Legislature(2003 - 2004)
03/16/2004 05:45 PM House EDT
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC
DEVELOPMENT, INTERNATIONAL TRADE AND TOURISM
March 16, 2004
5:45 p.m.
MEMBERS PRESENT
Representative Cheryll Heinze, Chair
Representative Lesil McGuire, Vice Chair
Representative Pete Kott
Representative Nancy Dahlstrom
Representative Vic Kohring
Representative Sharon Cissna
Representative Harry Crawford
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 485
"An Act relating to the powers of the Alaska Energy Authority to
make grants and loans and enter into contracts; relating to the
bulk fuel revolving loan fund; relating to the Alaska Energy
Authority's liability for the provision of technical assistance
to rural utilities; relating to the Alaska Energy Authority's
investment of the power development fund; repealing the
electrical service extension fund; and providing for an
effective date."
- MOVED HB 485 OUT OF COMMITTEE
HOUSE BILL NO. 449
"An Act relating to the contracting and financing authority of
the Alaska Industrial Development and Export Authority;
authorizing the authority to issue bonds in a principal amount
not to exceed $76,000,000 to finance the acquisition, design,
construction, inventory, and operation of natural gas, propane
air, or manufactured gas public utility facilities; and
providing for an effective date."
- MOVED CSHB 449(EDT) OUT OF COMMITTEE
HOUSE BILL NO. 426
"An Act relating to the levy and collection of an assessment on
certain tourism-related and recreation-related goods and
services, to tourism marketing contracts, and to vehicle rental
taxes; and providing for an effective date."
- MOVED CSHB 426(EDT) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 485
SHORT TITLE: ENERGY PROGRAMS & FUNDS
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) EDT, CRA, FIN
02/26/04 (H) EDT AT 5:15 PM CAPITOL 120
02/26/04 (H) -- Meeting Canceled --
03/02/04 (H) EDT AT 10:00 AM CAPITOL 120
03/02/04 (H) Scheduled But Not Heard
03/09/04 (H) EDT AT 10:00 AM CAPITOL 120
03/09/04 (H) -- Meeting Canceled --
03/16/04 (H) EDT AT 5:15 PM CAPITOL 120
BILL: HB 449
SHORT TITLE: AIDEA BONDS FOR GAS PUBLIC UTILITIES
SPONSOR(S): REPRESENTATIVE(S) HARRIS BY REQUEST
02/09/04 (H) READ THE FIRST TIME - REFERRALS
02/09/04 (H) EDT, L&C, FIN
02/26/04 (H) EDT AT 5:15 PM CAPITOL 120
02/26/04 (H) -- Meeting Canceled --
03/02/04 (H) EDT AT 10:00 AM CAPITOL 120
03/02/04 (H) <Bill Hearing Canceled>
03/09/04 (H) EDT AT 10:00 AM CAPITOL 120
03/09/04 (H) -- Meeting Canceled --
03/16/04 (H) EDT AT 5:15 PM CAPITOL 120
BILL: HB 426
SHORT TITLE: TOURISM & RECREATION ASSESSMENT/CAR TAX
SPONSOR(S): REPRESENTATIVE(S) KOTT
02/04/04 (H) READ THE FIRST TIME - REFERRALS
02/04/04 (H) EDT, L&C, FIN
02/12/04 (H) EDT AT 10:00 AM CAPITOL 120
02/12/04 (H) Heard & Held
02/12/04 (H) MINUTE(EDT)
02/17/04 (H) EDT AT 10:00 AM CAPITOL 120
02/17/04 (H) -- Meeting Canceled --
03/16/04 (H) EDT AT 5:15 PM CAPITOL 120
WITNESS REGISTER
BECKY GAY, Project Manager
Alaska Industrial Development & Export Authority (AIDEA) and
Alaska Energy Authority (AEA)
Anchorage, Alaska
POSITION STATEMENT: Presented HB 485.
JIM McMILLAN, Deputy Director, Credit
Alaska Industrial Development & Export Authority (AIDEA) and
Alaska Energy Authority (AEA)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 485, answered
questions.
PETER FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 449 on behalf of its sponsor,
Representative Harris, by request of the Alaska Intrastate Gas
Company.
PAUL RUSANOWSKI, Vice President
Alaska Intrastate Gas Company (AIGC)
Anchorage, Alaska
POSITION STATEMENT: Spoke as the requestor of HB 449.
BOB VALDETTA
Seward, Alaska
POSITION STATEMENT: During discussion of HB 449, testified that
natural gas should be brought to Seward.
PHILIP SHEALY, City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Requested that Seward be certified as the
eighteenth community in the proposal encompassed in HB 449.
WILLARD DUNHAM, Member
City Council
City of Seward
Seward, Alaska
POSITION STATEMENT: Urged the committee's support of Seward
being added to the list of communities included in HB 449.
LOUIS BENCARDINO
Seward, Alaska
POSITION STATEMENT: Representing the Mayor of the City of
Seward, who supports [inclusion of Seward in HB 449].
SUE STANCLIFF
House Majority Office
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 426 on behalf of the sponsor,
Representative Kott.
DAN DICKINSON, Director
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Explained Amendment 2 to HB 426 and
answered questions.
JOEL HANSON
The Boat Company
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HB 426 and its
Senate companion.
ROB HARDY
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to the portion of
HB 426 on page 2 [Section 4(a)(1) and (2)], which refers to
scenic transportation services and recreational vacation camp
services.
CHIP THOMA
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 426.
JOSHUA ADAMS
Alaskan Hotel & Bar
Juneau, Alaska
POSITION STATEMENT: Characterized HB 426 as subsidized speech.
JAMES BARRETT, Co-Owner
Bergman Hotel
Juneau, Alaska
POSITION STATEMENT: Expressed concerns with HB 426.
ACTION NARRATIVE
TAPE 04-14, SIDE A
Number 0001
CHAIR CHERYLL HEINZE called the House Special Committee on
Economic Development, International Trade and Tourism meeting to
order at 5:45 p.m. Representatives Heinze, McGuire, Kott,
Kohring, Dahlstrom, and Cissna were present at the call to
order. Representative Crawford arrived as the meeting was in
progress.
HB 485-ENERGY PROGRAMS & FUNDS
CHAIR HEINZE announced that the first order of business would be
HOUSE BILL NO. 485, "An Act relating to the powers of the Alaska
Energy Authority to make grants and loans and enter into
contracts; relating to the bulk fuel revolving loan fund;
relating to the Alaska Energy Authority's liability for the
provision of technical assistance to rural utilities; relating
to the Alaska Energy Authority's investment of the power
development fund; repealing the electrical service extension
fund; and providing for an effective date."
Number 0076
BECKY GAY, Project Manager, Alaska Industrial Development &
Export Authority (AIDEA) and Alaska Energy Authority (AEA),
explained that HB 485 relates to the powers of AEA and amends
the AEA program. She pointed out that the legislation impacts
the power project fund, which provides loans to local utilities
and governments or independent power producers for the
development or upgrade of power projects. This legislation
would amend AEA by expanding the definition of a power project
to include energy efficiency projects because under the existing
statutory definition of eligible projects, AEA has had to deny
applications for worthwhile projects. Additionally, this
legislation will repeal the loan committee that reviews and
approves loans from this fund, and therefore AEA will use the
same credit approval process that AIDEA has successfully
utilized for its credit program.
MS. GAY pointed out that HB 485 also impacts the bulk fuel
revolving loan fund program, which provides short-term loans to
assist small rural communities in purchasing annual bulk fuel
supplies. This legislation would authorize loans from the
program to other entities, such as corporations, cooperatives,
and joint ventures. Recently, the Department of Law interpreted
the current statutory eligible borrowers to be only communities
and natural persons. The change encompassed in HB 485 won't
expand the definition of eligible borrowers beyond the long-
standing practice, which includes other entities such as
corporations.
MS. GAY noted that HB 485 also provides that AEA may invest in
its development fund. With concurrence of the Department of
Revenue, the power development fund has been invested by AEA
since 1993. This legislation proposed to confirm the
aforementioned by providing the statutory authority to invest
the fund. She noted that AEA would continue to remit all
earnings of the fund to the general fund (GF). Ms. Gay
highlighted that the legislation proposes amending the general
powers of AEA by clarifying that AEA has the authority to manage
various projects by issuing grants and contracts. By acting as
an agent for rural communities, AEA manages power projects, bulk
fuel projects, and alternative energy projects. The legislature
has authorized the aforementioned through the appropriation
process by providing AEA authority to receive and extend federal
funds from entities such as the Denali Commission and the U.S.
Department of Energy. Moreover, HB 485 specifies that AEA's
statutory mandate to provide technical assistance may not be
used as an independent basis for tort liability against AEA,
although AEA would continue to be liable for negligence if it
failed to use reasonable care in failing to use technical
assistance. Lastly, HB 485 would repeal the inactive electrical
service extension fund. Ms. Gay thanked the committee for the
ability to testify in support of HB 485, and urged the
committee's favorable action on it.
Number 456
JIM McMILLAN, Deputy Director, Credit, Alaska Industrial
Development & Export Authority (AIDEA) and Alaska Energy
Authority (AEA), in response to Representative Dahlstrom, said
that he was satisfied [with the legislation]. In response to
Chair Heinze, Mr. McMillan explained that AEA is a public
corporation "with a separate legal existence" that's governed by
a board of directors. The board of directors is the same board
that governs AIDEA. Of the five-member board, two are public
members, one is the commissioner of the Department of Revenue,
one is the commissioner of the Department of Transportation &
Public Facilities, and one - currently the commissioner of
Department of Community & Economic Development - can be selected
by the governor.
Number 0590
REPRESENTATIVE KOHRING moved to report HB 485 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, it was so ordered.
HB 449-AIDEA BONDS FOR GAS PUBLIC UTILITIES
CHAIR HEINZE announced that the next order of business would be
HOUSE BILL NO. 449, "An Act relating to the contracting and
financing authority of the Alaska Industrial Development and
Export Authority; authorizing the authority to issue bonds in a
principal amount not to exceed $76,000,000 to finance the
acquisition, design, construction, inventory, and operation of
natural gas, propane air, or manufactured gas public utility
facilities; and providing for an effective date."
Number 0630
PETER FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, presented HB 449 on behalf of its sponsor,
Representative Harris, by request of the Alaska Intrastate Gas
Company. He announced that Representative Harris is supportive
of any efforts to develop the natural resources of the state.
Furthermore, Representative Harris recognizes the need to
develop infrastructure in order to utilize those developing
resources. He explained that regardless of the viability of the
project, new project ideas are important to resource
development. Mr. Fellman related that Representative Harris is
a firm believer in the people's legislature and allowing the
committee process to be utilized to bring forth new ideas. He
then deferred to Mr. Rusanowski.
Number 0735
PAUL RUSANOWSKI, Vice President, Alaska Intrastate Gas Company
(AIGC), informed the committee that AIGC is in the process of
developing gas utility service to 17 communities throughout
Southeast Alaska and the Gulf of Alaska. Currently, AIGC's
efforts are focused on obtaining financing and the placement of
a bond issue to begin construction of a utility in the near
future. This legislation addresses a concern that the
communities have by expanding the financing opportunities to
those communities. The AIGC and AIDEA have agreed upon an
initial development program involving conduit bond financing,
which is moving forward now. The aforementioned will cover the
startup of the project and financing for the first two to three
communities. However, the remaining 14 communities still need
to be brought on line in the future years. Therefore, this
legislation provides a mechanism for communities working with
AIGC to consider various options suited for development of the
utility within each of these communities. Although the
development finance program may or may not be a suitable option
in the future, he highlighted that all 17 communities are part
of one project. If the entire project is fully built out as
planned, it will exceed $100 million. He explained that
legislative approval is required for AIDEA to consider a
development finance program for any communities because
currently there is a $10 million cap, which this legislation
would remove by granting approval for the 17 communities to
proceed with the development finance project, if viable.
Furthermore, the legislation includes $76 million in bond
authority and a sunset of July 1, 2009. In conclusion, Mr.
Rusanowski urged passage of HB 449.
MR. RUSANOWSKI, in response to Chair Heinze, confirmed that HB
449 would allow AIDEA the opportunity to use the development
finance program. He reiterated that AIDEA is already assisting
with financing the project through conduit bond financing, which
doesn't require legislative approval. In further response, he
also confirmed that the total project is $100 million and the
bond limit is $76 million.
Number 0988
REPRESENTATIVE KOHRING informed the committee that some want a
minor tweak to HB 449 because of the belief that this
legislation would benefit the City of Seward. Therefore, he
noted that he has an amendment to offer on that matter.
Number 1076
BOB VALDETTA said that natural gas should be brought to Seward
for industrial and consumer use.
PHILIP SHEALY, City Manager, City of Seward, informed the
committee that the City of Seward supports bringing gas to
communities such as Seward, which [aren't connected with]
conventional gas supply systems. Therefore, he requested that
Seward be certified as the eighteenth community in the proposal
encompassed in this legislation.
REPRESENTATIVE CISSNA inquired as to the benefits of including
the City of Seward.
MR. SHEALY informed the committee that the heating source in
Seward is fuel oil, which is approximately double the cost of
fuel provided through natural gas. Therefore, there would be a
cost savings to the community. Additionally, natural gas is
more environmentally friendly that fuel oil. Mr. Shealy related
the belief that access to natural gas would [help] with the
community's environmental development efforts.
Number 1190
WILLARD DUNHAM, Member, City Council, City of Seward, related
his support of Seward being added to the list of communities
included in HB 449. For many years, Seward has tried to get
natural gas to Seward. However, for one reason or another each
attempt hasn't come to fruition. This legislation is the first
opportunity Seward has seen to be tied into a barge service.
Mr. Dunham said he believes this is critical for Seward to have
a better alternative fuel than diesel. It would be a large cost
savings to switch the diesel backup generating plants to gas
fired generators. Therefore, he urged the committee to look
favorably on including Seward in this legislation.
Number 1293
LOUIS BENCARDINO informed the committee that he is representing
the Mayor of the City of Seward who supports [inclusion of
Seward in HB 449]. The community of Seward needs [the ability
to use natural gas]. Furthermore, he opined that it's time that
the state utilized some of its own fuel.
Number 1362
REPRESENTATIVE KOHRING moved that the committee adopt Amendment
1, which read:
Pg. 1 Line 13 insert [city of Seward] after Sitka
REPRESENTATIVE KOHRING said that natural gas is important for
any community and for more than heating homes. Natural gas is
important for industry as well. He highlighted that Seward is
an important industrial port that receives a lot of goods and
services that benefit areas beyond Seward. Therefore, what will
benefit Seward will benefit many others in the state.
[Amendment 1 was treated as adopted.]
Number 1430
REPRESENTATIVE KOTT asked if the adoption of Amendment 1
impacted the bonding amount of $76 million.
REPRESENTATIVE KOHRING said he didn't know.
MR. SHEALY informed the committee that [the City of Seward] has
been advised by Mr. Francis Avezac, Chairman of the Board, AIGC,
that he will work with the City of Seward so that it can be
included in the financial parameters that have been outlined.
Number 1472
REPRESENTATIVE McGUIRE moved to report HB 449, as amended, out
of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
449(EDT) was reported from the House Special Committee on
Economic Development, International Trade and Tourism.
HB 426-TOURISM & RECREATION ASSESSMENT/CAR TAX
CHAIR HEINZE announced that the final order of business would be
HOUSE BILL NO. 426, "An Act relating to the levy and collection
of an assessment on certain tourism-related and recreation-
related goods and services, to tourism marketing contracts, and
to vehicle rental taxes; and providing for an effective date."
Number 1520
REPRESENTATIVE KOHRING moved to adopt CSHB 426, Version 23-
LS1575\S, Kurtz, 3/9/04, as the working document. There being
no objection, Version S was before the committee.
SUE STANCLIFF, House Majority Office, Alaska State Legislature,
explained that [the sponsor] worked with the Alaska Travel
Industry Association (ATIA) and [the Alaska Tourism and
Marketing Board] to consolidate and refine the taxable items.
Version S removes references to salmon bakes and goods produced
in Alaska. Ms. Stancliff specified, "We removed the ... ability
to turn on and off the tax so that if the industry does not like
the tax, or at some point it needs to be turned off, they have
the ability to turn it off; we refined that." The
aforementioned are the significant changes in the legislation.
However, she noted that the committee packet should include some
amendments that developed after working with the Department of
Revenue.
Number 1618
REPRESENTATIVE KOTT moved that the committee adopt Amendment 1,
which read [original punctuation provided]:
Page 4, line 17 - 18:
Delete: [value of sales leases, and rentals described
in AS 44.33.126(a) and not exempt under AS 44.33.127]
Insert: tax paid under this chapter for the prior
calendar year.
Page 4, lines 28-29
Delete: [value of sales leases, and rentals described
in AS 44.33.126(a) and not exempt under AS 44.33.127
during the calendar year]
Insert: tax paid under this chapter for the prior
calendar year
Page 5, line 3
Delete: [effective date stated on the ballot]
Insert: the next December 31 occurring at least 5
months after the date of the certification of this
election under AS 44.33.129
Page 6, line 2
Insert: if the termination is approved after the
word assessment and before the semicolon
Page 6, line 12
Insert: (a) after the title and before the text.
Page 6, line 14
Delete: [the total value of sales leases, and rentals
described in AS 44.33.126(a) and not exempt under AS
44.33.127 during the calendar year]
Insert: tax paid under this chapter for the prior
calendar year.
Page 6, line 18 - 19:
Delete: [total value of sales leases, and rentals
described in AS 44.33.126(a) and not exempt under AS
44.33.127 during the calendar year]
Insert: tax paid under this chapter for the prior
calendar year.
Page 6, line 21-23
Delete: [total value of sales leases, and rentals
described in AS 44.33.126(a) and not exempt under AS
44.33.127 during the calendar year]
Insert: tax paid under this chapter for the prior
calendar year.
Page 6, line 24
Insert:
(b) Dollars paid with returns filed by taxpayers for
the calendar year shall be considered probative of the
amount of tax paid for the calendar year, except where
the Commissioner, at his or her discretion may
substitute audit assessments, claims for refund or
other pertinent evidence.
(c) Taxpayers appealing the commissioner's
determination shall be considered aggrieved under AS
43.05.240, however an appeal under that section will
not delay the commissioner's determination.
REPRESENTATIVE KOTT objected in order to hear an explanation of
Amendment 1.
MS. STANCLIFF informed the committee that most of Amendment 1 is
conforming language.
Number 1651
DAN DICKINSON, Director, Tax Division, Department of Revenue,
informed the committee that under this legislation the industry
can vote to terminate the assessment. As Version S specifies,
"the termination is approved by eligible visitor industry
businesses that together account for at least 51 percent of the
value of sales, leases, and rentals ...". However, the
department suggested reviewing the calendar year prior to the
year [the termination is requested] and those who paid 51
percent of the tax [in that prior calendar year] would have to
vote in favor of the termination in order for it to occur. The
reason to review the amount of the tax paid rather than the
sales is because one should reflect the other. Furthermore, the
department felt that it was important to review a specific
calendar year. He explained that one of the ways the election
can occur [under the current legislation] is if those
representing 25 percent of the sales [want it], and therefore
[Amendment 1] attempts to conform the language to refer to 25
percent of the tax paid. Mr. Dickinson pointed out that the
legislation refers to "assessment" rather than "tax", and
therefore the legislation's reference to "taxpayer" may need to
be reviewed. For all of the above reasons, Amendment 1 replaces
the language "value of sales, leases, and rentals described in
AS 44.33.126(a) and not exempt under AS 44.33.127" with the
language "tax paid under this chapter for the prior calendar
year".
MR. DICKINSON further explained that Amendment 1 also makes a
change such that when the industry votes to terminate the tax,
it will be terminated on the next December 31st that occurs at
least five months after the date of the certification of the
election. Therefore, businesses are given enough time to change
tax amounts in their computerized systems. The new provisions
that Amendment 1 would insert on page 6, line 24 of the
legislation continues the notion "that it's going to be the
amount of tax paid by the taxpayers." "But, unfortunately,
especially if there's a close election, there really could be at
the margin these ... issues," he said. Therefore, Amendment 1
inserts a provision specifying the following: "the
Commissioner, at his or her discretion may substitute audit
assessments, claims for refund or other pertinent evidence."
The other provision Amendment 1 inserts on page 6 provides the
taxpayer the right to appeal a decision.
Number 1861
REPRESENTATIVE KOTT removed his objection.
CHAIR HEINZE, upon determining there was no other objection,
announced that Amendment 1 was adopted.
REPRESENTATIVE KOTT moved that the committee adopt Amendment 2,
which read [original punctuation provided]:
Page 2, line26
Delete: [in this paragraph, "air transportation"
includes transportation by small]
Insert including following law;
Page 2, line27
Insert: , marine hwy, and railroad after ski lift and
before the semicolon.
Page 3, lines 5 - 8
Delete: ALL MATERIAL
REPRESENTATIVE KOTT objected for discussion purposes.
MS. STANCLIFF explained that the first change listed in
Amendment 2 attempts to refine the language and clean up any
ambiguity. Amendment 2 also inserts references to the marine
highway and the railroad. She explained that the language on
page 3, lines 5-8, is being deleted because the references to
the sale of marine ferry transportation services and railroad
transportation services would "touch on" the shipping of fuel,
coal, et cetera, which isn't the intent of the legislation.
Number 1972
CHAIR HEINZE recalled that at the last meeting there was concern
with regard to the Alaska Marine Highway System (AMHS), and
asked if that concern had been addressed.
MS. STANCLIFF said that whether or not to tax AMHS passengers is
a policy call for the committee. She recalled that the majority
of [AMHS] sales occur during the summer due to visitors.
CHAIR HEINZE then recalled that the suggestion was to have a
[seasonal tax] in which the driver would show his or her
drivers' license and not be taxed [if an Alaskan resident]. She
asked if the aforementioned was addressed [in Version S].
MS. STANCLIFF replied no, but offered that the committee could
adopt a conceptual amendment that would exempt Alaska residents
with proof of a drivers' license or Alaska residency.
Number 2025
REPRESENTATIVE KOTT withdrew his objection to Amendment 2.
CHAIR HEINZE, upon determining there was no other objection,
announced that Amendment 2 was adopted. She then returned the
committee's attention to the possibility of a conceptual
amendment regarding AMHS.
REPRESENTATIVE DAHLSTROM specified that the concern was in
regard to those Alaskans who use AMHS as their main mode of
transportation for medical and educational matters.
Number 2076
CHAIR HEINZE, upon determining there was no objection to the
conceptual amendment [that would exempt Alaska residents from
the proposed tax with proof of a drivers' license or Alaska
residency], announced that [Conceptual Amendment 3] was adopted.
MS. STANCLIFF interjected that AMHS advertises the Inside
Passage, and therefore many visitors use AMHS as if it were a
cruise. For that reason, it's reasonable, she opined, to
associate AMHS with the visitor industry and tax it.
Number 2131
JOEL HANSON, The Boat Company, informed the committee that The
Boat Company is a 25-year-old Alaska corporation that offers
high-quality educational cruises throughout the waters of
Southeast Alaska and in the winter operations occur in Costa
Rica and Panama. Mr. Hanson related that he is opposed to HB
426 and its Senate companion. He noted that his comments will
speak to the original version of HB 426. He pointed out that
the assessment in HB 426 is modeled after the Alaska Seafood
Marketing Institute (ASMI) assessment. However, there is a big
difference between salmon and tourists. Salmon can't promote
salmon fishermen and processors whereas tourists can promote
those in the tourism industry that they meet. The ASMI
assessment isn't perfect and nor is the assessment model put
forth by ATIA. Mr. Hanson said that the Alaska tourism industry
needs regulating. He pointed out that ATIA would be responsible
for issuing notices with regard to their position on things such
as a cruise ship dock in Sitka. Some of the members of ATIA are
from Alaska Airlines, Royal Caribbean, Princess Cruise Lines,
Holland American Lines, the Anchorage Convention & Visitors
Bureau, the Kodiak Convention & Visitors Bureau, the Fairbanks
Convention & Visitors Bureau, et cetera. All of the
aforementioned have a vested interest in increasing the number
of visitors to Alaska. However, not all areas are interested in
exponential increases in tourism.
Number 2285
MR. HANSON remarked that he was glad the committee was
discussing AMHS passenger issue, and opined that Alaska
residents should have an exemption to any increases to AMHS
fares. However, he noted that many extended families of
Alaskans visit via AMHS. He informed the committee that he had
read a report declaring that this summer there is no more room
for cars on AMHS from Bellingham, Washington. Therefore, to
further promote tourism on AMHS would seem to place those
Southeast Alaskans who depend upon AMHS for transportation in a
further bind.
MR. HANSON noted that ATIA "makes a big deal" about Alaska being
ranked 36 for state funding of tourism. However, Alaska isn't
like other states. Mr. Hanson opined that it isn't the time to
levy taxes for broad-based marketing such as proposed in HB 426
because there are a number of tax proposals that aren't yet
settled. For instance, there is the transportation and
accommodation tax.
TAPE 04-14, SIDE B
MR. HANSON turned to the "switch off" provisions, which he
referred to as great, although complicated.
Number 2343
ROB HARDY informed the committee that he and his wife operate a
small, remote, ecotourism business in the Talkeetna mountains.
Mr. Hardy announced his adamant opposition to the portion of HB
426 on page 2 [Section 4(a)(1) and (2)], which refers to scenic
transportation services and recreational vacation camp services.
With the financial burden he faces due to permitting, licensing,
liability insurance, advertising, logistical expenses, and basic
operating costs, his business is struggling to survive. The
marketing strategy of ATIA doesn't target the audience or
clientele who seek his remote, adventure services. The
marketing of ATIA predominantly benefits larger corporate
services, out-of-state operators, the cruise line industry, and
overall corporate interests. His business, he opined, sees
little from ATIA's direct marketing or representation. "To
saddle the smaller, in state, remote, mom and pop type
businesses that are struggling to stay economically viable with
a tourism assessment that they, by and large, do not benefit
from will be detrimental to local and rural economies, the
viability of individual business, community, and social
development," he remarked.
MR. HARDY, in response to Chair Heinze, specified that he has a
seasonal home outside of Wasilla, and for seven to eight months
of the year his family [and business] is located in the heart of
the Talkeetna Mountains, approximately 85 miles due east of
Talkeetna. Therefore, the area of operation is accessible by
horse and wheel plane.
Number 2218
REPRESENTATIVE KOHRING thanked Mr. Hardy for his testimony,
which he will take to heart. Representative Kohring noted his
appreciation of the tourism industry raising marketing dollars,
but noted his philosophical disagreement with this legislation.
REPRESENTATIVE CISSNA inquired as to how Mr. Hardy's business
has been in the past few years.
MR. HARDY related that through his good reputation and his own
aggressive marketing strategy on the Internet, his business has
experienced a slight increase in clientele over the last six to
seven years.
Number 2070
CHIP THOMA paraphrased from the following written testimony
[original punctuation provided]:
· Retain my opposition to the bill on constitutional
grounds; The effect of HB 426 is to compel those being
assessed the tax to subsidize speech with which they
may disagree.
· According to well-documented, federal case law,
proposals like HB 426 before you violates the First
Amendment, which prevents government from prohibiting
individuals from speaking, and it also prevents
government from requiring them to speak.
· There is a long, but very recent history, of these
promotional entities being struck down by federal
courts, beginning with the US Supreme Court and the
mushroom industry in 2001, known as United States v.
United Foods, following through with BEEF (What's for
dinner?) PORK (The other white meat) and potatoes,
watermelon, alligator skin, fresh-cut flowers, popcorn
and avocados.
· Remember the celebrity moustaches of the Got Milk?
campaign. Two weeks ago that federal assessment
program was found to violate the free speech of dairy
farmers in a unanimous decision by the US Court of
Appeals of the Third Circuit. (Cochran v. the
Secretary of Agriculture)
· I have provided the committee with the news story and
background on this latest decision, and a copy of the
Third Circuit ruling for staff.
· A similar Come to Alaska campaign is no different from
these promotional/advertising entities found
unconstitutional.
· Finally, the briefing by the successful litigants in
the Got Milk? case used a very forceful quote from
America's third President, Thomas Jefferson:
"To compel a man to furnish contributions of money for
the propagation of opinions which he disbelieves and
abhors, is sinful and tyrannical."
I believe this 200 year old quote makes the case well
against passage of HB 426, and obviously the federal
courts believe so, too.
Number 1963
REPRESENTATIVE McGUIRE asked if he believes [the state] is doing
enough to market tourism.
MR. THOMA replied yes. He highlighted that the cruise ship
industry is increasing by 9 percent this year, which, when
compared to five years ago, is a 15 percent increase. He
informed the committee that 800,000-850,000 visitors are coming
to Juneau this year and throughout Southeast, which should
increase to 1 million in the next couple of years. Therefore,
he opined that the monopoly that owns Princess, Holland America,
and Carnival Cruises does an outstanding job in promoting
Alaska. He also informed the committee that Juneau receives
over 100,000 independent travelers through the airport. The
only part of the state that has suffered [in regard to tourism]
has been the Fairbanks area, which he attributed to being an
"accident of geography" and the price of gas.
REPRESENTATIVE McGUIRE asked if Mr. Thoma believes that tourists
impact state services.
MR. THOMA replied no, but noted his belief that tourists impact
local/municipal services. He pointed out that Juneau has a $5
head tax, which brings in about $4 million a year and pays for
all the services related to cruise ship passengers on the docks.
In further response to Representative McGuire, Mr. Thoma
specified that individual cruise ship tourists don't drive on
state roads, but the tour buses do. He said he didn't believe
state troopers are utilized [with cruise ship passengers],
although he acknowledged that once in awhile an ambulance is
used and that cost comes out of the head tax.
REPRESENTATIVE McGUIRE pointed out that HB 426 is a direct
response to the governor's proposal, which would require those
tourists who come and enjoy the state to put some money into the
state's coffers as an Alaskan touring another state would do.
Representative McGuire asked if Mr. Thoma believes Governor
Murkowski's approach to assess the tax throughout the industry
and return it to the state would be a better approach.
MR. THOMA responded that he is a firm believer in the cruise
ship head tax, whether statewide or local. He opined that if
the state doesn't pass a head tax, Juneau will likely increase
its head tax. The head tax is done throughout the world and is
a very clean way of taxing.
Number 1736
CHAIR HEINZE highlighted that the federal regulations require
that any cruise ship tax collected would have to be used for the
infrastructure [of the tourism industry]. She asked if Mr.
Thoma wanted to change the federal regulation.
MR. THOMA replied no, and opined that the head tax can be
collected and spent on infrastructure.
CHAIR HEINZE asked if Mr. Thoma believes that the lion share of
Mr. Binkley's customers in Fairbanks are cruise ship passengers.
MR. THOMA answered yes, adding that he believes that all of Mr.
Binkley's customers come up either on the train or the bus, and
[proceed] on a cruise ship as a consequence. He said the same
is true with the railroad in Skagway and the helicopter tours in
Juneau. In further response to Chair Heinze, he confirmed that
these are land-based tours from the cruise ships.
Number 1662
JOSHUA ADAMS, Alaskan Hotel & Bar, said that he wanted to
further the arguments of Mr. Hardy and Mr. Thoma. He urged the
committee not to punish the mom and pop businesses. This 2
percent tax is on top of a 12 percent tax that has to be paid
for each guest, 75 percent of which are Alaskan residents. Mr.
Adams referred to this legislation as subsidized speech that is
regressive.
REPRESENTATIVE KOHRING inquired as to whether Section 4(a)(1)
and (2) would relate to Mr. Adams' business.
MR. ADAMS replied yes.
REPRESENTATIVE KOTT inquired as to whether the 12 percent tax
Mr. Adams spoke of is a local tax.
MR. ADAMS explained that the Alaskan Hotel & Bar pays a 7
percent hotel tax and a 5 percent local sales tax. In further
response to Representative Kott, Mr. Adams said that his parents
have been fighting the rising taxes since they purchased the
hotel in 1977.
REPRESENTATIVE KOTT asked if Mr. Adams would be supportive of a
5 percent state tax levied on hotels.
MR. ADAMS replied no.
Number 1535
REPRESENTATIVE CISSNA recalled Mr. Adams' comment that the
majority of his customers are Alaska residents, and asked if his
feelings would change if state residents didn't have to pay the
tax.
MR. ADAMS said with such a provision [HB 426] would impact the
Alaskan Hotel & Bar a lot less, but he expressed the need to
know how such a change would impact others.
CHAIR HEINZE recalled Mr. Adams' mother's comments from a prior
hearing in which she referred to cruise ships as floating
hotels. Chair Heinze asked if the rates at the Alaskan Hotel &
Bar are commiserate with those of the cruise ships.
MR. ADAMS clarified that the Alaskan Hotel & Bar is a lot more
economical than the cruise ships. In fact, the hotel offers
weekly rates, which reflects that it serves the locals.
CHAIR HEINZE inquired as to when was the last time the Alaskan
Hotel & Bar raised its rates to absorb some of the 12 percent
tax.
MR. ADAMS confirmed that he had reviewed raising the rates, but
it's difficult to make it work because the hotel is small,
doesn't have an elevator, and most of the rooms are small and
share a bathroom down the hall. In response to Representative
Kott, Mr. Adams informed the committee that for a small room
that shares a bathroom down the hall, the rate is $67.20 a
night. The weekly rate is $175 a week, without a television, he
noted. The rooms increase in price up to a suite that is about
$108 a night.
Number 1361
JAMES BARRETT, Co-Owner, Bergman Hotel, informed the committee
that his hotel is very similar to the Alaskan Hotel & Bar and in
fact they both cater to the same clientele. He noted that his
rates are even lower than those of the Alaskan Hotel & Bar. Mr.
Barrett said that this proposed 2 percent tax for marketing
isn't going to improve his market share or bring in customers to
his establishment. He informed the committee that he does
intense advertising for tourists from within the state. He
estimated the independent travelers he sees amount to about 10-
15 percent during only a few weeks in the summer.
Number 1219
REPRESENTATIVE CISSNA asked if Mr. Barrett's feelings would
change if state residents who prove they are residents wouldn't
have to pay the tax.
MR. BARRETT, replying as a Co-Owner of the Bergman Hotel, said
the company would be more comfortable with [Alaska residents not
paying the tax]. However, as a general citizen he said he
didn't like to see any more government involvement than
absolutely necessary.
Number 1075
REPRESENTATIVE CISSNA asked if it's a possibility to exempt
Alaskan residents from the tax proposed in HB 426.
REPRESENTATIVE KOTT replied that anything is a possibility, but
exemptions make it much more difficult on the business
establishment. He emphasized that this is only a $.10 per
dollar increase, which is a small amount.
CHAIR HEINZE, upon determining that no one else wished to
testify, remarked that this legislation could certainly be
tweaked in many ways. She said she would entertain a motion.
Number 0965
MS. STANCLIFF noted that the legislature has done things in the
past to help small businesses, such as the recreation liability
legislation that passed last year. She then turned to the
notion of having rates for Alaskans in order to avoid impacting
locals too much. In that vein, she highlighted that hotels in
the state have seasonal rates because they have visitors during
a certain period. Ms. Stancliff recalled living in Hawaii where
the locals weren't excluded from the tax, but received a
discounted rate. The aforementioned is an option the hotel can
decide to do itself.
MS. STANCLIFF noted that she lives on the road system. However,
in contrast to Mr. Thoma, she said she didn't believe that all
of the tourism dollars come from the cruise ship industry. She
also noted that she lives in an unorganized area for which the
only law enforcement is the Alaska State Troopers and local
volunteer emergency medical technicians. Therefore, she
believes it's only reasonable to make visitors pay for those
services. She informed the committee that Tok has almost 2,000
visitors a night; these are highway travelers. Furthermore,
folks fly into Anchorage, rent a car, drive around the state,
and utilize state services.
MS. STANCLIFF informed the committee that she and her husband
own a recreation-based business that takes people into the
backcountry. She acknowledged that she will have to pay the
tax, and emphasized that she is willing to pay for it and
doesn't believe that it's asking too much. Ms. Stancliff,
speaking as a private citizen, said that she would support it.
Number 0696
REPRESENTATIVE CRAWFORD inquired as to how [the state would
handle] a lawsuit such as the one brought forth with the "Got
Milk?" campaign.
MS. STANCLIFF answered that she didn't know. She said she
couldn't think of how Alaska could market such that a lawsuit
would be brought forward. She related her belief that the
lawsuit regarding the "Got Milk?" campaign was absurd.
REPRESENTATIVE CRAWFORD remarked that it's not the actual
advertisement [that's problematic] but rather assessing someone
for advertising against his or her will.
REPRESENTATIVE KOTT remarked that there may be some substance to
Representative Crawford's remark regarding assessing someone
against his or her will. However, when taken to the extreme
most wouldn't want to pay property taxes in Anchorage because
part of it goes toward marketing.
REPRESENTATIVE CISSNA inquired as to the next committee of
referral.
REPRESENTATIVE DAHLSTROM responded that the next committee of
referral is the House Labor and Commerce Standing Committee.
CHAIR HEINZE, in response to Representative Cissna, said that
the legislation does not have a referral to the House Judiciary
Standing Committee.
Number 0541
REPRESENTATIVE McGUIRE pointed out that whenever there is a
potential First Amendment violation one must review the
competing interests. In the "Got Milk?" case, the [judge] said
"that the government's interest in promoting the dairy industry
isn't sufficiently substantial to justify the infringement on
the First Amendment, free speech, and association rights". The
judge went on to say, "Promotional programs such as the Dairy
Act really seem to be more special interest litigation as
opposed to a benefit to the state." Therefore, Representative
McGuire said she believes one could argue that in the case of
the Dairy Act it's a single issue, whereas this legislation
proposes a comprehensive method of promoting an industry that
brings in money to the state and local municipalities.
Furthermore, this legislation is being offered to counter the
proposal of a tax for which the funds collected are placed in
the general fund and thus there is no guarantee those funds will
be used to market Alaska. She highlighted that the funds to
market Alaska have decreased to the point of being negligible.
However, Alaska is rapidly becoming a major tourist attraction
and one could even argue that tourism is a central part of
Alaska's economy and employment. Therefore, Representative
McGuire believes it [marketing for Alaska] could be distinct and
distinguishable. Moreover, the "Got Milk?" case was in the 3rd
Circuit Court of Appeals and Alaska is governed by the 9th
Circuit Court of Appeals. Finally, Representative McGuire
emphasized that the program proposed in HB 426 is patterned
after the ASMI program, which has worked successfully in Alaska
for many years.
Number 0336
REPRESENTATIVE KOHRING said he understood the need to raise
marketing funds to promote Alaska. He also acknowledged that
the tourism industry is a wonderful industry with tremendous
potential. However, some of the arguments today underscore the
problems with broad-based taxes in general. Representative
Kohring said he was more comfortable with encouraging industries
to raise money [for marketing] on their own. He inquired as to
the penalty if one refused to pay this tax in HB 426.
Number 169
MR. DICKINSON pointed out that HB 426 specifically refers to the
tax provision, and therefore the punishment for not paying would
be like any other under the tax provisions. In further response
to Representative Kohring, Mr. Dickinson said that what the
state would do would depend upon the amount of the tax. Just as
any other tax, the state would have the ability to create a
judgment or a lien.
REPRESENTATIVE KOHRING said he understood Ms. Stancliff's
earlier testimony to promote this tax as a way to pay for
police, emergency services, and roads. However, he said he
thought the only intent was to raise funds for marketing the
tourism industry.
MS. STANCLIFF confirmed that the thrust of this legislation is
to raise funds for marketing. She also confirmed that it's her
personal opinion [that this tax could be a way to] raise revenue
[for] emergency services, highways, et cetera at the local
level.
Number 0010
REPRESENTATIVE KOHRING turned attention to page 2, lines 25 and
27 of HB 426 [Version I], and inquired as to the possibility of
extracting the language "scenic and sightseeing".
TAPE 04-15, SIDE A
REPRESENTATIVE KOHRING inquired as to the impact of deleting
[line 25] on page 2 and the reference to "recreational" on [line
28] of page 2. He asked how much such a change would impact the
tourism industry's ability to raise [marketing] funds.
MS. STANCLIFF opined that such a change would require a new
fiscal analysis because the portion of this legislation relating
to recreation is sizable.
Number 0107
REPRESENTATIVE McGUIRE [returned to the "Got Milk?" case] and
pointed out that the [3rd Circuit Court of Appeals] says that
the test is regarding whether the money is used solely for
speech purposes and not germane to other purposes. Therefore,
she proposed that the legislation could specify that the money
raised could be used for marketing or community improvements.
The aforementioned would benefit tourist infrastructure.
REPRESENTATIVE CISSNA expressed concern that if the committee
starts excluding groups then more exclusions will come.
Number 0257
REPRESENTATIVE KOHRING moved that the committee adopt
[Conceptual Amendment 3 to HB 426, Version I], which would
"strike number one on line 25 and the portion ... in number 2 on
line 27 that makes reference to recreational."
REPRESENTATIVE DAHLSTROM objected.
A roll call vote was taken. Representative Kohring voted in
favor of Conceptual Amendment 2. Representatives Cissna,
Crawford, McGuire, Kott, Dahlstrom, and Heinze voted against it.
Therefore, Conceptual Amendment 3 failed by a vote of 1-6.
Number 0362
REPRESENTATIVE DAHLSTROM moved to report CSHB 426, Version 23-
LS1575\S, Kurtz, 3/9/04, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 426(EDT) was reported from the
House Special Committee on Economic Development, International
Trade and Tourism.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 7:25 p.m.
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