Legislature(2003 - 2004)

03/16/2004 05:45 PM EDT

Audio Topic
* first hearing in first committee of referral
+ 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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