Legislature(2009 - 2010)SENATE FINANCE 532
01/30/2009 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Commercial Passenger Vessel Excise Tax | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 30, 2009
9:00 a.m.
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:00:37 AM.
MEMBERS PRESENT
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
Senator Lyman Hoffman, Co-Chair
ALSO PRESENT
Johanna Bales, Deputy Director, Tax Division, Department of
Revenue; Phillip Oates, City Manager, City of Seward.
SUMMARY
^Presentation: Commercial Passenger Vessel Excise Tax
Update.
Presentation:
Commercial Passenger Vessel Excise Tax Update
Co-Chair Stedman clarified that the excise tax, commonly
known to the committee as the crew ship head tax, has
several elements and that there are limitations as to how
the revenue can be spent. He reported that the Office of
Management and Budget would be before the committee at a
later date to answer further questions.
9:03:56 AM
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, introduced a PowerPoint presentation "Commercial
Passenger Vessel Excise Tax (CPV)" (Copy on File). She
shared that the tax and the subsequent provisions of the
tax, was initiated thorough a public initiative process. The
tax took effect on December 17, 2006. She read from Slide
1b, "Initiative Overview (Revenue Provisions)":
· Imposes a $46 CPV tax on large cruise ships (over 250
berths).
· Levies a tax at the rate of 33 percent of adjusted
gross income on cruise ship gambling activities in
state waters.
· Subjects cruise ship companies to Alaska's corporate
net income tax.
· Assesses a $4.00 per passenger berth fee to cover the
cost of state-employed marine engineers (Ocean Rangers)
to observe health, safety and wastewater treatment and
discharge operations.
Ms. Bales explained that the tax consists of the $46 CPV tax
and the $4 Ocean Ranger fee, bringing the cruise ship tax to
a total of $50 per passenger.
9:06:09 AM
Ms. Bales discussed Slide 3a, "Department of Revenue
Responsibilities":
· Administer and collect the corporate net income tax.
· Administer and collect the 33% cruise ship gambling
tax.
· Administer and collect the $46 CPV tax (commonly
referred to the cruise ship "head tax").
· Account for and disburse proceeds of the tax as
directed by the legislature.
· Draft regulations for all tax purposes.
9:08:04 AM
Ms. Bales parlayed that Alaska has had a corporate income
tax for many years. She pointed out that in the past foreign
flag vessels, which cruise ships generally are, were exempt
from Alaska's corporate tax under a federal provision that
the state had adopted. The initiative reversed the adoption
of the federal provision making all foreign flagged vessels
subject to Alaska's corporate income tax. She continued to
Slide 3b, "Administer and collect the corporate net income
tax":
· Cruise ship owners are subject to the corporate income
tax just like all other corporations in Alaska.
· Money collected is deposited in general fund (no
current estimate of revenues).
· First tax returns due April 15, 2008.
· There is no revenue sharing to municipalities from this
tax type.
· Regulations effective October 2007.
Ms. Bales addressed Slide 4a, "Administer and collect the 33
percent cruise ship gambling tax":
· Regulations effective April 11, 2008.
· Tax is imposed on adjusted gross income received from
gambling activities conducted in state waters.
· Adjusted gross income is gross gambling proceeds less
prizes paid out and federal and municipal taxes
imposed on the income.
· Annual return with the first returns due April 15,
2008.
· Revenue deposited in CPV tax account.
Ms. Bales continued to Slide 4b, "Administer and collect the
$46 CPV tax, ("head tax")":
· Levied on the cruise ship passenger per voyage.
· Paid by the cruise ship owner or operator.
· Due by the end of the month following the month in
which the voyage ended.
· Due for each voyage lasting longer than 72 hours.
· Must report the number of passengers at each Alaska
port of call.
9:11:12 AM
Senator Elton understood that the head tax was being paid to
the state by the cruise ship owner but was collected from
the passenger. Ms. Bales clarified that that was correct. He
thought the language was confusing and could lead people to
believe that the tax was being assessed to the cruise ship
owner when in fact it is added to the ticket price paid by
the passenger. Ms. Bales agreed the language could be made
clearer.
9:12:37 AM
Ms. Bales addressed Slide 5a "Account for and disburse
proceeds of the CPV tax as directed by the legislature:
· CPV tax is deposited into a sub account of the general
fund as follows:
o CPV tax account -75 percent of proceeds or $34.50
per person.
o Regional Cruise Ship Impact Fund -25 percent of
proceeds or $11.50 per person.
Ms. Bales turned to a chart on Slide 5b depicting receipts
from the CPV tax. The chart illustrates the cruise ship
season revenue in FY07 and FY08, minus the gambling tax
revenue. There were approximately 1 million passengers each
year. In 2007 the deposits into the two accounts totaled
$46,306,774. In 2008 the deposits totaled $46,755,412. Slide
6a breaks these numbers down month-by-month. Slides 6b and
7a depict the breakdown of the cruise ship season revenue
deposits in pie chart format. The projected cruise ship
season revenue, based on previous years, is $46,800,000
total. Slide 8a shows the 2007, 2008 and projected 2009
numbers combine for a total of $139,862,186.
9:15:16 AM
Ms. Bales hoped the 2009 tourist season would be as
successful as is projected. She stressed that all the funds
deposited into the CPV account are subject to statutory
guidelines as to how they should be spent. She discussed
Slide 8b, "CPV Tax Account":
· Revenue disbursed to communities under "first five
ports of call" rule comes from this account.
· Gambling tax revenue deposited in this account.
· Legislature may appropriate money from this fund "for
state-owned port and harbor facilities, other services
to properly provide for vessel or watercraft visit, to
enhance the safety and efficiency of interstate and
foreign commerce and such other lawful purposes."
9:17:34 AM
Ms. Bales turned to Slide 9a, detailing the first five ports
of call (estimated disbursement of $10 million annually):
· $5 per passenger shared with first five ports of call
· Port of call
o Must be a municipality or borough.
o Must be location where passengers embark or
disembark (includes lightering of passengers).
o Cannot have its own passenger tax.
o Boroughs not unified with a municipality may
receive $2.5o per passenger.
o Cannot also receive funds from "Regional Cruise
Ship Impact Fund."
9:19:28 AM
Ms. Bales addressed Slide 9b, "Revenue Sharing":
· CPV Tax Account
o First 5 ports of call
ƒLegislature appropriated amount needed for
community revenue sharing from 2007 cruise
ship season- 2 disbursements made to
communities in December 2007 and June 2008.
ƒLegislature appropriate amount needed for
community revenue sharing from 2008 cruise
ship season- 1 disbursement made to
communities in January 2009.
9:20:39 AM
Ms. Bales detailed the amounts received by communities in
the first five ports of call as delineated on Slide 10a. She
explained that some communities receive shares based on
$2.50 per passenger instead of $5.00 per passenger. Those
communities have a different share base because they are not
unified within the borough in which they are located.
Co-Chair Stedman asked for a list of the ports with a $2.50
share base. Ms. Bales replied that Homer and Seward were
listed because they are not unified with the Kenai Peninsula
Borough. The City of Ketchikan has it own passenger tax but
the Ketchikan Borough, which is not unified with the city,
receives the $2.50 share. Co-Chair Stedman wondered where
the City and Borough of Juneau figured into the share base
equation.
Senator Elton asked for more discussion of the different
communities on the list. He queried how the department made
the decisions on share distribution in Hoonah where the port
is privately owned and the passengers are discharged
offshore.
9:23:10 AM
Ms. Bales answered that the City of Hoonah qualifies under
statute for it's share because the private dock used by the
cruise ships is located within the municipality.
Ms. Bales continued with Slide 10b, "CPV Tax Account":
· CPV Tax Account
o Remaining revenue (after sharing with first 5
ports of call) is not shared with communities.
o Funds can be used to "for state-owned port and
harbor facilities, other services to properly
provide for vessel or watercraft visit, to enhance
the safety and efficiency of interstate and
foreign commerce and such other lawful purposes."
o Funds can be used for state projects in specific
communities.
o Appropriation is requires by the legislature.
9:24:29 AM
Ms. Bales discussed Slide 11a, which is a pie chart
depicting total CPV revenues of approximately $10 million
that will be deposited based on the projected 2009 season.
There were appropriations in the 2009 budget of
approximately $15 million made to the Department of
Commerce, Community and Economic Development (DCCED) for
municipal grants. The proposed 2010 capital budget includes
another $39 million capital projects. The projects in the
port communities are spilt between the DCCED and the
Department of Transportation and Public Works. If
projections are accurate there will be $20 million remaining
in the account for future appropriation.
Ms. Bales addressed Slide 11b, "Regional Cruise Ship Impact
Fund" (estimated amount available for appropriation- $11.6
million annually):
· Disbursements from this fund must be appropriated by
legislature.
· Funds can only go to municipalities and other
governmental entities "impacted" by cruise ship
activity.
9:27:09 AM
Senator Thomas asked for clarification on the definition of
cruise ship activity. He shared concerns that the funds
would not extend into areas beyond the coast. He pointed out
that cruise ship activity impacts the Interior. At least 50
percent of cruise ship passengers pass through Fairbanks
area to access Denali National Park. He wondered how long it
would take the department to clarify what constitutes cruise
ship impact. This would help in understanding the guidelines
for determining which municipalities could receive the
impact funds. Ms. Bales replied that there are cautionary
measures to examine in determining which municipalities will
receive funds. She felt the question would be better
answered by Office of Budget and Management (OMB). Co-Chair
Stedman added that in FY08 the appropriation of $3.6 million
for Anchorage and $3.5 for Fairbanks, from the capital
budget for cruise ship impact, had been vetoed. Anchorage
and Fairbanks had been labeled low priority in the matter.
He reiterated Senator Thomas's concerns that the Interior be
considered when examining the distribution of money from the
cruise ship impact fund.
9:30:44 AM
Senator Elton wondered about the distribution of the $11.6
million in the Regional Cruise Ship Impact Fund. He queried
the rule that states that those funds cannot be appropriated
to cities already receiving funds under the "first five
ports of call" rule. He understood that appropriations from
the fund could be made to Juneau and Ketchikan because they
do not fall on the department's list of "first five ports of
call", even thought they are most likely one of the first
five ports of call the cruise ship visits. Ms. Bales
acknowledged that the department has details to work out.
She felt that Senator Elton's questions would be better
answered by the Department of Law and the Governors Office.
Senator Elton stated for the record that it was unfair to
the cities of Juneau and Ketchikan to be excluded from
available funds. He felt the revenue sharing as it is
currently set up was inconsistent. Co-Chair Stedman
explained that Ketchikan, Juneau and Skagway host the
highest numbers of cruise ship and cruise ship passengers
seasonally. He stressed that the issue would be revisited.
9:33:38 AM
Senator Huggins asked about line items in this fund that
were vetoed in the last capital budget cycle. Senator
Stedman specified that there had been nine line items vetoed
amounting to $18.3 million. He added that the vetoed items
had been deemed low priority or set aside for future
consideration. Senator Huggins wondered why the veto's had
occurred. He felt that the people had voted on the tax and
should benefit from the generated revenue. Ms. Bales said
that she would share the committee's concerns with the
governor's office.
Co-Chair Stedman recalled discussions with the Department of
Law concerning the FY09 capital budget projects. Senate Bill
221 initially appropriated $33,468,700 for capital budget
projects, leaving a balance of $3 million. When the
governor's office returned the budget to the committee after
consideration, line items totaling $18.3 million had been
vetoed. Co-Chair Stedman stressed that the funding for the
projects had been available, with money to spare, which made
the reasoning behind the governor's vetos questionable. Co-
Chair Stedman was specifically curious about the timeline
that would apply to line items that were marked to be
considered in the future.
9:36:44 AM
Senator Elton emphasized that "low priority" was the
terminology used by the executive administration and does
not reflect the priorities of the legislative bodies. He was
offended that the administration had deemed the Juneau
Centennial Hall Cruise Ship Passenger Emergency Relief
Center as something that could be considered in the future.
He felt that the center should be built as soon as possible.
Co-Chair Stedman added that the AV Lituya was presently
grounded. He felt that communities should be prepared for
immediate response to marine emergencies. Ms. Bales stated
that she would share the committee's concerns with the
governor's office.
9:39:12 AM
Ms. Bales continued with Slide 12a which details the FY09
appropriations of the total revenue deposited into the
Regional Cruise Ship Impact Fund. One appropriation for
$2,500,000 was made for the Department of Transportation,
leaving $32,465,547 in unappropriated funds.
Ms. Bales addressed the large passenger vessel gambling tax
(Slide 12b):
· First returns were filed April 15, 2008
· Actual revenue for calendar year 2007 was $6.8 million.
· Revenue deposited in Commercial Vessel Passenger Tax
Account.
· No constitutional restrictions on how this money can he
spent.
Ms. Bales referred to two pie charts on Slides 13a and 13B
delineating actual and projected revenues.
9:41:18 AM
Senator Huggins wondered if the unappropriated money in the
Regional Cruise Ship Impact Fund was generating additional
revenue. Ms. Bales thought that the question was better
answered by OMB. Senator Huggins felt that the issue was
essential when examining the inflationary cycle. He felt
that the equitable distribution of the funds generated by
CPV should be of high priority to the committee.
Senator Elton referred to Slide 13b which charts the FY08-
FY10 large passenger vessel gambling tax revenues (actual
and projected). He wondered if the desire of the executive
branch was to spend only $12 million total of the funds in
FY10, which would leave the remaining $8.4 million available
for legislative prioritization. Ms. Bales answered that she
would look into the question.
Co-Chair Stedman requested that Ms. Bales research which
communities applied for appropriation consideration and
which qualifying communities have yet to apply. He felt that
the process for applying for appropriations from the state
should be readily accessible to all communities that may
qualify for the impact funds. Ms. Bales avowed to relay the
concerns of the committee to the governor's office.
9:43:49 AM
Co-Chair Stedman shared that there were concerns in the FY08
appropriation cycle concerning the timing of revenue sharing
payments to communities. He wondered if the timing issue had
been sorted out for FY09.
Ms. Bales clarified revenue sharing would be earlier. She
explained that currently the payments are made when the
department reconciles it's accounts at the year's end. She
asserted that the department was working toward distributing
the funds at an earlier date.
9:45:55 AM
PHILLIP OATES, CITY MANAGER, CITY OF SEWARD, shared his
concerns with the limits of the distribution of funds under
the "first five ports of call" rule. He felt that the entire
state has a hand in a successful tourist season. He informed
the committee that clear reasons had not been given by the
governor's office as to why projects in Seward had been
vetoed in the FY09 capital budget. He stressed that it was
difficult to plan for the future without understanding the
decision making rationale used by the executive branch.
Co-Chair Stedman pointed out that the Seward project for
dredging cruise ship berthing basins and approaches had been
the first project to be vetoed. The $4.5 million project had
been set aside for future consideration. He wondered if the
city of Seward was still interested in funding for the
project. Mr. Oates replied absolutely. He added that the
project is an ideal use for the CPV funds as it will benefit
the cruise ships directly. He stressed that if the project
is not implemented, large cruise ship could stop visiting
Seward altogether.
9:48:00 AM
Co-Chair Stedman discussed the following week's agenda.
ADJOURNMENT
The meeting was adjourned at 9:48 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Commercial Passenger Vessel Excise Tax.pptx |
SFIN 1/30/2009 9:00:00 AM |
|
| 3 10 09 OMB SFC Cruise Ship Followup.pdf |
SFIN 1/30/2009 9:00:00 AM |
|
| REV Tax Report pages.pdf |
SFIN 1/30/2009 9:00:00 AM |
|
| Projects.pdf |
SFIN 1/30/2009 9:00:00 AM |
|
| Cruise ship SFC Q&A letter 2-26-09.pdf |
SFIN 1/30/2009 9:00:00 AM |