Legislature(2007 - 2008)BARNES 124
04/17/2007 05:00 PM House ECONOMIC DEV., TRADE, AND TOURISM
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| HB217 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
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| += | HB 217 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
April 17, 2007
5:07 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Chair
Representative Carl Gatto
Representative Kyle Johansen
Representative Vic Kohring
Representative Bob Lynn
Representative Andrea Doll
MEMBERS ABSENT
Representative Mike Doogan
OTHER LEGISLATORS PRESENT
Representative Lindsey Holmes
COMMITTEE CALENDAR
HOUSE BILL NO. 217
"An Act relating to required onboard disclosures and displays
about tours, flightseeing operations, other shoreside
activities, and visitors bureaus; and providing for an effective
date."
- MOVED CSHB 217(EDT) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 217
SHORT TITLE: TOURISM DISCLOSURES AND NOTICES
SPONSOR(s): REPRESENTATIVE(s) HOLMES
03/22/07 (H) READ THE FIRST TIME - REFERRALS
03/22/07 (H) EDT, JUD
04/03/07 (H) EDT AT 5:30 PM CAPITOL 106
04/03/07 (H) Heard & Held
04/03/07 (H) MINUTE(EDT)
04/10/07 (H) EDT AT 5:00 PM BARNES 124
04/10/07 (H) Heard & Held
04/10/07 (H) MINUTE(EDT)
04/17/07 (H) EDT AT 5:00 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE LINDSEY HOLMES, Member
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 217.
ROB SCHEER, Owner
Great Alaska Lumberjack Show and Experience Alaska Tours
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of HB 217.
PATRICIA SCHAUGHNESSY, Employee
Experience Alaska Tours
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
CARSTENS JASPER, Employee
Experience Alaska Tours
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
CHUCK SLAGLE, Owner
Baranof and Company
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
STACEY HUNT, Employee
Great Alaska Lumberjack Show
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
JANICE GARCIA, Employee
Great Alaska Lumberjack Show
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
JOHN DUNLAP, Manager
Allen Marine Tours
Allen Marine Inc.
Ketchikan, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
KARI ERICKSON, Division Manager
Gray Line of Alaska
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of HB 217.
DOT WILSON, Owner
Coastal Helicopters Inc.
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
CHIP THOMA
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 217.
ACTION NARRATIVE
CHAIR MARK NEUMAN called the House Special Committee on Economic
Development, International Trade and Tourism meeting to order at
5:07:44 PM. Representatives Kohring, Lynn, Johansen, Doll, and
Neuman were present at the call to order. Representative Gatto
arrived as the meeting was in progress. Representative Holmes
was also in attendance.
HB 217-TOURISM DISCLOSURES AND NOTICES
5:08:15 PM
CHAIR NEUMAN announced that the only order of business would be
HOUSE BILL NO. 217, "An Act relating to required onboard
disclosures and displays about tours, flightseeing operations,
other shoreside activities, and visitors bureaus; and providing
for an effective date."
5:08:25 PM
REPRESENTATIVE JOHANSEN moved CSHB 217, 25-LS0696\L. There
being no objection, Version L was adopted.
5:09:42 PM
REPRESENTATIVE LINDSEY HOLMES, Alaska State Legislature,
informed the committee that previous testimony on HB 217 raised
some concerns about the language of the bill. In an effort to
preserve the language of the Alaska Cruise Ship Initiative
(initiative), HB 217 created an "and/or" option. She said the
Committee Substitute corrects that situation by setting up one
set of criteria that is applicable to all tours that are sold.
In addition, it creates a three or four part disclosure that
reveals: that the on-board sale is a paid promotion; that other
alternatives are available for a lower price at the port of
call; and the address, website, and telephone number of the
visitor's bureaus in future ports of call with a list of tour
operators. Representative Holmes continued to explain that if
the commission paid to the cruise ship exceeds 33 percent of the
total cost of the excursion, an additional disclosure of that
fact is required. This change, she said, will protect
proprietary information of local Alaska businesses and will set
a threshold of what a consumer might conclude is the reasonable
and expected cost of a commission.
5:13:21 PM
CHAIR NEUMAN remarked:
There was one more change from what had been probably
a sponsor substitute. And that would have removed
language that is in the initiative, and in trying to
reach a boundary between all the parties concerned.
... That has to do with the words that shall "...and
shall result in a penalty of not more than $100 for
each violation." That is in Sec. C, of the cruise
ship regulation disclosure in 45.50.474, so that's
been retained in there....
CHAIR NEUMAN indicated that he had discussed the percentage of
the threshold with the sponsor and the drafter of the original
initiative. He pointed out that over one-half of the tourist
related businesses in the state have five or less employees and
that he was searching for an accord for all parties. He then
referred to the change on page 1, line 14, that replaced the
words "all ports of call" with "each future port of call."
5:16:17 PM
REPRESENTATIVE LYNN asked whether there would be a definition in
the statute of "paid promotion."
5:16:53 PM
REPRESENTATIVE HOLMES replied that the language came from the
initiative. She said that she would consider a change to
"commission."
5:17:17 PM
CHAIR NEUMAN indicated that the definition of "paid promotion"
is in statute.
5:17:53 PM
REPRESENTATIVE LYNN inquired as to whether the sponsors of the
initiative are comfortable with [Version L].
5:18:27 PM
REPRESENTATIVE HOLMES responded that she has not been able to
contact the sponsors and that she does not believe that they are
comfortable with Version L. She added that she did not want to
speak for them.
5:18:38 PM
CHAIR NEUMAN added that Sec. 2 was in the original language of
the initiative; thereby, the original language was retained in
Version L.
5:19:12 PM
REPRESENTATIVE LYNN asked whether Representative Holmes agreed
with Representative Neuman's statement.
REPRESENTATIVE HOLMES expressed her understanding, from
discussions with the original initiative sponsors, that previous
to the passage of the initiative, a violation of disclosure laws
was considered an Alaska Unfair Trade Practices Act violation.
The initiative unintentionally added language that lowered the
penalty to $100 for each violation. Representative Holmes
continued to explain that Version K reinstated the unfair trade
practices act penalty; however, Version L reinstates the
original language of the initiative and again sets the penalty
at $100 for each violation.
5:20:33 PM
REPRESENTATIVE LYNN asked again whether Representative Holmes
felt that HB 217 reasonably reflects the intent of the
initiative sponsors and of the voters. He said, "Are we
violating the intent of that initiative, if we were to pass this
out?"
5:21:13 PM
REPRESENTATIVE HOLMES replied that the initiative sponsors
indicated that the language of the initiative "is a floor, not a
ceiling." The Alaska Supreme Court has indicated that a change
can be made to the initiative unless there is a change of
direction. The intent of HB 217 is to keep strong disclosure
provisions and take care of unintended consequences. She
acknowledged that the sponsors have not read Version L.
5:22:50 PM
CHAIR NEUMAN reiterated that the original ballot language is in
Version L.
5:23:05 PM
REPRESENTATIVE GATTO said that the original sponsor is out of
town. He expressed his belief that the original sponsor would
not accept the change of the percentage of the threshold from 25
percent to 33 percent. Representative Gatto said that a
commission of 33 percent of the total cost of a tour is not a
reasonable percentage and that he would not support Version L.
5:24:01 PM
CHAIR NEUMAN requested that Representative Holmes explain how
the percentage is determined.
5:24:21 PM
REPRESENTATIVE HOLMES explained that if a tour costs $100, and
the commission is $33 or less, the disclosure would be that a
paid promotion is being paid. If a tour costs $100 and the
commission was $34 or higher, that commission would need to be
disclosed as a paid promotion of 33 percent or greater.
5:25:16 PM
REPRESENTATIVE DOLL expressed her concern about the possible
conflict with unfair trade practices statutes. She suggested
that HB 217 should conform to existing statutes.
5:26:31 PM
REPRESENTATIVE HOLMES informed the committee that existing
statutes for penalties for unfair trade practices are to apply
under Version L, and they allow for penalties of up to three
times damages or $500, whichever is greater. Existing statutes
also allow for the attorney general to file suit. Those
penalties, she said are for a minimum of $1,000 and a maximum of
$25,000 per occurrence. Representative Holmes suggested that
there is confusion over whether the penalties in the initiative
override those contained in the unfair trade practices act and
that a legal analysis may be needed.
5:27:43 PM
CHAIR NEUMAN said that the legal aspect of HB 217 could be
studied by the House Judiciary Standing Committee.
5:28:04 PM
REPRESENTATIVE GATTO noted that the majority of the discussion
has been from the perspective of the vendor and that he wanted
to hear from the consumer. He suggested that the 33 percent
commission cost is infuriating.
5:29:45 PM
REPRESENTATIVE JOHANSEN referred to page 2, line 1, and asked
for the reason flight seeing operations are specified.
5:30:28 PM
REPRESENTATIVE HOLMES replied that "...tours, flightseeing
operations, or other shoreside activities..." is the original
language of the initiative.
5:30:47 PM
CHAIR NEUMAN invited public testimony.
5:31:21 PM
ROB SCHEER, owner, Great Alaska Lumberjack Show and Experience
Alaska Tours, informed the committee that he is concerned by the
member's comments regarding the value of the commission. Mr.
Scheer said that the commission pays for a very extensive
eight-month marketing campaign provided by the cruise lines that
market to millions of consumers around the world. Mr. Scheer
stated that his business model is built to achieve success for
his tour, which has happened after an investment of millions of
dollars in the Ketchikan community. He said the commissions are
proprietary information and should not be disclosed in any
manner. Mr. Scheer expressed his support of HB 217 as a
beginning step to change the initiative that was enacted to hurt
the cruise lines. He suggested that the committee should
research the "free market abusiveness" model of the tourism
industry. Mr. Scheer concluded by saying that his business
employs 70 workers and his customers support his community's
economy with millions of dollars.
5:35:08 PM
PATRICIA SCHAUGHNESSY informed the committee that she is an
employee of Experience Alaska Tours. She said that the cruise
line provides advertising and booking services that extend
beyond a paid promotion, and that these are services her company
can not afford. In addition, she pointed out that if she hired
an advertising firm, her contract with them would be private.
Ms. Schaughnessy concluded by saying that the commission is
reflected in the total price of the tour and the consumer makes
his/her decision based on the total price.
5:36:51 PM
CHAIR NEUMAN asked whether a commission of any percentage is
acceptable.
5:37:12 PM
MS. SHAUGHNESSY answered yes.
5:37:29 PM
CHAIR NEUMAN further asked whether a disclosure of any amount is
acceptable.
5:37:46 PM
MS. SHAUGHNESSY answered no.
5:37:54 PM
CARSTENS JASPER informed the committee that he is an employee of
Experience Alaska Tours. Mr. Jasper expressed his belief that
visitors to Alaska are very satisfied with the experiences
provided by the Alaskan tourism industry. He noted that other
industries have large mark-up margins and the cost of products
and the infrastructure to support them must be taken into
consideration. He said that this disclosure requirement could
apply to any business.
5:39:47 PM
REPRESENTATIVE DOLL asked at what point should there be
regulation of unfair business practices.
5:40:17 PM
MR. JASPER opined that dissatisfaction with the industry or an
outcry from consumers would call for regulation; in contrast,
his tours often have repeat customers. He stressed that tourism
is the only industry that is thriving in Southeast.
5:41:18 PM
CHUCK SLAGLE, owner, Baranof and Company, informed the committee
that he has been selling tours through the cruise industry since
1981. Since then, the market has grown dramatically and the
cruise lines have lowered prices to attract business. Mr.
Slagle pointed out that customers choose the tours through the
cruise lines, but before the cruise begins. He said that 80
percent of cruise passengers have searched for tours and cruise
lines on the World Wide Web (internet), and are aware of the 350
tours available in Southeast. The internet creates the free
market for consumers. Mr. Slagle stressed that tour operators
realize that the commission to the cruise lines is cheaper than
establishing their own sales staff and advertising programs.
The best choice for his company is to use the cruise industry
for marketing its tours.
5:44:10 PM
REPRESENTATIVE DOLL asked how many cruise ships with which Mr.
Slagle negotiates.
5:44:48 PM
MR. SLAGLE answered that he works with all of the cruise lines.
In fact, 80 to 90 percent of his customers are passengers of
Norwegian Cruise Line, Carnival Cruise Line, and Regency
Cruises.
5:45:07 PM
REPRESENTATIVE DOLL asked whether each contract is for a similar
price.
5:45:31 PM
MR. SLAGLE responded that he does not have a contract and the
commissions vary between cruise lines. In answer to questions,
Mr. Slagle explained that he informs the cruise lines of his
wholesale price and they add the commissions. He further
explained that most commissions are similar, but not identical,
in price.
5:45:47 PM
REPRESENTATIVE GATTO observed that cruise passengers are very
educated and savvy, and asked Mr. Slagle whether voters are,
also.
5:46:22 PM
MR. SLAGLE replied no; voters are uninformed and uneducated
about the tourism industry.
5:47:20 PM
STACEY HUNT, employee, Great Alaska Lumberjack Show, stated that
the only person to have detailed information about a company's
profit margin is a stockholder or investor. Ms. Hunt said that
posting profit margins with tour information will force cruise
passengers on vacation to think about money; thereby, cheapening
their Alaskan experience. She said that the tourism consumer
has a choice of activities.
5:48:34 PM
JANICE GARCIA, employee, Great Alaska Lumberjack Show, expressed
her belief that companies who have a relationship with the
cruise ships have hired them as their advertising and marketing
agents. Ms. Garcia stated that the disclosure of commissions
damages tour companies relationships with the cruise lines and
makes the guests uncomfortable. She suggested that the
passengers would be confused by the breakdown of the tour's
cost.
5:49:52 PM
JOHN DUNLAP, Manager, Allen Marine Tours, Allen Marine Inc.,
informed the committee that Allen Marine Tours employs 200
people during the summer. Allen Marine Inc., also operates a
shipyard in Sitka, and has earned its success following 40 years
of business in Southeast Alaska. Mr. Dunlap expressed his
belief that his fellow Alaskans voted on the head tax provision
of the initiative and did not understand the disclosure
provision.
5:51:35 PM
REPRESENTATIVE GATTO asked whether Mr. Dunlap agreed with Mr.
Slagle that the voters were unaware of the provisions of the
initiative.
5:52:00 PM
MR. DUNLAP affirmed that he felt that the voters did not
understand the initiative, except for the assessment of the head
tax.
5:52:29 PM
REPRESENTATIVE GATTO asked why Mr. Dunlap did not take a poll in
Ketchikan to support his testimony.
5:53:00 PM
KARI ERICKSON, Division Manager, Gray Line of Alaska, stated
that her company hires forty employees seasonally, and four year
around. She noted that her company solicits comments from
guests and there are few complaints about the price of tours.
Ms. Erickson expressed her dissatisfaction with the initiative
and urged the committee to support HB 217.
5:54:37 PM
REPRESENTATIVE KOHRING indicated that constituents in his
district have contacted him, have confirmed that they knew about
the provisions, and do not support changes to the initiative.
5:55:37 PM
MS. ERICKSEN stated that she has polled a lot of people on the
initiative and was told by voters that the smaller issues could
be easily changed.
5:56:13 PM
REPRESENTATIVE LYNN asked what kind of poll was taken.
5:56:26 PM
MS. ERICKSEN responded that she asked friends, neighbors, and
those who are impacted by the initiative in her community.
5:56:41 PM
REPRESENTATIVE LYNN asked whether there has been any testimony
from an independent tour operator who does not contract with the
cruise industry.
5:57:29 PM
DOT WILSON, owner, Coastal Helicopters Inc., stated that her
business does not contract with the cruise industry. Ms. Wilson
stressed that she supports free enterprise.
5:57:51 PM
CHIP THOMA informed the committee that he is a supporter of
initiative. Mr. Thoma expressed his belief that the sponsors of
the initiative have not reviewed Version L, and are not aware of
the increase of the threshold percentage from 25 percent to 33
percent. He stated that he supported the 25 percent figure. He
said that he also agrees with earlier testimony about the
availability of tour information on the internet, and said that
internet access may be a solution to the problem. In the
future, he expects that the number of tours sold on the ships
will be about 10 percent. Mr. Thoma pointed out that, at this
time, $250 million in shoreside tours are sold in northern
Southeast per season. He concluded by saying that [the
disclosure] is information that consumers need.
6:00:52 PM
CHAIR NEUMAN observed that negotiating improvements to HB 217
has been very difficult due to conflicting testimony from
interested parties.
6:02:27 PM
MR. THOMA stated that the sponsors of the original initiative
are speaking for the passengers on the ship and for the
alternative tour operators who do not have their tours sold by
the ships.
6:02:55 PM
CHAIR NEUMAN asked whether there is competition amongst all of
the tour operators for business with the cruise ships.
6:03:16 PM
MR. THOMA said, "Very little." He compared the situation to a
limited entry program.
6:03:22 PM
REPRESENTATIVE GATTO asked about the percentage of tours sold on
the ships as compared with the percentage of tours that are not
pre-sold. This information, he said, would indicate to the
committee the scope of the influence of the disclosure
requirements.
6:04:16 PM
MS. WILSON informed the committee that pre-sold tours for her
business are by direct inquiry or through travel agents.
REPRESENTATIVE JOHANSEN asked whether Ms. Wilson knows the
profit margins of the travel agents.
MS. WILSON answered no.
6:05:19 PM
CHAIR NEUMAN announced that public testimony was closed.
6:05:26 PM
REPRESENTATIVE KOHRING expressed his empathy with small
businesses who are required to divulge proprietary information.
He suggested that initiatives must be crafted carefully in the
future to avoid unintended consequences.
6:06:45 PM
CHAIR NEUMAN reminded the committee that other initiatives have
been amended and that the legislative body is responsible for
the process of discovery.
6:07:37 PM
REPRESENTATIVE JOHANSEN stated that the disclosure required by
the initiative is unfair for businesses. He noted that in the
marketplace, the total price should dictate the success of a
product or service. He opined that HB 217 eases the impact on
small business and that he will support the Committee Substitute
for HB 217.
6:09:02 PM
REPRESENTATIVE GATTO reminded the committee of the failure of
the Gas Reserves Tax Initiative. He said when other ballot
measures have failed; the legislature never considered passing a
bill for the same purpose. He remarked:
Even if you feel, that this bill was presented to the
public as an initiative, not the bill, but the
initiative, was incorrectly voted on, my personal
feelings, [the] public has a right to be wrong. ... I
don't know that the public is ever wrong; they just
are allowed to make votes.... It is the state's
citizens that voted for the initiative. ... But in
order to do what they asked us to do, we have a cruise
ship head tax, and most everyone agrees that's okay,
[we have] an Ocean Ranger program, which was the
second big thing in the bill, and now it starts to
deteriorate. ... I will never say that the public did
not read far enough. ... I have trouble saying we need
to, we need to meddle with the public's vote. ...
These bills are not enforcing what the public asked
for, they are altering ... I am not about to overturn
what the public asked for.
6:13:02 PM
REPRESENTATIVE DOLL stated her belief that some regulation is
needed in a situation where there is a growing monopoly. She
noted that the anti-trust laws may have applied to this type of
situation in the past. Representative Doll expressed her
support for HB 217 and her understanding of the profit margins
of business. She concluded that her support is for the
compromise crafted to assist the small businesses.
6:15:18 PM
REPRESENTATIVE LYNN said that he must assume that the voters
know what they are voting for. Each vote counts whether or not
the voter has a complete understanding of a long and complicated
issue. He expressed his concern about the 33 percent threshold
included in Version L. Representative Lynn said that he can
address that issue in the House Judiciary Standing Committee.
6:16:46 PM
CHAIR NEUMAN agreed that this committee is the first stop for HB
217 and there has been a lot of work done with all of the
parties concerned. He pointed out that this is the third
hearing for the bill.
REPRESENTATIVE GATTO informed the committee that he had an
amendment.
6:18:47 PM
CHAIR NEUMAN suggested that the amendment be offered in the
House Judiciary Standing Committee since the initiative sponsors
are out of town.
REPRESENTATIVE GATTO said that his amendment applies to page 2,
line 14. He then read:
If the value paid by the business is a commission of
more than ten percent, of any single sale, the
disclosure shall also state that more than ten percent
commission is being retained by the person or entity
making the sale.
REPRESENTATIVE GATTO explained that his amendment has been
accepted by the sponsor of HB 217.
6:21:04 PM
REPRESENTATIVE LYNN recommended that the sponsor of the bill
offer the amendment in the proper form.
6:21:30 PM
CHAIR NEUMAN confirmed that the amendment was not offered to
this committee.
6:21:47 PM
REPRESENTATIVE Johansen moved to report HB 217, Version L, out
of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
271(EDT) was reported out of 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 6:23 p.m.
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