Legislature(1997 - 1998)

02/05/1997 01:35 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE                         
                        February 5, 1997                                       
                           1:35 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                                                           
 SENATE BILL NO. 23                                                            
 "An Act levying and providing for the collection and administration           
 of excise taxes on the rental or furnishing of transient lodging,             
 and authorizing disposition of estimated receipts from that tax;              
 and providing for an effective date."                                         
   - CSSB 23(CRA) ADOPTED & MOVED OUT OF COMMITTEE                             
 SENATE BILL NO. 50                                                            
 "An Act relating to administrative penalties for violation of                 
 public water supply system requirements; amending Alaska Rule of              
 Civil Procedure 82 regarding attorney's fees; and providing for an            
 effective date."                                                              
   - HEARD AND HELD                                                            
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 23 - Community & Regional Affairs minutes dated 1/22/97.                   
 SB 50 - No previous action to record.                                         
  WITNESS REGISTER                                                             
 Senator Bert Sharp                                                            
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Prime Sponsor of SB 23                                 
 Ms. Sheila Romero, Executive Director                                         
 Fairbanks Convention & Visitors Bureau                                        
 550 First Ave.                                                                
 Fairbanks, AK 99701                                                           
  POSITION STATEMENT:   Testified in opposition to SB 23                       
 Bill Elander                                                                  
 Alaska Tourism & Marketing Council                                            
 526 W. 4th Ave.                                                               
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Testified in opposition to SB 23                       
 Ms. Susan Bell, President                                                     
 Juneau Convention & Visitors Bureau                                           
 379 S. Franklin St.                                                           
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Testified in opposition to SB 23                       
 Ms. Diane Mayer-Pearson                                                       
 4541 Sawa Circle                                                              
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Does not support SB 23                                 
 Phil & Karen Greeney                                                          
 Juneau, AK                                                                    
  POSITION STATEMENT:   Opposed to SB 23                                       
 Ms. Judith Wood                                                               
 Gustavus Visitor Association                                                  
 Gustavus, AK                                                                  
  POSITION STATEMENT:   Supports broad based tax                               
 Gerd Krause, General Manager                                                  
 Baranof Hotel                                                                 
 127 N. Franklin St.                                                           
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Testified in opposition to SB 23                       
 Ms. Janice Adair, Director                                                    
 Division of Environmental Health                                              
 Department of Environmental Conservation                                      
 555 Cordova St.                                                               
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Offered information on SB 50                           
 Keith Kelton, Director                                                        
 Division of Facility Construction & Operation                                 
 Department of Environmental Conservation                                      
 410 Willoughby Ave., Suite 105                                                
 Juneau, AK 99801-1795                                                         
  POSITION STATEMENT:   Offered additional information on SB 50                
 Breck Tostevin, Assistant Attorney General                                    
 Environmental Section                                                         
 Department of Law                                                             
 1031 W. 4th Ave., Suite 200                                                   
 Anchorage, AK 99501-1994                                                      
  POSITION STATEMENT:   Answered questions on SB 50                            
  ACTION NARRATIVE                                                             
  TAPE 97-5, SIDE A                                                            
 Number 001                                                                    
  CHAIRMAN MACKIE  called the Senate Community & Regional Affairs              
 Committee meeting to order at 1:35 p.m.  All members of the                   
 committee were present.                                                       
            SB 23 EXCISE TAXES ON TRANSIENT LODGING                           
  CHAIRMAN MACKIE  brought SB 23 before the committee and directed             
 attention to a C&RA committee substitute which incorporates an                
 amendment adopted at the committee's January 22 meeting.                      
  SENATOR WILKEN  moved the adoption of CSSB 23(CRA).  Hearing no              
 objection, it was so ordered.                                                 
 Number 020                                                                    
  SENATOR BERT SHARP , prime sponsor of SB 23, related he met with Mr.         
 Elander of the Anchorage Convention & Visitors bureau following the           
 previous meeting on SB 23, where they discussed the need to come to           
 the table and jointly work on some kind of long range funding plan            
 to finance the state participation in the marketing of tourism for            
 the state of Alaska.  However, after that meeting, Mr. Elander sent           
 out a member's alert letter in which he made some statements that             
 Senator Sharp found distressing.  Mr. Elander said that most                  
 legislators know that representatives of the tourism industry are             
 willing to work towards a broad based taxation policy that will be            
 acceptable; however, Senator Sharp said he doesn't know of the                
 industry coming forward with their recommendations, and he has been           
 involved with that discussion for over nine years.  Mr. Elander               
 also made reference to a dedicated fund, but Senator Sharp stressed           
 that there is not going to be a dedicated fund just to fund tourism           
 marketing in this state.                                                      
 Number 080                                                                    
  SHEILA ROMERO , Executive Director, Fairbanks Convention & Visitors          
 Bureau, stated the bureau, its board of directors and 400 members             
 encourage the committee to kill SB 23.  If passed, the bill would             
 have far reaching effects on Alaska's entire visitor industry.  For           
 instance, Fairbanks area hotels, lodges and bed and breakfasts                
 would collect this tax in addition to the City of Fairbanks and               
 Fairbanks North Star Borough's current 8 percent bed tax.                     
 Ms. Romero said this proposed tax puts the Alaskan tourism and                
 hospitality industry in a competitive disadvantage and will likely            
 diminish the contribution to the communities, to the cities and to            
 the state economy that is currently derived from the visitor                  
 industry.  If it costs more in taxes for the visitors to experience           
 Alaska, they spend less on the goods and services that the                    
 statewide businesses provide to them, or they don't come at all.              
 In closing, Ms. Romero urged defeat of the legislation.                       
 Number 110                                                                    
  SENATOR PHILLIPS  asked Ms. Romero what the industry is doing in the         
 Fairbanks area as far as trying to come up with some alternatives.            
  MS. ROMERO  said she believes the industry statewide is ready and            
 willing to work on this issue.  She also pointed out the tourism              
 industry right now is contributing about $124 million to local and            
 state government through taxes and other fees that they pay.                  
 Number 183                                                                    
  CHAIRMAN MACKIE  commented that the idea of the state wanting the            
 industry to step up to the plate a little bit more is not a new               
 idea; it is something that has been around for a long time.  He               
 said he thinks the state will be best served if everyone works                
 together to find that comfort zone so that adequate marketing for             
 Alaska as a destination can still be provided.  He asked Ms. Romero           
 if she had any ideas as to how to increase the involvement from the           
 industry so that there can be that partnership.   MS. ROMERO  replied         
 that the Fairbanks Convention & Visitors Bureau's main concerns               
 with the bill is that it is not a broad based tax and there is no             
 assurance that this money will be used for tourism marketing.                 
  CHAIRMAN MACKIE  reminded her there is a prohibition in the Alaska           
 Constitution against dedicated funds, and he suggested that coming            
 to the table and working with Senator Sharp and the committees is             
 probably the best way to work through the different philosophies on           
 this issue.                                                                   
 Number 240                                                                    
  BILL ELANDER , a member of the Board of Directors of the Alaska              
 Tourism and Marketing Council, said from the point of view of those           
 in marketing, he thinks all would agree that public funding is not            
 appropriate for tourism marketing, but the government role is to in           
 some way level the playing field between the competition of this              
 state.  Unfortunately, the legislatures and the governing bodies of           
 this state's competition don't feel that way, and they put                    
 tremendous amounts of public dollars to draw Alaska's visitors to             
 their destinations.                                                           
 Mr. Elander noted a comment was made during the previous hearing on           
 SB 23 that the state is carrying most of the marketing dollars, but           
 he pointed out $42 million was marketed for Alaska last year.  He             
 said the tourism marketing dollars for the generic part of Alaska             
 to get that word out for these small emerging businesses to enable            
 them to grow and develop is a worthy cause.  He stressed it is not            
 a whole a lot of money that is needed, and the beauty of Alaska is            
 that a modest budget is all that is needed to get its image out               
 there, but he cautioned that Alaska has got to get its message out            
 there because it is getting buried by the competition.                        
 Mr. Elander suggested, as a possible alternative to SB 23, perhaps            
 a tax with a sunset date to see if enough dollars are generated and           
 to see if the dollars are committed to satisfy both sides on the              
 issue.  He added that he doesn't know if something like that will             
 work, but sitting down and discussing those types of ideas will               
 work better than bringing forth a bill that targets one segment of            
 the industry.                                                                 
  SENATOR WILKEN  asked Mr. Elander to expand on his comment that the          
 government's role in tourism marketing is to level the playing                
 field.   MR. ELANDER  explained that, if another state government was         
 using their taxes and revenues to compete against one of our major            
 industries, he thinks it would be incumbent on our state government           
 to sit down with its industries and see how it can help mitigate              
 the situation.  He said the industry is asking for the state's                
 help, and he reiterated that it is the generic part of this                   
 marketing program that is so important to them.                               
 Number 352                                                                    
  SUSAN BELL , President, Juneau Convention and Visitors Bureau, said          
 the businesses that are members of the JCVB and SATC could not                
 begin to compete with the heavy marketing dollars that are                    
 available with some of the larger companies.  She has worked for              
 three visitor bureaus and each of those bureaus has relied very               
 heavily on leveraging the state's program, as does SATC.  She                 
 pointed out that Juneau gets over a $100 million economic impact              
 from the visitor industry, and when looking at the state, something           
 that develops healthy municipalities is going to make sure that               
 each of our communities needs less municipal assistance  at the               
 state level.  She stated the visitor industry is a very competitive           
 marketplace that is very cost sensitive, and we have to be aware of           
 how we fall in on a world competitive scale.                                  
  CHAIRMAN MACKIE  said he knows from being part of the industry               
 himself that there is a strong desire for additional state                    
 contribution to marketing at a time when our budgets are dwindling,           
 and this is one way to generate many millions of dollars which                
 actually could help the industry.  He asked if anybody has ever               
 stopped to take a look at that angle versus the attitude that the             
 tax will destroy the industry.   MS. BELL  replied that AVA and               
 others have voiced support for a broad base tax, and the major                
 stumbling blocks over SB 23 is that it is not broad based enough.             
 Number 406                                                                    
  DIANE MAYER-PEARSON , owner of Pearson's Pond Luxury Inn & Travel in         
 Juneau, testifying in opposition to SB 23, said the majority of               
 potential travelers list price as one of the things that makes them           
 reject Alaska as a visitor destination and passage of this                    
 legislation would mean visitors to the Juneau area would be paying            
 a total of 14 percent in taxes.  She advised that as the owner of             
 small business, she relies very heavily on the image campaign                 
 through the Alaska Tourism and Marketing Council to help promote              
 Number 431                                                                    
  PHIL GREENEY , who along with his wife owns a bed and breakfast in           
 Juneau, also voiced concern about 14 percent in taxes on their                
 particular service.  He said he doesn't know of any other service             
 in Alaska that pays that kind of rate.  He suggested a much more              
 broad based way to generate more funds would be a much more                   
 desirable way to go, and it would be much easier for the people in            
 the small business community to bear.                                         
  KAREN GREENEY  of Juneau, said when we market Alaska, we are                 
 marketing entry to Alaska to everyone.  If there needs to be a tax            
 to supplement or to help the state finance tourism marketing, it              
 needs to be broad based, one where everyone, no matter how they               
 enter the state, will be paying their fair share of that tax.                 
 Number 494                                                                    
  JUDITH WOOD,  a member of the Gustavus Visitor Association and owner         
 of a fishing lodge in Gustavus, said that area is proposing                   
 incorporation and that incorporation petition includes a three                
 percent bed tax, which has mixed feelings among the lodge owners in           
 Gustavus, and she thinks adding an additional two percent tax would           
 meet with opposition from lodge owners and bed and breakfast                  
 owners.  She supports more marketing of Alaska and a broader based            
 Number 523                                                                    
  GERD KRAUSE , General Manager of the Baranof Hotel in Juneau, said           
 not only is the bed tax used for marketing tourism, but it is used            
 in communities to help build convention centers and to bring more             
 business into the communities.  An added two percent tax would                
 diminish these communities' chances of attracting conventions,                
 especially when competing for out-of-state conventions.                       
 Number 542                                                                    
  SENATOR SHARP  expressed his appreciation for all the input from the         
 various industry people.  He said there are some innovative ways              
 possibly that a revenue bill could be structured to give assurance            
 that the revenue would be spent on marketing tourism.  He pledged             
 his willingness to work with all concerned to find a way to fund              
 tourism marketing on a state basis and to spread the cost to all of           
 those that are benefiting from it.                                            
 There being no further testimony on SB 23,  CHAIRMAN MACKIE  stated           
 it was his intention to move SB 23 out of committee, as well as               
 stating that as a lodge owner himself and part of the visitor                 
 industry he would be not be voting on whether to move the bill from           
 Number 574                                                                    
  SENATOR WILKEN  moved CSSB 23(CRA) and the attached fiscal notes be          
 passed out of committee with individual recommendations.  Hearing             
 no objection, it was so ordered.                                              
 Number 578                                                                    
       SB 50 PUBLIC WATER SUPPLY VIOL: ADMIN PENALTIES                       
  CHAIRMAN MACKIE  brought SB 50 before the committee as the next              
 order of business.                                                            
  TAPE 97-5, SIDE B                                                            
 Number 001                                                                    
  JANICE ADAIR , Director, Division of Environmental Health,                   
 Department of Environmental Conservation, explained Congress                  
 reauthorized the Safe Drinking Water Act (SDWA) in 1996 and added             
 a new requirement for primacy of the drinking water program.                  
 Another change was requiring primacy for continued access to                  
 federal construction funds for drinking water systems.                        
 Ms. Adair pointed out that the state of Alaska has primacy for the            
 drinking water program at this time as does all other states except           
 for Wyoming.  Primacy means that the state manages and enforces the           
 terms of the SDWA in lieu of the federal government.  It affords              
 the state several benefits, including the ability to waive certain            
 monitoring requirements for specific water systems.  She related              
 these waivers have saved almost $1.5 million in laboratory costs              
 for systems that are located in the districts of committee members.           
 Primacy also allows the department to work one-on-one with systems            
 on solving their problems, and that helps ensure the delivery of              
 safe water to the communities served.                                         
 SB 50 will provide DEC the authority to establish a program for               
 administrative penalties.  It sets an amount of $1,000 per day per            
 violation for systems that serve more than 10,000 people, and for             
 all other systems, the penalty may not exceed $750 per day.                   
 On page 2, beginning with line 10 and ending on page 3, line 4, it            
 outlines the factors the department thought were important to be              
 considered when establishing an amount of a penalty.                          
 Ms. Adair pointed out that Section 7 of the bill delays the actual            
 effective date of the penalty authority until the EPA tells the               
 state it must have administrative penalty authority to retain                 
 primacy for the drinking water program.                                       
 Number 035                                                                    
  CHAIRMAN MACKIE  referred to the title of the bill and asked for an          
 explanation of change to the Alaska Rules of Civil Procedure.   MS.           
 ADAIR  explained that the administrative penalty for a violation is           
 a federal mandate.  The Civil Procedure Rule change is not a                  
 requirement of federal law, but where there is a water system that            
 refuses to pay a penalty and it necessitates taking them to court             
 in order to get them to do what needs to be done and to pay the               
 penalty, then that change would allow the state to recover those              
 attorney fees.                                                                
 Number 050                                                                    
  SENATOR HOFFMAN  referred to subsection (d) on page 3, line 8, which         
 provides a 30-day period in which a person can file an appeal after           
 receiving an assessment notice on a penalty, and suggested it was             
 too short a tim period and that it should be changed to 45 days.              
  MS. ADAIR  stated the department would not have a problem with his           
 suggested change.                                                             
  SENATOR HOFFMAN  then referred to page 3, line 19, which provides            
 that the person who receives an administrative penalty can file a             
 notice of appeal in the superior court.  He pointed out that people           
 in the smaller communities would have to fly in to file an appeal,            
 and he questioned why that couldn't be done in a district court               
 because there aren't that many superior courts in the state.   BRECK          
 TOSTEVIN , Assistant Attorney General, Department of Law, responded           
 that traditionally administrative appeals from an agency action go            
 to superior court and a superior court acts as an appellate court             
 and reviews the agency action as opposed to the district court, so            
 that's why those provisions were drafted that way.                            
  SENATOR HOFFMAN  referred back to subsection (d) and said it                 
 provides that the department may extend the time periods in the               
 subsection for good cause.  He then asked if there was a definition           
 of "good cause."   MS. ADAIR  answered that she did not know, but it          
 would be something that the department would want to address the              
 regulatory development process as they put the program together.              
 Number 105                                                                    
  SENATOR WILKEN  referred to the sectional analysis and asked if this         
 issue only deals with Anchorage, Juneau, Fairbanks, one air force             
 base and two army bases.   MS. ADAIR  said those six systems are the          
 ones that serve more than 10,000 people so those would be the                 
 systems that would be subject to the $1,000 per day per violation             
 penalty.  For all other systems in the state with less 10,000                 
 people are subject to a $750 per day per violation penalty.                   
  SENATOR WILKEN  inquired when the last time there was an issue that          
 required the filing of a lawsuit in a matter such as drinking                 
 water.   MS. ADAIR  thought it was in the very early 1990's, it was           
 a system in Southeast Alaska, and it was a criminal issue.                    
  SENATOR WILKEN  voiced his concern that as a society we need to talk         
 about administrative penalties and, particularly, allowing DEC to             
 impose them unilaterally.  He said this is probably an excellent              
 example of the heavy handed way that government controls what we              
 do, both state and federal.  He suggested there needs to be a                 
 better way to do this and not to just give carte blanche approval             
 to DEC to sanction something as simple as providing good drinking             
  CHAIRMAN MACKIE  asked Ms. Adair what would happen if this                   
 legislation did not pass.   MS. ADAIR  replied that at some point in          
 time, the EPA would begin the process to withdraw primacy for a               
 drinking water program, and if primacy was withdrawn, the program             
 would become an enforcement only program.  She related that 85                
 percent of the state's drinking water program is funded by EPA,               
 which amounts to approximately $1 million.  The 1996 amendments to            
 SDWA added construction funds for drinking water systems, and in FY           
 98 that is expected to be about $28 million to the state.                     
 Number 180                                                                    
 In a brief discussion on why the appeals have to go a superior                
 court instead of a district court, it was concluded that it is a              
 standard that is set out in the Administrative Procedures Act.                
  SENATOR DONLEY  suggested that could be amended if Senator Hoffman           
 thought his constituents would be better served by access to                  
 district court.                                                               
 Number 215                                                                    
  SENATOR HOFFMAN  stated he agrees with Senator Wilken's statement            
 about the heavy hammer that this legislation is giving DEC, but               
 because it is required in order for the state to comply with the              
 changes in SDWA and to continue to receive funds, he suggested                
 working on it to make sure that the department does not have so               
 much discretion on the use of that heavy hammer.                              
  KEITH KELTON , Director, Division of Facility Construction &                 
 Operation, Department of Environmental Conservation, said what                
 Congress is attempting to do with the changes in SDWA is respond to           
 an unfunded mandate complaint.  They are putting a carrot in this             
 Safe Drinking Water Act reauthorization that says they will fund a            
 low interest loan program with state participation.  The initial              
 funding, starting in FY 96, was $27 million and the state has to              
 put in a match of $5 million, so the there will be a total of $32             
 million for low interest loans for solving community infrastructure           
 problems.  The stick they are throwing in is the administrative               
 penalty, and if the state doesn't do the administrative penalty, it           
 loses primacy and the funding that goes with it, he said.                     
 Number 365                                                                    
  SENATOR WILKEN  commented that on the campaign trail he heard a lot          
 of good things about what the Legislature had been doing in the               
 rural areas in regard to sewer and water, and his comments, by no             
 means, should be taken that he doesn't support that.  He just wants           
 to make sure that the process isn't slowed down by having someone             
 or some group get out of control and forget where the power really            
 lies, and that's why he speaks against the ability to just simply             
 write an order that stops the process.                                        
  MR. KELTON  related that probably the primary recipients of these            
 loan funds are the larger urban communities, but any municipal                
 government can apply.  For instance, Anchorage has received well              
 over $30 million in the waste water program.  The smaller                     
 communities normally rely on a grants program rather than the loan            
  CHAIRMAN MACKIE  requested that Senator Hoffman and Senator Wilken           
 take a further look at this issue, both from an urban and rural               
 perspective, and work with the people at DEC to see if some of                
 these problems can be worked out before another hearing is                    
 scheduled on the legislation.                                                 
 There being no further business to come before the committee, the             
 meeting was adjourned at 2:48 p.m.                                            

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