Legislature(1997 - 1998)
02/19/1997 01:34 PM Senate CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE
February 19, 1997
1:34 p.m.
MEMBERS PRESENT
Senator Jerry Mackie, Chairman
Senator Gary Wilken, Vice Chairman
Senator Dave Donley
Senator Randy Phillips
Senator Lyman Hoffman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 43(FIN)
"An Act relating to registration of vehicles, to municipal taxation
of vehicles, and to emission control inspection fees for vehicles;
and providing for an effective date."
- MOVED CSHB 43(FIN) OUT OF COMMITTEE
SENATE BILL NO. 5
"An Act relating to municipal taxes and fees levied on certain
commercial vessels operating in waterborne commerce for the
privilege of entering into the port or levied on passengers who may
disembark from a commercial vessel at a port in the state; and
levying and providing for the collection and administration of fees
on passengers for the privilege of disembarking certain commercial
vessels that carry passengers in waterborne commerce at ports in
the state; and providing for an effective date."
- HEARD AND HELD IN COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
HB 43 - No previous action to record.
SB 5 - No previous action to record.
WITNESS REGISTER
Senator Bert Sharp
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of SB 5
Frank Rose
P.O. Box 72478
Fairbanks, AK 99707
POSITION STATEMENT: Opposes SB 5
Tom Dow
Princess Cruises & Tours
2815 2nd Ave., #400
Seattle, WA 98121
POSITION STATEMENT: Opposes SB 5; tax needs to be broad based
Tom Tourgas
P.O. Box 1889
Seward, AK 99664
POSITION STATEMENT: Opposes SB 5; supports broad based tax
Bob Engelbrecht, President
Alaska Visitors Association
1650 Maplesden Way
Juneau, AK 99801
POSITION STATEMENT: Opposes SB 5; supports broad based tax
Ms. Karen Rogina
P.O. Box 104900
Anchorage, AK 99510
POSITION STATEMENT: Opposes SB 5
David Lee
P.O. Box 1603
Valdez, AK 99686
POSITION STATEMENT: Opposes SB 5
Kevin Ritchie, Executive Director
Alaska Visitors Association
217 2nd St.
Juneau, AK 99801
POSITION STATEMENT:
Ms. Sheila Romero
550 1st Ave.
Fairbanks, AK 99701
POSITION STATEMENT: Opposes SB 5
Stan Stephans
P.O. Box 1297
Valdez, AK 99686
POSITION STATEMENT: Opposes SB 5
C.J. Zane
Holland America/Westours
POSITION STATEMENT: Expressed appreciation for hearing on
SB 5
ACTION NARRATIVE
TAPE 97-7, SIDE A
Number 001
CSHB 43(FIN) MOTOR VEHICLE FEES & TAXES
CHAIRMAN MACKIE called the Senate Community & Regional Affairs
Committee meeting to order at 1:34 p.m. He noted all committee
members were present and that the following teleconference sites
were participating in the meeting: Kenai, Seward, Fairbanks,
Valdez, Ketchikan and Anchorage.
CHAIRMAN MACKIE brought CSHB 43(FIN) before the committee as the
first order of business. He noted Tim Sullivan, staff to
Representative Eldon Mulder, who is prime sponsor of HB 43, was
present to respond to questions. However, there being no testimony
or questions on the legislation, he asked for the pleasure of the
committee.
SENATOR WILKEN moved CSHB 43(FIN) and the accompanying fiscal notes
be passed out of committee with individual recommendations.
Hearing no objection, it was so ordered.
Number 035
SB 5 EXCISE FEE ON PASSENGER SHIP TRAVELERS
CHAIRMAN MACKIE brought SB 5 before the committee as the next order
of business.
SENATOR BERT SHARP , prime sponsor of SB 5, explained the
legislation has several purposes, not the least being revenue to
the state. It is also a preemptive strike, possibly, that would
reserve this type of revenue for the state of Alaska so as not to
have individual cities up and down the coast battling about what
level of head tax they would want to charge in the future. He
noted an attempt to levy a head tax on cruise ship passengers
failed at the polls in the City and Borough of Juneau last October,
and that there has been discussion in other communities about a
possible head tax.
Senator Sharp read the following sponsor statement into the record:
"SB 5 would levy a $25 per passenger fee for each port of call
within Alaska.
"It is the intent of this legislation that the fee revenue
collected be distributed to municipalities through the existing
program of state revenue sharing to municipalities. The
municipalities shall use the shared revenue to provide, operate and
maintain emergency response capabilities as well as public safety
and security services.
"It is recognized that the large number of cruise visitors arriving
in our state impact not only on the port cities but many continue
their travels throughout Alaska, thereby impacting public service
facilities in many areas. Several of the major cruise companies
offer cruise and land tour packages as a majority of their options
and to this end they own hotel/motel facilities throughout the
state served by transportation equipment that they own.
"Section 1 outlines the intent and purpose of this bill.
"Section 3 establishes the exclusiveness of the state to levy or
collect a passenger tax or fee except for those already in
existence and pledged by covenant to the retirement of port
facility bonds. This will preclude a hodgepodge of varying levels
of port fees causing friction among port cities. It also will
avoid the cruise companies from telling one that if you do that, we
won't come there anymore, which has occurred in the past.
"Section 4 adds a new chapter to AS 43 which sets the
responsibility and procedures for collection of the fees,
disposition of said revenues, subject to appropriation through the
existing municipal revenue sharing statutes, establishes the fee
and its applicability and defines certain terms used to assure
clarity and understanding.
"Finally, a "non-severability" clause is stated in Section 5 and
Section 6 sets and effective date that is practical to the seasonal
nature of this activity. The primary benefits of this proposed
legislation are:
1. Provides a method for a large portion of the visitors to our
state to share in the cost of providing critical public services
that they demand, utilize and expect.
2. Provides a low cost system of levy collection and
administration of this fee system.
3. Provides a fair and effective method of distribution of those
revenues throughout the impacted areas via an already existing
state municipal revenue sharing mechanism.
4. There is no question about our visitors needing and utilizing
emergency and other public safety services; you read about them
practically every day. Throughout the world, with the exception of
Alaska, fees are levied at most port-of-calls and they range from
$25 to $75 per call. These fees are added to the published fares
in all instances; thereby, they do not affect the cruise operators
bottom line profit, if, indeed, their cruise cost as advertised
includes the cost of operation.
"I urge each committee member to carefully scrutinize the contents
of this proposed legislation, ask questions, and ask yourself ...
Does this offer an acceptable, reasonable avenue to achieve a
portion of the $66 million in new revenue called for in this second
year of our long-range financial plan? Does this offer a new
revenue stream that would be more acceptable to your constituents
than other options? Is maintaining a viable state municipal
revenue sharing funding level important to us?
"If we are to be successful in achieving this year's financial plan
goals, this may very well be one of the options that we want to
consider. That is why I've offered this bill as option to
consider, to get testimony and people to the table to talk about
it."
Number 140
Senator Sharp directed attention to a handout which outlines port
charges, taxes and government fees that are added on to a
passenger's fare by Holland America and Princess Tours. Last year
these charges totaled approximately $50,525,130. A McDowell Group
study found that approximately $2.8 million was paid in state for
port moorages and lightering fees. He said this leaves $47,725,000
for some other services that are unclear, but he does not think
that they qualify as taxes or government fees as stated in the
publications of the cruise companies. He said the expenses
probably are justifiable but he doesn't think the descriptions
accurately say what they are.
Senator Sharp also spoke to lawsuits filed in Florida by people
that book reservations and then have to explain the additional port
charges, taxes and government fees when writing up tickets. It was
discovered that a majority of these charges were not port charges,
taxes and government fees. That situation was settled, and the
publication is being redesigned and clarified so that the buying
public knows exactly what those added on fees are for.
Senator Sharp stressed that he is not picking on the two companies
that operate a majority of the business in Alaska; he is just
saying that this may be the opportunity to avoid a dog fight down
the road between communities once they consider levying a head tax.
This legislation would preempt that by making it a state option,
and then distribute the money through municipal revenue sharing all
over the state where there is an impact from tourism.
Number 255
SENATOR SHARP directed attention to two amendments. The first
amendment clarifies that "vessel" is one that has overnight
accommodations for more than 20 persons, so that eliminates the day
cruises and the charter boat operators, etc. The second amendment
clarifies the definition of "port."
CHAIRMAN MACKIE suggested dealing with the amendments after all the
testimony on the bill has been heard. He then opened the meeting
to public testimony.
Number 285
FRANK ROSE , testifying from Fairbanks on behalf of the Alaska Hotel
and Motel Association, said their concern is making sure that there
is a good understanding that this particular bill not only impacts
what's happening in Southeast Alaska, but has a tremendous impact
on what's happening in Interior Alaska. Eighty percent of the
business during the summer months of two of the largest hotel
operators in the Fairbanks area comes from cruise tour business,
and fifty percent of the business of a hotel that he manages in
Denali National Park comes from cruise tour business. The concern
is that as prices start to rise, visitors will reconsider where to
travel. He said to say that the tax will have no impact on the
tour operators is short sighted, and as the prices rise, the number
of passengers will obviously start to decrease.
Number 316
TOM DOW , Vice President of Public Affairs, Princess Cruises and
Princess Tours, testifying in Juneau on their behalf as well as the
Northwest Cruise Ship Association, said he had several points to
make in hopes of clearing up what he thinks may be some
misconceptions or misunderstandings regarding the proposed tax.
He added that he finds himself in the position of agreeing with
Senator Sharp on several points that he made, if not all of them.
Mr. Dow said this proposed tax is unprecedented; there is no other
state or local government anywhere in the United States that
imposes a general tax on cruise passengers to fund general
government operations. On the other hand, cruise ship operators
pay port charges everywhere, including Alaska. He said everybody
knows about these charges before they book a trip so it is not a
hidden charge.
The charges paid by the cruise lines relate to facilities and
services provided to the ships or the passengers, and they are
customary and accepted widely in the industry. These customary
charges include docking, tugs that are sometimes necessary,
stevedoring, harbor pilots, etc., and in places like Juneau,
Princess Cruises pay sales taxes on top of these charges. These
are charges which would not be incurred were it not for the port
call. It is estimated that industry wide the cruise lines spend
about $25 million a year on these types of charges and fees.
Mr. Dow also pointed out that the cruise industry works with the
local ports in an effort to provide real solutions to real
problems. In Sitka, the cruise industry paid 50 percent of the
cost for an additional lightering dock, and they have done the same
thing in other ports around the state. The long established cruise
and tour operators make substantial investments in Alaska which
contribute to the local tax base, employment and economic activity.
He added Princess will become the largest bed tax payer in the Mat-
Su Borough this year when they open their new hotel, as well as
becoming one of the larger property tax payers there.
Concluding his testimony, Mr. Dow stated Princess and the Northwest
Cruise Ship Association support the Alaska Visitors Association's
position that any tax on the visitor industry needs to be broad
based and equitable, and he urged deferring action on SB 5 while
efforts to come up with an alternative are explored.
Number 485
CHAIRMAN MACKIE asked what the impact would be on pricing if their
vessels were to stop at four ports during a cruise to Alaska. MR.
DOW replied that the real pricing on cruising Alaska has not
increased in the last five years, which is also true for all the
major cruising destinations. However, they think they are probably
at the pricing point they could be at, and the impact of this could
be significant.
Number 500
TOM TOUGAS , President of Kenai Fjord Tours in Seward and testifying
from Seward, said it appears the concern about day boats and
charter boats will be addressed by Senator Sharp's proposed
amendment. Other concerns are the unfairness of singling out one
industry and that the smaller ports like Seward, Sitka and Valdez
will be bypassed by the cruise lines because of the added cost to
stop at those ports. He said the industry understands the concern
to raise additional revenues, and they stand ready to work with the
Legislature on a broad based tax.
Number 530
BOB ENGELBRECHT , President of the Alaska Visitors Association,
testifying in opposition to SB 5 outlined the following concerns:
(1) The tax is unfairly targeted; it targets one segment of the
industry, of the traveling public. Additionally, this bill is
trying to replace financial assistance to city governments with
taxes imposed on visitors.
(2) The tax is excessive; $25 per port per passenger will add
somewhere between $75 and $100 or more to the price of a cruise for
the privilege of disembarking at an Alaskan port. It is a very
price sensitive market and this tax would add somewhere around 15
percent to the cost of a cruise. Visitors are already paying sales
taxes to support general government services in many of the port
communities.
(3) The tax would negatively affect economic development,
particularly in the area of some of the smaller communities that
are trying to attract more cruise ship calls to their communities,
and it would probably encourage them to stop at fewer ports.
Mr. Engelbrecht stated the visitor industry is prepared to pay its
fair share in taxes, and as the state looks for new sources of
revenue, they ask the search be guided by principles of fairness
and that new taxes be equitable and broad based.
TAPE 97-7, SIDE B
Number 020
CHAIRMAN MACKIE asked Mr. Engelbrecht if he could explain the
process the industry would go through on taking a position on a
broad based tax, either on the industry itself or overall. MR.
ENGELBRECHT answered that he sees it starting at AVA's board of
directors level and smaller committee groups, and then going out to
the membership to see if it is something that works for them and is
fair and equitable.
Number 080
KAREN ROGINA , Executive Director of the Alaska Hotel and Motel
Association, testifying from Anchorage in opposition to SB 5, said
their opposition to this bill stems from the belief that it will
not accomplish its goal of creating a sustainable revenue stream.
It will erode the cruise visitors' travel into the Interior, and
decreased visitors means fewer hospitality related positions to
fill. Taxes that are specifically targeted at visitors will
ultimately result in fewer visitors. Making the state more
difficult to market will mean more money will need to be spent to
attract visitors.
Number 110
DAVID LEE , Executive Director of the Valdez Convention & Visitors
Bureau testifying from Valdez, pointed out that for the 1997 cruise
ship season, Valdez is already looking at 10 less dockings than
they had in the 1995 and 1996 seasons, and they believe that SB 5
would further discourage any growth in this activity. He noted the
City of Valdez has plans to expand and improve its port facilities,
and this legislation would be self defeating to their local effort.
Number 133
KEVIN RITCHIE , representing the Alaska Municipal League and the
Alaska Conference of Mayors, said both organizations agree more
work is needed on an issue that is this important.
Mr. Ritchie thanked Senator Sharp for recognizing that stabilizing
revenue sharing, which is another purpose of SB 5, is very
important. He said without stable local taxation, we're hurting
the growth of all business and all economies. Shared revenues is
a good way to go, and those type of issues are being discussed.
The more visitors, the more people that are on the roads the
greater the wear and tear, and so there are some good broad based
taxes that have a place in revenue sharing.
Number 220
SHARON ROMERO , testifying from Fairbanks on behalf of the Fairbanks
Convention and Visitors Bureau, voiced their opposition to SB 5.
The industry and their Interior industry businesses are highly
dependant upon the cruise segment of their marketing efforts and
what they offer to their visitors. She noted the City of Fairbanks
has a bed tax of which the Fairbanks Convention & Visitors Bureau
gets 65 percent and the other 35 percent goes to the city for its
efforts which includes some road repair as well as money going back
to the city. For the Fairbanks North Star Borough, 100 percent of
the bed tax collected goes into the borough's general fund. She
concluded there are monies being collected from the tourism
industry that are being put back into the municipalities.
Number 260
The teleconference moderator in Seward informed the Chairman that
John Tippett and Kim Hughes were present in the Seward LIO and
wanted to go on record as being in agreement with the comments made
earlier by Tom Tougas of Seward.
Number 270
STAN STEPHANS , owner of Stan Stephans' Cruises in Valdez stated his
opposition to SB 5. He urged the committee's favorable
consideration of Senator Sharps' amendment which would exclude
vessels having overnight accommodations for less than 20 persons.
He has various charter trips that cover Prince William Sound. For
one of his shorter trips that just goes into the bay, he charges
$35 and an additional $25 head tax would bring the cost up to $60.
He also has a trip to Whittier that stops at two ports and the head
tax would mean an additional $50 to each passenger. He stressed
the need for a broad based tax, which, he said, makes more sense.
Number 288
C.J. ZANE , representing Holland America Lines, expressed
appreciation for the hearing on SB 5. He informed the committee
that Al Parrish, who is a vice president for Holland America Lines
and based in Anchorage, had planned to testify, but his plane was
unable to land in Juneau due to inclement weather.
Number 310
CHAIRMAN MACKIE brought the following Amendment No. 1 before the
committee:
Amendment No. 1
Page 4, line 30: Following "or vessel" insert "having overnight
accommodations for more than 20 persons"
SENATOR SHARP explained it was never the intent to levy a tax on
day cruises or small charter boats and he thinks the amendment
would take care of that problem.
CHAIRMAN MACKIE asked Mr. Stephans if he thought more than 20
persons was an adequate number and if he was aware of other
operators in the same business that might be affected by that
number. MR. STEPHANS responded that he has one vessel that sleeps
35, but it doesn't get used often for overnight stays so he doesn't
think it will affect him more than four or five times during the
year. He related that Alaska Sightseeing has a new vessel coming
on line this year that will be making three-day overnight trips
within Prince William Sound, and he thinks the passenger count on
that vessel is close to 100.
CHAIRMAN MACKIE stated it was not his intention to take any action
on the bill or the amendments until concerns like those raised by
Mr. Stephans could be looked at.
There being no further business to come before the committee, the
meeting adjourned at 2:58 p.m.
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