Legislature(2009 - 2010)CAPITOL 106

03/09/2010 05:15 PM House ECON. DEV., TRADE & TOURISM


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05:15:28 PM Start
05:16:27 PM Presentation: the Alaska Alliance for Cruise Travel (alaskaact).
06:35:25 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: The Alaska Alliance for TELECONFERENCED
Cruise Travel (AlaskaACT)
-The importance of cruise travel to the
State of Alaska;
- The decline of cruise passengers in
Alaska, a city to city comparison of the
effects of cruise lines' redeployment
from Alaska;
- Taxation and competition,
by Fred Reeder, Past Sitka Mayor, Port
Manager, Cruise Line Agency; Chris Meier,
VP Operations for Alaska Travel
Adventures; Bob Janes, President,
Gastineau Guiding, Inc.
                    ALASKA STATE LEGISLATURE                                                                                  
 HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL                                                               
                       TRADE AND TOURISM                                                                                      
                         March 9, 2010                                                                                          
                           5:15 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jay Ramras, Chair                                                                                                
Representative Mike Chenault                                                                                                    
Representative Mark Neuman                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
Representative Kyle Johansen                                                                                                    
Representative Reggie Joule                                                                                                     
Representative Harry Crawford                                                                                                   
Representative Lindsey Holmes                                                                                                   
Representative Chris Tuck                                                                                                       
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Alan Austerman                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  THE ALASKA ALLIANCE FOR CRUISE TRAVEL                                                                            
(ALASKAACT).                                                                                                                    
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
FRED REEDER, Member                                                                                                             
Alaska Alliance for Cruise Travel (AlaskaACT); Port Manager                                                                     
Cruise Line Agencies of Alaska                                                                                                  
Sitka, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during the presentation by the                                                                 
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
CHRIS MEIER, Member                                                                                                             
Alaska  Alliance for  Cruise Travel  (AlaskaACT); Vice  President                                                               
Alaska Travel Adventures                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on behalf of  the Alaska Alliance                                                             
for Cruise Travel (AlaskaACT) and Alaska Travel Adventures.                                                                     
                                                                                                                                
BOB JANES, President                                                                                                            
Gastineau Guiding Company                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
CHIP THOMA, President                                                                                                           
Responsible Cruising in Alaska (RCA)                                                                                            
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
ALAN LEMASTER, Outfitter                                                                                                        
Copper River Salmon Charters                                                                                                    
Gakona, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
JOE GELDHOF, Legal Counsel                                                                                                      
Responsible Cruising in Alaska (RCA)                                                                                            
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska  Alliance for  Cruise Travel  (AlaskaACT)  as the  primary                                                               
author of the 2006 Cruise Ship Initiative 2.                                                                                    
                                                                                                                                
CAROL FRASER, Regional Director for Sales and Marketing                                                                         
ARAMARK Parks and Destinations                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
TYLER HICKMAN, Vice President-Operations                                                                                        
Icy Strait Point                                                                                                                
Hoonah, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified during  the presentation  by the                                                             
Alaska Alliance for Cruise Travel (AlaskaACT).                                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
5:15:28 PM                                                                                                                    
                                                                                                                                
CHAIR JAY RAMRAS  called the House Special  Committee on Economic                                                             
Development, International Trade and  Tourism meeting to order at                                                               
5:15  p.m.   Representative Ramras  was  present at  the call  to                                                               
order.    Representatives  Neuman  and Chenault  arrived  as  the                                                               
meeting was  in progress.   Representative Austerman was  also in                                                               
attendance.                                                                                                                     
                                                                                                                                
^PRESENTATION:     THE   ALASKA   ALLIANCE   FOR  CRUISE   TRAVEL                                                               
(ALASKAACT).                                                                                                                    
      PRESENTATION:  THE ALASKA ALLIANCE FOR CRUISE TRAVEL                                                                  
                          (ALASKAACT).                                                                                      
                                                                                                                              
5:16:27 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced  that the only order of  business would be                                                               
a  presentation   by  the  Alaska  Alliance   for  Cruise  Travel                                                               
(AlaskaACT).    Chair  Ramras  disclosed that  he  works  in  the                                                               
hospitality industry,  and indicated  that committee  members are                                                               
cognizant of  that fact,  and that [once  more members  arrive he                                                               
would be handing over the gavel].                                                                                               
                                                                                                                                
5:19:03 PM                                                                                                                    
                                                                                                                                
FRED   REEDER,  Member,   Alaska  Alliance   for  Cruise   Travel                                                               
(AlaskaACT);  Port  Manager,  Cruise  Line  Agencies  of  Alaska,                                                               
informed  the   committee  that  AlaskaACT  is   an  organization                                                               
concerned with  the decline in  the cruise ship volume  coming to                                                               
the state of Alaska, and the  economic impact thereof.  He opined                                                               
that in  2008, Alaska hit  the "high watermark" for  cruising and                                                               
the  volume would  have stayed  in  the 1,100,000  range for  the                                                               
future, except  for the intended  and unintended  consequences of                                                               
the 2006  ballot initiative.   As a  result of  that legislation,                                                               
cruise  executives were  convinced  to  serve their  stockholders                                                               
with a  higher yield and  return by going to  other destinations.                                                               
Mr.  Reeder emphasized  that cruise  line schedules  are set  two                                                               
years in advance, thus the  effects of the ballot initiative that                                                               
became law  1/2007, were not felt  until the fall of  2007.  Like                                                               
other  industries,  cruise  lines  attempt  to  maximize  revenue                                                               
wherever possible, and  he pointed out that  whereas other Alaska                                                               
businesses are  tied to  the land  and are  unable to  move their                                                               
assets, cruise  ships are  moveable assets that  can be  moved to                                                               
"where  they  can  make  the  most money."    Mr.  Reeder  opined                                                               
providing an  environment for businesses  in the state to  make a                                                               
profit  is  "not a  dirty  word."    Through  profit is  the  way                                                               
everyone can obtain a job.   The decline in cruise passengers for                                                               
2010 and 2011 will result in a  loss of 1,800 jobs in the visitor                                                               
industry beginning  this summer.  He  referred to a study  by the                                                               
McDowell Group  that indicates  there will  be $165  million less                                                               
spent in the  state, and a reduction to payrolls  of $72 million.                                                               
Mr. Reeder compared  the losses against an estimated  gain of $70                                                               
million from  the initiative,  and noted that  of the  revenue to                                                               
the  state, much  of it  cannot be  spent on  schools, roads,  or                                                               
other community needs.  He provided  a chart that showed the City                                                               
of Sitka  received $1,448,765  in sales  tax revenue  from cruise                                                               
passengers in 2008, and sales  tax revenue from cruise passengers                                                               
in 2011 is estimated to be $525,000.                                                                                            
                                                                                                                                
5:24:48 PM                                                                                                                    
                                                                                                                                
MR.  REEDER  continued  to  explain  that  the  effects  of  this                                                               
reduction  are grave  for the  City and  Borough of  Sitka.   For                                                               
example, revenue from the initiative  may be $1 million; however,                                                               
this  revenue is  tied  to benefit  only  cruise passengers,  and                                                               
cannot be  used for schools, gymnasiums,  or recreation programs.                                                               
He expressed  his belief  that the city  is better  off receiving                                                               
the same amount  of money in sales taxes.   Furthermore, if Sitka                                                               
needs cruise  ship infrastructure, the cruise  industry would pay                                                               
for  the improvements  that  are  needed.   Mr.  Reeder said  the                                                               
recession is not the reason  cruise ships have been redeployed to                                                               
other destinations,  but that  the revenue  generated is  less in                                                               
Alaska, and  the ships  are going  to areas  such as  Europe, the                                                               
Baltic,  and  the Mediterranean.    He  acknowledged that  cruise                                                               
companies should not be exempt  from paying their share, but they                                                               
should not  be held to a  higher standard than other  business in                                                               
the  state.   For example,  communities  in the  state could  not                                                               
afford  to  meet  the  same  waste  water  regulations  that  are                                                               
required of the  cruise industry.  He said, "If  it's good enough                                                               
for our  communities, it ought to  be good enough for  the cruise                                                               
ship."                                                                                                                          
                                                                                                                                
CHAIR  RAMRAS  noted  that  he  was  "very  comfortable  to  take                                                               
testimony, but not to pose questions from the chair."                                                                           
                                                                                                                                
5:29:59 PM                                                                                                                    
                                                                                                                                
MR.  REEDER said  he was  glad his  testimony would  be heard  on                                                               
Gavel to  Gavel.  He indicated  his concern that he  is unable to                                                               
provide jobs  to the youth  in his community this  coming summer.                                                               
He  concluded that  Alaskans need  to work  together for  jobs in                                                               
their communities.                                                                                                              
                                                                                                                                
CHAIR RAMRAS offered brief comments  about various industries and                                                               
items of interest in Sitka.                                                                                                     
                                                                                                                                
5:34:46 PM                                                                                                                    
                                                                                                                                
CHRIS   MEIER,  Member,   Alaska  Alliance   for  Cruise   Travel                                                               
(AlaskaACT),  and  Vice   President,  Alaska  Travel  Adventures,                                                               
relayed  that he  has been  involved in  the visitor  industry in                                                               
Alaska  for  17 years,  and  tourism  has  given his  family  the                                                               
opportunity  to   live  and  work   in  the  safe   and  pristine                                                               
environment of  Alaska.   He said he  has serious  concerns about                                                               
the  future of  the visitor  industry,  and the  impact that  the                                                               
ballot initiative is  having on his business and  others like it.                                                               
Alaska   Travel  Adventures   operates   tours  and   attractions                                                               
throughout  the state,  and  his experience  is  that the  cruise                                                               
industry is  important to communities  in Alaska for the  jobs it                                                               
provides.    He  opined  2006  Ballot  Measure  2  threatens  the                                                               
stability  of the  industry and  the  families it  supports.   In                                                               
truth, the  head tax is  a $50  million cost increase  imposed on                                                               
the cruise  ship industry that  is already in a  high operational                                                               
cost location.  Alaska is  now at a competitive disadvantage with                                                               
other   global  cruise   destinations,  and   cruise  lines   are                                                               
redeploying  ships  to  less  costly  destinations.    Mr.  Meier                                                               
expressed his belief that the  initiative is driving business out                                                               
of Alaska;  in fact, targeted  taxes are  not the way  to improve                                                               
Alaska's economic  situation.  Furthermore,  the tax is  not just                                                               
on outsiders, but is affecting  small businesses across the state                                                               
during  an  already challenging  economic  environment.   He  re-                                                               
stated the  revenue statistics,  and said  that economic  and job                                                               
loss will  be far greater than  any benefit derived from  the tax                                                               
itself.  Also,  current estimates are that there  will be between                                                               
1,800  and  2,100  fewer  industry   jobs  this  year,  with  the                                                               
resulting  negative  impact to  each  community.   Alaska  Travel                                                               
Adventures in Juneau has reduced  its full-time staff from six to                                                               
four employees.  In addition,  his office will hire approximately                                                               
15  percent fewer  seasonal  staff,  for a  total  loss of  sixty                                                               
seasonal  jobs  statewide.    His   personal  experience  in  the                                                               
industry began  as a  seasonal employee, and  he wondered  if the                                                               
same  opportunity  will  be  available  if  the  decline  in  the                                                               
industry  continues.   Mr.  Meier  pointed  out that  many  local                                                               
communities have become  dependent on the industry  for sales tax                                                               
revenue, and  warned that without  the repeal or  modification of                                                               
the  initiative, businesses  and  local  governments will  suffer                                                               
from fewer jobs, reduced economic  activity, and reduced revenue.                                                               
Because  of the  lapse  of  time in  cruise  line scheduling,  he                                                               
expressed his  hope that  action will  be taken  this legislative                                                               
session to repeal or significantly modify Ballot Measure 2.                                                                     
                                                                                                                                
CHAIR RAMRAS turned the gavel over to Representative Neuman.                                                                    
                                                                                                                                
CHAIR  RAMRAS asked  for  the projected  decline  or increase  in                                                               
employment for Alaska Travel Adventures.                                                                                        
                                                                                                                                
MR.  MEIER  said  the  staffing   plan  presently  calls  for  an                                                               
approximate 15 percent reduction of staff statewide.                                                                            
                                                                                                                                
5:42:35 PM                                                                                                                    
                                                                                                                                
BOB JANES,  President, Gastineau Guiding Company,  explained that                                                               
Gastineau Guiding Company is a  local eco-tour operation that has                                                               
been in business in Juneau for  about 15 years.  His business was                                                               
based  on  the  tourism  opportunity presented  by  the  visitors                                                               
brought to Juneau  by the cruise ships; this  opportunity is also                                                               
appreciated  by many  other towns  in  Southeast, and  throughout                                                               
Alaska.   He  assured the  committee his  employees work  hard to                                                               
provide  an incredible  experience  for people,  but his  company                                                               
needs  the cruise  ships  that provide  "business  coming to  our                                                               
doors."   Mr.  Janes said  his  main concern  is to  look at  the                                                               
intent of  the voters when  Ballot Measure  2 passed.   He opined                                                               
the  intent of  the Alaska  voters  was not  to cut  back on  the                                                               
number of  visitors, or to  see businesses like his  reduce their                                                               
donations  to  non-profits  because   the  market  is  shrinking.                                                               
Another  result  the  voters  did   not  intend  is  to  see  the                                                               
infrastructure shrinking rather than  growing, and he listed some                                                               
of the improvements in Juneau  that were based on the involvement                                                               
of the  cruise industry.  He  said he also does  not believe that                                                               
the  intent  of  the  voters  was  to  see  the  job  market  and                                                               
opportunities  for young  people,  diminished.   Mr. Janes  urged                                                               
voters to  contact their  legislators and  make clear  the intent                                                               
behind passing Ballot Measure 2.                                                                                                
                                                                                                                                
REPRESENTATIVE  NEUMAN asked  Mr. Janes  what the  intent of  the                                                               
voters was.                                                                                                                     
                                                                                                                                
MR. JANES  responded that he  feels the voters want  the industry                                                               
to pay for itself.  Unfortunately,  he added, the $50 head tax is                                                               
excessive; in fact,  it is difficult to spend that  much money on                                                               
infrastructure  directly related  to  the  cruise ship  industry.                                                               
Although eliminating  the tax  would be  a mistake,  leveling the                                                               
tax, and making it fair,  would continue to encourage cruise line                                                               
visitation,  provide   for  a  more  affordable   experience  for                                                               
visitors, and continue to bring resources into the state.                                                                       
                                                                                                                                
REPRESENTATIVE  NEUMAN asked  whether the  voters understood  the                                                               
ballot initiative.                                                                                                              
                                                                                                                                
MR. JANES said  he did not think so, adding  that he probably did                                                               
not either.   Acknowledging that "it is easy to  vote for a tax,"                                                               
he  re-stated that  most people  did  not realize  "who would  be                                                               
paying for it, or what the loss might be."                                                                                      
                                                                                                                                
5:50:41 PM                                                                                                                    
                                                                                                                                
CHIP  THOMA, President,  Responsible  Cruising  in Alaska  (RCA),                                                               
stated  that the  recession  is over;  in  fact, Carnival  Cruise                                                               
Lines  announced on  2/24/10, that  it is  raising ticket  prices                                                               
worldwide by 5  percent, and in Alaska ticket  prices were raised                                                               
by  21 percent.   This  difference  was revealed  when the  state                                                               
purchased  tickets  for  the Division  of  Water,  Department  of                                                               
Environmental  Conservation  (DEC),  Ocean Ranger  program.    He                                                               
opined this increase is good  because that means that the economy                                                               
is improving  dramatically, nationally and worldwide.   Mr. Thoma                                                               
concluded  that prices  will increase,  along with  the increased                                                               
interest in  travel to Alaska.   Also, he related that  through a                                                               
Freedom of  Information Act request  to DEC, Ocean  Ranger ticket                                                               
purchases  further  reveal that  there  are  three categories  of                                                               
prices:   basic  price; taxes  and fees;  gratuity.   The average                                                               
taxes  and fees  paid by  a customer  coming to  Alaska is  $140,                                                               
although the state and local taxes  are $66.  This discrepancy is                                                               
explained  because the  additional taxes  and fees  are going  to                                                               
private  vendors  and  private  dock  owners.    He  offered  the                                                               
following examples:   in Skagway, taxes and fees are  paid to the                                                               
White Pass &  Yukon Route Railway; in Whittier, they  are paid to                                                               
the  dock;  in Seward,  they  are  paid  to the  Alaska  Railroad                                                               
Corporation; in  Hoonah, they are  paid to  the dock.   Mr. Thoma                                                               
continued to  explain that the  average gratuity charged  to each                                                               
ticket to  come to Alaska for  one week is $80,  and he expressed                                                               
doubt about the  disbursement of gratuities to staff.   He opined                                                               
$80 million  per year was  being collected in gratuities,  and he                                                               
encouraged further investigation into this matter.                                                                              
                                                                                                                                
5:54:35 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS asked Mr. Thoma  to address the testimony from small                                                               
business  people   across  the  state  about   their  businesses,                                                               
families, and livelihoods.                                                                                                      
                                                                                                                                
MR. THOMA  said he  believes the economy  is turning  around, and                                                               
that  the economy  will improve.   In  further response  to Chair                                                               
Ramras, he said  the loss of employees  and "personal situations,                                                               
family  situations, employment  situations, all  of those  are on                                                               
the mend, they will improve in the next year or two."                                                                           
                                                                                                                                
CHAIR RAMRAS clarified  that he was not  asking about situations,                                                               
but about people and families.                                                                                                  
                                                                                                                                
MR. THOMA expressed his empathy  for those who testified, and his                                                               
confidence  that personal  things will  improve in  the years  to                                                               
come.                                                                                                                           
                                                                                                                                
5:57:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   NEUMAN  referred   to  the   statistics  offered                                                               
regarding Sitka's loss of revenue.   He offered his understanding                                                               
that the  recovery will  be slower  than the  decline.   He asked                                                               
whether the economy will return to  the level of 2008 within four                                                               
years.                                                                                                                          
                                                                                                                                
MR. THOMA stated  his belief that the economy will  return to the                                                               
level of  2008 within  three years.   He added  that the  last 25                                                               
years  of the  cruise  ship industry  in Alaska  has  shown a  15                                                               
percent  increase almost  every year.   The  last few  years have                                                               
shown a 5  percent increase; in fact, 2008 was  the highest year,                                                               
and  in 2009,  volume  was flat  for  the first  year  ever.   He                                                               
concluded that this is an industry that will bounce back.                                                                       
                                                                                                                                
REPRESENTATIVE  NEUMAN  observed  that  ticket  prices  could  be                                                               
raised due to  the increase in operating expenses,  such as fuel,                                                               
and  a decline  in ridership.   He  opined that  the increase  in                                                               
prices was imposed  to cover base costs after  ridership was down                                                               
64 percent.                                                                                                                     
                                                                                                                                
MR. THOMA stated that ridership is  not down; in fact, all of the                                                               
ships to Alaska are full.                                                                                                       
                                                                                                                                
There followed brief comments on the interpretation of numbers.                                                                 
                                                                                                                                
6:01:46 PM                                                                                                                    
                                                                                                                                
ALAN LEMASTER,  Operator, Copper River Salmon  Charters, recalled                                                               
that three years ago he  employed three and one-half guides full-                                                               
time and  four or  five others, and  those numbers  have declined                                                               
each year.  There has also  been a marked decline in his business                                                               
as a  vendor for  the Copper River  Princess Wilderness  Lodge of                                                               
about two-thirds.   He said his overall business  has declined in                                                               
the last three years to about  one-third.  Mr. LeMaster stated he                                                               
will try  to stay in business  this summer with no  employees and                                                               
one commissioned guide.   Furthermore, Princess Tours  has cut 30                                                               
days from  its schedule at  the hotel,  and reduced its  fleet by                                                               
one ship  per week.   This reduction is equal  to 130,000-150,000                                                               
guests who will not come to Alaska.                                                                                             
                                                                                                                                
MR. LEMASTER continued  to explain that this  critical problem is                                                               
based on  two things: (1)  there is insufficient money  to market                                                               
the state appropriately; (2) the burden  must be taken off of the                                                               
cruise ship  industry so that  they can  bring the ships  back to                                                               
Alaska.  He agreed that this  is the first decline in visitors to                                                               
Alaska  since 1953.    Now,  however, there  is  a 20-25  percent                                                               
decline,  and he  asked legislators  to bolster  the industry  by                                                               
providing funds  to market  Alaska tourism to  the world,  and by                                                               
easing the  pressure on  the cruise ships.   Mr.  LeMaster warned                                                               
that without these measures, the  visitor industry will shrink to                                                               
a size smaller than it was 25 years ago.                                                                                        
                                                                                                                                
REPRESENTATIVE NEUMAN  offered his belief that  the Copper Center                                                               
area is  one of the most  highly advertised and popular  areas of                                                               
the state  for tourism.   He assumed Mr.  LeMaster was in  a good                                                               
position and well established.                                                                                                  
                                                                                                                                
MR.  LEMASTER emphasized  that  his business  is  "on the  ropes,                                                               
too."  The Copper  Center area is not in a  borough thus does not                                                               
have the advantages of a borough,  but does have high costs, such                                                               
as energy  for transportation  on the river  and roads.   Without                                                               
high  volume,  his   business  will  not  be   able  to  continue                                                               
operating.  In  addition, the Copper Center area is  faced with a                                                               
very  poor  future because  the  Department  of Transportation  &                                                               
Public Facilities (DOT&PF) does not  have major plans for work in                                                               
the  area, nor  does the  Alyeska Pipeline  Service Company.   He                                                               
disagreed about  the visibility  of the  Copper Center  area, and                                                               
said that his  area is fourth or fifth in  marketing behind other                                                               
areas  of the  state that  have "thousands,  if not  millions, of                                                               
dollars to market their area."                                                                                                  
                                                                                                                                
6:08:20 PM                                                                                                                    
                                                                                                                                
JOE  GELDHOF,  Legal  Counsel,  Responsible  Cruising  in  Alaska                                                               
(RCA), informed  the committee he  was the primary author  of the                                                               
2006  Cruise Ship  Initiative.   Furthermore,  he  has worked  on                                                               
cruise ship and associated tourism  issues for at least 10 years.                                                               
Mr.  Geldhof  opined  that  the  industry  markets  its  business                                                               
extremely well, especially  beginning in the 80's.   Beginning in                                                               
the late 90's, issues such  as taxation, consumer disclosure, and                                                               
pollution  to  marine  waters  coalesced.     He  disagreed  with                                                               
statements  concerning unintended  consequences, and  pointed out                                                               
that the initiative  was based on polling  and widespread citizen                                                               
discussion.  In  addition, the initiative was in  response to the                                                               
legislature's failure to act on the  $50 tax passed by the Senate                                                               
in 2000.   He opined  the Senate arrived  at the $50  price point                                                               
after  deliberation and  considered analysis.   Mr.  Geldhof also                                                               
disagreed with the suggestion that  voters did not understand the                                                               
initiative; in fact, there was  a very vigorous debate and dialog                                                               
surrounding the initiative.                                                                                                     
                                                                                                                                
MR. GELDHOF  recalled that the  initiative has been  amended four                                                               
times by the legislature, with  the cooperation of RCA and others                                                               
who are represented today.  Mr. Geldhof remarked:                                                                               
                                                                                                                                
     ...  people stepped  up and  worked with  you and  your                                                                    
     colleagues to  get adjustments changed.   My  point is,                                                                    
     this wasn't  some unintended thing that  lurched out of                                                                    
     the back  of the Red Dog  Saloon and was popped  on the                                                                    
     industry  and has  been this  grossly  unfair piece  of                                                                    
     legislation.   It basically is working;  it's providing                                                                    
     the Alaska Legislature with  the resources financial to                                                                    
     build the large Panamax docks that we need.                                                                                
                                                                                                                                
MR. GELDHOF  continued to  explain that  two large  Panamax docks                                                               
are  needed in  Juneau, and  Ketchikan and  the other  ports need                                                               
them  also.    Furthermore,  during   negotiations  on  the  four                                                               
amendments,  in  2009 there  was  discussion  about reducing  the                                                               
amount   of  the   tax;  however,   he  said   he  was   told  by                                                               
representatives that  the industry preferred to  pursue political                                                               
avenues and  litigation strategies.   He  pointed out  that there                                                               
has been  a attempt to  determine what  the capital needs  are in                                                               
terms of wharves  and infrastructure.  He  compared the situation                                                               
of  the local  tourism  industry with  that of  the  oil and  gas                                                               
industry.                                                                                                                       
                                                                                                                                
6:15:08 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF expressed his sympathy  toward those whose businesses                                                               
have a need for marketing; in  fact, he has advocated for funding                                                               
for marketing  aimed at independent  tourists.  In response  to a                                                               
question  from Chair  Ramras,  he agreed  that  taxes can  change                                                               
behavior.     Mr.  Geldhof  emphasized   that  there   have  been                                                               
adjustments, and  a sense of  empathy, sympathy,  and cooperation                                                               
from  Alaskans  who  may  approach   this  issue  from  different                                                               
viewpoints.     However,  someone  must  determine   a  fair  and                                                               
equitable  user  fee that  allows  the  state to  capitalize  the                                                               
necessary  cruise ship  infrastructure for  ports.   He concluded                                                               
that this is a question of policy and common sense.                                                                             
                                                                                                                                
6:17:50 PM                                                                                                                    
                                                                                                                                
CAROL FRASER, Regional Director  for Sales and Marketing, ARAMARK                                                               
Parks  and Destinations,  informed the  committee ARAMARK  is the                                                               
concessionaire for  Denali and Glacier  Bay National Parks.   Ms.                                                               
Fraser noted  that she previously  owned a hotel chain  with over                                                               
100 employees  and is  very familiar  with the  tourism industry.                                                               
She agreed that  the following statements are  true: ships coming                                                               
to Alaska  are full; the 2006  Ballot Measure did not  affect the                                                               
2007  or  2008  tourism  season;  the  cruise  industry  is  very                                                               
successful at  marketing.  However,  to fill the ships  coming to                                                               
Alaska,  the industry  is marketing  seven-day cruises  to Alaska                                                               
for $399.   She opined  the passengers "that were  very conscious                                                               
of  the value  of the  dollar"  are unlikely  to take  helicopter                                                               
flights.   Ms.  Fraser  said  the cruise  line  industry is  very                                                               
healthy worldwide;  in fact,  24 new ships  are being  built, but                                                               
none of  those are slated to  come to Alaska.   She observed that                                                               
in cities that are competing for  cruise ship visits, such as St.                                                               
Kitts and  Bermuda, taxes  are being  lowered or  eliminated, and                                                               
free services are  offered.  She noted that the  cruise lines are                                                               
making smart  business decisions that  would be supported  by any                                                               
business person.                                                                                                                
                                                                                                                                
MS. FRASER  continued to  explain that  the decision  process for                                                               
cruise lines is  a 3-5 year process, thus the  itinerary for 2010                                                               
will be the first affected by  the change, and she estimated that                                                               
142,000 passengers  will not be  coming to Alaska.   Furthermore,                                                               
because 27 percent of cruise  line passengers return to the state                                                               
within three years,  the result will be "an  even worse economy."                                                               
Again  referring  to  marketing,  she stated  that  the  industry                                                               
spends $75 million per year  marketing Alaska.  The Alaska Travel                                                               
Industry Association  (ATIA), the  state marketing entity,  has a                                                               
very  small  budget,  and  out-of-state  TV  advertising  is  not                                                               
sponsored  by  the  state,  but  by  the  cruise  ship  industry.                                                               
Therefore, her business  relies on that advertising,  as do other                                                               
tourism  businesses.   She offered  her understanding  that along                                                               
with the  removal of ships  and advertising, the  cruise industry                                                               
can influence travel agencies to  discontinue marketing Alaska as                                                               
a destination.                                                                                                                  
                                                                                                                                
MS. FRASER advised that 1,800  Alaska tourism employees will lose                                                               
jobs  because  of  the  loss  of cruise  ship  passengers.    She                                                               
concluded that  it is necessary to  have a reduction in  the head                                                               
tax; in truth,  without a change in regulations,  Alaska will not                                                               
recover, even if the economy goes through the roof.                                                                             
                                                                                                                                
6:23:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN  assumed  that  those  who  are  going  on                                                               
cruises now  do not have the  same level of expendable  income as                                                               
before.                                                                                                                         
                                                                                                                                
MS. FRASER  concurred, adding  that in  Denali National  Park the                                                               
income from food, beverages, and retail shops was down.                                                                         
                                                                                                                                
6:25:12 PM                                                                                                                    
                                                                                                                                
TYLER  HICKMAN,  Vice  President-Operations,  Icy  Strait  Point,                                                               
explained  that  Icy   Strait  Point  is  owned   by  Huna  Totem                                                               
Corporation and is  a completely private investment.   Huna Totem                                                               
Corporation  made  a  substantial  investment to  get  a  private                                                               
cruise  ship  port  "off  the  ground and  running."    It  began                                                               
operation in  2004, however,  since 2007 there  has been  a sharp                                                               
decline in  business.   Employment in 2007  was over  130 people,                                                               
but this year and last year  employment is about 100 people.  The                                                               
reduction in  cruise ship  guests is about  50,000 per  year, and                                                               
the  impact is  huge  because taxes  from  the ballot  initiative                                                               
bypass Icy  Strait Point,  and are  paid to  the city  of Hoonah.                                                               
Mr.  Hickman questioned  the comments  made about  the gratuities                                                               
collected  by the  cruise lines,  and equated  the comments  with                                                               
"demonizing  the cruise  lines."    Mr. Hickman  said  it is  the                                                               
responsibility of Alaska to incentivize  the cruise lines so they                                                               
will bring  people to Alaska.   In  response to Chair  Ramras, he                                                               
said  his  company  employs  100 seasonal  workers  that  are  80                                                               
percent Native hire,  and 90 percent local hire.   Also, he noted                                                               
that his business  provides 25 percent of the  payroll in Hoonah;                                                               
in fact,  there are very  few jobs in  Hoonah.  Mr.  Hickman said                                                               
that the imposition of additional taxes stops business.                                                                         
                                                                                                                                
6:29:44 PM                                                                                                                    
                                                                                                                                
MR.  GELDHOF, in  response to  a  question, provided  information                                                               
about the membership in Responsible Cruising in Alaska.                                                                         
                                                                                                                                
MR.  THOMA,   in  response  to   a  question,   provided  further                                                               
information about Responsible Cruising in Alaska.                                                                               
                                                                                                                                
REPRESENTATIVE NEUMAN closed public testimony.                                                                                  
                                                                                                                                
6:33:20 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS thanked those in attendance.                                                                                       
                                                                                                                                
REPRESENTATIVE  NEUMAN  mentioned  that he  heard  comments  from                                                               
those in  his district  regarding the economy  and the  effect of                                                               
the ballot initiative; in fact, there is a possibility that the                                                                 
impact will be felt even in Whitehorse, British Columbia,                                                                       
Canada.                                                                                                                         
                                                                                                                                
6:35:25 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Economic Development, International Trade                                                                  
and Tourism meeting was adjourned at 6:35 p.m.                                                                                  

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