Legislature(2003 - 2004)
04/25/2003 02:53 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 25, 2003
2:53 PM
TAPE HFC 03 - 65, Side A
TAPE HFC 03 - 65, Side B
TAPE HFC 03 - 66, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 2:53 PM.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
Representative Reggie Joule
ALSO PRESENT
Representative Pete Kott; Representative Peggy Wilson; Rick
Urion, Director Occupational Licensing, Department of
Community and Economic Development; Edgar Blatchford,
Commissioner, Department of Community and Economic
Development; Tom Lawson, Director, Administrative Services,
Department of Community and Economic Development; Diane
Barrans, Executive Director, Postsecondary Education
Commission, Department of Education; Rhonda Richtsmeier,
Assist Chief, Section of Public Health Nursing; Linda Fink,
Alaska State Hospital and Nursing Home Association; Tom
Irwin, Commissioner, Department of Natural Resources;
Ernesta Ballard, Commissioner, Department of Environmental
Conservation; Larry Persily, Deputy Commissioner, Department
of Revenue; Gary Zimmerman, Vice President, AVIS; Jerry
Burnett, Commissioner, Department of Corrections; Fred
Coven, Alaska State Employees Association.
PRESENT VIA TELECONFERENCE
John Robertson, Medical Director, Department of Corrections;
Dick LeFebvre, Acting Deputy Commissioner, Department of
Natural Resources; Cameron Leonard, Assistant Attorney
General, Department of Law; Andrew Halcro, AVIS.
SUMMARY
HB 162 "An Act increasing the fee for a state business
license; and providing for an effective date."
CSHB 162 (FIN) was heard and HELD in Committee for
further consideration.
HB 192 "An Act designating the Department of Natural
Resources as lead agency for resource development
projects; making conforming amendments; and
providing for an effective date."
HB 192 was REPORTED out of Committee with a "do
pass" recommendation and two zero fiscal notes:
#1 from Department of Natural Resources and #2
from Department of Environmental Conservation.
HB 211 "An Act relating to a student loan repayment
program for nurses, and amending the duties of the
Board of Nursing that relate to this program; and
providing for an effective date."
HB 211 was heard and HELD in Committee for further
consideration.
HB229 "An Act relating to special medical parole and to
prisoners who are severely medically and
cognitively disabled."
HB 229 was heard and HELD in Committee for further
consideration.
HB 271 "An Act levying and providing for the collection
and administration of an excise tax on passenger
vehicle rentals; and providing for an effective
date."
HB 271 was heard and HELD in Committee for further
consideration.
SB 115 "An Act allowing expenses of the correctional
industries program that may be financed from the
correctional industries fund to include the
salaries and benefits of state employees."
HCS SB 115 (FIN) was REPORTED out of Committee
with a "do pass" recommendation and one previously
public fiscal impact note from the Department of
Corrections.
HOUSE BILL NO. 192
"An Act designating the Department of Natural Resources
as lead agency for resource development projects;
making conforming amendments; and providing for an
effective date."
TOM IRWIN, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES
testified in support of the bill and provided information.
He stressed his support of the Governor's priority to
develop natural resources. He highlighted the intention of
the legislation to lead and coordinate the operations only,
and not to take authority away from the other Departments.
He read from prepared testimony as follows:
The purpose of this bill is to help facilitate and
expedite resource development in Alaska. This bill
would specifically provide the Commissioner of the
Department of Natural Resources with statutory
authority under AS 38.05.020(b) to lead and
coordinate all matters relating to the state's
review and authorization of resource development
projects.
As the state focuses more on development of its
resources the department needs clear and explicit
authority to carry out its role to lead and
coordinate the state's review and authorization of
resource development projects. Even though the
department has and will continue to serve as lead
for mining projects, the department's authority to
serve as lead agency for other resource development
projects is not as explicit. This bill will provide
the necessary clarity as the state moves forward in
the development of its resources.
The primary responsibility in the Department of
Natural Resources for carrying out lead agency
coordination functions will rest with the Office of
Project Management and Permitting. This new Office
within the department includes the project
management function and the Alaska Coastal Zone
Management program.
Large resource development projects, because of
their scope and complexity, are more efficiently
reviewed and authorized using a lead agency to
coordinate and integrate, to the extent possible,
the various permitting processes of the agencies
involved using the project team approach. Smaller
projects, normally less complex and requiring fewer
permits, may benefit from lead agency coordination
for review but may not require the establishment of
a project team.
Resource development projects utilizing the lead
coordinating agency and project review team approach
will go through a three phase process. Phase I
focuses on evaluating a proposed project to
determine if the lead agency project team approach
would best address the review and permitting needs
of the project. Phase II results in establishment of
the project team, development of an integrated
agency review schedule, delineation of information
requirements, and completion of any necessary
agreements amongst the agencies and applicant. Phase
III is the actual project review and authorization
process, including public participation, tailored
specifically to the requirements for permitting the
project.
Additionally, we view this bill as assisting in our
efforts to streamline project review and
authorization. This bill will help to facilitate:
The state's ability to pull together agencies to
address project specific concerns, and to facilitate
and expedite the review and authorization process; a
more cohesive working relationship amongst agency
representatives; better communication, more
efficient permitting, consolidated public process
where possible, and to assist in integrating the
state's process with that of the federal agencies.
Speaking from personal experience, the laws
governing resource development have proliferated,
and there are now more agencies than ever with
permitting authority over resource development
projects. Resource development should not be held up
by the sheer complexity of government. This bill is
intended to help alleviate that problem as this bill
would authorize DNR to lead and coordinate the
permitting activities of all agencies with
jurisdiction over the project.
Commissioner Irwin noted that in effect all operations would
be brought into one office to facilitate coordination.
ERNESTA BALLARD, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION expressed support of the bill. She referred to
her prepared statement:
Governor Murkowski is committed to enhancing Alaska's
economy through resource development. He is equally
committed to protecting Alaska's environment. A strong
economy will generate the revenue base to continue
funding our important regulatory and development
projects. Without a strong economy we cannot hope to
have a strong government.
I have been before this committee to speak on behalf of
other governor's bills and have opened with that same
message. It is a fundamental principle to this
administration and bears repeating.
In any undertaking, be it your home, your office, a
small business or a large complex organization like
state government - critical path planning is
fundamental; with out it time is wasted. This bill, HB
192, is about critical path planning. It directs the
Department of Natural Resources to lead and coordinate
resource development projects. It directs the
permitting agencies to sequence actions and
requirements so time lines are met. Armed with
sequenced and prioritized project plans we can insure
that each of our own department's permitting
requirements are met without delay
The genesis of this bill goes back several years. The
resource agencies came together to coordinate
permitting issues on large mine projects. They
discussed, planned and communicated, and found that the
permitting process became more efficient. It was not
only more efficient for the agencies; it was more
productive for industry. Why? Because, we, the
permitting agencies, identified our regulatory
requirements in a systematic and sequenced manner
insuring that the most critical needs and timelines for
the project were established. Because we, DNR, Fish and
Game and DEC had identified and articulated the
critical points and times in our regulatory processes,
industry understood its responsibilities and provided
the needed information on time. Additionally by
evaluating its regulatory responsibilities as a whole
industry can gain what synergies are possible.
Critical path planning provides efficiencies for the
departments as well. We hold joint meetings. We use
staff resources efficiently. Industry provides
information we can all use because we agreed, at the
outset, on data standards acceptable to all.
The state's citizens benefit from this approach. In
rural communities it is more difficult to track
separate agency processes so when agencies hold joint
public meetings concerned citizens are given the entire
regulatory picture. With out critical path planning,
public participation happens based in the public notice
requirement of individual permits, which can be months
even years apart depending on the project.
I have also talked with many of you about how we are
reviewing our regulations and statutes to ensure they
are meaningful and not a victim of mission creep. As
part of that process, we are deleting 46.35 Permit
Coordination and Extension. This statute was enacted in
1977. That same year the legislature established the
Coastal Management Program, which became the permit
coordinator. AS 46.35 has become a relict. However
there is one small section of AS 46.35 that is being
relocated. Sections 2 and 3 of this bill move the
Department of Environmental Conservation's authority to
use our appeals process to other sections of law.
The DEC process is easier to use and well laid out in
understandable regulations.
It is also important to understand what HB 192 does not
do. HB 192 bill does not change the protective
standards that the state has developed and fine-tuned
over the last decade. It does not change the Department
of Environmental Conservation's permitting
requirements, its regulatory discretion, enforcement or
appeal process. This bill simply insures critical path
planning.
Commissioner Ballard summarized that the bill provided the
opportunity to be more organized. She noted that, as the
permitting agency, DEC benefited from identifying at the
outset key data requirements needed to produce permits in a
timely fashion. She stressed that having clear legislative
language provides the agency with a clear mandate in the
permitting project.
Ms. Ballard emphasized the importance of critical path
planning. By moving permits and the project forward in a
coordinated way, the department is able to effectively use
resources and to present to the public the entire project as
it moves forward. Otherwise, the public may only view
portions of the projects and may not be able to understand
its impact on their community. She noted her commitment to
both resource development and resource conservation and her
belief that they are compatible. She also noted her
determination to identify instances of "mission creep".
Ms. Ballard explained that, resulting from a review of
statutes and in conjunction with HB 192, the Department is
deleting AS 46.35, "permit coordination and extension". She
stated that the statute had never been used since its
enactment in 1977, the same year that the legislature
established the Coastal Management Program, which became the
permit coordinator. She noted that they had proposed a
relocation of a small segment of the statute: Section 2 &
3, which would move DEC's authority to use the appeals
process to other sections of law.
Ms. Ballard expressed her enthusiasm for this type of
coordination, and reiterated the importance of coordinating
the permitting process to provide a clear path for resource
development.
Representative Croft asked if AS 46.35 had ever been used.
Ms. Ballard confirmed that it had never been used. She noted
that they retained the authority to use their own appeals
process.
CAMERON LEONARDS, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, in response to a question by Representative Croft,
explained that two provisions of 46.35 would remain in
statute following the proposed bill, one of which would be
relocated from 46.35.090 (e). The relocated language
clarifies that procedures to review DEC permit decisions
need not conform to the Administrative Procedure Act (APA).
He explained that sections 2 and 3 of the bill simply
transplanted this existing provision to two chapters of
Title 46 that govern DEC permitting decisions.
Representative Croft asked which provisions did not need to
conform to APA and why. Mr. Leonard noted that the
procedures governing adjudication hearings were already
covered comprehensively in DEC regulations and by existing
law were not subject to the APA. He confirmed that this
paralleled APA procedures.
Representative Foster MOVED to report HB 192 out of
Committee with the accompanying fiscal note. There being NO
OBJECTION it was so ordered.
HB 192 was REPORTED out of Committee with a "do pass"
recommendation and two zero fiscal notes: #1 from
Department of Natural Resources and #2 from Department of
Environmental Conservation.
HOUSE BILL NO. 229
"An Act relating to special medical parole and to
prisoners who are severely medically and cognitively
disabled."
TOM WRIGHT, STAFF, REPRESENTATIVE JOHN HARRIS, deferred to
the Departments of Corrections and Health and Social
Services to answer questions about the new fiscal notes.
JERRY BURNETT, DIRECTOR ADMINISTRATIVE SERVICES, DEPARTMENT
OF CORRECTIONS addressed the new fiscal note. He deferred
to Dr. John Robertson to answer questions.
JOHN ROBERTSON, MEDICAL DIRECTOR, DEPARTMENT OF CORRECTIONS,
observed that the new note more accurately takes into
account the life expectancy of the paroled inmates, as well
as reflecting the resources available to them and its impact
on potential savings. He added that the new note also
reflected the cost of a correctional officer in relation to
patient care. He expressed confidence in the new figures.
Co-Chair Harris observed that the projected potential
savings of general funds in FY 09 was $805 thousand, offset
by a projected general funds cost of $234 thousand for the
Department of Corrections, and calculated that the overall
savings vs. costs, including the Department of Health and
Social Services, for that year would be $500 thousand
projected.
Representative Hawker noted material changes in the new
fiscal notes and expressed disappointment in the quality of
information provided by the new notes.
Representative Foster MOVED to report HB 229 out of
Committee with individual recommendations and the
accompanying fiscal note.
Representative Hawker OBJECTED. He reiterated his belief
that the fiscal information was inadequate to make a
decision.
Representative Whitaker also OBJECTED on that same basis.
A roll call vote was taken on the motion.
IN FAVOR: Chenault; Foster; Meyer; Harris; Williams
OPPOSED: Croft; Hawker; Moses; Stoltze; Whitaker
The vote was tied at 5 to 5.
HB 229 was HEARD and HELD in Committee for further
consideration.
SENATE BILL NO. 115(efd fld)
"An Act allowing expenses of the correctional
industries program that may be financed from the
correctional industries fund to include the salaries
and benefits of state employees."
Vice-Chair Meyer MOVED to ADOPT the Committee Substitute 23-
GS1104\D (4/25). There being NO OBJECTION the Committee
Substitute was ADOPTED.
Vice-Chair Meyer pointed out the changes in the Committee
Substitute. He noted that the changes were to incorporate
comments made during the previous Committee hearing, and
made reference to Co-Chair Harris' concerns about competing
with private industry. He also noted concerns raised by the
Public Employees Union, and stated that these parties were
now in agreement on the bill.
JERRY BURNETT, DIRECTOR OF ADMINISTATIVE SERVICES,
DEPARTMENT OF CORRECTIONS spoke to the changes contained in
the Committee Substitute. He noted that the Committee
Substitute provides intent to keep the correctional
industries program operating if it fails to produce
sufficient income. He referred to Section 3, b 2, stating
that the correctional institute may sell products to other
companies as approved by the Correctional Industries
Commission. The section deletes: "have minimal negative
impact on existing private industry or labor force" and
inserts: "will be of benefit to". The purpose of the change
is to encourage correctional institutions to work with
private industry.
Co-Chair Harris asked who determines the benefit. Mr.
Barnett indicated that the Correctional Industries
Commission, appointed by the Governor and meeting quarterly,
determines the benefit. In response to a question by Co-
Chair Harris, Mr. Burnett explained that the Commission made
findings and held public hearings.
FRED COVEN, ALASKA STATE EMPLOYEES ASSOCIATION, expressed
his support for the Committee Substitute. He added that the
effective date gave the correctional industry the time
needed to plan for budgetary changes.
Public testimony concluded.
Representative Foster MOVED to report HCS SB 115 (FIN) out
of Committee with the accompanying fiscal note. There being
NO OBJECTION it was so ordered.
HCS SB 115 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and one previously public fiscal impact
note from the Department of Corrections.
Vice-Chair Meyer MOVED to Introduce a House Concurrent
Resolution for a title change: work draft 23-LS1047\A
(4/24/03) on the House Floor. There being NO OBJECTION, it
was so ordered.
HOUSE BILL NO. 211
"An Act relating to a student loan repayment program
for nurses, and amending the duties of the Board of
Nursing that relate to this program; and providing for
an effective date."
REPRESENTATIVE PEGGY WILSON, SPONSOR, provided information
about the legislation. She emphasized the nursing shortage
in the state of Alaska. She noted that the vacancy rate was
11.5 percent. Traveling nurses from other states were being
used to fill these vacancies. The bill would create an
incentive in assisting nurses in repaying their school
loans. To qualify for the loan reimbursement program an
individual would have to be hired as a nurse in Alaska after
July 1 of 2003, be licensed in the state, work in Alaska and
have an outstanding school loan from a recognized
institution. The program would reimburse $2 thousand per
year, up to a total of $10 thousand. She noted that this
amount would not cover a nurse's entire education expense,
but would serve as a tool in recruitment. She explained
that the State Board of Nursing would adopt the criteria
guidelines for the loan program in consultation with the
Alaska Commission on Post-secondary Education. She added
that it would be appropriated from the student loan
corporation dividend.
Representative Wilson pointed out that currently 5,200
nurses are working in Alaska and that the university
produced 110 nurses per year. The intent is to double the
amount (220 per year). In next seven years, due to growth
in health care needs, Alaska will need an additional 1,400
nurses. She maintained that the proposed bill is crucial to
meeting that need.
Co-Chair Harris asked whether loan reimbursement programs
were being created for any other groups, such as teachers.
Representative Wilson stated that a program already existed
for teachers, which was used as a model for the proposed
program for nurses. Co-Chair Harris asked for an
explanation of the repayment program. Representative Wilson
explained that if a hospital were attempting to hire a nurse
into the state, the reimbursement program would be an
additional incentive in providing reimbursement of $2
thousand per year, up to $10 thousand, of their outstanding
student loans. She also noted that if a new nurse lived in
Alaska, they might choose to stay in the state and take
advantage of the program.
Co-Chair Harris observed that the student loan program,
would incur a cost of $918,000 in FY 04, up to a possible
$5.1 million in FY 09.
Representative Wilson noted that if the state of Alaska
could not recruit nurses, then nurses would be brought in
from other states. She emphasized that since the traveling
nurses cost nearly double the salary of instate nurses, this
would escalate health care costs in the state.
In response to a question by Co-Chair Harris, Representative
Wilson noted that nearly every hospital, from small to
large, was paying large amounts for traveling nurses. She
speculated that in Southeast Alaska some hospitals pay over
$100 per year just on traveling nurses. She noted that
these nurses demanded higher salaries.
Co-Chair Harris asked if there was a provision offering
benefits to students who attended school in Alaska.
Representative Wilson noted that there was no provision, but
added that there were enough vacancies to fill with nurses
from any location.
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, DEPARTMENT OF EDUCATION pointed out a correction
in the analysis of the fiscal note that inaccurately totaled
the number of nurses (2,525).
Representative Croft asked for explanation of the
progression in the number of nurses. Ms. Barrans explained
that they used projections from the Department of Labor from
a report of trends for April 2003. The figures were
extracted based on new positions, estimating that they would
be most likely to have student loans outstanding.
LINDA FINK, ASSISTANT DIRECTOR, ALASKA STATE HOSPITAL AND
NURSING HOME ASSOCIATION testified in support of the
legislation. She stated that they had worked closely with
the University of Alaska to double the number of nurses, but
emphasized that this would not meet projected needs. She
also noted their work to develop distance delivery programs
and other training programs. They also work with advance
training programs for nurses, K-12 education, and job
centers to increase health care opportunities. She observed
that the bill presents another avenue to increase retention
and recruitment for nurses.
HB 211 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 162
"An Act increasing the fee for a state business
license; and providing for an effective date."
RICK URION, DIRECTOR OCCUPATIONAL LICENSING, DEPARTMENT OF
COMMUNITY AND ECONOMIC DEVELOPMENT, testified in support of
the legislation. He stated that the cost of business
licensing had remained at $25 per year in Alaska since 1949.
He noted that a method had been devised [in the House Labor
and Commerce Committee] of stepping up the licensing fee
depending on the number of employees: $50 for those with
five or less employees, $100 for those with between 6 and 25
employees, and $200 for business with more than 25
employees. He stated that the revenue generated from that
method was less than desired.
He explained that the bill proposed a new method that
depends on the type of business. He noted that sole
proprietors would be charged $100 per year, and corporations
$300 per year. He pointed out that this new method
generated $2.8 million more revenue for the state of Alaska.
He maintained that the new method was simple to administer.
He noted that the only objections to the proposal have come
from small businesses.
TAPE HFC 03 - 65, Side B
Mr. Urion referred to the proposed changes in a Committee
Substitute.
Co-Chair Harris observed that under the new system, smaller
employers that were incorporated would still pay the higher
amount since corporations would typically have a larger cash
flow.
Vice-Chair Meyer MOVED to Adopt the Committee Substitute
Work Draft 23-Gh1102\I (4/25/03). Representative Croft
OBJECTED.
Representative Croft commented that his small business,
because it is incorporated, would go from paying $25 to $300
per year. He maintained that this was too large an
increase. He stated that he preferred the Labor and
Commerce Committee Substitute.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Meyer, Stoltze, Williams, Harris
OPPOSED: Croft, Moses
There being NO OBJECTION, the Committee Substitute was
ADOPTED.
Representative Moses noted that his small business would now
pay the same amount as a large corporation.
Co-Chair Harris asked how many categories now existed; he
pointed out that the previous Committee Substitute contained
three categores. Mr. Urion noted that there were two
categories: sole proprietorships and corporations. He
maintained that corporations would be more sophisticated
businesses.
In response to a question by Representative Stoltze, Mr.
Urion noted that the licenses would now be annual. The cost
will be $190 thousand more per year, as indicated in the
fiscal note, due to the need for more personnel. He
speculated that the system might be streamlined in the
future when the computer system is updated to allow
purchasing of businesses licenses online.
Representative Stoltze asked if businesses could apply for
two-year licenses. Mr. Urion conceded that this was
possible. He stated that the goal was to have a consistent
system.
Representative Croft asked for the reason to begin licensing
every year. Mr. Urion noted the rationale that to charge
annually minimized the impact on businesses.
Representative Moses asked whether a small family business
would be considered a sole proprietorship, even though they
have a partnership. Mr. Urion confirmed that such a
business would be considered a sole proprietorship.
Co-Chair Harris referred to the fiscal note that listed
three full time positions. Mr. Urion stated that the fiscal
note referred to the Labor and Commerce proposal that was
more difficult to administer. He noted that the new
Committee Substitute required only two new positions. Co-
Chair Harris observed that no cost was listed on the fiscal
note for these two positions. Mr. Urion could not produce
the rationale for that figure.
CSHB 162 (FIN) was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 271
"An Act levying and providing for the collection and
administration of an excise tax on passenger vehicle
rentals; and providing for an effective date."
KRIS KNAUSS, STAFF, REPRSENTATIVE KOTT (SPONSOR) provided
information regarding the bill. He noted that the bill
implements a ten percent tax on rental cars, and a three
percent tax on recreational vehicles (RV's), for rentals
under 90 days. He highlighted the new fiscal note prepared
by the Department of Revenue that indicated revenue of $6
million annually. He referred to the changes on page 1,
line 7 of the bill and noted that the sponsor was happy with
these changes. He pointed out that the bill had been
changed from a 15% to a 10% tax, and now included RV's. He
confirmed that the Sponsor was in agreement with the
changes.
Representative Stoltze asked whether this might be
detrimental to the tourism industry. Mr. Knauss responded
that they would like to see tourists pay their fare share.
Representative Foster referred to the tax authorized by
Anchorage of 8 percent, and asked whether the proposed 15
percent would be added to that tax, totaling 23 percent.
Mr. Knauss confirmed that this was true, placing Alaska in
the top third of states in terms of car rental taxes. He
noted other states with higher rates of tax.
Co-Chair Harris asked whether the bill allowed for Alaska
residents to be excluded from the rental car tax. Mr.
Knauss stated that the only exemption was for governmental
employees. In response to a question by Co-Chair Harris,
Mr. Knauss confirmed that legislators would not pay the tax
when on business trips.
Vice-Chair Meyer reiterated that Anchorage would be in the
top third of states with the additional tax. He asked about
other communities, such as Fairbanks. Mr. Knauss confirmed
that other communities totaled different percentages.
Vice-Chair Meyer asked if the funding would be directed to
road maintenance. Representative Kott stated that page 2 of
the bill offered intent language, and noted that the revenue
would be placed within the General Fund to be appropriated
according to the legislature.
Vice-Chair Meyer noted that there is a dedicated bed tax in
Anchorage and questioned if that was the intent of the
proposed bill. Representative Kott indicated that the intent
language tax revenue might be directed toward tourism
marketing. He stated that he would like to see some of the
tax return to the industry. He pointed out that, even with
the 10 percent tax, Alaska would still be several percents
less than the amount charged in Seattle. He stressed that
the cost of car rentals in Seattle has never kept him from
renting a car there.
Vice-Chair Meyer observed that the tourism industry has
requested more funding and added that he would like to see
more money available.
Representative Croft referred to the state-by-state
comparison of rental car taxes and commented that the reason
that some of the percentages rose so high was due to
additional sales taxes. He noted that with a ten percent
state rental tax, Alaska would actually be in the top five
in terms of the rental tax alone. Representative Kott
confirmed that the addition of local airport tax placed
Alaska in the top third of the nation.
Representative Croft compared Alaska's aggregate rental tax
with other areas, such as Seattle, and maintained that the
new tax would place Anchorage substantially ahead of these
areas. Representative Knauss stated that in Illinois, the
maximum local tax rate was 18.5 percent. Representative
Croft observed that Anchorage paid 19 percent locally,
including airport charges, in addition to the 10 percent
proposed by the bill.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
noted that if the version of the bill [House Ways and Means
Committee] passed, it would add up to 29 percent in
Anchorage, which was the same combined tax and fees as
Seattle. He noted that all fees were not reflected in the
chart (copy on file).
Representative Croft also asked whether, apart from the
airport fees, Anchorage would still be ahead of Seattle.
Mr. Persily responded that if one included municipal sales
tax in Seattle as well as state sales tax, the rate of tax
was the same as Washington.
Representative Stoltze asked if this proposal had been
discussed by previous legislatures. Representative Kott
noted that a similar bill was introduced in 1999, both in
the Senate and House.
Representative Stoltze asked whether prices of rental cars
reflected the cost of taxes. Representative Kott observed
that the tax would implement approximately a $4.50 increase
in the price of the overall cost of a rental vehicle.
Representative Stoltze asked whether they had considered a
seasonal tax, effectively exempting Alaskans from rentals
during non-tourist season. Representative Kott maintained
that a seasonal tax would not be cost effective. He added
that the bill would not affect Alaskans since most Alaskans
did not need a rental car in the state for extended periods
of time, with the exception of state government work, which
is exempted.
Mr. Persily added that in Anchorage 75 percent of the
vehicle rentals occurred in the second and third quarter of
the year. He also pointed out that in footnote #2, there
had to be some basis for comparison, since states might have
various additional fees. He stated that the comparison was
based on a $50 per day average, but explained that this did
not necessarily represent the percent of charge.
Representative Moses asked why recreational vehicles were
charged at a different rate. Representative Kott noted that
originally the tax was proposed at the same rate. However
after speaking with car rental companies, it indicated that
a previous tax increase might have caused some companies to
go out of business. After reflection, they concluded that
the fee was lowered for RV's since their rental fee was
already substantially higher and this might discourage
business.
Representative Moses speculated that the vast majority of
the RV's were rented by non-residents, and proposed that the
fees should not be lower. Representative Kott maintained
that it should be kept equitable.
GARY ZIMMERMAN, GENERAL MANAGER-VICE PRESIDENT, AVIS RENT-A-
CAR, ANCHORAGE, commented that they have offices statewide.
He stated that his industry opposes HB 271. He read from a
HR 1 regarding the importance of economic development
throughout the State, particularly tourism. He questioned
why the bill was introduced to target the rental car
industry. He challenged some of the background information
contained in the sponsor statement. For example, he
maintained that the business climate in Alaska is very
different than that of Seattle. He noted the pressures on
his industry to increase their inventory during the tourism
season, and to decrease inventory during the rest of the
year. He pointed out that Seattle has an eleven to twelve
month season. There is a tremendous increase in business in
Alaska during the summer. He contended that adding
additional taxes to a price competitive market would have
drastic consequences for Alaskan rental car businesses.
Mr. Zimmerman noted that the sponsor statement indicated
that extra [rental] vehicles caused road damage. He
contended that motor homes cause far more damage in the
tourism field than a rental car, since they are a heavier
vehicle and create parking problems.
Mr. Zimmerman noted that the amount charged for the lease
would place Alaska in the top one or two most expensive
market places in the United States. He referred to the
earlier mentioned comparative table, and strongly questioned
the validity of its information. He pointed out that the
table lists local tax as "non applicable", while it had been
stated that Anchorage charges an airport tax. He noted that
local sales tax "up to 6 percent" was not correct, with a
total of 5 percent sales tax plus a 4 percent "vehicle
guided facilities fee" in areas like Sitka. He maintained
that the current tax rate in Anchorage was currently 19
percent, placing Alaska in the top ten nationwide, and added
that the proposed tax would then place Alaska at 29 percent
second in the nation.
Mr. Zimmerman concluded that the bill requires more correct
information. He listed additional taxes for specific
communities in addition to the proposed tax.
TAPE HFC 03 - 66, Side A
Co-Chair Williams encourage Mr. Zimmerman to speak with
Representative Kott and Mr. Persly regarding these facts.
He suggested that additional testimony could be heard on the
bill.
Mr. Zimmerman went on to note that the car rental industry
concern over the possibility of a statewide sales tax being
eventually added to the fee. He maintained that this would
be disastrous to the industry.
Mr. Zimmerman pointed out that just the Fairbanks and
Anchorage car rental industry paid the State of Alaska $4.5
million dollars per year, based on the gross 10 percent fee
paid to the state. In addition, he stated that $1.5 million
was paid in fees to the Department of Motor Vehicles.
Airport parking totaled $250 thousand, and customers pay in
the area $500 thousand dollars in state gas tax. He
concluded that the industry already paid fees totaling $6 to
$7 million, in a marketplace which grosses $45 million. He
noted that this therefore represented a fee of 10 percent of
gross receipts.
Mr. Zimmerman also stated that the car rental industry is
currently struggling. Nationwide, air travel is decreasing;
non-cruise passengers have decreased by six percent. The
projections for this summer are low and the market is not
growing. He also noted that the majority of car rental
agencies are locally owned and that some locations have been
closed recently.
Mr. Zimmerman stated that HEIA, the marketing branch of the
Alaska Tourism Industry Association is against targeted
taxes in the visitor industry. He quoted the Sponsor in
addition to the Governor as having stated they did not
support a cruise ship tax since it "targeted a single
sector".
Mr. Zimmerman recommended that the Legislature needs more
information on the negative impact of an additional tax on
the car rental business before making a decision.
Vice-Chair Meyer asked for a breakdown of car rentals for
the business sector and the tourism industry. Mr. Zimmerman
responded that the true tourist business comprised 60
percent of the summer business. During the winter, October
to late April, the bulk of business is corporate.
Vice-Chair Meyer noted that in Anchorage car rentals had
locations outside the airport. He asked if customers could
avoid airport tax by using other location. Mr. Zimmerman
confirmed that this was true, although they could not divert
business. He noted that some hotels had shuttle services
from the airport. Vice-Chair Meyer speculated that a
customer could avoid airport tax by choosing another
location.
Representative Moses noted that the proposed tax could not
be avoided.
Representative Whitaker asked whether the car rental
industry would support a broad based tax on all goods and
services. Mr. Zimmerman confirmed that they would support
such a tax.
Representative Croft asked if Mr. Persily's characterization
that 75 percent of businesses in the summer comprised three
quarters of the yearly business. Mr. Zimmerman observed
that Mr. Persily had referred to the second and third
quarters. He noted that the summer business spanned June in
the second quarter and July and August in the third quarter.
He confirmed that in a broad characterization, approximately
50 percent of business was during those three months.
HB 271 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:45 PM
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