Legislature(2009 - 2010)BARNES 124
04/06/2009 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB167 | |
| HB177 | |
| HB185 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 167 | TELECONFERENCED | |
| *+ | HB 177 | TELECONFERENCED | |
| *+ | HB 185 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 6, 2009
3:20 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Mike Chenault
Representative John Coghill
Representative Bob Lynn
Representative Robert L. "Bob" Buch
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
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."
- MOVED CSHB 167(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 177
"An Act relating to marine products and motorized recreational
products; and providing for an effective date."
- MOVED CSHB 177(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 185
"An Act relating to the labor organization position of state
agencies and others with regard to construction contracts paid
for by state money."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 167
SHORT TITLE: TAX CREDIT FOR STATE TOURISM PROGRAM
SPONSOR(s): REPRESENTATIVE(s) COGHILL
03/09/09 (H) READ THE FIRST TIME - REFERRALS
03/09/09 (H) L&C, FIN
04/06/09 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 177
SHORT TITLE: MARINE & MOTORIZED RECREATIONAL PRODUCTS
SPONSOR(s): REPRESENTATIVE(s) COGHILL
03/12/09 (H) READ THE FIRST TIME - REFERRALS
03/12/09 (H) L&C
03/30/09 (H) L&C AT 3:15 PM BARNES 124
03/30/09 (H) Scheduled But Not Heard
04/06/09 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 185
SHORT TITLE: LABOR NEUTRALITY FOR STATE CONTRACTS
SPONSOR(s): REPRESENTATIVE(s) KELLY
03/12/09 (H) READ THE FIRST TIME - REFERRALS
03/12/09 (H) STA, L&C, FIN
03/12/09 (H) STA REFERRAL REMOVED
03/27/09 (H) L&C AT 3:15 PM BARNES 124
03/27/09 (H) Scheduled But Not Heard
04/06/09 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
KAREN LIDSTER, Staff
Representative John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of a joint prime
sponsor of HB 167.
JOHANNA BALES, Excise Audit Manager
Anchorage Office, Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 167.
ROURKE BROWN
Homer, Alaska
POSITION STATEMENT: Testified during the discussion of HB 167.
JERRY SCHOLAND, Operator
Kiana Bed and Breakfast
Homer, Alaska
POSITION STATEMENT: Testified in support of HB 167.
BONNIE QUILL, Executive Director
Matanuska-Susitna Convention & Visitor's Bureau (MSCVB)
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 167.
SHANNON HAMRICK
Kenai Peninsula Tourism Marketing Council (KPTMC)
Kenai, Alaska
POSITION STATEMENT: Testified during the discussion of HB 167.
DEB HICHCOCK, President, and CEO
Fairbanks Convention & Visitor Bureau (FCVB)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 167.
SUZANNE RUST
RUSTS FLYING SERVICE
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 167.
JULIE SAUPE, President
Anchorage Convention and Visitor Bureau
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 167.
RYNNIEVA MOSS, Staff
Representative John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on HB 177, on behalf of a joint
prime sponsor, Representative John Coghill.
CURTIS SPENCER
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 177.
DUDLEY BENESCH, Owner
Alaska Mining and Diving Supply
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 177.
WAYNE HULS, Co-owner
Marita Sea & Ski, Alaska Power Sports
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 177.
LARRY INNIS, Director
Marine Retailers Association of America (MRAA)
Annapolis, Maryland
POSITION STATEMENT: Testified in support HB 177.
RALPH SEEKINS, Owner
Seekins Ford Mercury
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 177.
CLINT KIRRY, Representative
Hewes Marine Company
Reno, Nevada
POSITION STATEMENT: Testified in opposition of HB 177.
DAVID DICKERSON, Representative
National Marine Manufacturers Association (NMMA)
Chicago, Illinois
POSITION STATEMENT: Testified during the discussion of HB 177.
DAVID MCCORMICK
Bethel, Alaska
POSITION STATEMENT: Testified during the discussion of HB 177.
CRAIG COMPEAU, Vice President
Compeau Marine
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 177.
PETER THOMPSON, President
River and Sea Marine
Soldotna, Alaska
POSITION STATEMENT: Testified in support of HB 177.
MARK HORDEMANN
Soldotna, Alaska
POSITION STATEMENT: Testified in support of HB 177.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section, Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Provided comments and answered questions
during the discussion of HB 177.
REPRESENTATIVE MIKE KELLY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as prime sponsor of HB 185.
ACTION NARRATIVE
3:20:19 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives Buch,
Chenault, Neuman, and Olson were present at the call to order.
Representatives Coghill, Holmes, and Lynn arrived as the meeting
was in progress.
HB 167-TAX CREDIT FOR STATE TOURISM PROGRAM
3:20:32 PM
CHAIR OLSON announced that the first order of business would be
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."
KAREN LIDSTER, Staff, Representative John Coghill, Alaska State
Legislature, introduced herself as staff to a joint prime
sponsor of HB 167.
3:21:15 PM
REPRESENTATIVE NEUMAN made a motion to adopt the proposed
committee substitute (CS) for HB 167, labeled 26-LS0695\E,
Bullock, 4/1/09.[Version E was before the committee.]
CHAIR OLSON objected for purposes of discussion.
MS. LIDSTER explained the changes. She stated that on page 2,
line 2, a new paragraph was added, as follows:
(3) not used to provide the person making the contribution
with a direct or tangible benefit.
MS. LIDSTER explained paragraph (3) was added to ensure that a
person making a contribution would not receive a direct or
tangible benefit from the contribution and also receive an
income tax credit. She explained that the bill would establish
a tourism marketing tax credit to help create a sustainable
funding source for Alaska's tourism marketing program. The bill
would allow a tax credit for contributions to a qualified trade
association that has been awarded a contract by the Department
of Commerce, Community, & Economic Development for planning and
executing a destination tourism marketing campaign. The tax
credit would be equal to the value of the qualified
contributions and could be applied to a tax liability under the
Alaska Corporate Net Income Tax. The credit could not be used
to reduce corporate income tax below zero, and the tax credit
could not be carried forward or transferred. Additionally, the
definition of "commercial passenger vessel" is defined in AS
43.52.295. This bill was created when the legislature asked the
tourism industry for ideas for funding sources for tourism
marketing in Alaska.
3:23:57 PM
REPRESENTATIVE NEUMAN referred to the sectional analysis for HB
167. He related his understanding the bill would provide
commercial passenger vessels a credit against the tax due for a
cash contribution to a marketing program. He asked for further
clarification.
MS. LIDSTER explained the contribution would be made to a
qualified trade association that was awarded the tourism
marketing contract administered by the DCCED.
REPRESENTATIVE NEUMAN asked if a business such as a fictitious
"Karen's Whitewater Riverboat Extravaganza" made a contribution
to the Alaska Tourism and Marketing Association if it would get
a credit.
MS. LIDSTER agreed it would be eligible for a tax credit so long
as the business fell under the definition in AS 43.52.295 with
respect to "commercial passenger vessel." She explained that
the tax credit is limited to vessels with 250 berths or more.
3:25:47 PM
MS. LIDSTER, in response to Representative Neuman, explained
that no limit has been established at this time. In further
response to Representative Neuman, Ms. LIDSTER explained that
the company could make a $10 million contribution so long as the
company's income tax did not fall below zero.
3:27:44 PM
JOHANNA BALES, Excise Audit Manager, Anchorage Office, Tax
Division, Department of Revenue (DOR), stated this particular
tax credit is limited to those corporations that operate
commercial passenger vessels of 250 berths or more, which would
apply basically to cruise ships. Under the bill, the company
could reduce its tax liability to zero. She referred to
Representative Neuman's earlier question and answered that a tax
credit would apply so long as the industry had a $10 million tax
liability, the company could reduce its liability to zero. In
further response to Representative Neuman, Ms. Bales stated the
companies could estimate the tax credit since payments can be
made any time during the year. Thus, the company could take the
credit at the end of the year when the company would have a
better idea of the amount of corporate income taxes owed.
3:32:02 PM
MS. BALES, in response to Representative Buch, explained that
the fiscal note is for $30 thousand to cover a one time cost for
startup expenses to enhance the tax examination system, produce
tax forms, and educate the stakeholders. She explained that the
revenues are considered indeterminate since the department can
not estimate the amount of the income tax. She further
explained that currently the department only has one year of
data available and taxpayers that pay the corporate income tax
are also commercial passenger vessels. She offered that the
department previously "lumped" the corporation taxes together
with other tourism industry corporation taxes. In 2007, prior
to commercial passenger vessels paying corporate income tax, the
department received $3.5 million from other corporations in the
tourism industry. She highlighted the amount collected
increased to $15.8 million. She pointed out that a large part
of the tax collected was due to large passenger vessels.
However, taxpayers were not allowed to disclose the exact
amount, she noted. Thus, the department indicated in its fiscal
note that had the tax credit been in effect in 2008, the
potential could have resulted in a $15.8 million decrease in
revenue. In further response to Representative Buch, Ms. Bales
explained that the $30,000 is the specific cost of the impact of
this bill. She explained that the one time cost is to cover
contract costs for information technology assistance.
3:34:44 PM
ROURK BROWN explained that he is a small business owner and a
volunteer government relations chair for the Alaska Travel
Industry Association (ATIA). He stated that the tourism
industry is an important part of Alaska's economy. He provided
statistics such as that tourism brings $1.8 billion in new
dollars to Alaska's economy and provides the equivalent of
40,000 fulltime jobs, $70 million in local taxes and fees, and
$122 million in state taxes and fees. He referred to his
handout, titled "Tourism Tax Credit Premiere Travel
Destination", and to page 4, titled "Tourism Marketing in
Alaska". He explained that since 1999, the public sector
funding for tourism marketing has declined from $24 million to
$5 million in FY 08. During that time independent travel has
also declined. The industry believed that the only effective
proven tool is destination marketing and a minimum budget of $20
million is needed to effectively market Alaska as a destination.
Last year the legislature reinvested the $9 million vehicle
rental tax it collected. The bill that implemented the vehicle
rental tax also allowed funds to be spent on tourism marketing.
He further stated that the private sector matched the $9 million
with an additional $2.7 million, which was the third highest
public/private match. Only Hawaii and California exceeded
Alaska, he mentioned. He said, "We are very grateful for this
first step that was taken last year." Last year, the
legislature placed a three-year sunset on the vehicle rental tax
bill, asking the industry to work to provide a long-term
sustainable solution to use visitor industry generated tax
dollars to fund tourism marketing. He related that the industry
has worked to find a solution which is embodied in HB 167.
3:37:30 PM
MR. BROWN explained that HB 167 would allow the cruise lines to
make contributions directly to the state's marketing program and
receive a tax credit against their corporate income tax
liability. He related that the cruise industry pays corporate
income tax as a result of a cruise ballot initiative. He
referred to page 5 of his handout, titled "Estimated State
Tourism Revenues" and to the $12,300,000 collected from the
Cruise Corporate Income Tax. He clarified that this amount does
not include the head tax, gambling tax, or ocean ranger tax also
collected. He compared the concept for cruise tax credits is
similar to the concept of oil tax credits such that when the
industry drills more wells, it will produce more wells, which
will increase state revenues. He opined that this bill would
increase state revenues, which is also one of the travel
industry's goals.
MR. BROWN asked if travel marketing works. He then answered by
stating that in FY 05, the marketing program resulted in over
500,000 responses for people interested in coming to Alaska. He
referred to page 3 of his handout, titled "Research Reveals:
Marketing = Visitors," stating that the travel industry tracked
the results of visitors who traveled to Alaska. He provided
statistics on those who requested information in 2005. Of those
requesting information in 2005, 14.7 percent traveled to Alaska
in 2006, 13.7 percent traveled to Alaska in 2006, 7.7 percent
traveled to Alaska in 2007, and 9 percent traveled to Alaska in
2008. He opined that 45.1 percent of the people who indicated
they were interested in 2005 in traveling to Alaska actually
traveled to Alaska. He explained that the average group size
was 2.6 persons, and the average spending per person was $971,
not counting any transportation costs to Alaska. He said,
"Tourism marketing is the only proven way to increase
visitation."
3:39:32 PM
MR. BROWN referred to page 6 of his handout, titled "Season is
in Jeopardy", and stated the outlook is grim. He opined that
bookings are down anywhere from 20 to 60 percent. He stated
that cruise prices are at historic lows, many small businesses
may not survive, and local governments will also have diminished
bed tax revenue projections. He said that it is too late to
affect the 2009 travel season, but the industry could begin to
turn the tide in 2010 with passage of this bill. He urged
members to pass HB 167 this session.
3:40:46 PM
REPRESENTATIVE BUCH opined he would have a difficult time
justifying the bill to his constituents. He related his
understanding that many industries such as commercial fishing,
timber, and mining do not benefit from similar state funding for
their industries.
MR. BROWN related that he appreciated the concern. However, he
mentioned that the travel industry generates $122 million to the
state in taxes and fees, and contributes $70 million to local
governments. He highlighted that his community of Homer pays a
sales tax and a large part of the tax collected is derived from
nonresident tourists. He said, "I believe it's fair to say that
this industry does support the state and all residents thereof."
3:43:40 PM
JERRY SCHOLAND, Operator, Kiana Bed and Breakfast, stated he and
his wife operate the Kiana Bed and Breakfast. He related that
he is also a member of ATIA. He highlighted that tourism
provides about $122 million in state taxes. He indicated that
throughout the 1990s, more money was spent to market Alaska than
in this decade. He opined that HB 167 seems to be a painless
way to take about 10 percent or less of the $122 million and
return it to the industry to market Alaska. He further opined
that tourism is truly a renewable resource. Tourists take
pictures out of the state and basically come, spend money, and
leave. He stressed that Alaska is not losing any resources by
funding tourism. He emphasized that it will be a tough year for
tourism. He projected a reduction in Alaska's tourism ranging
from 30 to 60 percent, which he related he has confirmed in his
own business. He urged members to pass the bill.
3:45:58 PM
BONNIE QUILL, Executive Director, Matanuska-Susitna Convention &
Visitor's Bureau (MSCVB), stated that the MSCVB represents 300
tourism businesses in the Matanuska-Susitna valley, most of
which are small businesses. She asked members to support HB
167. She announced that she is pleased that ATIA has created
the proposal to make Alaska tourism marketing efforts
competitive. She opined that it is urgent to pass this bill to
provide the cruise lines that are paying taxes in Alaska an
opportunity to invest in the tourism marketing program. She
urged members to pass HB 167.
3:47:16 PM
SHANNON HAMRICK, Kenai Peninsula Tourism Marketing Council
(KPTMC), stated that the Kenai-Peninsula Tourism Marketing
Council represents over 400 tourism businesses on the Kenai
Peninsula. She encouraged members to move HB 167 from the
committee. She related that tourism is economic development for
Alaska and the Kenai Peninsula. She stressed that the industry
is in crisis. She emphasized that ATIA is critical to the
efforts of the KPTMC for outreach to prospective visitors. She
opined that this bill is an excellent step to provide a
sustainable solution to marketing using dollars that the visitor
industry generates. She concluded by stating that over 25
percent of all businesses licensed in the Kenai area are tourism
based, and 30 percent of overall sales tax revenues are
generated by tourism businesses. She said, "This bill will
support small businesses. Please help them by passing HB 167
this year."
3:48:44 PM
DEB HICHCOCK, President, and CEO, Fairbanks Convention & Visitor
Bureau (FCVB), stated that she also serves as a volunteer on the
ATIA Board. She thanked members who have supported HB 167. She
stated supporting funding for marketing for ATIA also assists
business owners in Fairbanks, the Interior and throughout
Alaska. She related that entrepreneurs are the hallmarks of the
visitor industry. She also related local business owners and
their employees are Alaskan neighbors, friends, and members'
constituents. She offered her belief that tourism creates a
ripple effect through the communities, generating construction,
transportation, and countless other services. She stressed that
tourism contributes to the quality of life in her community.
She related that the community has better airline schedules, a
beautiful airport, and many attractions. She indicated that
tourism also provides about half of the operating cost of the
University of Alaska Fairbanks, Museum of the North. She
highlighted that facilities like the Carlson Center benefit from
tourism dollars. She also offered her belief that additional
marketing funds could help Fairbanks develop its winter tourism.
She opined that Fairbanks has concentrated its efforts on winter
tourism, but cannot reach that goal solely by its own efforts.
She referred to a recent itinerary that was coordinated by the
ATIA for tour operators. She noted that tour operators from
countries such as Australia, Germany, Switzerland, and the UK
visited multiple points throughout the state. She explained
that in Fairbanks, the operators were exposed to many locally
owned businesses. She listed a long list of businesses,
including Brewster's Restaurant, the Pumphouse Restaurant,
Aurora Borealis Lodge, and the Farthest North Harley Davidson
Outpost. She mentioned the tour operators also visited the
Arctic Circle and Chena Hot Springs. She emphasized that HB 167
creates a sustainable funding mechanism for ATIA marketing that
could benefit businesses in the summer and winter. She opined
that this marketing reaches the depth and breadth of potential
customers that is far beyond the reach of most small businesses.
She urged members to support HB 167.
3:52:29 PM
SUZANNE RUST explained that her family owns Rusts Flying Service
in Alaska and K2 Aviation in Talkeetna. She explained that she
also volunteers on the ATIA board. She asked members to support
HB 167. She stated that her family's business has employed
about 75 people in Anchorage and Talkeetna. She also stated
that her family anticipates reducing its workforce by
approximately 20 to 30 percent this year. She highlighted that
the reduction in work force affects grocery stores and
restaurants, creating a strong ripple effect in the local
economies. She stressed that the situation is real. She opined
that tourism is the economic engine in Alaska. She related that
some of the major tour companies have cut their programs in
half. She noted that there is a limited pool of visitors in the
U.S. probably consisting of more domestic visitors than
international visitors. She opined that Alaska will need to
compete for its visitors from the overall pool. She stressed
the importance of marketing dollars to Alaska. She stated that
tourism is a renewable resource that affects everyone. She
asked member to support for HB 167.
3:55:19 PM
JULIE SAUPE, President, Anchorage Convention and Visitor Bureau,
offered her appreciation as well as that of the 1,100 members of
the ACVB for members' anticipated support of HB 167. She stated
by supporting the marketing funding for the ATIA that the state
will assist small and large businesses throughout the state.
She related that a healthy tourism industry is a key component
of Anchorage's growth. She pointed out that tourism contributes
significantly to the state's general fund and local government.
She further related that the tourism industry makes many
contributions that help create a robust and lively community
that residents enjoy year round. She said, "Your support of
this legislation will expand this win-win cycle to everybody's
benefit." She indicated she has observed first hand the number
of families that tourism supports. She emphasized that ACVB
relies on statewide marketing. She opined that by partnering
with ATIA, ACVB can focus its energy on booking conventions and
groups. She related that booking meetings and conventions keeps
the economy vibrant during winter months. She mentioned that
ATIA is a model of private/public partnership. She highlighted
that she serves on the Board of Directors of the ATIA and on its
marketing committee, so she can attest to the debates and the
efforts that are put forth to ensure the program is
representative of the entire state. She commended the ATIA.
She further opined that it is time to take this model program
and provide a stable funding mechanism. She asked members to
support HB 167.
3:58:05 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 167. He removed his
objection.
REPRESENTATIVE BUCH expressed reticence to second guess the
voters who passed the cruise ship initiative. He inquired as to
whether the sponsor has considered a sunset clause.
3:59:19 PM
REPRESENTATIVE COGHILL said he was open to that suggestion but
had not previously considered it. He related that a minimum of
three seasons is needed for planning purposes. He recalled that
several tax credits are targeted for profit and nonprofit
industries, as well as for public/private partnerships in
tourism. He related that due to the downturn in the economy
that this bill could help boost Alaska's economy. He projected
that the corporate tax will also diminish and the legislature
would likely need to revisit the matter very soon.
4:00:54 PM
REPRESENTATIVE BUCH suggested that the sunset clause would need
to be a minimum of five years. He made a motion to adopt
Conceptual Amendment 1, to add a sunset date ending June 30,
2014.
CHAIR OLSON asked if there was any opposition to Conceptual
Amendment 1.
REPRESENTATIVE NEUMAN suggested the sponsor consider an
amendment to Conceptual Amendment 1, and change the sunset date
from June 30, 2014 to January 1, 2015, to extend the date so the
legislature could review the matter.
REPRESENTATIVE BUCH offered an amendment to Conceptual Amendment
1, to extend the sunset date to January 1, 2015.
REPRESENTATIVE COGHILL stated that he did not have any
objections to the amendment. There being no objection, the
amendment to Conceptual Amendment 1 was adopted.
There being no objection to the Conceptual Amendment 1,
Conceptual Amendment 1, as amended, was adopted.
4:01:59 PM
REPRESENTATIVE NEUMAN offered his belief that tourism is
important to Alaska. He opined that the state can cover its
mandated costs such as for public safety and education for
several years. He recalled prior committee work to consider
directing marketing funds to the ATIA or other organizations.
He acknowledged that the marketing amounts fluctuate, which
makes it difficult for the tourism organizations since they do
not have any certainty of funding from year to year. However,
he expressed concern with this bill since state funding is also
uncertain. However, he noted that he did not wish to stop the
bill. He opined the tourism industry will be "hit hard this
year." He also offered his belief that it's important for
Alaskans to have jobs, too.
4:04:37 PM
REPRESENTATIVE NEUMAN moved to report HB [167], labeled 26-
LS0695\E, Bullock, 4/1/09, as amended, out of committee with
individual recommendations and the accompanying fiscal note.
There being no objection, the CSHB 167(L&C) was reported from
the House Labor and Commerce Standing Committee.
CHAIR OLSON announced that HB 167, Version E, as amended, will
move on to the next committee of referral, the House Finance
Committee.
4:04:58 PM
The committee took an at-ease from 4:04 p.m. to 4:07 p.m.
HB 177-MARINE & MOTORIZED RECREATIONAL PRODUCTS
4:07:34 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 177, "An Act relating to marine products and
motorized recreational products; and providing for an effective
date."
4:07:41 PM
RYNNIEVA MOSS, Staff, Representative John Coghill, Alaska State
Legislature, introduced herself.
REPRESENTATIVE NEUMAN made a motion to adopt the committee
substitute (CS) for HB 177 labeled 26-LS0477\P, Bannister,
4/2/09[Version P was before the committee.]
CHAIR OLSON objected for purposes of discussion.
4:08:16 PM
MS. MOSS explained that Version P represents three years of work
to implement consumer protection provisions with respect to
marine products and motorized recreational products, including
four wheelers, three wheelers, and snowmachines. She reviewed
the bill section-by-section. Section 1 amends AS 45.25 to
eliminate all-terrain vehicles, recreational vehicles, and
snowmachines from the "lemon laws" since those vehicles will be
addressed under new provisions in the bill.
4:10:56 PM
MS. MOSS referred to Section 2, titled "Chapter 27. Marine
Products and Motorized Recreational Products" and related that
AS 45.27 states that a manufacturer cannot withhold consent to a
sale or transfer of a dealership so long as the transferee meets
the criteria applied by the manufacturer and agrees to the terms
and conditions of the existing dealership agreement. Proposed
AS 45.27.020 would prevent a manufacturer from canceling or
declining renewal of a dealership agreement unless the
manufacturer has satisfied the notice requirements and has good
cause to cancel or fail to renew an agreement. She explained
that requirements for noticing are included such as a 60-day
notice to the dealership, with some exceptions such as a 15-day
requirement if the authorized dealer engages in fraud. The
manufacturer cannot decline to renew in the event of a death of
a partner/owner as long as the owner is not listed in the
agreement as one whose expertise and abilities were the reason
for the agreement.
MS. MOSS referred to page 3, to a definition for "good cause"
which includes infractions on material provisions. However,
material provisions may be a change that is not in the
agreement. In those instances, the item would need to be
noticed to the dealership or owner in writing not less than six
months prior to the effective date of the cancellation.
4:12:14 PM
MS. MOSS referred to page 3, of proposed AS 45.27.030, which
outlines the notice of cancellation or nonrenewal provisions.
She reviewed the requirements include a 90 day notice provision
must be given to a dealer for violations, and a 15 day notice
must be given for bankruptcy, insolvency, or conviction of a
felony involving moral turpitude, fraud, or a violation of a
dealership agreement contractual agreement.
MS. MOSS referred to page 4, of proposed AS 45.27, which
establishes that a manufacturer cannot coerce an authorized
dealer to enter into a dealership agreement with unfair
stipulations such as requirements of dealers to overstock
inventory. This proposed section creates a definition for
"manufacturer's representative" that can include an employee or
an agent who engages in the business, including distributors.
4:13:34 PM
MS. MOSS referred to proposed AS 45.27.050, which is similar to
motor vehicle statutes, she stated. She opined that these
statutes help ensure a dealer is treated fairly. This provision
requires that a manufacturer must repurchase a two-year
inventory, including those products listed in the manufacturer's
parts price books in the prior two years if the manufacturer
cancels or fails to renew a contract without good cause. She
recalled that in the motor vehicle provisions either party can
cancel a dealership agreement and the manufacturer would be
required to purchase the inventory. She related that the dealer
has 90 days to return the property for compensation and the
manufacturer has 60 days to reimburse the dealership or the
financial institution that holds the security interest.
4:14:54 PM
MS. MOSS referred to page 5, to Article 2 titled "Article 2.
Product Warranties." She explained that this article covers
what happens with respect to defects in products or parts. She
further explained that during a warranty period the dealer will
be paid to repair defective products. She related that this
provision establishes a requirement to provide a schedule for
reimbursement of defective products and the customary charges
for warranty work, which may be a printed flat rate, or it may
be a rate fee reviewed and agreed to by dealers and
manufacturers. She referred to page 7 of proposed AS 45.27.160,
which establishes a timely reimbursement of claims within 30
days. She noted that the manufacturer's failure to pay the
claim or to provide notice is considered a default. However,
manufacturers have 30 days to provide notice that manufacturers
do not intend to pay the claim.
4:16:57 PM
MS. MOSS referred to page 7, to Article 3, titled "Article 3.
Miscellaneous Business Practices" which she related as the
consumer protection provisions. She explained that this
requires authorized dealers to post notices for retail labor
rates, for notification that their technicians are factory
certified. This provision requires dealers to post notice for
customers who are having work done that does not fall under
warranty provisions to provide written estimates to include,
parts, labor, and costs, and any additional charges such as
diagnostic or storage charges. She related a scenario in which
a constituent took a car to a local shop for repair, discovered
the charges were more than she could afford, and when she picked
up her car she was assessed a $100 diagnostic charge. This
provision would require authorized dealers to post notices for
hidden charges. She referred to proposed AS 45.27.220, which
requires a manufacturer to provide the date when parts and
equipment will be available for factory recall notices.
4:18:23 PM
MS. MOSS referred to proposed AS 45.27.230, which she
characterized as the "lemon law." She stated that if a purchase
is under warranty, but the product is less than a year old and
at least one or two problems arise, the manufacturer must
replace the product or refund the purchase price. First, if the
dealer cannot fix a serious defect, after attempting to fix the
defect four times, or if the defect prevents the user from using
the product for 30 days or longer. She highlighted this
provision in the bill is clearly a policy call. She related her
understanding that the motor vehicle lemon law would apply to
vehicles that have been taken into the shop three times for
repairs, with the vehicle in the shop for up to 30 days without
the defective vehicle being repaired.
4:19:32 PM
MS. MOSS referred to page 8, titled "Article 4. Miscellaneous
Provisions." She explained any provision in a dealership
agreement that violates this chapter is unenforceable.
Additionally, contract law and common law continue to apply.
She referred to Article 6, titled "General Provisions" which
provides definitions including definitions for "authorized
dealers", "dealership agreements", and "landed cost." She
related that this legislation is named the Alaska Marine Product
and Motorized Recreational Product Act. She explained that
proposed AS 45.50.471(b) exempts these products from existing
law, AS 47.67, under the trade practices sections of the
statutes. She highlighted that the bill applies to dealership
agreements entered into after the effective date of the act.
The bill has an immediate effective date.
4:20:51 PM
REPRESENTATIVE HOLMES stated that she greatly appreciates the
time sponsor has put into HB 177.
REPRESENTATIVE NEUMAN pointed out he previously worked on this
issue. He related his understanding that this bill would cover
marine and motorized recreational products such as ATVs similar
to the automobile consumer protection. He offered his belief
that the bill is to help Alaskans. He highlighted that ATVs and
snowmachines are primary modes of transportation for many
Alaskans.
MS. MOSS brought up section she previously missed. She referred
to page 5, of proposed AS 45.27.110, with respect to defective
parts. She offered that language was added to require the
manufacturers to deliver the part to the authorized dealer
nearest to the purchaser or to the dealer that sold the product
to the consumer. She described a scenario in which a consumer
purchases a snowmachine or ATV in Delta Junction, but lives in
Fairbanks. Thus, in the instances of defects, the nearest
dealer would be a dealer that the consumer had not purchased the
product from or had not conducted business with. She related
this bill provides an option for the consumer to select the
dealer. She recalled early dealers operating out of their
garages and compared that to opening a new dealership with the
costs of inventory and specialized tools. She opined that this
bill could well be an example of cutting edge legislation for
this industry.
4:24:38 PM
REPRESENTATIVE COGHILL thanked Ms. Moss for her staff work. He
explained that he worked to strike a balance between the unique
needs of dealers and consumers in Alaska, and manufacturers. He
said, "I think we've found what I would consider a clean pathway
for all three to have good rules to work by and still have it so
the manufacturers just don't rule the distributors or refuse to
get good service to the consumers, So it is consumer protection
in that regard." He opined that the bill does not enter into
the contract agreements but can assist dealers in working with
manufacturers on issues. He further opined that the bill will
assist all three groups.
4:26:31 PM
CURTIS SPENCER stated he is a consumer who has had lots of
experiences with items. He related an incident in which he
purchased a jet boat for $125,000. He stated that he had to
replace 18 fuel pumps over four months, without any help from
the manufacturer. He opined this is a bill that needs to be
passed. He highlighted that he has worked with dealers on ATVs
and snowmachines so he has experienced the agony dealers have
when assisting consumers. He recalled that one time the dealer
purchased his snowmachine since he could not fix it. He offered
his belief that this bill will be good for everyone, including
the manufacturer.
4:28:41 PM
DUDLEY BENESCH, Owner, Alaska Mining and Diving Supply (AMDS),
stated his business has been in operation for 33 years and
employs 44 Alaskans. He related that he has worked on this
issue for many years. He offered his belief that this is
legislation that is being enacted throughout the country. He
pointed out numerous states such as Montana, New York,
Louisiana, and Texas have all passed similar legislation with
the same goal which is to create balance between manufacturers,
dealers, and consumers. He opined HB 177 focuses on problems
that have been experienced in the industry. He indicated that
the bill will help produce a more reliable product for
consumers. He said, "Our whole goal is to see warranty issues
go away or go down." He offered that approximately 30 to 40
percent of his shop's time is spent fixing warranty issues and
safety recall issues that the manufacturers have created. He
said he did not know if it is due to rapidly changing technology
and manufacturers can't keep up or if products are being rushed
to market without adequate testing.
4:31:02 PM
MR. BENESCH provided a sense of the expenses involved. He
related that on one occasion the dealership had an issue in
which 300 snowmachine units affected by a drive shaft recall.
He applauded the manufacturers for their efforts. He said, "But
the devil is in the details." Due to availability issues his
dealership had to order and pay in advance for 300 drive shafts
and kits with seals and gaskets for a total cost of over
$60,000. Additionally, his shop provided labor for 20 percent
reduction in the allowable time from last year, and this year
the gap was higher. Furthermore, he was given 21 days to return
the defective drive shaft to the factory at his expense. He
pointed out that to return items to the East Coast on that type
of timeframe required sending it by United Parcel Service (UPS)
or by U.S. Post Office priority airmail. He related that his
business has lost over $3,000 returning their defective drive
shaft without any reimbursement. He opined that the safety
recall cost his dealership over $35,000 in lost labor,
administration costs, and freight costs. He offered his belief
that the dealerships have been one sided with manufacturers,
making decisions on cost and paperwork issues. He said, "I
strongly support HB 177. I think it's a great, great
opportunity for this state to get some consumer protection there
for businesses and consumers."
4:34:17 PM
WAYNE HULS, Co-owner, Marita Sea & Ski, Alaska Power Sports,
stated that he is a board member of the Alaska Marine Dealers
Association. He stated that he has battled with manufacturers
for over 18 years on behalf of consumers. He opined that the
one-sided warranty policies make it difficult for dealers to
take care of their customers. He related his experiences are
similar to Mr. Benesch's experiences in terms of costs incurred.
He highlighted that many customers have missed out on an entire
season of outdoor sports due to warranty issues. Furthermore,
many of these people are dependent upon their ATVs or outboard
motor for living and income. He said, "I've seen manufacturers
grossly mismanage product recalls resulting in promises of
replacement parts, but continually pushing the ship date out for
the parts leaving the affected customer without use of the
product for extended periods of time."
4:36:07 PM
MR. HULS offered his belief that his product really is customer
service, but that he has been in a stranglehold by the
manufacturers which has made it very difficult to provide good
service to Alaskans who want to enjoy the outdoors. He stated
that the manufacturers dictate labor charges based on Lower 48
prices. Furthermore, the manufacturers discount parts, delay
the arrival of parts, and require the broken parts to be
returned to them which force the dealer to pay freight expenses.
He related his understanding that providing warranty service to
his customers costs Alaska's small businesses. He opined that
the dealer either makes little profit, or loses money to care
for customers. He pointed out the uniqueness of Anchorage,
Alaska as a hub for sales in Western Alaska and elsewhere. Many
small "bush" dealers must perform warranty work on products the
business did not even sell. He mentioned that he is a dealer
for a major brand and recognizes that many rural dealers "clean
up" problems that a manufacturer has caused, even though the
machines were purchased at his dealership. He offered his
belief that these dealers must take a loss to accommodate the
customer or the consumer must return the unit to him, at great
expense. In short, the manufacturer sent defective products
that were purchased by consumers. Meanwhile, the dealer must
fix the problem that was the manufacturer's problem, but the
dealer is not breaking even. This bill is a consumer protection
measure, and if passed all dealers, including rural dealers,
will be in a better situation to provide good customer service.
He said, "I see this for all constituents will benefit if this
bill is passed. It will be a win-win situation and will make
the ground effort equal amongst the manufacturer, the dealer,
and the consumer. Thank you for the opportunity to express my
opinions."
LARRY INNIS, Director, Marine Retailers Association of America
(MRAA), stated that the MRAA strongly supports the bill. He
also asked committee members to support HB 177. He explained
that MRAA is a national trade association representing
businesses in the retail side of recreational boating. He
offered that MRAA consists of 3,000 members that sell and
service boats and operate marinas and retail stores. He
explained that since the early 1970s, the MRAA has worked to
protect investments and promote small businesses. He related
that boat dealers work hard to enhance the boating experience
and make it safe and enjoyable. During this time boating
consumers expect far better quality than they currently receive.
As a result of increased expectations, boat dealers have worked
to improve their relationships with manufacturers. Dealers have
found that the informal practices of 30 to 40 years ago do not
work in today's environment. He said, "Consumers want and
expect more. Dealers want more safeguards to protect their
business. Many of these safeguards can only be provided by
their product manufacturers. Dealers would like to enhance
warranty payment and claims procedures, and would like more
assurances on future business relationships to correspond with
the increased financial commitment that many are required to
make in order to keep a certain product line. Additionally,
dealers want to build a business that has value to sell or
transfer. He opined that due to the frustrations with the
arcane agreements and the unwillingness of manufacturers to
revise or edit the agreements, dealers have turned to the MRAA
for assistance. He recalled that MRAA promoted a model
agreement in 1966 that more closely resembled the business model
of the time and would have made a fair and level playing field
between dealers and manufacturers to meet the expectations of
buyers and consumers.
4:41:37 PM
MR. INNIS related that after circulating the model agreement the
manufacturers did not comment. Once more, changes were made and
copies were distributed but dealer agreements did not change and
manufacturers did not express any willingness to address the
changing climate. Eventually dealers began to turn to state
legislatures for relief. He related his understanding that
currently seven or eight states have dealer manufacturing laws
in place and four additional states are working to adopt changes
this year. Presently the legislatures' approach more closely
addresses the market place than agreements by boat
manufacturers. Thus, the market is thriving in states that have
passed similar consumer protection. He related that long-term
agreements provide dealers increased security and business
value, and more importantly, boating customers enjoy improved
warranty service and enhanced boat buying experience. He
concluded by stating MRAA believes that HB 177 is a good bill
that addresses many of the issues expressed by dealers including
fair and timely payment of warranty claims, product buyback due
to manufacturer cancellations, long-term multiyear contracts and
protection from unwarranted cancellations. He thanked the
committee and offered strong support for HB 177.
4:43:10 PM
RALPH SEEKINS, Owner, Seekins Ford Mercury, stated that he has
been a Ford dealer in Fairbanks for over 32 years and has been
in the auto business for 40 years. He further stated that he is
the primary author of the automobile dealer franchise law as
well as the Alaska Motor Vehicle Warranties Act, or "Lemon Law,"
prior to being a member of the Alaska State Legislature. He
noted that he worked with Ms. Moss to review this bill. He
offered several suggestions. First, he suggested that this bill
takes the customer out of the middle between the dealer and the
manufacturers. He recalled similar experiences in the
automobile industry. At the time, car dealers were picking up
expenses for the manufacturers in an attempt to keep customers
happy with the products. He opined that the dealers had
adhesion contracts, which are basically "take it or leave it
contracts." He offered his belief that virtually every state
has an Automobile Franchise law and some version of a Lemon Law.
He opined that was the only way to require manufacturers to
uphold their responsibilities.
4:45:11 PM
MR. SEEKINS referred to the applicability section of HB 177 and
related his understanding that this means the bill would not
apply to current dealership agreements. Thus, a dealer could be
covered, but one down the street might not be covered. He
highlighted that in the Automobile Franchise Law, the law was
crafted to apply to franchise contracts between the manufacturer
and dealers. He applauded members for continuing to keep the
term snowmachine and not snowmobile, which he stated is truly an
Alaskan term. He recalled that several things were important to
the automobile dealers. First, they wanted to ensure that the
franchise agreements apply to all dealers. Secondly, dealers
wanted the jurisdiction or venue to be within the state. Most
contracts required that disputes be adjudicated under the laws
of the state of Michigan, for example, with Ford Motor Company.
However, the legislature changed the law so disputes were
adjudicated in Alaska, more specifically to the location of the
dealer's principal place of business. Additionally, the
automobile law prohibited manufacturers from forming a corporate
or subsidiary to accomplish what was prohibited by the bill. He
recalled that the manufacturers came to the legislature to
attempt to get the applicability changed to after the effective
date. He opined that would have left him 20 plus years out of
time.
4:47:19 PM
MR. SEEKENS explained that some contracts may be renewable on
regular cycles such as a five year cycle. He further explained
that may be something the committee might want to consider. He
said, "Otherwise, I look at this bill as pure consumer
protection. I know what it meant to my consumers to be able to
have the force of law to require manufacturers to be reasonable
about what they paid for repairs." He opined that encourages
dealers to perform a quality repair since he/she does not lose
money in doing so. Additionally, he opined that most reputable
manufacturers would prefer to have the quality service. He
encouraged passage of the bill on behalf of consumers across the
state.
4:48:30 PM
CLINT KIRRY, Representative, Hewes Marine Company, stated that
Hewes Marine Company has been creating high quality aluminum
boats since 1944 and is currently the number one selling
aluminum boat in Alaska. He expressed concern with any
legislation that might affect the risk of doing business in
Alaska. He related that Hewes Marine Company does not support
HB 177. In general, he offered his belief the bill is one-
sided, in that it protects marine dealers against cancellation
by manufacturers, while leaving manufacturers at risk of
cancellation by dealers. He related that even when a boat
manufacturer meets all requirements for cancellation or non-
renewal the boat manufacturer would be required to buy back
large amounts of inventory. He opined that a dealer could under
perform in selling products and the manufacturer would still
have requirements to buy back perfectly fine products. He
highlighted that manufacturers work with each dealer on a case
by case basis and have dealer agreements in place. He stressed
the importance of the need for freedom to put together dealer
agreements.
4:50:23 PM
MR. KIRRY offered his belief that HB 177 makes the playing field
uneven and protects the dealers at the risk of manufacturers.
He also expressed concern that warranty requirements seek to
hold the manufacturers responsible for warranty coverage that is
already being provided by the manufacturers is good faith to the
dealers in Alaska. He opined that his company already commits
to paying retail for labor costs, with respect to warranties.
Further, warranty policies between Hewes Marine Company and
dealers have already been determined in writing. He related his
understanding that the proposed legislation is unnecessary. He
maintained that his company has had few recalls, and every claim
has been handled fairly and all parts and labor are handled by
the manufacturer. He pointed out his company realizes that
warranties are put in place for a reason.
MR. KIRRY stated when the manufacturer has placed a defect in
the product that manufacturers must take care of that through
warranties. He emphasized that his company hopes to do business
in Alaska for a long time and simply do this within the
marketplace without this type of legislation. Additionally, the
issues brought forward seem to be aimed at correcting a few
isolated incidents of bad practices by one or two motor sports
or marine manufacturers who do not handle their dealerships
relationships in the right way. He objected to having the bill
apply to all manufacturers since the industry has voluntarily
established practices that have made doing business in Alaska
agreeable for a long time. He concluded by stating the bill
seems to attempt to rewrite and supplant dealer/manufacturer
agreements and hinders the ability for manufacturers to enter
into business freely. He urged members not to approve HB 177.
4:52:57 PM
DAVID DICKERSON, Representative, National Marine Manufacturers
Association (NMMA), stated that the NMMA represents about 1500
boat builders, engine manufacturers, and accessory
manufacturers. He recalled earlier testimony today and had
several comments to make. First, the bill does not recognize
how cancellations by the dealer impacts manufacturers. For
example, a cancellation at the end of a model year can leave a
manufacturer with a tremendous amount inventory to store.
Secondly, he related that he visited Alaska and learned more
about the Alaska market. In particular, a cancellation by the
dealer can be a crisis for the manufacturer due to the small
number of dealers in Alaska and the ability to retain a market
presence. He related his understanding of the intent, but
opined that he is not sure the proposal provides balance. To
illustrate he indicated a number of issues raised should not be
addressed in this bill such as proper replacement of fuel pumps,
the amount of money expended for a drive shaft recall, and the
method by which recalls are handled. He agreed that recalls
must be handled appropriately. He referenced other legislation
in the Lower 48, stating that Minnesota and Iowa have chosen not
to take any action. And Michigan has not taken any action for
two full legislative terms. He acknowledged that contractual
obligations between manufacturers and dealers are respected in
the bill.
4:55:38 PM
MR. DICKERSON questioned the need for the legislature to intrude
when so much weight is placed on the contracts. He asserted
that the contracts should be supreme and should oversee
relationships between the manufacturers and their marine
dealers. He recalled testimony suggesting consumers wanted to
move to purchase their products other than the dealer closest to
their home since the consumer preferred the service or a better
deal. In fact, anything to encourages better service rather
than allow the consumer to leave the area for better service
creates a disservice to the consumer. Yet, that is what this
bill does rather than protecting dealers that perform well. He
recognized that testimony was given by what appears to be superb
dealers. However, he offered his belief that the real
protection this bill provides is to dealers who are not
providing the level of service that the testifiers strive to
give.
4:57:06 PM
MR. DICKERSON referred to the warranty reimbursement. He
explained that marine reimbursement provides "full reimbursement
plus, plus." A large number of the brands sold in Alaska
provide full warranty reimbursement. He offered his belief that
this bill is well intended, but it over regulates and misses the
mark. He said, "And overall, I think it is a real thumb on the
scale of competition and in the end will not be good for
consumers because it will protect those dealers that provide
poor service rather than provide any real benefit to those
dealers who are at the top of their game and doing the best they
can." He concluded by asking Chair Olson to not report out this
bill.
4:58:03 PM
DAVID MCCORMICK stated that he has operated a marine business
since 1999. He related that he has had the same manufacturer
for five years. He mentioned he has raised his family in Bethel
and loves the area. He pointed out that his customers come
first. He stressed his experience that in the past five years
his manufacturer has been an anchor that has been sinking him.
He opined that there has not been a year except for this year
that he has not had to take out loans. In particular, he
pinpointed warranties as the reason. He offered his belief that
the unfair reimbursement from the manufacturers makes it nearly
impossible for him to do business. He said he is in business
since he loves his business, the state, and the people in
Bethel. He said, "I'd like to continue what I do. I do it. I
do it well and I want to continue doing it. But, unfortunately,
how long can I keep on taking loans out that keep mounting up to
hundreds of thousands of dollars and keep in business." He
emphasized that this bill is long overdue. In particular, he
related that warranties have caused problems for dealers since
the 1970s. He related his understanding that manufacturers
worry about paying too much for unwarranted repairs. Typically,
he finds warranty issues to be legitimate. He stressed
manufacturers are often aware of issues at the factory level.
He explained that he sells 50 machines per year, cannot afford
to pay employees due to insurance costs. Thus, he must provide
warranty work himself. He reiterated he would love to stay in
this business. He said, "I find this to be a very good bill. I
just hope you guys can pass it. I'd love to stay in this. I
know my customers deserve a good product. The product should
come out of the factory without these defects that they are
coming here with." He thanked members for his opportunity to
testify.
5:02:15 PM
CRAIG COMPEAU, Vice President, Compeau Marine, stated his
testimony would be brief. He said his testimony is similar to
that of other dealers who have testified. He provided an
incident in which one of the manufacturers had outboard motors
that could not be fixed. The manufacturers refused to
repurchase the outboard motors. After much pleading, the
compromise offered was to have the dealer remove the power pack
and serial number tag from the motor for a $2 thousand credit.
He stated that the company paid $7 thousand per motor, which
totaled over $100,000. More importantly, the outboard motors
potentially could have affected his customer's safety. And to
maintain credibility with his customers, Mr. Compeau further
stated that he had to purchase back the motors from many of his
customers. He implied this is not an isolated case, but one
that is repeated. He said, "We think HB 177 truly benefits
Alaska's consumers, who are the ones behind the steering wheel
of that boat, behind the four-wheeler, you know, who are really
operating this product that isn't just a toy. We really
appreciate the opportunity to do testimony here and I thank the
committee for their time and service."
5:04:09 PM
PETER THOMPSON, President, River and Sea Marine, stated his deep
appreciation for the opportunity to speak in support of HB 177.
He related that the uniqueness of Alaska also poses many
challenges including transportation. He offered his belief that
HB 177 provides many safeguards for customers and consumers who
use the products as daily tools. He opined that dealers invest
large sums and pay Alaskan workers. He further opined that
businesses have a ripple affect including transportation and
aviation. Dealers can only satisfy customers if manufacturers
initially produce a good product. He emphasized that dealers
expend thousands of dollars to train with the new technology in
order to be able to provide warranty service. If the dealer
does not invest in adequate training, it could result in a
breach of the manufacturer's contract. He related that
consumers are often deprived of the use of products for weeks or
months while the dealer attempts to remedy the situation. He
said:
This is not in any way, shape, or form, an acceptable
scenario. We need to come into line with many Lower
48 states [that] have already passed legislation
designed to mitigate this totally untenable situation
and rectify to the fullest extent possible the need to
have a cohesive support line from manufacturer to end
user and to endeavor to have these past inequities
minimized. To all the parties involved, and
ultimately to better serve the needs of the customers
in this state, to ultimately the future development
and success of the state rests. In closing, I'd like
to address the concerns of Mr. David Dickerson, NMMA,
and Mr. Clint Kirry, from Hewes Craft, that if this
bill is enacted it is not intended to polarize or
antagonize any parties, but is in fact a chance to
form a new and fair and beneficial chance for all
parties to start afresh.
5:08:37 PM
MARK HORDEMANN stated that his snowmachine came in during
October, but the machine had a recall due to the gas tank. He
waited several weeks for the remedy and picked up his
snowmachine. Part way through the season the drive shaft
snapped. He said:
I was told, yes, they are having a problem with it.
This was a new and improved drive shaft, in which fact
it was nothing more than the same exact drive shaft
that they'd put in from the manufacturer. The drive
shaft was put in and this year I received a recall
notice once again to have the same drive shaft
replaced with a new and upgraded drive shaft. All
this time put out basically was around three months of
not being able to use my snowmachine. This is the
type of thing I would like protection from. And I
support the bill and thank you very much for listening
to me.
5:10:03 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 177. He removed his
objection [Version P was before the committee].
5:10:23 PM
REPRESENTATIVE HOLMES asked if Mr. Sniffen had any overall
thoughts on the proposed committee substitute.
5:10:47 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), stated that he has reviewed the bill.
He related that he does not have too many comments. He further
related he noticed that the Lemon Law section is a fairly short
and streamlined process compared to the motor vehicle law. He
pointed out that the motor vehicle statutes consist of three
pages and include details such as for noticing, and under what
circumstances a replacement is not authorized. He offered to
discuss the details with the sponsor prior to the next committee
hearing. Otherwise, he offered that the DOL has no other issues
with the bill.
5:12:12 PM
REPRESENTATIVE BUCH commented he first reviewed the bill several
years ago and had reservations, particularly with some
provisions that were very restrictive regarding
manufacturer/dealership requirements. He recognized the major
modifications made to the bill and suggested it may need some
minor tweaking as mentioned by the assistant attorney general.
Thus, he has chosen to cosponsor the bill and endorses HB 177.
5:12:54 PM
REPRESENTATIVE NEUMAN offered that he worked on this issue
several years ago in order to protect Alaskans, not only with
respect to costs, but for the safety aspects. He stated that he
wanted to ensure that Alaskans have good equipment since their
lives are at stake. He recalled the testimony from the Bethel
businessman who cannot afford the warranty problems. He
stressed when businesses must pay for extra equipment and parts
that the additional business costs reduce profits to the point
the dealer will simply go out of business. He thanked the
sponsor and his staff for their hard work. He opined that HB
177 is a good consumer protection bill.
5:13:54 PM
MS. MOSS asked to point out that the only repurchase the bill
requires is when a manufacturer terminates or fails to renew a
contract without good cause. She said, "Very straightforward.
I have before me a dealership agreement that does not even
address warranty work and defects. She asked to read two
sentences. She said she would not name the company. She read,
"This company has the absolute right in its sole discretion to
terminate this agreement on written notice of ten days prior to
the effective date of termination.
MS. MOSS stated under repurchases, it reads, "Upon termination
or nonrenewal of this agreement the company has no obligation
but shall have first option to repurchase any inventory." Thus,
these dealership agreements do not provide much protection for a
dealer.
REPRESENTATIVE COGHILL commented that he will work on the
replacement issue with respect to the Lemon Law. He offered to
work to tighten up the language. He stated that he does not
want to slow down the bill.
5:15:18 PM
REPRESENTATIVE NEUMAN moved to report Version P, labeled 26-
LS0477\P, Bannister, 4/2/09, out of committee with individual
recommendations and the accompanying fiscal note. There being
no objection, the CSHB 177(L&C) was reported from the House
Labor and Commerce Standing Committee.
5:15:59 PM
The committee took an at-ease from 5:15 p.m. to 5:18 p.m.
5:18:02 PM
HB 185-LABOR NEUTRALITY FOR STATE CONTRACTS
5:18:04 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 185, "An Act relating to the labor organization
position of state agencies and others with regard to
construction contracts paid for by state money."
REPRESENTATIVE MIKE KELLY, Alaska State Legislature, speaking as
prime sponsor of HB 185, stated that the bill promotes open
construction and is also called the "Government Neutrality and
Contracting Act." He related that Alaska's construction force
consists of about 70 to 75 percent non-union and about 25 to 30
percent union. This bill would promote and ensure open
competition on state construction projects while maintaining
government neutrality toward construction contractor labor
relations, he further stated.
5:19:15 PM
REPRESENTATIVE KELLY offered that the intent of HB 185 is to
reduce construction costs, expand job opportunities, and prevent
unfair discrimination based on labor affiliation or non-
affiliation. This bill supports awarding construction work
based on the merit of the bid or proposal through open
competition without favoritism to any special interest. The
bill forbids the state from requiring union only project labor
agreements (PLA), while at the same time providing that nothing
in its terms prohibit any contractor or subcontractor from
voluntarily entering into a PLA or other labor agreement. He
related that this bill is about fairness. It's about the three-
fourths of our state that operate non union. It ensures PLAs
are voluntary, that the state does not impose its will on the
construction work force.
CHAIR OLSON stated that HB 185 would be held over for further
consideration.
5:20:37 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:20 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 HB167 ver R.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 01 HB177 ver E.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 177 |
| 02 CSHB167 ver E Sponsor Statement.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 03 CSHB167 ver E Sectional Analysis.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 04 HB167 Draft CS ver E.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 05 HB167 Fiscal Note DOR-TAX-04-03-09.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 06 HB167 PPT Presentation by ATIA.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 |
| 02 HB177 Sponsor Statement.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 177 |
| 03 HB177 Sectional Analysis.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 177 |
| 04 HB177 Draft CS ver P.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 177 |
| 04 HB185 Fiscal Note DOT-AD-CA-3-26-09.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 185 |
| 17 HB185 Multiple Letters of suppor-opposition.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 185 |
| 18 HB185 Multiple Letters of suppor-opposition_2.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 185 |
| April 6 Packet Information.pdf |
HL&C 4/6/2009 3:15:00 PM |
HB 167 HB 177 |