Legislature(2009 - 2010)HOUSE FINANCE 519
04/05/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB422 | |
| HB167 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 422 | TELECONFERENCED | |
| + | HB 167 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 5, 2010
2:10 p.m.
2:10:18 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 2:10 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Anna Fairclough
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
None.
ALSO PRESENT
Curtis Thayer, Deputy Commissioner, Department of
Community, Commerce and Economic Development; Dan Sullivan,
Attorney General, Department of Law; Chris Poag, Assistant
Attorney General, Department of Law; Chip Thoma, President,
Responsible Cruising in Alaska; Joe Gelhif, Juneau; John
Binkley, President, Alaska Cruise Association; Mike
Stedman, Owner, Wings Airways; John McConnachie, Owner,
Cycle Alaska; Brett Carlson, Cook, Coldfoot and Deadhorse;
Eleanor Davenport, Director, White Pass Railroad; Genevieve
Wojtusik, Staff, Representative Millet; Representative
Charisse Millet; Johanna Bales, Deputy Director, Department
of Revenue; Sandra Loomas, Business Manager, Talkeetna Air
Taxi; Roark Brown, Owner, Homer Ocean Charters.
PRESENT VIA TELECONFERENCE
Tom Hall, Klondike Gold Dredge, Skagway; Jill Cox,
Temptations, Skagway; Governor Bill Sheffield; Richard
Beneville, Nome Chamber of Commerce, Nome Visitor's Center
and Nome Discovery Tours; Walter Porter, City and Borough
of Yakutat; Paul Landis, Chief Operating Officer, CIRI
Alaska Tourism; Frank Flavin, Flavin Photography,
Anchorage; John White, Owner, Healy and Denali Businesses;
Judy White, Bookkeeper, Denali Business; Lois Wirtz,
Anchorage; Lee Kenaston, Tour Business Owner, Fairbanks;
Alan LeMaster, ATIA, Copper Valley; Scott Reisland, Denali
Grizzly Bear, Fairbanks; Mary Richards, All Season's Inn,
Fairbanks; Tim Cerny, Alaska Act Committee, Fairbanks; Kory
Eberhardt, A Taste of Alaska Lodge, Fairbanks; Erika Weld,
Arctic Outfitters, Fairbanks; Matt Atkinson, Northern
Alaska Tour Company, Fairbanks; Kathy Hedges, Northern
Alaska Tour Company, Fairbanks; Deb Hickok, Fairbanks
Convention & Visitors Bureau; Janet Buckingham, Alaska
Travel Industry Association, Kodiak; Bob Stanford, Kodiak
Island Convention & Visitors Bureau and Island Air; Blaine
Ashcraft, Ketchikan Chamber of Commerce; Pattie Mackey,
Ketchikan Visitor Bureau; Rick Erickson, Employee, Survey
Point Holdings, Alaska Alliance for Cruise Travel (ACT),
Ketchikan; Len Laurence, ACT, Ketchikan; Colleen Stephens,
Stan Stephens Charters, Valdez; Fred Reeder, Alaska Premier
Charters; Jamey Cagle, Vice-President, Allen Marine;
Jillian Simpson, Alaska Travel Industry Association; Tom
Hall, Klondike Gold Dredge Brewery; Tammy Griffin, Director
of Operations, Alaska Hotel and Lodging Association;
Shannon Hamrick, Executive Director, Kenai Peninsula
Tourism Marketing Council.
SUMMARY
HB 167 TAX CREDIT FOR STATE TOURISM PROGRAM
CS HB 167 (L&G) was HEARD and HELD in
Committee for further consideration.
HB 422 PASSENGER TAX; TOURISM TAX CREDIT
CS HB 422 (FIN) was HEARD and HELD in
Committee for further consideration.
2:10:24 PM
HOUSE BILL NO. 422
"An Act relating to a corporation income tax credit
for contributions to a qualified trade association
awarded a contract by the Department of Commerce,
Community, and Economic Development for planning and
executing a destination tourism marketing campaign
made by a person that derives income from the sale of
goods or services to visitors to the state; relating
to the excise tax on passengers traveling on
commercial passenger vessels providing overnight
accommodations in the state's marine waters; and
providing for an effective date."
Co-Chair Hawker MOVED to CSHB 422()26-GH2210\R, as a
working document.
There being no OBJECTION it was so ordered.
2:12:30 PM
CURTIS THAYER, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT, testified that the
administration was in support of the legislation. He
underscored the urgency that the legislature should take
action on the bill during the 2010 session. He stated that
the governor proposed legislation that included the exact
provisions included in the bill also included a marketing
component. The administration believed that tourism numbers
would increase in the state by reducing the commercial
passenger vessel excise tax and increasing Alaska's
visibility through an Alaska tourism marketing program. A
study recently published by the department highlighted the
economic impact tourism had on the state. Direct visitor
spending was $2.1 billion per year, generating 27 thousand
jobs. When accounting for indirect impacts, Alaska's
visitor industry represented $3.4 billion in total spending
in Alaska, and peak employment of over 40 thousand. The
state was currently facing a decline in the industry.
Travel in Alaska was down by 7 percent in 2009, and visitor
spending decreased by $270,000,000 compared to 2008. It was
expected that 140,000 fewer cruise ship passengers would
travel to the state in 2010. Alaska was expected to gain 2
ships in 2011, but was also losing 2 ships, further
prolonging economic challenges. A recent McDowell Group
report demonstrated the far reaching statewide effects of
dwindling visitor traffic. The estimated job loss for the
next two years was approximately 5000. The lost jobs run
the gamut; fishing guides on the Kenai Peninsula, tour
companies in Ketchikan and Sitka, lodging and
transportation services in Fairbanks, restaurants and
lodging in Anchorage. Additionally, hundreds of businesses
throughout Alaska that provided goods and services to the
industry; commercial fishermen, seafood processors,
mechanics, fuel providers, and numerous professional
services, would see a decline in revenue. The industry as a
whole contributed $200,000,000 in direct payments to state
and local governments through various user fees. He stated
that two-thirds of the visitors in 2009, arrived by cruise
ship. The administration and DEC met with industry
representatives, community leaders, and small business
owners across the state to develop a comprehensive strategy
to make Alaska more attractive to industry and travelers
alike. Lessing the head tax and growing the tourism
marketing program would be beneficial to the industry. The
cruise ship industry had signaled the willingness to drop
the lawsuit against the state if the tax was reduced by 25
percent. However, the state was faced with a 2 year delay
before cruise ship volumes were expected to increase. The
cruise line industry had indicated that they would refrain
from making final decisions on the 2012 schedule until
action was taken by the legislature. He stressed that
Alaska should be made a more affordable destination and a
message should be sent that the state welcomed travelers.
2:18:31 PM
DAN SULLIVAN, ATTORNEY GENERAL, DEPARTMENT OF LAW,
explained that the department had been defending the state
against the lawsuit filed by the Alaska Cruise Association
(ACA), and would continue to zealously do so. The
department was also in the role of legal advisor to the
governor. The department was working to ensure that if the
legislation was enacted the lawsuit would be dropped. An
agreement was being drafted between the state, the ACA, and
individual cruise ship lines, to make certain the case
would be dismissed. House Bill 422 served two main
purposes; increasing tourism in the state, and to
indirectly resolve the pending litigation. The litigation
was filed in fall of 2009, regarding whether or not the tax
could be imposed, and if so, at what rate. The legislature
retained the authority to set tax rate and throughout the
litigation the cruise ship industry had not been present in
tax rate discussions. He reiterated that if the legislation
were enacted, the lawsuit would be dropped. He emphasized
the importance of the periodic review process written into
Section 6 of the bill. The process would allow state and
local communities to collaborate in monitoring visitor
trends, and identify projected service and infrastructure
needs, to safely and efficiently accommodate passengers in
Alaska. This would provide the legislature the background
on which to base a future tax increase or reduction. The
department believed that keeping the tax rate commensurate
with the cost of hosting passengers would help the state
avoid litigation in the future. Given the risks, cost,
time, resources, and the uncertainty regarding the
continued litigation, pursuing the settlement would be in
the states best interest.
2:25:12 PM
Representative Austerman asked if the dismissal of the
lawsuit was dependent on the tax number being $34.50. Mr.
Sullivan replied that the actual tax amount would depend on
how large the material amendment would be.
Representative Austerman asked if the agreement between the
department and the industry could be found in the committee
file. Mr. Sullivan replied no. He explained that the
agreement was still being worked on by the department to
ensure that if the legislation were to pass, the lawsuit
would be dismissed. The agreement would not be made public.
The department had been provided a copy of the agreement
and had been working to revise it in order to better serve
the state.
Representative Austerman clarified that the agreement was
with the ACA. Mr. Sullivan replied that one of the
amendments stipulated that every member of the ACA would
sign the agreement.
Representative Austerman understood that the agreement had
not been in place when the $34.50 figure had been written
into the bill.
CHRIS POAG, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
interjected that ACA had provided a copy of a stipulation
that set out the terms of the negotiation. The department
had reviewed the stipulation to ensure the provisions were
satisfactory to the state. Mr. Poag assured the committee
that the agreement would be finalized by the time the bill
was passed and sent to the governor for signing.
2:29:27 PM
Representative Austerman assumed that it was a sufficient
enough agreement to base a bill on. He expressed concern
that legislation had been drafted based on an agreement
that had yet to be signed and put into place. Mr. Sullivan
responded that the purpose of the agreement was to protect
the state, and to ensure the lawsuit would be dropped, if
there was action taken by the legislature. He agreed the
passing of the legislation without the signed agreement
would not be in the states best interest.
2:32:05 PM
Representative Austerman asked what impact changing the
dollar amount would have on both the agreement and the
bill. Mr. Sullivan replied that the department would
research the question.
2:33:14 PM
Representative Gara asked if the tax was lowered, and the
lawsuit was dropped, what would stop the public or city
from filing a lawsuit. Mr. Sullivan responded that the
settlement would be binding between the state and the ACA.
There would be nothing to stop other entities not subject
to the agreement from filing a lawsuit.
Representative Gara understood that under the governor's
proposal the state could reduce the tax and still be
vulnerable to litigation. Mr. Sullivan explained that the
state gets sued a lot. In all cases the department would
vigorously defend the best interests of the state.
Representative Gara asserted that the settlement would not
be binding if it bound only in favor of the cruise ship
companies and not the state. He stated that over the last 4
years the amount that the state and private entities paid
into Alaska Travel Industry Association (ATIA) had been
adjusted. He believed that the state had been paying more
and more while the cruise ship companies had paid less and
less. He contended that the cruise ship companies had
cancelled their ATIA contribution.
Co-Chair Stoltze interjected that funding and ATIA would be
discussed at another time in an attempt to separate the
head tax and marketing issues.
2:37:02 PM
Vice-Chair Thomas understood that the governor's bill was
an effort to overturn an initiative voted on by the people.
Mr. Thayer responded that it would modify the initiative.
Vice-Chair Thomas asserted the head tax amount had been
established by a vote of the people. He stated that the
port fees for communities that he represented would suffer
an immediate impact from a lowering of the tax. He
expressed concern for the overturning of the people's vote
and for the effective date. He said that there was no
evidence of a signed agreement that the lawsuit would be
dropped. He noted that the immediate effective date was
flawed, as ships had already been collecting the head tax
for 2010 cruises. He suggested an effective date of
November 1, 2010. He relayed that he was 1 of 1700
commercial fishermen in Southeast that lost halibut
individual fishing quotas (IFQ) over charter fishing
industry issues. That equated to a $30 million loss to the
Southeast economy. He requested answers as to what the
department planned to do about the direct impact of the
tourism industry on communities. He said that Section 5
should be written out of the bill because it was confusing.
He also thought that the Juneau and Ketchikan ports were
being treated better than other ports in Southeast.
2:42:02 PM
Representative Doogan requested further explanation of
Sections 3 through 7 of the bill.
Mr. Poag explained that Section 1 contained a clarifying
amendment that codified the regulation to clarify that the
tax did not apply on vessels that were transiting state
waters. It applied to vessels that stopped in ports with
the intent to allow passengers to disembark. Section 2
discussed the rate reduction from $46 to $34.50. Section 3
contained clarifying amendments. It made a conforming
amendment, by repeal of the regional impact fund, and a
clarifying amendment that provided a guideline on how the
legislature ought to appropriate proceeds in the account.
Section 4 described the same clarification in regard to the
ports of call sharing funds. Section 5 explained that a
passenger that purchased a voyage that stopped in Juneau
would pay the $8 local levy, which would reduce the $34.50
statewide tax by $8.
Representative Doogan asked why the statewide tax would be
reduced by $8 in Juneau ports. Mr. Poag explained that the
communities of Juneau and Ketchikan had imposed local
levies and were collecting them to defray local impacts.
The provision gave the credit for collecting and defraying
the local impacts. The cities of Juneau and Ketchikan take
care of their own needs so the state had less needs to
accommodate through the port of call sharing.
Representative Doogan was still confused. Mr. Poag
continued. Section 6 added the periodic report. The report
was important because the level of constitutional taxation
would fluctuate with passenger impact. The state could be
subject to other lawsuits and the provision would allow the
tax rate to take into account the rising and lowering of
impacts to reduce the risk of litigation. Section 7
clarified the definition for "voyage". Section 8 repealed
the regional cruise ship impact fund, all proceed would go
into the commercial passenger excise fund account. Section
9 was the immediate effective date.
2:46:23 PM
Representative Doogan quoted from Section 7; ""voyage"
means any trip or itinerary lasting more than 72 hours in
the state's marine waters." He wondered how the 72 hour
number was derived. Mr. Poag replied that the department
was suggesting an amendment to the amendment; that the
language simply read 72 hours in the state. Currently, most
voyages were within 72 hours on the water, but there were
land-based tours as well. The tax was similar to a bed tax
on a floating hotel.
Representative Doogan asked if it was a bed tax, why not 24
hours in state marine waters. Mr. Poag replied that if it
were for 24 hours the tax would have to been collected
every 24 hours. The initiative had been crafted taking into
consideration administrational reasonable methods of
imposing the tax.
2:48:34 PM
Representative Kerttula cited section Section 6, Sub-
section 1:
(1) addresses the projected needs of communities to
safely and efficiently host passengers that pay
taxes under AS 43.45.200-43.52.295
Representative Kerttula wondered if the needs included
ports, docks, harbors, and roads. Mr. Poag replied that the
language originated in the commerce clause; from old cases
that discussed safely and efficiently hosting taxpayers.
The tax was on passengers to defray the cost of safely and
efficiently hosting them when they were in the state. He
agreed that there may be better ways to draft the language.
2:50:22 PM
CHIP THOMA, PRESIDENT, RESPONSIBLE CRUISING IN ALASKA,
testified that the cruise tax had helped toward building
infrastructure that was a direct benefit to the cruise
industry. Over $50 million had been collected in Juneau,
and had been used for infrastructure projects and
government assistance. On the state level $100 million had
been collected for similar projects. He supported the
legislation, but suggested that Section 2, Line 13, should
be amended to bring the head tax down to $39 instead of
$34.50. He thought that there was enough money in the fund
that the $7 discount could be passed into the passengers.
He stated that Page 2, Section 5, was problematic in the
discounting of the amounts collected in Ketchikan and
Juneau. He relayed that the amendment would effectively
lower the tax in those ports to $19. He believed that
Section 5 should be eliminated all together. He supported
the effective date of November 2011.
Representative Austerman asked if the other municipalities
that did not impose a local cruise tax would the state
receive the full $34.50. Mr. Thoma replied that if Section
5 were removed any ship entering the state would pay a
$34.50 head tax. If the section remained the head tax being
paid in Juneau and Ketchikan would be $19. He believed that
Section 5 was essentially a "math trick".
2:56:53 PM
JOE GELHIF, JUNEAU, stated that he had drafted the original
initiative for the head tax enacted in 2006. He asserted
that it was time to eliminate the sub-account within the
large cruise passenger account. He thought that there was
room to lower the excise tax from the current $46, which
was $4 less than the senate passed in 2000. Now that the
state had capitalized on some of the infrastructure needs
the tax could be lowered by 15 percent. He warned against
skimming the local head taxes because it would deeply
affect ports without local levies such as; Homer,
Anchorage, Prince William Sound, and little discretionary
money would be available for places like Wrangell and
Sitka. If the bill passed in its current form, the
effective drop in state revenue would be significant. He
believed the case against the state was weak, and should
not force the state to discount its sovereign power.
3:01:56 PM
JOHN BINKLEY, PRESIDENT, ALASKA CRUISE ASSOCIATION,
testified in supported of the governor's provision. He
stated that the cruise industry was concerned about the
cost of traveling to Alaska. This had lead directly to the
reduction of the number of visitors, and consequently, the
number of jobs. He understood the number the governor had
chosen was not arbitrary. The governor, in consultation
with the attorney general, had looked at the litigation and
the various aspects of the tax. The law stated that there
was 25 percent of the tax collected that could not be spent
in the ports of call that the ships made. He stated that
the federal law was clear and the current tax could be
challenged legally. He hoped the agreement would be signed
and executed before the bill was passed by the legislature
and signed into law. The bill would allow every visitor
that arrived on a cruise ship to be charge the same tax
amount.
Representative Austerman returned to the $34.50, and
wondered if it would make a difference to charge $1 more.
Mr. Binkley replied that the principle was that the
regional impact fund was eliminated, which equated to the
$34.50. He believed that this was the least stable aspect
of the tax.
Representative Austerman cited the $19 head tax created in
Section 5. He wondered how this reconciled with Mr.
Binkley's statement that all port would charge $34.50. Mr.
Binkley contended that the amount charged to each passenger
was exactly the same through the proposed legislation.
Currently under law passengers were being charged $61 if
they stop in Ketchikan and Juneau.
3:08:49 PM
Representative Doogan asked if there was a definitive study
linking the decline in passengers to the head tax. Mr.
Binkley responded that the cruise industry had articulated
3 aspects that were affecting the deployment of ships to
the state: (1) marketing - Alaska had been out of the game
in competing with other destinations around the world in
attraction visitors, (2) cost structure - Alaska was a very
high cost destination to bring ships to; one component
being the high head tax, (3) regulations - the regulations
imposed on the industry by the state were unattainable. The
governor had responded by introducing related legislation.
3:11:36 PM
Representative Kerttula understood that passengers not
visiting Ketchikan or Juneau would pay the same $34.50 tax.
Mr. Binkley replied yes.
Representative Kerttula clarified that the state would
receive $19.50 of the $34.50. Mr. Binkley explained that it
would depend on which ports of call the passengers visited.
If the passenger did not visit Ketchikan or Juneau, the
state would receive the $34.50. If they stop in Ketchikan
and not Juneau, then it would be $34.50 minus $7. If they
stop in Juneau and not Ketchikan it would be $34.50 minus
$8. If they stop in Ketchikan, Juneau, and Skagway then it
would be $19.50.
Vice-Chair Thomas understood that cruise ship marketing
money was already available for marketing Alaska, but was
not being used effectively. Mr. Binkley said that he was
simply restating what cruise lines had articulated to the
governor what they saw from a global perspective.
Vice-Chair Thomas wondered if the tax was lowered for 2
years, and the number of cruise ship passengers did not
rise, could the state reinstate the $46 tax. He stressed
the need to lock down a guarantee that the ships were
coming back. He believed that all port fees should be equal
across the state.
3:16:16 PM
Mr. Binkley responded that under the immediate effective
date the tax money already collected would go back to the
passengers. The governor believed that the passenger credit
was mechanism to get the money back into the hands of
Alaskans.
Mr. Binkley stated that a sunset provision could be written
into the bill. If the tax was not enough to take care of
infrastructure needs there would be a review process that
could result in a written report before the legislature.
Mr. Binkley believed that varying amounts of the tax were
given to different ports because all communities approached
the industry in various ways. For example, in Ketchikan the
city built and owned all of the docks and the $7 head tax
was reimbursement for construction. The docks in Skagway
were built by private contractors and the cruise lines paid
them directly, so $5 went to the community to help with
other infrastructure needs.
Vice-Chair Thomas pointed out to the committee that
traveling from Alaska to Florida by air to take a cruise
was extremely expensive. He disliked the idea of making
travel to Alaska cheaper than any other destination.
3:20:38 PM
Mr. Binkley admitted that air travel was very expensive and
was becoming more of a component of vacation costs, which
was one of the reasons 30 percent less visitors were
visiting South central Alaska. Trips to South central
Alaska were called "open jaw", a one way cruise either up
to South central, or from South central back down to
Vancouver, which included air cost not typically required
by other cruise destinations.
Representative Austerman wondered how many visitors were
expected to return to the state as a result of taking
$11.50 off the tax. Mr. Binkley reiterated the 3 industry
requests.
Representative Austerman asked if the all 3 components of
the agreement were not passed in the legislative cycle,
would the lawsuit stand. Mr. Binkley insisted that the
lawsuit dealt with the head tax alone. If the head tax bill
passed the litigation would be dropped.
3:25:05 PM
Representative Salmon speculated that the economic slump
throughout the world may have had some effect on the cruise
line industry, and not just the head tax. He suggested
giving the industry the tax break now and reinstating the
higher number when the economy picked up. Mr. Binkley
replied that growth in the industry was up by 6.5 percent.
The industry was strong in Europe, the Caribbean, the North
Atlantic Provinces, and Asia, but not in Alaska. He added
that the review process had been crafted to examine whether
the tax was the right amount for the existing economy.
Representative Salmon argued that $5,031 was not much more
than $5,000. He asserted that the tax amount was
insignificant compared to the overall cost of the cruise,
which made the theory used by the industry and the
administration to draft the bill moot. Mr. Binkley replied
that the bill was attempting to address the expected drop
of 142,000 people visiting Alaska in 2010. He contended
that the bill was not about protecting the industry, but
protecting Alaskan jobs.
3:30:46 PM
Representative Joule mentioned that the cruise ship
industry had announced the release of the final schedule
for 2012 would be delayed to the action of the state. He
wondered how many ships would be added to the schedule if
the tax was lowered, and how the lowering of the tax would
affect visitor's decisions to visit Alaska rather than
another destination. Mr. Binkley responded that the model
for the cruise industry was to always fill the ships. Costs
were fixed and the pricing would be discounted until every
bed was filled. If the demand was not there, or the cost
was too high, revenue generated off of the ship. Marketing
to drive up demand and lower the cost would help Alaska. In
summer 2010 the industry would get a better return on their
money by traveling to a more competitive destination.
According to the model, if the ship returned, it would be
full.
Representative Joule restated the question.
Mr. Binkley repeated the 3 aspects that were affecting the
market in Alaska; marketing, cost structure (taxes), and
regulations. The governor had sent the message to the
cruise lines that if state made changes, it was expected
that the ships would return. The company had yet to create
the 2012 schedule and there was still an opportunity for
adjustment. A quid pro quo had not been offered in terms of
specific ships, or specific numbers, for any specific
changes.
3:35:43 PM
Representative Doogan understood that the agreement was if
the state brought the tax down to $34.50, the lawsuit would
be dismissed. He asked if the $34.50 was gross or net, and
would the taxes levied by municipalities need to be netted
out in order for the agreement to work. Mr. Binkley replied
yes, and that it was explained in Section 5.
Representative Doogan surmised that the tax was not $34.50,
but $34.50, net whatever bold taxing jurisdiction the boat
might visit was. Mr. Binkley answered that to the extent
that any community had a larger head tax it would be net of
the tax, because it would be an off-set to the cruise
passenger.
Representative Doogan asserted that he had heard 2
different ideas. One was a way to lower the tax based on
the amount of money that was going to non-cruise ship
jurisdictions, which would lower it to $34.50. The second
was the idea that the local Juneau tax of $8, would be
subtracted from the total tax, which would result in $26.50
for the state. Mr. Binkley responded that the latter would
be the case if the passenger stopped in Juneau.
3:38:40 PM
Representative Kerttula relayed concern for the impact on
small local merchants and the loss of jobs. She wanted to
see Juneau benefit from the agreement with the industry.
She appreciated that with the immediate effective date the
money would be credited to the passengers, but wanted
assurances that the money would be sent in Juneau. She
added that there should be a requirement in the agreement
that the ships return to Alaska. Mr. Binkley replied that
the industry open to finding a mechanism that would ensure
the credit was put back into Juneau. He solicited
suggestions and reminded the committee that at the end of
the day the passenger could not be forced to spend the
credited funds in Juneau. Mr. Binkley said that writing in
as a stipulation agreement on the lawsuit that ships come
back to Alaska was contingent on the state meeting the 3
previously mentioned aspects of improvement.
3:42:11 PM
Representative Austerman queried how the savings of $11.50
would make a significant impact in the effort to bring
visitors back to Alaska. He asserted that the $11.50 head
tax had nothing to do with the industries profitability
because they would not be keeping the $11.50 anyway. He
wondered if the real issue was the slump in the global
economy. Mr. Binkley stated that although the passenger
paid the tax, the cruise lines had to reduce the amount
that could be charged for the Alaska product, which reduced
the revenue that was brought in. Alaska was the only
destination that was dropping while others were increasing.
He stated that North American cruise customers were not
traveling to Alaska in large numbers because there were not
as many ships to travel on.
3:46:22 PM
Representative Kelly asked if the passing of HB 422 would
be sufficient for the lawsuit to be dropped. Mr. Binkley
responded that the lowering of the head tax would be enough
to drop the lawsuit.
Representative Doogan asked if the lawsuit would be dropped
if Section 5 were written out of the legislation. Mr.
Binkley said no.
3:50:14 PM
MIKE STEDMAN, OWNER, WINGS AIRWAYS, testified in support of
the legislation. He shared that his business was down 20
percent in the last year, which would cause the grounding
of several aircraft in summer 2010, and equated to a loss
of jobs.
LAURA MARTINSON, MANAGER, CARIBOU CROSSINGS, urged
committee support for the bill. She highlighted the ways in
which the cruise ship industry had supported her
economically. She believed that the legislation would
support the youth of Alaska by providing summer employment.
LAWRENCE GAFFANEY, PRESIDENT and CEO, HUNATOTEM
CORPORATION, supported the legislation. The company had
invested $25 million to build a cruise ship port. The
corporation was the largest employer in Hoonah, providing
130 jobs. He stated that the loss of ships equated to less
revenue which resulted in a loss of jobs for the community.
JOHN MCCONNACHIE, OWNER, CYCLE ALASKA, testified in favor
of the legislation. He believed that the excise tax on
passengers had hurt Alaskan businesses. He stated that his
company would be hiring 3 less employees for the 2010
tourist season as a result of the tax. He also advocated
for better tourism marketing.
3:57:29 PM
BRETT CARLSON, COOK, COLDFOOT AND DEADHORSE, testified that
the tax had affected businesses in rural areas up in the
Arctic regions, well away from tidewater. He shared that
tourists traveled up to Coldfoot and Deadhorse on air
tours. He stressed that it was not the size of the tax that
kept visitors from coming to Alaska, it was the tax itself.
ELEANOR DAVENPORT, DIRECTOR, WHITE PASS RAILROAD, testified
in support of the legislation. She spoke to the concerns in
Skagway that fewer jobs available in the city would lead to
families being forced to move out of town. As the families
leave the schools in the city suffered due to the loss of
funding. The White Pass Railroad supported the legislation.
4:02:42 PM
TOM HALL, KLONDIKE GOLD DREDGE, SKAGWAY (via
teleconference), urged support for the legislation as a
vehicle for job creation. He expressed concern for the
survival of the community of Skagway without the cruise
industry's support.
JILL COX, TEMPTATIONS, SKAGWAY (via teleconference),
strongly supported that legislation.
GOVERNOR BILL SHEFFIELD (via teleconference), spoke in
support of the bill and relayed personal experience with a
rental business. He noted that the cruise ship industry
supported many Alaskan businesses.
4:08:47 PM
Governor Sheffield emphasized that nothing could replace
the tourism industry, and spoke to the importance of the
cruise ship industry for the economic stability of the
state.
RICHARD BENEVILLE, NOME CHAMBER OF COMMERCE, NOME VISITOR'S
CENTER AND NOME DISCOVERY TOURS (via teleconference),
stated that the tourism industry up north was just
beginning and was thriving. He stressed that the industry
was in the business of fulfilling the dream of people all
over the world who had longed to visit Alaska. He was
afraid that the regulations that had been set on the
industry had been viewed as punitive and unfriendly. He
believed that Alaska should be shared with the world.
4:13:32 PM
PAUL LANDIS, CHIEF OPERATING OFFICER, CIRI ALASKA TOURISM
(via teleconference), offered support of the bill. He said
that there was a direct correlation between the head tax
and jobs in the state. He thought that avoiding costly
litigation was the right move for Alaska. Resolving the
issue would take the uncertainty out of the industry in
Alaska.
FRANK FLAVIN, FLAVIN PHOTOGRAPHY, ANCHORAGE (via
teleconference), urged support for the legislation. He
pointed out to the committee that his company was not
directly a tour company, but that half of his business
generated from tour related companies. The cruise ship
initiative has had negative consequences, and the economic
turnaround was necessary to stop the companies from going
where there were less taxes and restrictions.
JOHN WHITE, OWNER, HEALY AND DENALI BUSINESSES (via
teleconference), represented the interests of Nenanna Raft
Adventures, Denali Petal Sports, Chugach Outdoor Center,
and Alaska Sea Kayakers. He thought that the legislation
was a good start, but believed that the excise tax should
be repealed completely. He stated that Proposition 2 sent a
message that Alaskans viewed the cruise industry as an
adversary. Through conversations with tourists he had
learned that the tax came off as hostility toward visitors.
He relayed that the industry was held to higher regulatory
standard than the communities that were visited. He argued
that the optimal tax rate for the industry was zero.
JUDY WHITE, BOOKKEEPER, DENALI BUSINESS (via
teleconference), urged supported for the bill. She believed
that the state needed to avoid litigation with the cruise
lines. She cited Section 7, Article 9 of the Alaska State
Constitution, which states that the taxes should not be
dedicated to any special purpose.
4:23:41 PM
LOIS WIRTZ, ANCHORAGE (via teleconference), spoke in favor
of the bill.
LEE KENASTON, TOUR BUSINESS OWNER, FAIRBANKS (via
teleconference), urged support of the bill. He believed
that raising the price of goods lowered the demand for
them. He testified that the guest numbers for his business
were down by 35 percent from 2008.
4:27:21 PM
ALAN LEMASTER, ATIA, COPPER VALLEY, GLENNALLEN (via
teleconference), supported the legislation. He stated the
loss in cruise line visitors over the last few years had
negatively affected his community. He shared that the ships
docked in Whittier and then transported their passengers to
Valdez, filling the hotel in Copper Center throughout the
summer. He stated that the hotel had been full the previous
summer, but only because cruise prices had been reduced. He
explained the when the price of the cruise was drastically
lowered, passengers experienced sticker shock when paying
for in-state tours.
SCOTT REISLAND, DENALI GRIZZLY BEAR, FAIRBANKS (via
teleconference), testified in support of the bill. He said
that his business numbers for 2009 were down 44 percent. He
stated that 25 percent of the cruise ship industry clients
were dropped off on land and continued to travel
independently in the state. He believed that small
businesses were hurt the most by the tax.
MARY RICHARDS, ALL SEASON'S INN, FAIRBANKS (via
teleconference), testified in support of the legislation.
She echoed previous statements of declining business due to
the head tax. She said that the bed and breakfast community
of the state lost 23 members in 2010.
TIM CERNY, ALASKA ACT COMMITTEE, FAIRBANKS (via
teleconference), urged support of HB 422. He stated that
over the past 2 years tour traffic to Fairbanks had dropped
significantly. He stressed that more should be done to
advertise Alaska as a destination for travel.
KORY EBERHARDT, A TASTE OF ALASKA LODGE, FAIRBANKS (via
teleconference), testified in support of the bill. He
stated that tourism was down by 40 percent in 2009. Hiring
of new employees and construction project were being put o
hold due to loss of visitor industry revenue.
ERIKA WELD, ARCTIC OUTFITTERS, FAIRBANKS (via
teleconference), offered support for the bill.
MATT ATKINSON, NORTHERN ALASKA TOUR COMPANY, FAIRBANKS (via
teleconference), supported the bill. He shared that
although Fairbanks was inland it was still affected by the
cruise industry. He said that it was particularly damaging
to the interior and Arctic regions to lose the ships that
travel across the gulf.
KATHY HEDGES, NORTHERN ALASKA TOUR COMPANY, FAIRBANKS (via
teleconference), supported that legislation. She encouraged
a strong visitor industry and a welcoming environment for
guests. She believed that showing gratitude to the cruise
line industry would ensure strong economic results for all
of Alaska.
DEB HICKOK, FAIRBANKS CONVENTION & VISITORS BUREAU (via
teleconference), spoke in support the bill. She mentioned
that about 50 percent of summer visitors to Fairbanks were
on a cruise land tour.
4:44:28 PM
JANET BUCKINGHAM, ALASKA TRAVEL INDUSTRY ASSOCIATION,
KODIAK (via teleconference), supported the bill. She
believed that the tax credit model in the bill provided a
long term funding solution. She spoke of the necessity to
keep the tourism industry thriving in the state.
BOB STANFORD, KODIAK ISLAND CONVENTION & VISITORS BUREAU
AND ISLAND AIR (via teleconference), testified in support
of the legislation. He relayed that tourism was a vital
driver to the Kodiak economy. He reiterated the ATIA
statistic that 25 percent of all cruise ship passengers who
visited the state returned as independent travelers.
4:50:05 PM
BLAINE ASHCRAFT, KETCHIKAN CHAMBER OF COMMERCE (via
teleconference), spoke in support of the legislation. He
stated that the city had made significant investments over
the last 15 years in the tourism industry, transitioning
from a resource extraction community to a tourism
community. The economy was primarily based on tourism and
would be devastated by the loss of ships.
PATTIE MACKEY, EXECUTIVE DIRECTOR, KETCHIKAN VISITOR BUREAU
(via teleconference), stated that Proposition 2 had failed
in the community and had narrowly passed in the state.
Lowering head tax and eliminating fees would allow the city
to move forward. The city anticipated a loss of $17 million
in visitor spending in 2010. She pointed out to the
committee that coupled with the loss of passengers would be
the loss of state receipts for items like commercial
permitting into state parks, and sport fishing licenses
purchased by out-of-state residents.
RICK ERICKSON, EMPLOYEE, SURVEY POINT HOLDINGS, ALASKA
ALLIANCE FOR CRUISE TRAVEL (ACT), KETCHIKAN (via
teleconference), supported the bill. He stated that the
companies and families that he represented were
economically dependent on the cruise ships, and would be
negatively affected by the loss of ships. He believed that
the reduction of 140,000 visitors in 2010, was a direct
result of the head tax.
LEN LAURENCE, ACT, KETCHIKAN (via teleconference),
supported the bill. He shared that this was the first time
in 40 years that the state would suffer from a serious
visitor decline. He lamented the effect of the passenger
loss on shore excursions, which had been forced to cut
employment. He urged the development of a healthier climate
with cruise industry and the passage of the tourism
marketing income tax credit.
4:58:11 PM
COLLEEN STEPHENS, STAN STEPHENS CHARTERS, PRESIDENT, VALDEZ
CONVENTION AND VISITORS BUREAU, VALDEZ (via
teleconference), testified in support of the legislation.
She relayed that the operating schedule for Stan Stephens
Charters had fallen by 22 percent since 2008. With the
reduction of cruse call headed into South central ports the
community expected to see a continued reduction in the
amount of travelers.
4:59:45 PM
FRED REEDER, ALASKA PREMIER CHARTERS (via teleconference),
spoke in favor of the bill. He believed that the cruise
industry needed encouragement from the state. Sitka had
experienced a net decrease of over $1 million in sales tax
revenue since 2008.
JAMEY CAGLE, VICE-PRESIDENT, ALLEN MARINE (via
teleconference), urged support for the bill. He stated that
a majority of Allen Marine's business comes from the cruise
ships. Allen Marine employed year-round employees in their
Sitka shipyard who build and maintain the fleet vessels.
Without the support of the tourism dollars the shipyard
would be shut down.
5:03:25 PM
Co-Chair Stoltze closed public testimony.
CS HB 422 (FIN) was HEARD and HELD in Committee for further
consideration.
5:04:33 PM AT EASE
5:15:13 PM RECONVENED
HOUSE BILL NO. 167
"An Act relating to a corporation income tax credit
for contributions by a person owning or operating a
commercial passenger vessel to a qualified trade
association that was awarded a contract by the
Department of Commerce, Community, and Economic
Development, and used for planning and executing a
destination tourism marketing campaign."
5:15:31 PM AT EASE
5:16:40 PM RECONVENED
Representative Fairclough introduced the bill and solicited
public testimony.
GENEVIEVE WOJTUSIK, STAFF, REPRESENTATIVE MILLET, stated
that the tourism industry had encouraged the development of
HB 167. Alaska's tourism industry had informed lawmakers
that Alaska had failed to maintain, and grow, a market
share in national and international markets. Competing
destinations were outspending the state with increasing
marketing budgets. All sectors of Alaska's travel industry
were reporting an unprecedented drop in summer season
bookings. The bill attempts to secure funding for the
marketing of Alaska by taking money from the industry and
giving a tax credit back, which would create a sustainable
source of income. The bill would ensure that a person
making a contribution would not receive a direct benefit
from the contribution while also receiving the income tax
credit. The bill deals only with commercial passenger
vessel income, and a credible passenger vehicle tax.
REPRESENTATIVE CHARISSE MILLETT (via teleconference), she
stressed state investment in marketing the Alaska product.
She reiterated that the state was competing on the global
market with international destinations. Alaska has unique
wildlife attractions, but other areas often have the same
attributes. She stated that the tourism industry created
jobs and sustained the economy, and that infrastructure for
tourism had been built that should not go to waste. The
bill provided a mechanism for a steady stream of revenue
for marketing, which would alleviate the need for future
legislative allocations in the area of marketing.
5:22:08 PM
Representative Doogan asked how much revenue would be
generated by the tax to spend on tourism marketing. Ms.
Wojtusik replied that Title 44.33.125 defined how the
marketing would be done with both private and state
dollars.
JOHANNA BALES, DEPUTY DIRECTOR, DEPARTMENT OF REVENUE,
explained that the bill would allow credit against the
corporate income tax paid by operators of commercial
passenger vessels, which would be the difference between
the tax already paid without the excise tax, and the tax
paid including the excise tax. The department had
encountered 2 problems when trying to figure the actual
numbers. First, there were only 3 tax payers, so
confidentiality was an issue. Second, it the nature of the
corporate income tax made it difficult to make an
approximation.
Representative Doogan requested the amount that the cruise
industry would pay the state under the legislation. Ms.
Bales responded the ships were often subsidiaries of larger
corporations which made estimating the funds the state
would receive difficult.
5:26:40 PM
Representative Kelly noted that the version of the bill
before the committee referred to the 3 major recipients of
the credit. The governor's version was much broader in the
amount of businesses that could take part. He queried the
department's position on including larger groups. Ms. Bales
responded that the governor's bill was crafted to include
any corporation engaged in tourism activity in the state.
House Bill 167 was crafted to include only 3 companies, and
one small segment of the corporate base, that could take
advantage of the credit. The department had suggested
putting a cap on the credit, but opening the credit to all
corporations that were engaged in tourism in the state.
5:29:13 PM
SANDRA LOOMIS, BUSINESS MANAGER, TALKEETNA AIR TAXI, spoke
in favor of the legislation. She stated that the tourism
industry was vital to the community of Talkeetna. She
shared her experience with ATIA and the marketing help
provided by the association. She contested that there was
no end to the benefits for the state from the marketing
work done by ATIA.
ROARK BROWN, OWNER, HOMER OCEAN CHARTERS, HOMER, supported
the bill. He stated that ATIAs board of directors, on
behalf of the 1,100 member businesses in Homer, unanimously
endorsed the governor's plan to restore the health of
Alaska's travel industry. If the bill were amended to add
the governor's language the state's tourism marketing
program would be adequately funded. He noted that the
program had extensive state oversight, including veto
power.
Representative Kelly pointed out to the committee that the
element differences between HB 167 and HB 422, was the
discussion of the 3 taxpayers versus the broader based
plan, he wondered which method the testifier supported. Mr.
Brown supported the broad based plan.
5:36:34 PM
BRETT CARLSON, COOK, COLDFOOT AND DEADHORSE, testified in
support of the bill. He shared that in his region there
were many small businesses that were not primarily cruise
related businesses. The businesses focus on non-cruise
visitors and were dependent on a tourism marketing program
that reached out to non-cruise travelers. Declining
marketing funding over the past 20 years had made it
increasingly difficult for the non-cruise businesses. He
stated that the tourism numbers in the northern areas of
the state were dismal. He noted that the low tourism
numbers were expounded by the weak economy. He felt that
Alaska was comparable to other destinations like Hawaii,
New Zealand, and Australia. He concluded that the bill
offered a long term sustainable funding plan for marketing
the state.
5:42:19 PM
ALAN LEMASTER, ATIA, GLENALLEN, urged supported of the
governor's HB 422, but not HB 167. He argued that HB 167
was fragmented and contained no fiscal impact information.
He divulged that in his business experience, a reduction of
marketing equaled a reduction in visitation, which equated
to a reduction in jobs. He believed marketing was the first
step in reenergizing the tourism industry in Alaska.
COLLEEN STEPHENS, VALDEZ, voiced support for the
legislation. She stated that the reduction of visitors to
the state had negatively affected 10 full-time seasonal
jobs, and 1 full-time year-round position in the community.
She believed that seasonal employment help young people
develop a work ethic which would continue with them through
life. Scarce entry level jobs for young people across the
state would affect the work force in to the future, as well
as the economy and the viability of the state.
SCOTT REISLAND, DENALI GRIZZLY BEAR, DENALI NATIONAL PARK,
testified in support of the bill. He said that ATIA
marketing was critical for marketing his business. The
funding received by the passage of the legislation would
help with increasing the independent travel market.
MARY RICHARDS, ALL SEASON'S INN, FAIRBANKS urged support of
the bill. She explained that the only way the inn could be
effectively marketed was in cooperation with the ATIA
marketing plan. She used her money to reach out to the
association, who in turn reached out to the rest of the
world on her behalf.
MATT ATKINSON, FAIRBANKS spoke in support of the governor's
bill. He offered accolades to ATIA for the association's
ability to maximize available funds. He believed the tax
credit would allow the state to direct more focus on
marketing the state and less on requesting one-time
appropriations.
5:53:20 PM
LOIS WIRTZ, SELF, spoke in support of the legislation. She
stated that statewide marketing was crucial for tourism
development in Nome, Kotzebue, and Gamble. Reducing the
head tax was only one aspect of what was necessary to
foster tourism in the state. She believed that an ongoing
marketing effort was necessary to bring back non-cruise and
independent visitors.
JILLIAN SIMPSON, ALASKA TRAVEL INDUSTRY ASSOCIATION (via
teleconference), testified in support of the broad based
bill for tourism marketing tax credits. She felt that
Alaska needed sustainable marketing funding for to the
domestic and international market in order for the state to
continue to grow.
TOM HALL, KLONDIKE GOLD DREDGE BREWERY (via
teleconference), offered support for the bill. He testified
that ATIA offered unique opportunities for collaboration in
marketing the Alaska product to visitors from far away. He
felt that there would be significant return on the
marketing investment.
5:58:28 PM
TAMMY GRIFFIN, DIRECTOR OF OPERATIONS, ALASKA HOTEL AND
LODGING ASSOCIATION (via teleconference), supported the
legislation. She stated that the association supported an
amended HB 167 that included the participation of a broader
selection of industry players in the tax credit. She
concluded that an increase in tourism marketing funding was
imperative for the future of the industry in Alaska.
FRANK FLAVIN, PHOTOGRAPHER supported the bill. He cited the
marketing spending increases made by other destinations in
the past 6 years. He revealed that Alaska had spent $10
million in 2005, with an additional $5 million match from
the industry, but had only increased to 11.7 million in
2010.
6:02:46 PM
SHANNON HAMRICK, EXECUTIVE DIRECTOR, KENAI PENINSULA
TOURISM MARKETING COUNCIL (via teleconference), testified
in support of the legislation. She opined the downturn in
the tourism economy of 2009, and the equally abysmal
forecast for 2010. She explained that her family business
relied on the building of lodges and bed and breakfast
establishments, which were is less demand because of the
industry slump. She said that the loss of visitors had a
ripple effect of loss throughout the community.
Co-Chair Stoltze closed public testimony.
Co-Chair Stoltze discussed housekeeping.
HB 167 was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 6:07 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| Visitor Industry Impacts 3_30.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| Sponsor Statement Tourism Enhancement 31Mar10.doc |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| Sectional Analysis Tourism Enhancement 31Mar10.doc |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Letters.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Gov Transmittal Letter.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| Testimony HB 167.docx |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| Nov09HouseFinTourismReport.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| McDowell Group GDS Presentation 2009.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| HB 167 Testimony.PDF |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| HB 167 Support Letters.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| HB 167 Referral Summary.doc |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| HB 167 Back Up.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| 06 HB167 PPT Presentation by ATIA.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| 03 CSHB167 ver E Sectional Analysis.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| 02 CSHB167 ver E Sponsor Statement.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 167 |
| HB 422 CS WORKDRAFT VERSION 26-GH2210 R.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| RCAgov31210.doc |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| 4-2-10 Ltr support HB 422 (3).doc |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| RCAhb4224510.doc |
HFIN 4/5/2010 1:30:00 PM |
HB4224 |
| Deputy Commissioner Thayer's Testimony on HB 422.PDF |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Letters Additional.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Letters Sharp-7000-OMb_20100406_165809.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Letters Sharp-7000-OMb_20100409_113735.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |
| HB 422 Support Letter.pdf |
HFIN 4/5/2010 1:30:00 PM |
HB 422 |