Legislature(2007 - 2008)SENATE FINANCE 532
02/22/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| HB226 | |
| SB230 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 230 | TELECONFERENCED | |
| + | SB 249 | TELECONFERENCED | |
| + | HB 61 | TELECONFERENCED | |
| + | HB 226 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 22, 2008
9:09 a.m.
CALL TO ORDER
Co-Chair Bert Stedman called the Senate Finance Committee
meeting to order at 9:09:06 AM
MEMBERS PRESENT
Senator Bert Stedman, Co-Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
MEMBERS ABSENT
Senator Lyman Hoffman, Co-Chair
Senator Charlie Huggins, Vice-Chair
ALSO PRESENT
Frank Richards, Deputy Commissioner of Highways & Public
Facilities, Department of Transportation and Public
Facilities; Greg Winegar, Director, Division of Investments,
Department of Department of Commerce, Community and Economic
Development; Mike Stedman, Director of Operations, Wings of
Alaska and Vice President, Alaska Air Carriers Association;
Representative John Coghill, Sponsor; Guy Bell, Assistant
Commissioner and Director, Division of Administrative
Services, Department of Labor and Workforce Development;
Chris Harmon, International Brotherhood of Electrical
Workers, Juneau; Robert Cesar, Apprentice Electrician,
International Brotherhood of Electrical Workers, Juneau; Tom
Brice, Alaska District Council of Laborers, Juneau; Barbara
Huff Tuckness, Director of Legislative and Governmental
Affairs, Teamsters Local 959; Senator Johnny Ellis, Sponsor;
Max Hensley, Staff, Senator Johnny Ellis; Bob Crockett,
Board Member, Alaska Film Group; Debra Schildt, Founding
Member, Board Member, Alaska Film Group; Kate Tesar, Pro
Bono Lobbyist, Alaska Film Group; Dan Stickle, Economist,
Department of Revenue.
PRESENT VIA TELECONFERENCE
Jere Hayslett, Project Manager, Surveillance Broadcast
Services & Capstone Program, Federal Aviation Association;
Leonard Kirk, University of Alaska; Wilfred Ryan, Alaska Air
Carriers Association; Ann Williams, Human Resources
Administrator & Training Coordinator, Klebs Mechanical,
Inc., Anchorage; Jeannine Provost, Grants Manager, Alaska
Laborers Training School; Rebecca Logan, President,
Associated Builders and Contractors of Alaska.
SUMMARY
SB 230 "An Act establishing the division of film in the
Department of Commerce, Community, and Economic
Development; and creating a transferable tax
credit applicable to certain film production
expenditures incurred in the state."
SB 230 was HEARD & HELD in Committee for further
consideration.
SB 249 "An Act establishing the Alaska capstone avionics
revolving loan fund and relating to the fund; and
providing for an effective date."
SB 249 was HEARD & HELD in Committee for further
consideration.
HB 61 "An Act relating to tax credits for cash
contributions by taxpayers that are accepted for
certain educational purposes, including vocational
education programs and courses at the secondary
school level; and providing for an effective
date."
HB 61 was SCHEDULED but not HEARD.
HB 226 "An Act repealing the termination of the state
training and employment program; and providing for
an effective date."
HB 226 was HEARD & HELD in Committee for further
consideration.
SENATE BILL NO. 249
"An Act establishing the Alaska capstone avionics
revolving loan fund and relating to the fund; and
providing for an effective date."
Co-Chair Stedman introduced the initial hearing for SB 249,
sponsored by the Governor.
FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, explained that SB 249 would create the Alaska
Capstone Avionics Revolving Loan Fund within the Department
of Commerce, Community and Economic Development (DCCED). The
purpose of the project is to increase the safety of aviation
transportation within Alaska by providing low interest loans
for the purchase and installation of Capstone avionics
equipment. Capstone avionics is the next generation of
technology and will improve both flight safety and community
access in Alaska. The technology is called "Automatic
Dependent Surveillance-Broadcast" (ADS-B) and allows
equipped aircraft to interact with ground infrastructure and
satellite stations to provide pilots with essential
information, including: exact location, airspeed, rate of
accent and descent, surrounding terrain, other aircraft and
real time weather. The Federal Aviation Administration (FAA)
sponsored the technology and tested it in rural Alaska.
Mr. Richards stressed that the aircraft equipped with the
new avionics experienced a 47% reduction in accidents and a
33% reduction in fatalities. He said FAA wants to expand
this technology statewide and has funding to build the
necessary infrastructure. The FAA has determined that over
4,000 aircraft need to be equipped with the avionics. Senate
Bill 249 creates a low-interest loan program through DCCED
for aircraft owners unable to shoulder the initial purchase
cost out-of-pocket. He emphasized that the Department of
Transportation and Public Facilities supports SB 249.
9:13:43 AM
GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT
OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, described
the loan program. He explained that the Division of
Investments has been administering state loan programs since
the early 1970s and has experience, expertise and loan
related infrastructure in place to successfully operate the
program proposed by SB 249. Many of the provisions contained
in the bill were patterned after other programs administered
by the Division.
Mr. Winegar explained that the loan fund would allow
aircraft owners who log a substantial number of flight hours
in Alaska to purchase and install the necessary Capstone
avionics. The program would be set up as a revolving fund.
Repayments into the fund would finance loans to additional
participants and the operating costs of the program.
Mr. Winegar said SB 249 stipulates that the program can loan
up to 80% of the cost to purchase and install the avionics,
the interest rate cannot be less than four percent, and the
term may not exceed ten years. He described an average loan
for the program of $12,000, which would mean payments of
approximately $122 each month or $1480 annually. The
Division's goal was to provide loan terms that resulted in a
manageable repayment plan for aircraft owners, while
providing sufficient cash flow to cover expenses, provide
loans to future participants, and return capital to the
General Fund (GF).
Mr. Winegar referred to the fiscal note, which capitalizes
the loan fund with a $4.8 million appropriation. The amount
would allow the Division to provide approximately 400 loans
during the first year and around 60 additional loans each
year thereafter. The program would sunset in 2020, at which
time the money in the fund as well as all future earnings
would revert back to the GF. Senate Bill 249 requests two
positions, one loan officer and one loan closer to handle
the increased workload; however, the positions would be
filled only if loan demands required them. The Division
plans to absorb accounting-related work.
9:15:29 AM
Senator Olson wondered if the State would save search and
rescue money that would not be needed because of the new
technology. Mr. Richards thought there would be savings.
9:16:13 AM
Senator Thomas noticed that the fund would be available to
individuals, corporations, limited liability partnerships,
and so on. He understood the cost to equip an aircraft would
be in the range of $15,000 to $25,000 and wondered if this
was for small planes and small carriers rather than large
planes.
9:17:01 AM
Mr. Winegar answered that the loan program is set up for
commercial operators to have access to the funds. Senator
Thomas was concerned that the funds in the program would be
available to larger carriers that would be more able to
afford the avionics. Mr. Winegar replied that the loan is
first-come, first-served, and would be for commercial
carriers or individual, private pilots.
9:18:27 AM
Senator Elton wondered if the loan fund would be accessible
to people who have already installed the Capstone avionics
and are paying off a loan at a higher percentage rate. Mr.
Richards thought that would be determined through
regulations. In other programs, most loans are set up for
new loans, although there are provisions to pay off interim
financing.
Senator Elton wondered if the loan would be available to
non-Alaskan residents, such as a big game guide who resides
in another state. Mr. Richards responded that eligibility
relates not to residency but to the number of flight hours
logged in Alaska. The number of flight hours required would
be determined by regulation. Senator Elton wondered what
"substantial percentage" of flight hours in the state meant.
Mr. Richards guessed the number would be 90%.
9:20:27 AM
Mr. Winegar explained that there are about 10,000 aircraft
in Alaska, of which 6,500-7,000 are operable. FAA chose
4,000 as the number of aircraft that they felt needed to be
equipped because those aircraft represented around 90% of
the flight hours logged in the state.
Senator Elton referred to the provision regarding the loan
term of ten years and wondered if it were possible to extend
the term of the loan. Mr. Richards replied that there is
some flexibility.
9:23:21 AM
MIKE STEDMAN, DIRECTOR OF OPERATIONS, WINGS OF ALASKA; VICE-
PRESIDENT, ALASKA AIR CARRRIERS ASSOCIATION, testified in
support of 249. He spoke as a pilot with thirty years of
experience in Alaska. He piloted 24 of those years without
Capstone avionics. He described the safety benefits of
having an aircraft equipped with the avionics. Before
Capstone was available, there was an accident approximately
every 29 days in the Yukon-Kuskokwim Delta. More recently,
there was a 29 month period between accidents. Capstone
enhances situational awareness substantially. He emphasized
the importance of real time weather information. Wings of
Alaska currently has 12 airplanes with the equipment and the
pilots fully embrace it.
9:26:25 AM
Mr. Stedman demonstrated what a pilot sees in an airplane
equipped with Capstone avionics. He projected onto a drop
screen in the Committee room what currently operating
aircraft could see. Green, moving diamonds showed the
position of aircraft in the area. The program gave
identification, altitude, and relative position of the
different aircraft.
9:30:45 AM
Co-Chair Stedman asked if there had been a decrease in
accidents and fatalities in other areas around the state.
Mr. Stedman said generally yes, although data is still being
collected. Co-Chair Stedman asked if the industry supports
the amount of allocation and the time frame recommended by
SB 249. Mr. Stedman thought the proposed revolving loan
program is a good start. He explained that Alaska would need
to equip 4,000 within five years to get the full funding
from FAA.
Senator Thomas wondered if the appropriation were sufficient
to cover equipping 4,000 planes. Mr. Stedman answered that
the amount would cover approximately 90 airplanes the first
year. Over the five years the amount would be around $34
million to equip 4,000 planes.
Co-Chair Stedman asked for an overview of the federal
government's participation. Mr. Stedman replied that the
federal government has committed $497 million to this point
and if Alaska does not equip 4,000 planes, $187 million of
that will be lost.
9:33:19 AM
JERE HAYSLETT, PROJECT MANAGER, SURVEILLANCE BROADCAST
SERVICES AND CAPSTONE PROGRAM, FAA (TESTIFIED VIA
TELECONFERENCE), clarified that FAA currently has a
commitment of $493 million for infrastructure. If the 4,000
aircraft are not equipped in five years, FAA would only
commit to $306 million.
9:34:51 AM
Senator Olson wondered how far off shore the Capstone
coverage went. Mr. Stedman thought it went around 30 miles,
although it depends on the altitude of the aircraft. Senator
Olson asked how rapidly the data is updated. Mr. Stedman
replied that the information is real time.
Senator Olson wondered what kind of commitment has been
secured from the general aviation community. Mr. Stedman
said the Alaska Airmen's Association has conducted a survey
to see how many aircraft owners would equip their planes and
how much they would be willing to pay for it. There is
general support.
Senator Elton asked if the Air Carriers Association had a
position regarding whether re-financing should be available
for aircraft that already have the system, or should the
priority be to add equipment to additional aircraft that
have none. Mr. Stedman thought that the more airplanes
equipped the better.
9:38:51 AM
Senator Olson pointed out that he did not see letters of
support from the Alaska Airmen's Association and wondered if
the program would be more attractive if the loan structure
was better. Mr. Stedman thought it would be difficult to
equip 4,000 air planes within five years and any incentive
to help the general aviation pilot would help immensely.
9:40:13 AM
Senator Dyson realized how prohibitive it was for general
aviation pilots to carry insurance, and wondered if
insurance carriers would drop rates for aircraft equipped
with avionics. Mr. Stedman thought that as the accident rate
went down, premiums would go down as well. Senator Dyson
asked if the insurance carriers would only respond to the
accident rate. Mr. Stedman did not know.
9:41:44 AM
LEONARD KIRK, UNIVERSITY OF ALASKA (TESTIFIED VIA
TELECONFERENCE), spoke in support of SB 249. He said the
University of Alaska (UA) has been part of the safety
evaluation of the Capstone system in the Yukon-Kuskoskwim
Delta. The University has also been involved in pilot
training.
Mr. Kirk answered Senator Olson's question about how far
ADS-B reaches: approximately 120 nautical miles line-of-
sight. A ground-based transceiver located at Sitka could see
an aircraft 120 miles out over the ocean. He said the
information is updated every second.
WILFRED RYAN, ALASKA AIR CARRIERS ASSOCIATION (TESTIFIED VIA
TELECONFERENCE), spoke in favor of HB 249 and gave further
answers to Committee members' questions. Regarding Senator
Elton's question about the position of the Association on
refinancing, he said the official position is that operators
should have the opportunity to refinance their equipment. He
added that the Alaska Airmen's Association does support the
program fully. He said there has been approximately a 20%
reduction in insurance rates since the program's inception.
9:46:15 AM
Mr. Ryan said Alaska has been on the forefront with research
and development for the ADS-B program. Currently Alaska is
competing against the rest of the nation in receiving
ground-based transceivers.
Mr. Ryan gave testimony in support of SB 249, representing
the Alaska Air Carriers Association, the Alaska Airmen's
Association and the Alaska Aviation Safety Foundation. These
groups represent nearly all commercial and general aviation
constituents in Alaska. Because more than 90% of Alaska is
accessible only by air, Alaska has the highest aviation
accident rate in the nation. The expedited state-wide
implementation of proven Capstone safety technologies is
essential for the future of flying safety. During a ten year
period from 1997 to 2006, there were 124 fatal aviation
crashes in Alaska. Many of these pilots were mid-career. The
National Institute for Occupational Safety and Health has
determined that based on their annual salaries, the total
loss in earnings exceeded $226 million.
9:49:41 AM
Mr. Ryan noted that the five-year plan includes 4,000
Alaskan-based aircraft, approximately 1,000 commercial
aircraft and 3,000 general aviation aircraft. The safety
incentive program will enable Alaskan operators to install
the safety equipment. Once implemented statewide, FAA
anticipates a 33% reduction in fatal accidents, more
effective search and rescue operations, and a public benefit
of approximately $824 million over the next 27 years.
9:51:34 AM
Senator Olson asked if Mr. Ryan could think of any other
incentives the State could use to entice people to use the
program. Mr. Ryan thought it would be extremely challenging
to bring the general aviation group into the incentive
program. Research has indicated that the population is only
willing to spend about $2,500 each to equip their airplane,
and the avionics package costs about $12,000. Alaska
Airmen's Association currently has about 180 people
interested in the program, but feel it would be difficult to
attract 3,000 equippers from the general aviation group
unless there is financial incentive.
9:52:44 AM
PUBLIC TESTIMONY CLOSED.
Co-Chair Stedman reminded the Committee that the
implementation of SB 249 would open up another fund. He
wanted to critically look at the $120,000 for travel and
supplies in the fiscal note.
SB 249 was HEARD and HELD in Committee for further
consideration.
AT EASE 9:54:15 AM
RECONVENE 10:04:05 AM
HOUSE BILL NO. 226
"An Act repealing the termination of the state training
and employment program; and providing for an effective
date."
10:04:56 AM
REPRESENTATIVE JOHN COGHILL, SPONSOR, introduced HB 226,
related to the State Training and Employment Program (STEP).
This program puts unemployment insurance (UI) money into
grant capacity to train and re-train workers within Alaska.
The current version of the bill would sunset the program in
2018 and requires the Department of Labor (DOL) to provide a
review of the program. The review will look at union and
non-union entities, publish a report and make
recommendations.
Representative Coghill explained that DOL has set up a task
force to develop the report to be presented to the Alaska
Legislature in early 2009. He expressed his confidence in
the Department. The program is designed for workers who have
paid into UI and who cannot afford to pay for their own
training or re-training.
10:08:21 AM
Representative Coghill wanted workers to have access to the
program as it effectively helps to get young people and
hard-to-place people back into the workforce. He said that
the grant process currently is very complex. The process has
been streamlined this year. He recommended extending the
program out to 2018 with an annual review.
10:10:26 AM
Co-Chair Stedman referred to an audit made of the program
and asked if the issues brought up in the audit had been
resolved. Representative Coghill replied there were still
issues with the grant process. The Commissioner of DOL has
begun to deal with the issues by changing the application
process and how allocations are made.
10:11:25 AM
GUY BELL, ASSISTANT COMMISSIONER AND DIRECTOR, DIVISION OF
ADMINISTRATIVE SERVICES, DEPARTMENT OF LABOR AND WORKFORCE
DEVELOPMENT, spoke in support of HB 226. He said the program
has demonstrated success for over 19 years and has served
over 23,000 Alaskans. The program is evaluated annually. The
most recent report indicates that more than 94% of trainees
were employed within 12 months of receiving the training.
Those people earned over $71 million in the year following
their training, an increase of 35% over their pre-training
earnings. Over 90% of 2003 participants were still Alaska
residents in 2006. The Department supports the on-going
annual review which has begun, supervised by David Stone,
the Deputy Commissioner of the Department of Labor and
Workforce Development.
10:14:19 AM
ANN WILLIAMS, HUMAN RESOURSES ADMINISTRATOR AND TRAINING
COORDINATOR, KLEBS MECHANICAL INC. (KMI), ANCHORAGE
(TESTIFIED VIA TELECONFERENCE), spoke in opposition to HB
226. She emphasized that unless there are major revisions,
KMI would like to see STEP sunset. She gave an overview of
KMI experience with the program. They partnered with another
business to provide joint job training for approximately 80
underemployed and potentially at-risk construction workers.
The vision was to achieve stable employment of a diverse and
well-trained local construction force. The program was a
success.
Ms. Williams said their experience with the administration
of the program was not as successful. The requirements for a
private employer were a burden. She listed restrictions,
especially removal of payment for instructor fees.
10:18:05 AM
Ms. Williams believed that KMI was one of the few private
employers who received a STEP grant. Immediately upon
completion, the grant program was restructured and
effectively eliminated the possibility of future private
employer funding. She said it is well understood that the
STEP grant program has allocated the vast majority of its
training money to organized labor while purporting to
provide training opportunities to any Alaskan with need.
STEP is funded by the UI contributions of all Alaskans and
should be accessible to all.
10:19:24 AM
JEANNINE PROVOST, GRANTS MANAGER, ALASKA LABORERS TRAINING
SCHOOL (ALTS) (TESTIFIED VIA TELECONFERENCE), spoke in favor
of HB 226. She spoke about the positive impact of the
program on the construction workforce. Alaska Laborers
Training School trains about 300 people per year through
STEP, focusing on preparing the workforce in the
construction industry. Outreach includes members of the
union as well as other Alaskans, most of whom come from
remote rural areas of the State. Training requests come from
village councils. Statistically speaking, 50% or more of the
individuals served are from minority populations and over
45% are from areas outside of Anchorage, Fairbanks and
Juneau. The program's success rate has consistently been
above 87%.
10:22:09 AM
CHRIS HARMON, INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS (IBEW), JUNEAU, spoke in favor of HB 226 and
described how the training money helped him. He said he
would not have been able to complete the apprenticeship
without the grant, as he had to be away from home for five
terms of 7 weeks each for 8,000 hours of on-the-job
training.
Senator Thomas asked about his training. Mr. Harmon said he
trained about 1400 hours in the classroom in addition to the
on-the-job training. Co-Chair Stedman asked if the training
was beneficial. Mr. Harmon listed expenses. Senator Olson
asked how many people are affected by the program. Mr.
Harmon knew of twenty or so apprentices in Juneau who are
recipients of the program.
10:25:29 AM
ROBERT CESAR, APPRENTICE ELECTRITION, IBEW, JUNEAU, spoke in
favor of HB 226. Mr. Cesar, who is a single father of an ill
child, was not able to receive assistance from STEP due to
administrative problems. He had financial problems and the
STEP grant would have been greatly beneficial. He urged the
Committee to extend the program.
Senator Dyson asked if he had been asked to come and testify
and if he received help preparing his testimony. Mr. Cesar
said it was suggested he come at an IBEW union meeting and
he was given help with preparation.
Senator Elton acknowledged Mr. Cesar's struggle as the
father of a child with a bone marrow transplant. Mr. Cesar
said Senator Elton and other Legislators had helped.
10:29:49 AM
TOM BRICE, ALASKA DISTRICT COUNCIL OF LABORERS, JUNEAU,
spoke in favor HB 226.
Senator Olson referred to earlier testimony that the STEP
program was only targeting special interest groups and asked
Mr. Brice's opinion. Mr. Brice thought the doors are open to
anyone who can show they have a viable accounting system and
can show they are doing real training. He cited a non-union
program that has been successful. His organization trains
both union and non-union individuals.
10:33:02 AM
BARBARA HUFF TUCKNESS, DIRECTOR OF GOVERNMENTAL AND
LEGISLATIVE AFFAIRS, TEAMSTERS LOCAL 959, spoke in favor of
HB 226. She said Teamsters Local 959 has both union and non-
union training programs. The progams are funded through
joint efforts in negotiations with the employers that Local
959 has collective bargaining agreements with. Local 959
also attempts to reach out to employers that were not part
of the collective bargaining agreement. The tech engineer
program, a four-year apprentice program for surveyors, has
spent extra time and effort reaching out to individuals
around the State. The cost of housing has been a major issue
because of the six-week training program; STEP funds have
helped with that.
10:35:18 AM
REBECCA LOGAN, PRESIDENT, ASSOCIATED BUILDERS AND
CONTRACTORS OF ALASKA (TESTIFIED VIA TELECONFERENCE), spoke
in support of HB 226. She pointed out the discrepancies in
the program reflected in previous testimony: a private
employer not being able to use funds for instructors while
individuals use the same money for travel and housing.
Associated Builders and Contractors supports the program but
urges some clean-up before the program is extended.
10:36:49 AM
Co-Chair Stedman asked Mr. Bell to address concerns brought
up in testimony. He asked him to also have the audit issues
raised prepared for a future Committee meeting.
Mr. Bell stated that DOL uses a competitive grant proposal
process to receive and process applications. The independent
evaluation committee does not evaluate on a union/non-union
basis but on the overall quality of the proposal. The
distribution of grants over the past years has been reviewed
and presented to the Legislature. The Department recognizes
the criticisms and intends to resolve them. He invited
critics to participate in the task force that is being
developed.
10:40:16 AM
Co-Chair Stedman pointed out that more work will be needed
on fiscal notes.
HB 226 was HEARD and HELD in Committee for further
consideration.
10:40:40 AM
HOUSE BILL NO. 61
"An Act relating to tax credits for cash contributions
by taxpayers that are accepted for certain educational
purposes, including vocational education programs and
courses at the secondary school level; and providing
for an effective date."
SB 61 was SCHEDULED but not HEARD.
SENATE BILL NO. 230
"An Act establishing the division of film in the
Department of Commerce, Community, and Economic
Development; and creating a transferable tax credit
applicable to certain film production expenditures
incurred in the state."
SENATOR JOHNNY ELLIS, SPONSOR, gave an overview of SB 230.
He described the need to diversify Alaska's economy and
thought SB 230 would make Alaska competitive by creating the
Alaska Film Incentive Program and re-establishing the Alaska
Film Office. Forty-five other states have active film
offices. Senate Bill 230 proposes transferrable tax credits.
The plan is built on the successes of other states. For
example, New Mexico had $1.5 million in film spending in
2001, the year they enacted tax incentives. In 2007, the
film industry spent $476 million in the New Mexico economy.
Senator Ellis listed films Alaska has lost in recent years
that were set in Alaska but filmed in other countries and
states.
MAX HENSLEY, STAFF, SENATOR JOHNNY ELLIS, summarized the
sections of the bill.
· Sec. 1 authorizes the Department of Revenue and the
Department of Commerce, Community and Economic
Development to give tax credits to film producers for
qualified spending on qualified projects.
· Sec. 2 establishes an Alaskan Film Office and the
administration of a film production incentive
program. Subsections direct how the Department will
proceed with the film industry in relation to tax
credits.
10:44:35 AM
Senator Ellis has been encouraged by the amount of business
support the proposal has received.
Senator Elton referred to page 3, line 5, regarding
productions that are now eligible. He wondered what the bill
meant by "current events programming." Senator Ellis said he
would get a specific definition. Sports broadcasts would not
be covered for the incentive, but a show like "The Deadliest
Catch" would be.
Senator Elton wanted more information regarding another type
of non-eligible production, "sexually explicit conduct" as
defined in federal law (page 3, line 16). Senator Elton had
the impression that the federal definition was so broad that
it would disqualify many projects. Senator Ellis explained
that all states use the same standard and it has worked
well. Senator Elton said he was satisfied with that.
Co-Chair Stedman referred to page 3, line 11, regarding non-
eligible sports events or programs, and wondered if dog-
mushing races would be excluded. Mr. Hensley replied that
the definition is meant to exclude live broadcasts of
sporting events such as ESPN at the Great Alaska Shootout.
ESPN already has to come to Alaska to cover that event;
there is no reason to give them additional incentives to
come. Mr. Ellis added that the bill would allow a special
project relating to sled-dog racing, which would promote
Alaska, create jobs and bring money into the state.
10:51:00 AM
BOB CROCKETT, BOARD MEMBER, ALASKA FILM GROUP (AFG); DEBRA
SCHILDT, FOUNDING MEMBER, BOARD MEMBER, AFG; and KATE TESAR,
PRO BONO LOBBYIST, AFG, spoke in support of SB 230. They
gave a PowerPoint presentation (Copy on File). Mr. Crockett
pointed out that a film production can have broad economic
impact in Alaska. He explained how tax credit incentives
work:
· The production company applies for a credit.
· The film office approves production, issues a
preliminary certificate with estimated credit amount
which the company can use as collateral for loans,
financing, etc.
· The movie gets made.
· The production company submits a spending report
verified by Department of Commerce, Community and
Economic Development and an independent CPA.
· The film office issues a transferrable tax credit.
· The producer sells the credit to an Alaska corporate
tax payer, generally through a broker.
· The taxpayer redeems the transferrable credit to
offset tax liability any time in the future.
Ms. Schildt explained that Canada has been Alaska's biggest
competitor. From 2001-2005, 142 features were produced in
Canada. Canada built an infrastructure around the film
industry. She described films that were set in Alaska and
shot in other states because those states had incentive
programs. Mr. Crockett discussed a chart showing examples of
how much money can be spent on location by television shows
and films. These projects create high paying jobs that can
compare to North Slope jobs. Feature films pay high union
rates; commercials pay even higher. Ms. Tesar described the
film dynamic: Incentives attract films, which in turn affect
markets, which help build infrastructure, that employs a
larger labor force, and so on.
10:58:39 AM
Senator Thomas asked what the amount of tax credit would be
if there were $10 million spent in Alaska, of which $1
million was wages. Ms. Tesar answered the tax credit would
be approximately 30% of that.
10:59:45 AM
DAN STICKLE, ECONOMIST, DEPARTMENT OF REVENUE, stated that
the Department does not have an official position on SB 230.
He outlined the rates of the tax credit:
· 30% of eligible production expenditures;
· an additional 10% of Alaska wages;
· an additional 2% for off-season filming; and
· an additional 2% for rural spending.
Mr. Stickle explained that the tax credit would be available
to film production companies. He said that most production
companies are limited liability corporations which under
State law are not subject to corporate income taxation. The
Department sees that the tax credit will be a subsidy of the
film industry. If Alaska is able to attract dozens of
feature films, the impact could be quite large.
11:02:10 AM
Co-Chair Stedman wondered what a $100 credit, just as an
example, would go against. Mr. Stickler answered that the
credit would be applicable to the corporate income tax. The
company that incurs the production expenses, assuming it was
a limited liability corporation and did not have the
corporate income tax liability, would sell the credit to a
company that does have a corporate income tax liability in
the State. Co-Chair Stedman asked if there were limits on
the credits. Mr. Stickler said there are no limits on the
credits in SB 230.
11:03:11 AM
Senator Olson asked if there were any way to evaluate the
impact the investment would have on the State. Mr. Stickler
said he could not predict that. Senator Olson wondered if
tax credits in general have been successful in the state.
Mr. Stickler said he would look into any specific credits.
11:04:17 AM
Co-Chair Stedman asked Mr. Stickler to clarify the
difference between a credit and an expense, using $100 as an
example. Mr. Stickler explained that a credit is going to
have a much larger effect on revenues than an expense. A
$100 expense against an income tax would reduce net income
by $100. A credit applies directly to tax liability. A $100
credit will reduce state revenue collections on the
corporate income tax by $100, while an expense would reduce
net income that gets apportioned to Alaska by $100.
Co-Chair Stedman added that a credit is more powerful by
over ten times with a 9.4% corporate income tax. There is a
substantial difference between the ability to deduct an
amount or take it as a credit.
11:06:08 AM
SB 230 was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 11:06 AM.
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