tourism and the industry was probably
willing to go to the table and make more changes. The change, that
seems to be holding things up, is whether the state will get out of
the marketing business. It will be very difficult to bring all of
the dollars to bear and all of the players together, if the state
has the ability to take money and do more than one contract.
REPRESENTATIVE ROKEBERG wondered if the members of the transition
team would be more comfortable if the terms of the contract were
more clear.
MS. LINDGREN stated that she was not sure she was understanding
Representative Rokeberg's question.
REPRESENTATIVE ROKEBERG clarified the question. He asked if the
terms of the contract were more clearly spelled out would it
generate more comfort with the AVA.
MS. LINDGREN explained that the concern is whether or not there
will be more than one contract, because the old legislation allowed
for that.
Number 0957
REPRESENTATIVE ROKEBERG expressed concern, "There could be certain
niche areas or certain areas that the new QTA wouldn't be willing
or may not -- may give short shrift to putting resources into and
the department [division] may see that as a problem. ... I don't
understand why there couldn't be parallel programs if, in fact, you
didn't want to in the specifications of the contract, except that,
that particular scope of work. ... If you had the scope of work
attached to a monetary percentage amount, or something, then they
could just opt in or out of the menu. I mean, I don't understand
what the problem is here."
MS. LINDGREN responded that in the past, competing programs have
been set up are for different purposes, which leads to a situation
like the current one where you don't know where to go for which
program. In some cases, different departments are trying to raise
funds from the same people. She believes that it would be feasible
to have some of things discussed today implemented into the
contract.
Number 0866
REPRESENTATIVE KERTTULA wondered what Ms. Lindgren's definition is
of a small business.
MS. LINDGREN responded 50 employees.
REPRESENTATIVE KERTTULA requested clarification on whether Ms.
Lindgren meant 50 employees or under.
MS. LINDGREN replied yes.
REPRESENTATIVE KERTTULA inquired about whether it was 90 percent,
of the 370 people that responded to the surveys, that favored "The
New Millennium Plan".
MS. LINDGREN replied that is correct.
REPRESENTATIVE KERTTULA asked if those people got to review HB 136.
MS. LINDGREN responded that the bill did not go out to them. The
plan calls for many more details than HB 136. The bill sets up the
mechanism whereby there is no ATMC and the Division of Tourism
cannot contract, but the funding source is not in the bill.
Number 0772
TODD BUREAU, small business owner [business name not specified],
testified via teleconference from Hope. He said that he would like
to echo Commissioner Sedwick's remarks. His business is a member
of AVA, but he doesn't feel that his business has been entirely
well represented. The common term used is "the industry does this,
the industry does that," but in reality it is an element of the
industry. He feels that HB 136 seems to circumvent many of the
processes that were in SB 350 and deletes some of the terminology,
but it does guarantee a certain level of representation. He is
afraid to see the Division of Tourism reduced to a contract
awarding committee, because he believes that the state is an
important element in keeping control of a vital industry such as
tourism. He stressed his opposition to HB 136 and said that the
state should reconsider its role in the process.
Number 0673
BOB DINDINGER, Vice-President of Government Relations, Alaska
Visitors Bureau (AVA); President, Alaska Travel Adventures (ATA),
stated that many of the comments were well dealt with by Tina
Lindgren. He asked the committee to take a more global view on
tourism marketing and where it is today. He has spent 30 years
marketing Alaska tourism; ten of those years with the state tourism
office during the 1970s. In those years there was money to burn,
and much of it was spent on television marketing. More money was
spent on television than is spent now on the entire tourism
marketing program. There was very little conflict between small
operators and large tour companies, because there was enough money
to cover all the bases. Tourism was growing in Alaska at double
digit rates of increase.
MR. DINDINGER further stated that today half as much money is being
spent and all the bases are not being covered. Some of the small
niche markets are not being dealt with well. There is virtually no
advertising for Alaska on national television and television is the
most cost effective method for reaching people in North America,
because you can buy an impression on television for more people
than any other mechanism. Unfortunately, it's not possible to have
a small television program.
MR. DINDINGER continued, stating that it is tougher now for
businesses to sell their product than it was in the 1970s. There
are way more businesses, because, with the decline of other
economies in Alaska, more money has been invested in tourism and it
is a more competitive industry. We are beginning to feed on
ourselves, instead of having a big enough pie so everyone can get
a bite, now some people are getting smaller bites. The whole
agenda to create a new marketing scenario for Alaska comes from
trying to come up with a mechanism in which enough money can be
invested. The $10 million is not enough money, but it is a start
in the right direction and it provides an opportunity for growth.
He is confident that the industry will come up with its matching
contribution. The industry eats at this table, not the government
and if there isn't enough money spent then the industry will suffer
the consequences.
MR. DINDINGER concluded that the reason for having a new
organization is so there isn't a battle every year on whether the
ATMC gets the money or the Division of Tourism gets the money. The
last couple of years the issue has been who's going to take the hit
when the budget gets cut back. Also, AVA wouldn't be a part of
that battle either. There is a handful of truly large companies in
Alaska and they would only get one vote, which means they get the
same number of votes as the small businesses. The small businesses
are just as empowered to elect representatives that will protect
their interests as much as anyone else.
Number 0386
REPRESENTATIVE HALCRO asked Mr. Dindinger how many people he
employees in Juneau.
MR. DINDINGER replied that they employee about 20 in the winter and
200, statewide, in the summer.
REPRESENTATIVE HALCRO referred to Mr. Dindinger's comment about the
fact that the needs of small businesses are not being met. He
asked Mr. Dindinger how he gets people to his doorstep.
MR. DINDINGER responded that many of ATA's customers come to them
because of their alliance with other businesses. They also have to
hustle their business by going to meetings with travel agents and
tour wholesalers, as well as, advertising.
REPRESENTATIVE HALCRO wondered if Mr. Dindinger has read SB 122 and
what his feedback is on it.
Number 0256
MR. DINDINGER stated that there are several problems with SB 122.
One of which is that there are not broad based dedicated taxes in
Alaska and he sees it as problematic. He knows that everyone in
the legislature is a person of integrity, but as the oil money
diminishes the demands on tax revenues will be stretched and that
is troublesome. He believes that a lot people will be contributing
to this program knowing that if they don't raise their share of the
$6 million dollars that the alternative is a tax. Another problem
with that legislation is that it allows money to be spent on things
other than marketing.
MS. KASZA responded to Ms. Lindgren's comments about the
opportunity for a broad range of people to participate in the
survey. She was one of the people that filled out the survey, late
in the game, and none of the concerns that she expressed in there
seem to be reflected. AWRTA's president, Kirk Hoessle, made it
very clear that if AWRTA's concerns were not incorporated into "The
New Millennium Plan" that AWRTA would not support it.
DEROTHA FERRARO, Homer Chamber of Commerce, stated that out of the
412 members of the Homer Chamber of Commerce 402 of them have fewer
than 5 employees; therefore, she truly feels that she represents
small businesses in the state of Alaska.
TAPE 99-5, SIDE A
Number 0024
MS. FERRARO continued, stating that the Chamber of Commerce Board
of Directors supports the concept of HB 136, but she is not clear
on the differences between SB 350 from last year and HB 136. She
does believe it comes down to the control issue. All of the
businesses in Homer have had the opportunity to learn about this
issue, voice their opinions and get involved. The question, that
surfaced earlier, as to whether the AVA circulated the proposed
legislation, she received it, but believes that it is up to the
individual to obtain that information for themselves. The Homer
Chamber of Commerce feels that the concept of cooperative marketing
is the direction to go. They are not interested in the concept of
a tax, but they definitely support the concept of a match with the
Alaska State Legislature providing funding and the private sector
matching that.
Number 0250
ANN CAMPBELL, Vice-President, Alaska Village Initiatives, stated
that she doesn't pretend to represent all small businesses in the
state, but she does work with a lot of them. It is not fair to say
that all small businesses are not supportive of the existing
program and/or the idea of trying to do consolidated marketing.
The job of the state of Alaska is to bring visitors to Alaska. The
businesses know that they will have to fight over those people
after the state finds them, but for many small villages, the state,
getting the word out, is their only hope. As the chair of the
transition team she believes that she represents a broad
constituency. The idea was to reach out and get as much feedback
from people as possible, so the opportunity is there and a real
effort was made.
CHAIR PHILLIPS announced that HB 136 would be held in subcommittee
and the members would be Representatives Halcro, Barnes and
Kerttula, and Representative Halcro will chair the subcommittee.
ADJOURNMENT
Number 0506
CHAIR PHILLIPS adjourned the House Special Committee on Economic
Development and Tourism at 6:55 p.m.
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