Legislature(1997 - 1998)
04/16/1998 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE 16 April, 1998 9:10 a.m. TAPES SFC 98 # 122, Side A (000-590) Side B (590-000) CALL TO ORDER Senator Bert Sharp, Co-Chair, convened the meeting at approximately 9:10 a.m. PRESENT In addition to Co-Chair Sharp, Senators Pearce, Torgerson, Adams and Phillips were present when the meeting was convened. Senators Donley and Parnell arrived shortly thereafter. Also Attending: Representative TERRY MARTIN; Representative NORM ROKEBERG; JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development; MIKE CONWAY, Director, Division of Air and Water Quality, Department of Environmental Conservation; TINA LINDGREN, Executive Director, Alaska Visitor's Association; MIKE GREANY, Director, Division of Legislative Finance and aides to committee members and other members of the Legislature. via Teleconference: From Anchorage: DEBORAH SEDWICK, Commissioner, DCED; JANICE ADAIR, Director, Division of Environmental Health, DEC; CRAIG TILLERY, Assistant Attorney General, Environmental Section, Civil Division, Department of Law; and other members of the public. SUMMARY INFORMATION Co-Chair Sharp acknowledged the agenda in the past few days had changed continually. He announced that SB 108 would not be brought to the table during this meeting. While it was not on the agenda, he had made an earlier announcement that it might be addressed. He stated work needed to be done on the fiscal notes before continuing in the committee process. Senator Adams interjected that he had an amendment prepared on SB 108 and he wished to pass it out to fellow members for their review. He briefly explained that it addressed the long-term, short-term oil lease land disposal. He requested members give his idea some consideration. Co-Chair Sharp continued announcing the plan for the current meeting, to start with HB 51 and continue with SB 350. HB 234 would be moved to the afternoon schedule. If time allowed, bills scheduled for the afternoon meeting would be heard during this meeting. CS FOR HOUSE BILL NO. 51(RLS) am "An Act relating to the Department of Environmental Conservation; amending Rules 79 and 82, Alaska Rules of Civil Procedure; and providing for an effective date." Co-Chair Sharp instructed a member of his staff, LARRY STEVENS, to explain the proposed CS Workdraft. He noted the bill's sponsor was present and would be allowed to speak. Mr. Stevens spoke to the CS as follows: "I'm going to start slowly, because I believe the teleconference folks and some of the agency personal don't come on-line until about 9:15. But I will walk you through the changes that were made over the break to the CS that was described at the last meeting. The latest version of the bill in the CS that I'm referring to, is identified as /AA. The changes I'm describing refer to /Y." "Most of the changes that we made were to remove material that was not directly applicable to maintaining primacy for enforcement of the federal drinking water program. There were some compromises on other language that was generally appropriate." "Specifically, Section 1 was deleted. Section 2 was replaced with a finding section in the original version of the bill SB 50. Section 3 was revised in the following way: page 1 line 9 - the new material was retained. That has to do with compliance agreements. Page 2 lines 13-15 - the new material was deleted. Page 3 lines 20-22 - the new material was removed. So in that entire Section 3, the only change is at page 1 line 9, that language stays in. Section 4 was deleted. Section 5 was deleted. Section 6 was deleted. And throughout Section 7 references to entity remain but at the end of that section, there's a definition of the term "entity", and that definition is: "owner or operator of a public water system. So that flows through the entire Section 7. Also in Section 7, Subsections C and D were replaced with new material - approximately two pages, provided be the department as suggested by the Anchorage Water and Wastewater Utility. I understand that Fairbanks is also supportive of this different approach. Finally in Section 7, Subsection K was deleted. Now we go pretty quickly. Section 8, page 8 lines 9-13, the definition of "compliance agreement" which goes with the material that was retained in Section 3, was amended. On line 11, after the word "voluntary" the word "enforceable" was inserted and on page 8 line 12, the word "permittee" was deleted and the word "person" inserted. Sections 9 and 10 have conforming changes as required." "A note, there are court rule changes in this version of the bill. The drafter advises that a title change resolution is not required for court rule changes - somewhat along the same lines as an effective date." "Section 12, the material that was there has been replaced with what was Section 7 in SB 50. Those are the extent of the changes to the CS." "There are a few rough spots remaining and I believe Senator Torgerson has amendments to address those. There may also be one item, which the department will have some suggestions on." Senator Pearce admitted she had not been a part of discussions on this bill, nor had she been keeping up so she was confused. She asked what the bill would do. Mr. Stevens replied he would be more comfortable letting the sponsor and the department respond. Senator Phillips alluded he had questions of the department also. Co-Chair Sharp told committee members he believed the thrust of the bill was to allow the state to retain primacy over drinking water utilities. Senator Pearce asked if the state would lose primacy without this bill. Co-Chair Sharp affirmed. Representative NORM ROKEBURG, the bill's sponsor was invited to join the committee and speak to the bill and the new CS. He testified as follows: "Thank you Mr. Chairman, members of the committee, as difficult as it is for me to see four years of effort be in large part be deleted from this bill, I understand it's the Finance Committee's responsibility to do a fiscal note related to it and I understand that the department's indicated that to provide for the provisions that I had in the first section of the bill would be of a value of some $248,000. Therefore, with the deletions of parts of the bill, given your responsibility for sound fiscal management, Mr. Chairman, I would cede to your judgement of removing those and assume there would be a zero fiscal note attached to the bill as a result of those actions." "Also I agree with the drinking water section of the bill in relating to the recommendations made by the department as well as I agree with the amendments that I've had a chance to review with Senator Torgerson that cleans up some of those coercion I think. Creates better equity, particularly as it relates to the court rule [undecipherable]." So with that, Mr. Chairman, I have no objections to the CS with the Senator from Kenai's amendments. I would just in closing indicate that I am - and I would also like to thank Mr. Stevens and your staff that did some yeoman work in the last few days on this bill and congratulate him on his efforts. I would say in closing that the one [tape malfunction-undecipherable] that indicated that - it granted statutory authority to the department to discretionary enter into regulations on such things as site-specific mixing zones and those things there. I'm not sure the department made a sufficient case to say that they had authority to do so. And that's why it was added to the bill. With that, Mr. Chairman I have no further comments and I thank your committee for the time and effort they put in on this legislation." Because of the significant changes that were made to the bill, Senator Pearce asked Representative Rokeberg to explain what the bill did, and why it was needed. Representative Rokeberg responded that the CS had one provision that allowed the department to enter into compliance agreements for not only permitees, but other users of water as well. Additionally, he said it met the requirements of the Federal Clean Drinking Water Act. The provisions that were added provided a hearing procedure and allowed penalties to be imposed on municipalities of various sized. There was a sliding scale and a penalty schedule set up. He detailed the fines imposed and the hearing procedure. Senator Pearce asked of the department currently did not have authority to impose penalties on municipalities and if that was something they needed in order for the state to retain primacy. Representative Rokeberg affirmed that was true under the federal mandate and was necessary to continue receiving funding for capital water projects. Senator Pearce asked if the department could issue punishments through the regulatory process. Representative Rokeberg assumed the Legislature would wish to retain authority to level fines. Senator Pearce disagreed. Co-Chair Sharp indicated to the committee, two representatives of DEC were available to answer questions. He invited MIKE CONWAY, Director, Division of Air and Water Quality, to come to the table and noted that JANICE ADAIR, Director, Division of Environmental Health, was on-line via teleconference from Anchorage. Co-Chair Sharp said it was his understanding there was a change to the Federal Clean Water Act a couple years ago that required some of these changes. If the state failed to take appropriate action, it stood to lose primacy on the regulations. He knew that made many water suppliers concerned because they would rather work with state officials rather than the 9th Region of the EPA. He stated he had received considerable correspondence on the matter. He asked Mr. Conway to comment on the present version of the bill before the committee and give particular attention to whether the department felt it would accomplish the requirements to retain primacy. Mr. Conway introduced himself and commented as follows: "The aspects that I will deal with - and Janice is on line to talk about the drinking water aspects - but the compliance agreement language in there is something the department can live with. We enter into compliance agreements currently that, by putting them in here its bolsters that so we don't object to that. All the other water quality aspects have been addressed so Janice at this point can address the others when you're ready." Senator Phillips got to the bottom line by asking Mr. Conway to clarify what he meant when he said the language was something the department could live with. He asked if that meant DEC would support the bill. Mr. Conway stated that the department would support the aspect he talked about, but that Ms. Adair would need to address the drinking water aspect. Senator Phillips wanted to know if the department would recommend a veto action to the Governor. Mr. Conway assured the senator that he would not push for a veto of the bill. Co-Chair Sharp requested Ms. Adair to give her comments on the CS. After introducing herself, she testified as follows: "The bulk of this bill does deal with the drinking water program, which is under the Environmental Health division. It responds to changes made by Congress in 1996 to the state drinking water act, wherein it required that states have administrative penalty authority for violation of the Safe Drinking Water Act regulations." "DEC does not have statutory authority at the present time to administrate penalties, therefore this legislation was necessary. Without administrative penalty authority, the state stands to lose - any state would stand to lose primacy for the drinking water program. And with primacy would go access to federal construction funds for drinking water systems." "The federal law sets a minimum level of $1000 per day for systems that serve more than 10,000 people and requires penalties in an amount sufficient to ensure compliance for systems that serve fewer than those people. This bill does establish the schedule of those penalties from down to $100 a day for systems serving 1,000 or fewer persons." "We do support the bill in its present form. I believe it does address the other issues that were brought forward by the Anchorage Water and Wastewater Utilities [undecipherable] review process prior to the leveling of a penalty." Senator Phillips again asked if the department endorsed the bill and would not recommend a Governor's veto. Ms. Adair affirmed that. Co-Chair Sharp pointed out in the original bill, the fines imposed and how they had been reduced. He felt they had been reduced as much as possible while still meeting the intent of the federal dictation. These reductions had not met objection from the EPA, he noted. Senator Torgerson moved the committee adopt CS HB 51(FIN), Version "AA". Senator Adams objected for the purpose of asking a question. He requested the department explain the appeal process between the different versions of the bills. He referred to the earlier bill version where the appeal was to be heard in the Superior Court as opposed to the District Court. Did the appeals process change in the newer version of the bill, he wondered. Ms. Adair responded that it did not change. The only difference was an adDTional step was added before the appeals process. A request could be made to the department to review its decision before an appeal was filed in the court system. Senator Adams withdrew his objection and Co-Chair Sharp ordered the CS adopted. Senator Torgerson moved for adoption of Amendment #2, and spoke to the amendment. He told the committee it would delete material from page 6 lines 28-30, and restate the language to say, "the prevailing party shall be awarded full reasonable attorney fees and costs incurred in the collection actions" as earlier stated by the sponsor. He continued, adding that the amendment would bring back the effective date of the act. He believed the department brought this issue to the sponsor's attention for correction. Sections 2 and 4 should have the same effective date as section 7, he explained. Senator Adams asked how this would go along with section 5, page 7 lines 14-17. Would they complement each other with this amendment, he wondered. Senator Parnell joined the discussion and confirmed that they would complement because of the effect on the civil rule. He had another question for Senator Torgerson. He granted that he liked the provision allowing for the collection of attorney fees by the operator. But he felt that if the committee were going to remove the section, they needed to decide if they were going to allow full reasonable attorney fees or to allow Rule 32. He referred to a schedule of fees and a percentage rate and asked if there was a reason for not choosing that system of refund. Senator Torgerson responded that he hadn't thought about going with a percent of reward rather than a full refund of reasonable attorney fees. The court would make the decision, as how much could be recovered, he stressed. He didn't feel that would be the entire amount of the costs, but what the judge decided to allow. He indicated he would be open to a change to the amendment to allow for a straight percentage. Senator Parnell replied that he thought they were on the right track because if the agency were not the prevailing party the Legislature would want the operator to recover full reasonable attorney fees. However, the issue then came up as to what full reasonable attorney fees would be for the state, he warned. He felt there were other ways the department could engage the matter. He stated he had no objection with the amendment. Senator Torgerson requested Ms. Adair comment on the point brought up by Senator Parnell. She did not have a copy of the amendment to refer, but had been trying to follow along with the conversation. She offered CRAIG TILLERY, Assistant Attorney General, Environmental Section of the Department of Law was present at the Anchorage teleconference site with her and could comment. She preferred to have him speak to the issue since it was a legal matter. Senator Torgerson read the language of the amendment for the benefit of the teleconferenced testifiers. Mr. Tillery listened to the amendment and commented as follows: "The amendment that is offered - I guess it does look to me - if you want to make - I gather the sense of the committee is to make this [undecipherable] which would leave you basically with two choices, which would be to do this amendment, which makes everybody entitled to recover full reasonable attorney fees. The other choice would simply be to delete this and then delete section 5 I assume and make everybody subject to the existing rules, which would also lead to a fairly equitable situation except potentially in a situation of public interest litigation or one of the exceptions to Rule 82C. We don't have a position one way or another I think on this issue whatever is appropriate." Co-Chair Sharp ordered Amendment #2 adopted, as there was no objection. Senator Torgerson moved to adopt Amendment #3. He explained this amendment would change the title to amend Rule 602-B, Alaska Rules of Appellate Procedure and would also take out all references to filing with the District Court and the District Court, because it had no jurisdiction, passing the appeal along to the Superior Court. He felt this was a confusing process, the appeals should be taken directly to the Superior Court, where they would be heard. He also referred to language on page 5 line 13, which said the order must include notice that the entity may appeal the order to the Superior Court and list the address of the appropriate Superior Court. In other words, the ruling would include information on where to file an appeal and make reference to the District Court unnecessary and should not be mentioned in the bill. Co-Chair Sharp asked what action this amendment would require with relation to the title change. To Senator Torgerson's understanding, because this was a court rule change, it did not require a title change. They would not need a separate resolution. Senator Adams said he probably agreed with the amendment, but wanted to hear from DOL. Mr. Tillery commented that he also believed having the District Court involved in the appeal process added confusion to the issue. That was one of the reasons for the department suggesting the change to include the addresses of the Superior Court to ensure the paperwork be routed properly. DOL supported the amendment, he stated. Without objection, Amendment #3 was adopted. There were no further amendments. Co-Chair Sharp noted an individual on-line from Seward who was signed up to testify regarding this legislation. He called upon TOM TOUGAS, who began speaking. His testimony addressed a different bill and Co-Chair Sharp interrupted him and asked him to hold his comments until the committee brought that bill before them. There was no one else signed up to speak to HB 51. Senator Torgerson asked if there would now be a zero fiscal note on this bill. Ms. Adair affirmed it would be zero. Senator Phillips made a comment on the common title of the bill, asking if it would now be referred to as the Clean Water Bill. Senator Torgerson moved CS HB 51 (FIN), Version "AA" as amended from committee with zero fiscal notes. Hearing no objection, Co-Chair Sharp so ordered. SENATE BILL NO. 350 "An Act relating to tourism; relating to grants for tourism marketing; eliminating the division of tourism and the Alaska Tourism Marketing Council; and providing for an effective date." Co-Chair Sharp ordered a brief AT EASE, while Senator Donley was summoned to speak to the bill. The committee was in recess approximately five minutes starting at 9:50 a.m. Senator Donley offered a motion to adopt CS SB 350 (FIN), Version "B" for purposes of discussion. Senator Adams objected also for discussion purposes. Senator Donley requested that an industry representative explain the changes in the CS. TINA LINDGREN, Executive Director of the Alaska Visitor's Association came to the table. Her comments were as follows: "As I understand it, you would like a brief difference between the original bill and the CS. There really ..." Senator Pearce interrupted stating that since this was the first hearing on the bill, Ms. Lindgren should give an overview on the entire bill. Ms. Lindgren asked if it would be possible to go over the workdraft rather than the original bill and then explain the differences. Co-Chair Sharp agreed. Senator Donley felt that would be helpful. Ms. Lindgren asked permission to defer to Mr. Tougas, via teleconference for an introduction first. Senator Torgerson noted that Mr. Tougas was president of the AVA. Co-Chair Sharp delegated the decision to Senator Donley. Senator Donley expressed his desire to get a document before the committee for discussion purposes. He initially wanted an explanation of what was contained in the CS. Co-Chair Sharp then directed Ms. Lindgren to give an overview. She commented: "I'll attempt to do it in brief and then if you have any questions..." Co-Chair Sharp assured her the committee would refer its questions as necessary. Ms. Lindgren continued with her presentation. "The purpose of this bill is really to fulfill a request by the Legislature for several years to come to the table with more industry funding to replace tourism marketing. Some of you at the table have been requesting this for a long time and I have to say it was a monumental task but I am proud to be here before you with a plan and a bill." "What this bill is designed to do is implement the plan that you were given before for reorganizing tourism. It is not the only piece that would be required to implement that plan. There would be a bill. There would also be a set of bylaws of a new organization, which would have to outline many of the details of the plan. And then there would have to be a grant or contract with the Department of Commerce [and Economic Development], which would put further restrictions on the money as to how it could be used and performance measures - those kinds of things. So I just want to point out at the onset that this would both [undecipherable], therefore you won't see every detail that's here in the bill itself." "There is only one significant change between what was in the plan and this bill. And that is the retention of the Division of Tourism functions, except for primarily marketing has been removed." "The reason for the CS, to Senator Adam's question as opposed to the original amendment is that since its introduction we have worked with the DCED. They have concerns about some things they would like to see in the Legislation and we have attempted to work with them to address their concerns and are continuing to do that. That's the main reason for introducing the separate CS." "To go through the bill quickly, Section 2 amends the statute where it outlines the purposes of the Alaska Tourism Marketing Council and DT. This bill would essentially eliminate the DT - excuse me - the ATMC after a one-year transition. The purposes section right now currently in law is identical for both the ATMC and the DT. The section just removed the reference to ATMC. The only other change to this section is the word, "generic", and that was removed at the request of the department because there is some concern that that might preclude individual markets from being marketed, such as the highway or rural tourism, cultural tourism, eco-tourism, and that wasn't the intent. It was to clarify what the intent was." "Section 3, all reference to the ATMC are removed and it also adds to the duties if the DT a tourism planning and advocacy role. That would be something that is very much needed in the DCED with regard to tourism. There are many issues throughout state government that tourism is affected by. And there really needs to be a role within state government when it comes to transportation planning, land use planning, state's advocacy also work with the Western State's Policy Council in other areas where the government talks to the government differently than they do to the private sector. So we always envisioned there would be a role for the department in tourism. The second change to that section adds that they will evaluate the tourism matching grant program that's outlined in the bill." "Section 4 adds a new subsection to the statute, which would require the department every year to make a matching grant to a qualified trade association for planning and executing tourism marketing programs. The idea behind this bill was to consolidate all marketing in one single place. And that the division would be charged with doing a grant. Currently there is a proposed amendment, which would change this to a contract at the request of the department also." "We have, at the request of the department added a matching grant formula and also at the request of some Legislators who saw that while the state was putting up funds there was nothing to say that the industry would come back with matching funds. And although that is the entire purpose of going through this change in legislation we felt there would be best if there was some sort of minimum matching contribution. We are proposing that it be 30 percent at the outset, increasing in two years to 40 percent and by no means is this meant to be the amount that's contributed only a minimum amount. So that there is a tie between the state coming forward with funds and the industry." "Some of this language you'll find familiar from the ATMC statutes. We've learned over the years there's some things that have worked and some things that haven't worked. So some of the language is still here." "The next subsection requires that the marketing campaign be conducted by a group composed of people who have tourism marketing experience, or are with a state agency, or are head of a - for instance a convention and visitor's bureau so that there is some requirements for the people who serve on the board." "Sections C and D are really designed to address those things that we have come up against in the past, such as the proceeds from sale of ads in the vacation planner rather than returning those as part of the general fund, making it clear that those proceeds can be used as part of the marketing program. One of the things that's included in this plan is to heavily based paid employ programs, where if you advertise, you would pay for advertising. But those funds need to be able to go back into the program." "There's also a second issue with this and that is the materials and information that's gathered and some of you remember this piece of legislation from years past that it is not public information. When people request a vacation planner, those names and addresses are an asset, which are currently sold by the state but if they were not - if they were made public information, then they would be available to anyone at anytime. And that's currently in law and we'd like to see that retained." "Section 5 increases the amount of matching funds by - from 30 to 40 percent in fiscal year 2002." "Section 6 repeals all the existing statutes of the ATMC." "The last section provides for an effective date of July 1, 1999. The reason for the one year delay is we feel that it will take that long to set up a new organization. It is the intent that if the Legislature and state supports this concept that representatives of the AVA, the ATMC and the state would form a transition team to set up a new organization during the coming year after which time the ATMC and the AVA would dissolve." Side B Tape #122 10:00 a.m. "There is one other amendment that is proposed and that is in working with the department, they would like to see the reference to grant changed to contract. One of the reasons originally for having a grant, is that we felt it was - or Legislative Legal did, I'm not sure where it originated at but - that it was a little cleaner in some of these issues about ownership of documents and also not having to go through a bid process or procurement process in identifying a trade association. But we're certainly supportive of changing that to a grant with an exemption to the procurement." "Also there is a[n] amendment asking for this to be changed so that marketing is added to a responsibility of the division should there not be a contract so that the marketing could continue if they were not able to contract with a trade association." "Mr. Chairman, I think that is a brief overview and I would be happy to explain anything in more detail to you." Senator Torgerson needed some help in understanding why the marketing information was to remain not public information. Ms. Lindgren explained how when people from the Lower '48 requested a copy of the state vacation planner, their name and address was entered into a database. Tourism businesses could then pay for access to that information and obtain mailing labels as a standard marketing practice. The money generated from these sales then went back into the program. If the information was public information, the ability to charge for the names and addresses and therefore generate income would be lost, she explained. Also she warned, other states and anyone else would also have access to those names and addresses. She continued by adding that sometimes the information was used to do research to determine effectiveness of different publications, their application, and what types of advertising should be targeted. Senator Torgerson gave Ms. Lindgren a scenario, asking her to determine how it would apply in this instance. This plan, which he happened to support, called for contributions from different entities to make up the match. He described a large entity and proposed a situation where there was disagreement in which that entity didn't pay their share of the matching requirements, while the state continued to pay. Most information generated by the state government was considered public information. What would happen to this one entity that decided to no longer participate in the group, would they still be able to have access to the mailing label information, he wondered? Ms. Lindgren speculated the situation would be the same as the current system, which dictated that anyone who promoted a tourism business or service would have access to that information. This information would still be available to the department, she stated. She doubted whether the information would still be available to an organization that decided to not participate and was not contributing to the new program. Senator Torgerson expressed disagreement with exclusion of some groups. His main reason was because 70 percent of the funding was state generated. He granted there could be many different reasons an organization chose not to participate, but they should still have access to the public information. He didn't feel that access could be denied. Another problem he had with the proposed system had to do with materials designed by the state, where there may not be a patent, but were recognized as belonging to everybody. He offered an example of developing a seal for marketing the State Of Alaska, and felt that should belong to the state not the qualified trade organization. Senator Adams removed his objection on the motion to adopt the CS. Co-Chair Sharp asked if there was further objection and hearing none ordered the CS adopted as a working document for the committee. Senator Donley moved for adoption of Amendment #1. Senator Adams offered a motion to divide the amendment into two sections. He spoke to that motion and why he felt the amendment should be divided. His reason was that he believed it was not clear where the language of a portion of the amendment belonged in the bill. Senator Donley had no objection to splitting the amendment, but added that the amendment had been cleared with the bill drafters and they understood the appropriate location of the proposed changes. Co-Chair Sharp ordered Amendment #1 divided into Amendment consisting of AS 44.33.120. Senator Donley moved for adoption of Amendment #1A. There was no objection and it was adopted. Senator Donley then moved for adoption of Amendment #1B. Without objection, it was also adopted. Co-Chair Sharp noted there were several people signed up to testify on this bill, many who were linked to the meeting via teleconference. There was some conversation as to the time constraints of the meeting. Co-Chair Sharp called upon DEBORAH SEDWICK, Commissioner of Department of Commerce and Economic Development. Ms. Sedwick was on-line from Anchorage and deferred to Deputy Commissioner, JEFF BUSH to testify in person to the bill. His testimony was as follows: "The department has been working I would say in the last week or so extensively on this piece of legislation with industry, with the AVA. However, the recent CS we received at least an indication of what was going to be in it late yesterday. We have since that time, I have prepared a position paper - and had prepared, I shouldn't say I prepared it - a position paper and a proposed alternative CS that the department would like to see. I could distribute these now or distribute them when I've completed either way. I have lots of copies here." "We retain some serious concerns about the piece of legislation that is before you, Mr. Chairman although we concur with a lot of what's being attempted here in many of the ideas that are being put forward. We also have some serious concerns about some of the other items. We would like - the department would like and the Administration would like - to retain a relatively strong Division of Tourism. We believe that the DT serves a function of allowing - of a policy level control over our tourism- marketing program. And I believe that's a good administrative and legislative function and that we should retain that." "Some efforts have been made in the recent CS, which I have to admit I just saw this morning for the first time, to give the division some stronger authority. But, we still have some concerns and I'll try to describe the major concern. The major concern with the bill right now is the exclusive nature of the contract from marketing that's proposed in the bill. The reason being that if you have a single association and a single marketing - private marketing entity for the State Of Alaska, we are concerned that important pieces of our tourism program may get lost." "As an example, the DT in recent years has done things like promote the Aurora Borealis opportunities in Fairbanks. We have put together a - very recently - a rather extensive Tourism North program. That Tourism North program, we leveraged about $280,000 of DT money into about $1.2 million marketing, specifically designed to benefit the Alaska Marine Highway and the road system in Alaska." "Those kinds of responses to crisis that are identified in the tourism industry, or needs that are identified in the tourism industry. We believe that if you do not have an effective DT it is very difficult to meet those kinds of needs. That's as if your entire - you essentially give up all control over a marketing program to a private entity - to a single private entity, that single private entity may disagree or may not see the same needs as both the Legislature and the Administration view as needs at a particular time." "Simply trying to do that kind of program through a contract arrangement, becomes problematic. It's just - they're not sufficient control in our opinion. We believe a more effective way to do this and the way it's proposed in this CS. We concur with the elimination of the ATMC and the reliance on private industry to do the vast majority of marketing in the tourism business. We concur with that approach. But what we would suggest, is that it makes more sense from a state perspective to - and a policy perspective - to set up a program that allows a competitive system for marketing. In other words, if an association is qualified to do visitor marketing, a private entity like the AVA, and is willing to put up a match, which the visitor's association is proposing in this bill, and we in our proposed CS also propose, that that entity can bid to the state, to make a proposal for a contract and that we would enter into a contract to do marketing. They would agree to match at 30 percent and then we've also rolled in the 40 percent increase in the future. But that that contract not be an exclusive contract. That in fact the state, if we decide for example that we want to do a Tourism North program, and private entity comes in and says we would like to do a Tourism North marketing program, and we're prepared to put up 30 percent, and we'll focus exclusively on the road system in Alaska, that it makes sense for the DT to be able to enter into that contract as well." "Therefore there is a diversity in the program, there is an ability to react to different needs, not simply the needs of this single organization. Another good example would be if a sport fishing association comes in and says we would like to run a sport fishing program - marketing program, we are willing to come up with 30 percent, would you be willing to - would the state be willing to come up with the 70 percent. We could analyze that proposal and on a competitive basis, bid that out. It wouldn't cost the state any more than it does right now. We don't foresee any changes from what the proposed bill before you in terms of the match requirements and the state contribution to the program and it allows for private industry to run to program." "Our only - our major concern with the proposal before you right now is the exclusive nature of the contract and the ability of the state to react because of that to what we envision as needs, not just what the AVA or whatever the entity may be, envisions as needs." "There's sort of another point here under the current proposal that's before you with a single marketing contract. An argument could be made that the state no longer enters into contracts to run our tourism foreign office operations. We have right now as based upon - at the request of the Legislature - we run joint offices in Korea and Japan with our trade and development people, and our tourism people. We've combined those offices. Those are under contract. Under the language of this particular bill, the state DT can only have a single contract for tourism. And that it would be the responsibility of this private entity that we enter into a contract with to have - to chose and elect how to spend the money, and it is true that we may be able to, in the contracting process, leverage the organization to retain current contracts - foreign contracts. But there's no guarantee of that by any means." "Once again it's a situation where the control of the marketing program, at least from a policy level, is being taken away from the state. And we have concerns with that." "We also have a concern with the funding source requirement. I think that this committee is probably familiar with some of the proposals contained in the millenium - so called millenium plan that has been put forward. As this bill is written right now, there is no guarantee of the sources of the funding. And I think some of the questions that Senator Torgerson raised earlier, relating to ownership of documents, I think he raised also the question of what happens if a large contributor decides that they are not willing to play any longer. There's nothing in this bill other than the match requirement, to deal with that kind of situation. We are essentially put in an uncomfortable situation that we need - that we're just relying upon the promises of industry to come up with the money sufficient to run this kind of a program. For example, this program relies heavily on donations - so called donations from the cruise industry and we don't know if those donations can in any way be guaranteed or assured under this program." "Likewise, because of the strong - the requirement of strong donations from specific industry participants, such as the cruise industry and the convention and visitors bureau, we are also concerned that other members of Alaska's tourism industry may be less - may have less influence on the eventual program and may not be adequately covered under the program. Our proposal is meant - is designed specifically to deal with that situation because we can - if we see that there is a particular segment of industry is being - is not being adequately represented or covered under whatever contract marketing contract is being done as the main contract. And there's no doubt that there will be a main contract - a major contract that covers the majority of the visitor marketing. That we can react to that by offering to specific industry sectors, matching grant funds or matching contract funds in order to run specific programs for their interests." "So with that Mr. Chairman, I will be happy to answer questions with respect to state's position. I could go through the bill that we've put on the table as a proposal. It's relatively simple and if you'd like I could do that or I can just be available for questions and allow the committee to review that. It's consistent with my testimony today." Senator Adams asked Mr. Bush to describe the principle suggestions. Mr. Bush responded as follows: "The principle suggestions that we are putting forward is that, instead of a single contract for marketing that the state at least have the ability to enter into multiple contracts for tourism promotion. In other words, if - and obviously because of the match requirement, the only entities that are going to come forward are going to be those that can raise sufficient funds to run a marketing program with matching funds. So therefore, we recognize that the largest program is certainly going to be a program similar to the one that - run by private industry by a single organization, most likely the AVA or something like it. But that we have the authority to enter into other contracts for marketing programs, like a Tourism North program or an Aurora Borealis/winter tourism program. For example, the convention and visitor's bureaus of the state in Anchorage and Fairbanks may want to get together a matching grant - or a matching contract amount proposal to run specific programs designed for their needs. We know that they want to focus on winter tourism for example in Fairbanks. There's no reason that we can see why we shouldn't be allowed to also enter into contracts with a visitor's bureau to do that. So that's what our proposal is." Senator Torgerson wanted to know if Mr. Bush had discussed this proposal with the AVA and other people who were pushing for the millenium plan. Mr. Bush replied that the department had received the AVA proposal late yesterday and before that had several discussions with the AVA where he and other department staff had indicated some of their concerns. After receiving the AVA proposal at 6:00 p.m. the night before, the department reacted by putting together a position paper and their own draft proposal, which they brought with them to this meeting. Senator Torgerson challenged that the department knew about the single-source contract for some time. Mr. Bush agreed, but had concerns that the particular proposal would not adequately cover some of the specific problem areas the department identified. Co-Chair Sharp asked if the department would consider language that would state that a percentage of the matching funds be a minimum of 30 percent to allow some competitiveness. He indicated reluctance to lock into a guaranteed match on a sole-source contract. Mr. Bush assured that the department would concur with that. He felt that would be responsible from the department's perspective. If an organization proposed contributing 40 percent rather than 30 percent, the department would consider that in granting the match, he said. Co-Chair Sharp felt that type of a bid would be more responsive and more productive for the promotion efforts if the competitiveness was not locked in to a 30 or 40 percent. Co-Chair Sharp had a question on the source of the matching funds required of the organization. Was that money to be cash or "in kind", he asked? He referred to empty hotel rooms and felt they were not an adequate contribution. Mr. Bush's response was to say that the question had come up but had not been resolved. He believed when looking at the language of the CS, that cash would not be required. He offered, however, that in a contracting process, the issue could be taken into account in an analysis of a contract bid. The department would not oppose a change in the bill to require the contribution be made in cash, he stated. Co- Chair Sharp stressed that he felt if the state was going to put up cash then the organization should also put up cash. At this point the committee continued hearing public testimony. He again called upon TOM TOUGAS to testify via teleconference from Seward. After introducing himself again as the AVA president and also president of Kenai Fjord Tours, his presentation was as follows: "As Tina outlined the bill, the bill implements a plan which was actually comes full circle. We were requested by the Legislature to come back with a plan that addressed three specific items. Number one was a requirement for less general fund dollars and recognizing a decreasing roll in general fund dollars. Number two is an increase in private sector participation in market funding. And number three is to increase the efficiency of the marketing by consolidating the marketing." "Currently there's a great confusion as to the - by many people, 'who does state tourism - state tourism marketing?' because three different entities of course are involved in doing that. The DT, the ATMC and AVA. And that was a specific request of the Legislature. Those are the three issues we are addressing and as Jeff Bush says, we have been working with the Administration to try to have a plan that addresses all of those factors. We've also spent the last year working with the over 750 members of AVA and we mailed the plan to 3,000 businesses in the state that are affected by tourism. This is all necessitated of course by, number one the falling amount of dollars and the fact that the rate of growth of tourism has declined over the last eight years. At the same time that more and more Alaska families are trying to live off of tourism." "So, the plan - the bill before you implements the new millenium plan, which addresses these requests of the Legislature and also addresses the requests of our membership that we need to turn around the slide in marketing that has been occurring over the last eight years." "And so, the plan certainly envisions cash contributions. This - there is nothing in the plan and never has been anything in the plan that envisioned these as being 'in kind' contributions. This is cash for cash and the commitment of AVA is to turn around this slide in tourism marketing. At the same time, we recognize that there are going to be less general fund dollars." "Currently, over two - the big challenge for the industry, is that currently with these three organizations, almost $2 million of the money is absorbed in administrative costs. And it's our goal by consolidating into a single entity to eliminate a lot of that overhead costs so that the money can actually be used for marketing. That is probably the biggest challenge with the concept that Jeff Bush has introduced today, which is to have multiple grants or multiple contracts. The State of Washington tried that for awhile and they had eight or ten contracts that were regional. And funds were so dispersed that every organization had an executive director and an office and most of the money was absorbed in administration and overhead to administer these programs. And the direction we have received from the Legislature is exactly the opposite. That their goal is to reduce administrative costs and to move this forward." "I'll tie up those comments simple by saying that we do want to continue to work with the Legislature on increased efficiency of the program. We definitely want to continue to work with the Commissioner Sedwick and the DT on making this plan work. Our whole goal is with declining funds, how do we increase the effectiveness of those marketing dollars. And we believe that the CS as it's amended addresses those concerns that we heard from the Legislature. So thank you for your time." Co-Chair Sharp announced that further testimony would be limited to three minutes so the committee could hear from everybody who had signed up. He turned to the people listening in the Legislative Information Office in Tok and started calling upon those wishing to testify from that location. First up was JERRY JERNIGAN. His comments were as follows: "Thank you very much. I want to say very briefly that I do support the movement proposed by the AVA. I do feel that the existing system is broken and we need to try some kind of a fix. I understand the program and I support it wholeheartedly. It might need a little fine-tuning." "I should have gone back and told you who I am. I'm a small businessman in Tok with a couple small businesses on the highway depending on highway traffic." "Now they have mentioned gentleman that the tourism growth is slipping. This is true. Let me tell you about a segment of the tourism growth that is not slipping, but has actually decreased. The highway traveler - the individual highway traveler that thousands of us - hundreds of us depend on. Us being small businesses slipped drastically last year and have slipped for many years. We need some help and we're willing to reach for straws especially when I feel they are well planned out as the program from the AVA" "I haven't reached my three minutes, but I want to thank you for your consideration." Co-Chair Sharp next called upon ALAN LEMASTER, also on teleconference via Tok. He testified as follows: "I too am very much in support of this. My name is Alan LeMaster. I run an operation in Gakona, Alaska down the road - the next stop sign down the road from Tok here, about 125 miles. And I was privileged to be with you folks beginning of this month - spent April Fool's Day with you - and a lot of contingents from our industry and I want to thank you for the excellent welcome we received down there. We came out very enthusiastic about the way the House and the Senate felt about the work that we were doing on this program." "I have just one quick brief comment with regard to what the deputy commissioner, Jeff Bush said in his remarks when he spoke to the fact that there are no guarantees from industry in this program. If you read the millenium plan carefully, what we're working toward is initially a $10 million budget, which is far and exceeds where we are at this point - close to 100 percent improvement over what we've had in the past. Those dollars will have to come from industry and we in the industry as exampled by the people who went to Juneau on the first, and the people who have been very much involved in this over the last year, and are making a commitment to make this work. And that commitment is for money." "And the plan laid out in the millenium is something that hasn't been come to briefly. It's a plan that has been very well thought out over many, many, many months of very long discussions and work groups." "I would only ask the deputy commissioner where are the guarantees at this point from the state. From the mid- eighties when we reached our high in funding we have continued the decline of funding of tourism in Alaska. And if you are to look at the charts, the increase or growth of tourism in Alaska has decreased on a sliding scale in exact proportion to the amount of dollars we have gotten from the state." "If we're to continue what we're doing now, there will come a time in the not to distant future where that increase will become a decrease. And as Mr. Jernigan says we're already seeing signs of it on the highway and that's just the tip of the iceberg. We have to do something to make this work. We as an industry have to pick up the ball and run with it. We have to run with or without the state. We would much prefer to run with the state because the state needs us as much as we need them. And really urge your very serious consideration on our proposals here. And I thank you for this time." Co-Chair Sharp called upon MATT ATKINSON via teleconference from Fairbanks. He testified as follows: "I work here in Fairbanks with Northern Alaska Tour Company. We operate excursion throughout Alaska's arctic and also rely heavily on highway traffic as do Mr. LeMaster and Mr. Jernigan. I'm also the chairman of the board of Fairbanks Convention and Visitor's Bureau. I just want to take a few moments to speak in support of the CS as amended for SB 350." "Over the past several years it's really become an annual event for us as small businesses to come before the Legislature and plead the case for tourism marketing. It's been made abundantly clear that a new method is really needed. We've seen generic tourism marketing plummet from $15 million in FY90 to $6.7 million in FY 98. So the comments of Mr. Bush also struck a cord with me saying how the plan would have industry - or how the government relying on industry putting up money, but we've been relying on the Legislature and it just hasn't been happening. So in a kind of de-facto ultimatum to the industry is been, 'come up with a plan for funding or funding will be slashed.' So there has been a lot of work put into this plan as President Tougas mentioned, 750 AVA members, out to 3,000 other visitor related businesses. I know we specifically here from a community standpoint in Fairbanks had a special meetings for the industry as a whole and also as a board of directors for the convention and visitors bureau. And one of the things we need to remember is that in order for regional cooperative destination marketing to work effectively and make efficient use of funds, there needs to be a strong statewide generic program on which to leverage." "And so as a board of directors we did offer some changes to the plan that were taking into account are definitely in favor of any plan that's gonna lead to the survival of statewide cooperative marketing. And some of the things that Mr. Tougas also pointed out that one of the things that the plan's done, were at the request of Legislators, shifts marketing efforts to a private entity that combines all of the, somewhat confusing at times, roles of the ATMC, [and] AVA. DT would still exist. And as a small business we have definitely benefited from the functions that the DT provides. I think that the plan leaves a lot of those functions in tact and agree with the policy considerations and powers for DT existing." "It does seem there would be challenges with offering multiple contracts. We're trying to eliminate multiple entities and with multiple contracts that could go exactly the reverse. I know here at a local level, it would be difficult to have more than one entity just for efficiency and - I guess efficiency mainly, to be able to have a marketing program." "So the plan addresses that and decreases the confusion, increases private sector contributions to the program and one of the things I know has been a point with Legislators, is that has kind of wondered what are the cruise companies contributing. And this plan actually increases contributions from the cruise sector while making it less expensive for small businesses to participate. And then the bottom line is that it decreases state funding for cooperative marketing." "I think those are all [undecipherable] was able to participate in the AVA fly-in earlier in the month and that was something that seemed important to Legislators. And I just wanted to close with definitely support and thank you for all of your work going into this and AVA working with the DCED as well. For small businesses, we're just at a stage where, in order to survive, we need cooperative marketing. And right now at the rate that it's going it won't last and we're not [undecipherable]." Co-Chair Sharp called on KAREN ROGINA, Executive Director of the Alaska Hotel and Motel Association, who was waiting to testify via teleconference from Anchorage. After introducing herself, she spoke as follows: "In the interest of time, I'll simply convey that the AHMA supports the new millenium plan. We have participated in the process as the plan has developed and we support the concept that it represents as well as the positions and amendments that have been conveyed by the AVA in the last couple days and today. We also appreciate the collaborative process and the effort put forth by the Legislature to make this project work and make the plan something that becomes a reality. And I appreciate the efforts - I was at the AVA Fly-in as well earlier this month and found that there was a tremendous effort on the part of the Legislature to work towards finding a solution. So we appreciate that, all the work that's put in and again convey our support of the plan. Thank you." Co-Chair Sharp called JUSTIN RIPLEY, who was also linked to the committee from Anchorage via teleconference. His testimony was as follows: "I'm the co-owner of a small seasonal lodge company. We have lodges in Denali, Seward, at Moose Pass. All of course are on the highway system. We'd like to reiterate our support for the CS as you see it before you." "And I guess I would also reiterate a couple points that probably have been made already. But, the first one is that really the current generic marketing plan isn't working for small businesses. We track our results fairly carefully and we've seen the results trailing off even at a faster rate than the funding has, which is a serious concern. I think that maybe for a couple reasons." "One is because the available funds have been put off into various niche marketing programs like Tourism North for example. And each of these programs takes on a life of it's own. And in my opinion, it's much less effective than if there was one solid program." "Tourism North, for example, the North to Alaska publication, we've participated for the last couple years for the entire life of our company essentially, and the results have been abysmal. The program has been late getting out on the streets and in fact we've currently applied for a refund for a portion of our ad contribution for this year just because the program was not executed as it was represented to us. And I'm not just one example of what happens when you fracture a limited amount of funds among a number of different programs." "Also in my opinion, the sort of quasi-governmental control over the current program contributes to the demise. In my opinion, effective program needs to have the ability to react quickly to changing market conDTions. And an effective marketing program has to be administered by marketing professionals and not just a random sampling of well-intentioned citizens and other state employees." "The new millenium plan I believe represents - calls for a well represented board that can focus this - a professional marketing approach on a generic marketing program. So I think it will solve that problem. I don't really know the ins and outs of implementing the program in legislation, but I guess in general I urge you to minimize state involvement, maximize program stewardship by the private sector and do what you can to promote a stable annual program contribution." "I guess quickly in response to Mr. Bush's comments, again I just don't believe a fragmented multi-contractor program will work. A program must be efficient in terms of economies and scale. It must be administered by marketing professionals." "I don't - personally don't have any problem with competition, but I don't agree with nickel and dime-ing various marketing programs - basically a program which promotes funding to whichever special interest group happens to have the best lobbying group in a given year. I think a generic marketing program with broad based representation like is called for in the new millenium plan, will effectively represent all regions of the state and all different types of business sectors. Thanks for the chance to comment." Co-Chair Sharp determined all who were present to testify had done so. He ordered the bill sent to a subcommittee for further review. He assigned Senator Donley, Senator Torgerson, Senator Adams and himself to that subcommittee. Senator Donley would serve as chair. Senator Adams requested the department attend the subcommittee meetings and bring their proposed amendments for consideration. Co-Chair Sharp agreed. Co-Chair Sharp wanted to know what was the current industry contribution. It was determined the current amount was 25 percent. Co-Chair Sharp noted that this bill would call for a five percent increase to start with. This concluded bill actions for this meeting. Senator Pearce had a question relating to HB 380. It was her understanding the bill would be read across on the Senate floor that day and was to be assigned to the committee. She also understood this one of several bills the Legislature wanted to get to the Governor's desk right away. She asked Co-Chair Sharp's intention on getting the bill moved through the Senate Finance committee. Co-Chair Sharp replied his plan was for the committee to hear the bill later in the day during the 4:30 p.m. meeting. He added that if there was time, the committee would move on to HB 210 and other bills. Senator Pearce shared that she was having an amendment drafted for HB 380. As soon as she received it from the attorney, she would distribute it to members. Her amendment pertained to changes proposed by the Senate Resources committee. ADJOURNMENT Co-Chair Sharp recessed the meeting at approximately 10:55 a.m. He announced the committee would reconvene at approximately 4:30 p.m. SFC-98 (25) 4/16/98 am
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