Legislature(2017 - 2018)SENATE FINANCE 532

01/24/2017 09:00 AM FINANCE

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09:02:38 AM Start
09:03:12 AM Presentation: Intent Language Funding Plan
10:12:28 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Intent Language Funding Plan TELECONFERENCED
Alaska Travel Industry Association
                 SENATE FINANCE COMMITTEE                                                                                       
                     January 24, 2017                                                                                           
                         9:02 a.m.                                                                                              
                                                                                                                                
9:02:38 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 9:02 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Click Bishop, Vice-Chair                                                                                                
Senator Mike Dunleavy                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator  Mia Costello;  Sarah  Leonard,  President and  CEO,                                                                    
Alaska Travel Industry  Association; John Lambeth, President                                                                    
and Chief Executive Officer, CIVITAS.                                                                                           
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^PRESENTATION: INTENT LANGUAGE FUNDING PLAN                                                                                   
ALASKA TRAVEL INDUSTRY ASSOCIATION                                                                                            
                                                                                                                                
9:03:12 AM                                                                                                                    
                                                                                                                                
[Senator Costello was  invited to join the  committee at the                                                                    
Senate Finance table.]                                                                                                          
                                                                                                                                
SARAH  LEONARD, PRESIDENT  AND CEO,  ALASKA TRAVEL  INDUSTRY                                                                    
ASSOCIATION, introduced herself.                                                                                                
                                                                                                                                
JOHN  LAMBETH,   PRESIDENT  AND  CHIEF   EXECUTIVE  OFFICER,                                                                    
CIVITAS   introduced   himself.   He   detailed   that   his                                                                    
organization  specialized in  working  with destinations  on                                                                    
tourism promotion funding.                                                                                                      
                                                                                                                                
COLLEEN STEPHENS,  STAN STEPHENS GLACIER &  WILDLIFE CRUISES                                                                    
AND GOVERNMENT RELATIONS CO-CHAIR, ATIA introduced herself.                                                                     
                                                                                                                                
Ms.  Leonard  discussed   the  presentation  "A  sustainable                                                                    
solution  for   Alaska  destination  marketing   funding:  A                                                                    
tourism  improvement district  model"  (copy  on file).  She                                                                    
thanked  the   committee  for   the  opportunity   to  share                                                                    
information about tourism  improvement districts (TIDs). She                                                                    
thanked  Senator Costello  for participation  on the  Alaska                                                                    
Tourism Marketing  Board (ATMB),  and for being  a supporter                                                                    
of the tourism industry.                                                                                                        
                                                                                                                                
Ms. Leonard recounted that the  tourism industry had come to                                                                    
Juneau many times previously  seeking the state's investment                                                                    
in tourism marketing. She  recognized the fiscal environment                                                                    
the state was  faced with. She stated that  she would review                                                                    
ATIA's marketing program before  her colleague would provide                                                                    
details of the TID model.                                                                                                       
                                                                                                                                
9:05:25 AM                                                                                                                    
                                                                                                                                
Ms. Leonard discussed slide 2:                                                                                                  
                                                                                                                                
     The intent language  found in House Bill  256, the FY17                                                                    
     operating  budget, Sec.  1, pg.  6, lines  18-23 is  as                                                                    
     follows:                                                                                                                   
                                                                                                                                
     "Tourism Marketing & Development -  It is the intent of                                                                    
     the  Legislature  that   the  Tourism  Marketing  Board                                                                    
     develop a  plan to  phase out reliance  on unrestricted                                                                    
     general  funds for  marketing,  moving  towards a  self                                                                    
     sustaining   program   funded   by   industry   to   be                                                                    
     implemented in the FY18 budget…"                                                                                           
                                                                                                                                
Mr. Leonard  recounted that during the  previous legislative                                                                    
session  and   following  the  governor's   vetoes,  tourism                                                                    
marketing  funding  from the  state  was  reduced from  $4.5                                                                    
million to $1.5 million.                                                                                                        
                                                                                                                                
Ms.  Leonard  showed  slide  3,  "Alaska  tourism  marketing                                                                    
budget in  millions," which showed  a bar graph.  She wanted                                                                    
to  share  the  TID  model,  which  she  hoped  could  be  a                                                                    
partnership  with the  legislature  and administration.  She                                                                    
pointed  out the  decline in  tourism  marketing dollars  as                                                                    
shown on the slide.                                                                                                             
                                                                                                                                
Co-Chair  MacKinnon asked  about  the  reduction of  tourism                                                                    
dollars  spent, and  if the  graph  represented the  state's                                                                    
investment in tourism dollars spent.                                                                                            
                                                                                                                                
Ms. Leonard  affirmed that the  graph represented  a decline                                                                    
in the state's investment in tourism marketing dollars.                                                                         
                                                                                                                                
Co-Chair MacKinnon  asked if  Ms. Leonard  had data  to show                                                                    
overall investment  in tourism  dollars. She  wondered about                                                                    
investing and advertising independent of the state.                                                                             
                                                                                                                                
Ms. Leonard stated  that ATIA could go  to industry partners                                                                    
and   determine  where   other   industry  businesses   were                                                                    
investing  their own  marketing  dollars in  the state.  She                                                                    
explained that  some information  was proprietary,  but ATIA                                                                    
worked  closely   with  all  sectors  of   the  industry  on                                                                    
anecdotal information.                                                                                                          
                                                                                                                                
Ms.  Leonard  presented  slide 4,  "Economic  Impacts."  She                                                                    
described  that the  'circle of  benefits' graphic  shown on                                                                    
the  slide  illustrated  why   her  industry  believed  that                                                                    
tourism marketing investment worked  at the statewide level.                                                                    
She thought  that with smart past  investments, industry was                                                                    
attracting  millions  of visitors  to  the  state that  were                                                                    
spending  almost  $2  billion  with  local  businesses.  She                                                                    
highlighted business growth  and added jobs as  results of a                                                                    
successful  visitor industry.  She  emphasized that  visitor                                                                    
spending generated  revenue through various taxes  and fees,                                                                    
which supported local and borough  budgets. The slide showed                                                                    
$83  million in  visitor fees  to city/borough  budgets, and                                                                    
$105 million in visitor fees  to the state budget. The slide                                                                    
highlighted over $4.17 billion  in economic activity for the                                                                    
state.                                                                                                                          
                                                                                                                                
Ms. Leonard reviewed slide 5,  "Visitor Spending by Sector,"                                                                    
which showed  a modified pie  chart. She indicated  that the                                                                    
tourism  sector  was   spending  dollars  consistently  with                                                                    
different  activities  such   as  transportation,  food  and                                                                    
beverage,  and  food  and souvenirs.  She  highlighted  that                                                                    
there  were many  businesses  that  benefitted from  visitor                                                                    
spending.                                                                                                                       
                                                                                                                                
9:08:49 AM                                                                                                                    
                                                                                                                                
Ms. Leonard  discussed slide 6, "Budget  Comparisons," which                                                                    
showed   a  bar   graph  entitled   'State  Tourism   Budget                                                                    
Compared.'  She noted  that the  $1.5 million  appropriation                                                                    
for  the current  fiscal  year  and the  $3  million in  the                                                                    
capital budget  were significant  declines from  years past,                                                                    
when  marketing funding  levels had  reached in  to the  $10                                                                    
million  range and  upward.  She pointed  out  that the  bar                                                                    
graph showed  Alaska's funding fell  well below  states such                                                                    
as Arizona,  Virginia, Arkansas as  well as  destinations in                                                                    
Canada. She relayed that along  with competing on a national                                                                    
scale; Alaska also  competed on an international  scale as a                                                                    
long-haul, exotic, and safe destination.                                                                                        
                                                                                                                                
Ms.  Leonard asserted  that it  took a  couple of  years for                                                                    
marketing strategies  to bring returns and  realize economic                                                                    
impacts.  She  feared  that with  less  statewide  marketing                                                                    
dollars there would  be an impact of  fewer visitor numbers,                                                                    
less  spending, and  less economic  impact. She  thought the                                                                    
negative impacts would be discernable in 2018 and beyond.                                                                       
                                                                                                                                
Vice-Chair  Bishop referred  to slide  6, and  asked if  Ms.                                                                    
Leonard could  provide the total revenue  generated in other                                                                    
states in  order to  make a  comparison of  state investment                                                                    
dollars versus total revenue.                                                                                                   
                                                                                                                                
Ms.  Leonard did  not have  the  requested information,  but                                                                    
offered to provide the data at a later date.                                                                                    
                                                                                                                                
Co-Chair Hoffman asked  if it was possible to  see the chart                                                                    
on slide 6 on a per capita basis by state.                                                                                      
                                                                                                                                
Ms. Leonard agreed to provide the information.                                                                                  
                                                                                                                                
Senator Costello understood  that it was the  first time the                                                                    
state  would not  have a  vacation  planner to  send out  to                                                                    
individuals planning trips to  Alaska. She asked Ms. Leonard                                                                    
if  ATIA  was  experiencing  a downturn  in  the  number  of                                                                    
visitors to  the state because  of the lack of  the planner.                                                                    
She asked  Ms. Leonard  to comment  on whether  other states                                                                    
were  facing  the  same  funding  predicament  and  lack  of                                                                    
planner.                                                                                                                        
                                                                                                                                
Ms. Leonard  relayed that  for the first  time in  40 years,                                                                    
ATIA  was  unable to  produce  a  'collateral piece'  travel                                                                    
planner.  She continued  that almost  every other  state had                                                                    
printed  such collateral  pieces  that  were distributed  to                                                                    
potential  visitors. Some  states had  multiple publications                                                                    
advertising  different  regions  or  niche  markets  of  the                                                                    
state. She found that the  main state vacation planner was a                                                                    
great tool  to provide  potential visitors  and get  them to                                                                    
choose Alaska over other destinations.                                                                                          
                                                                                                                                
9:12:05 AM                                                                                                                    
                                                                                                                                
Senator  von Imhof  referenced  slide 6,  and  asked if  Ms.                                                                    
Leonard  was aware  of the  budget sources  of other  states                                                                    
listed on the slide.  She acknowledged Ms. Leonard's earlier                                                                    
comment  that  it  was difficult  to  capture  what  private                                                                    
industry  was paying.  She wondered  if  the amounts  listed                                                                    
were all  state funded or co-mingled  with private industry.                                                                    
She wondered  how Alaska spent  its tourism  marketing funds                                                                    
as compared to  other states. She wondered  about the return                                                                    
on invested funds in other states as compared to Alaska.                                                                        
                                                                                                                                
Ms.  Leonard   agreed  to  provide  more   information,  and                                                                    
deferred  to Mr.  Lambeth. She  noted that  different states                                                                    
had   different  revenue   that   supported  its   marketing                                                                    
programs, much  of which was  state funded. She  pointed out                                                                    
that in the past, Alaska  had used marketing strategies that                                                                    
other  states   had  also  used.   She  thought   there  was                                                                    
significant  value in  having  a printed  piece  as well  as                                                                    
television marketing.                                                                                                           
                                                                                                                                
Mr.  Lambeth elaborated  that there  were several  different                                                                    
funding models  represented on the slide.  He furthered that                                                                    
most of  the funds  shown were state  efforts, and  most was                                                                    
General Fund (GF)  money. Some of the money  came from TIDs,                                                                    
which  he would  discuss  later in  the presentation.  Three                                                                    
states  used  funds from  a  sales  tax increment  financing                                                                    
mechanism,  and   some  states  had  a   co-op  program.  He                                                                    
reiterated  that  the  slide   represented  what  the  state                                                                    
organization had to market its state in each area.                                                                              
                                                                                                                                
Senator Micciche  expressed a  desire to  see all  50 states                                                                    
represented on the  graph on slide 6, as  well as percentage                                                                    
of overall Unrestricted General  Fund (UGF) spend. He stated                                                                    
he was  a supporter  of tourism  marketing, but  thought the                                                                    
slide only represented part of the picture.                                                                                     
                                                                                                                                
Ms. Leonard agreed to update the slide.                                                                                         
                                                                                                                                
Co-Chair MacKinnon  recalled some language  change regarding                                                                    
authority  to  spend  receipts, and  asked  Ms.  Leonard  to                                                                    
comment on how  the changes were incorporated  into the plan                                                                    
being presented.                                                                                                                
                                                                                                                                
Ms.  Leonard recounted  that the  legislature had  supported                                                                    
language  for the  industry to  be able  to re-invest  funds                                                                    
collected through  program sales.  The language  had allowed                                                                    
partners  at  the  Department  of  Commerce,  Community  and                                                                    
Economic  Development  (DCCED)  to capture  the  sales.  She                                                                    
continued that ATIA  currently had a grant with  DCCED to be                                                                    
able  to receive  the funding  and continue  to reinvest  it                                                                    
into the program.                                                                                                               
                                                                                                                                
9:16:20 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon asked  about the choice not  to print the                                                                    
planner,  and   asked  if  the  publication   was  available                                                                    
electronically.  She wondered  if other  states were  making                                                                    
the same choice.                                                                                                                
                                                                                                                                
Ms.  Leonard  expressed  that  ATIA had  tried  to  use  its                                                                    
available  funds  most  efficiently.   She  noted  that  the                                                                    
planner was available digitally  on the consumer website. In                                                                    
the  past the  planner  was printed  and  produced, and  had                                                                    
resources  available to  market the  publication and  get it                                                                    
into the hands of consumers.                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  wondered if there were  taxes or special                                                                    
revenue  streams from  the other  states listed  on slide  6                                                                    
that  were  different  from  Alaska.  She  referred  to  the                                                                    
vehicle  rental tax  (VRT) which  helped provide  funding to                                                                    
advertise  Alaska as  a destination.  She wondered  if other                                                                    
states were using such a  tax or other broad-based taxes for                                                                    
tourism marketing use.                                                                                                          
                                                                                                                                
Mr.  Lambeth answered  in the  affirmative, and  stated that                                                                    
vehicle  rental taxes  were important  to tourism  marketing                                                                    
programs, and was  a key part of the  tourism economy. Other                                                                    
states  had  different kinds  of  levies,  such as  TIDs  or                                                                    
levies on  lodging. He offered  to provide  more information                                                                    
pertaining what revenue sources in other states.                                                                                
                                                                                                                                
Co-Chair MacKinnon noted that some  of her questions were in                                                                    
the context  of enabling the  public to understand  the work                                                                    
of ATIA  and its associated organizations.  She reminded the                                                                    
testifiers that the state was  in difficult financial times,                                                                    
and that the  committee was looking closely at  the best use                                                                    
of funds. She  named public safety as  an important priority                                                                    
of the  state. She  expressed appreciation for  the proposal                                                                    
being presented.                                                                                                                
                                                                                                                                
Senator  Micciche referenced  the states  of Washington  and                                                                    
Oregon, and  the price  of car  rentals that  included added                                                                    
taxes for  promotion funding. He  thought Alaskans  were not                                                                    
accustomed  to such  high taxes  which in  some cases  could                                                                    
help promote  industries that  resulted in  indirect dollars                                                                    
to the  GF. He considered that  most of such taxes  would be                                                                    
paid by out of state  residents. He thought it was important                                                                    
for Alaskans  to consider when  paying for things  that went                                                                    
toward supporting the tourist industry in other states.                                                                         
                                                                                                                                
9:20:59 AM                                                                                                                    
                                                                                                                                
Ms. Leonard showed slide 7, "International Marketing":                                                                          
                                                                                                                                
     No longer have:                                                                                                            
     • Representation offices                                                                                                   
     • Trade training                                                                                                           
     • Public relations                                                                                                         
     • Trade shows                                                                                                              
     • Sales missions                                                                                                           
     • Airline development                                                                                                      
     • Foreign language planners                                                                                                
                                                                                                                                
Ms.  Leonard detailed  that ATIA  had to  shut down  all its                                                                    
overseas  offices. She  specified  that  it represented  not                                                                    
being able to attract 10  percent of visitors which normally                                                                    
came from international markets.                                                                                                
                                                                                                                                
Ms.   Leonard   presented   slide   8,   which   showed   an                                                                    
advertisement.  She noted  that ATIA's  national advertising                                                                    
program  had been  eliminated, along  with television  cable                                                                    
ads.                                                                                                                            
                                                                                                                                
Ms. Leonard showed slide 9,  which displayed an image of the                                                                    
Alaska   vacation   planner.   She   reiterated   that   the                                                                    
association had  no vacation planner  for the first  time in                                                                    
40 years.                                                                                                                       
                                                                                                                                
Senator  Micciche  asked  about  the cost  of  printing  and                                                                    
distribution of the publication.                                                                                                
                                                                                                                                
Ms. Stephens estimated that  the previous year's publication                                                                    
cost  $3.5  million  including printing,  distribution,  and                                                                    
advertising.                                                                                                                    
                                                                                                                                
Senator  Micciche   asked  if  a  thinner   publication  was                                                                    
possible   by  covering   more   of   the  revenue   through                                                                    
advertisements.                                                                                                                 
                                                                                                                                
Ms.  Stephens  stated  that  ATMB  had  considered  all  the                                                                    
possibilities and  decided that the limited  funds available                                                                    
would be focused on a digital presence and online outreach.                                                                     
                                                                                                                                
9:24:06 AM                                                                                                                    
                                                                                                                                
Ms. Leonard  discussed slide  10, and  stated that  ATIA was                                                                    
using funds to  maintain a basic program  focused on digital                                                                    
media strategies, public relations,  and a core travel-trade                                                                    
program.                                                                                                                        
                                                                                                                                
Ms. Leonard showed slide 11, "What If?":                                                                                        
                                                                                                                                
     In 1993, Colorado repealed tourism funding                                                                                 
          Within 2 years, lost 30% of its U.S. visitor                                                                          
          market share                                                                                                          
                                                                                                                                
     During a recession, Michigan doubled state tourism                                                                         
     marketing funding                                                                                                          
          From 2006-2014, "Pure Michigan" generated $6.6                                                                        
          billion in visitor spending                                                                                           
                                                                                                                                
Ms.  Leonard wanted  to discuss  conversations the  industry                                                                    
had  around statewide  tourism marketing  and the  effect of                                                                    
eliminated funding.                                                                                                             
                                                                                                                                
Ms. Leonard presented slide 12, "What If":                                                                                      
                                                                                                                                
     In 2010, Connecticut eliminated entire tourism                                                                             
     marketing budget                                                                                                           
          Travel-related tax revenue growth slowed to half                                                                      
          the pace during slow economic times of 2009-2010                                                                      
                                                                                                                                
     In 2011, Washington shut down tourism office                                                                               
          Saw competing states increase tourism promotion                                                                       
          budget and capture increased visitor spending                                                                         
                                                                                                                                
Co-Chair MacKinnon  asked about the reference  to the slowed                                                                    
growth of tax revenue in Connecticut.                                                                                           
                                                                                                                                
Ms. Leonard explained that  Connecticut visitor numbers were                                                                    
the same or  may have increased, however the  rate of growth                                                                    
had slowed.                                                                                                                     
                                                                                                                                
Co-Chair Hoffman asked about the  reaction of the Washington                                                                    
State Legislature after it had  observed the market decline.                                                                    
He wondered if the program had been reinstituted.                                                                               
                                                                                                                                
Mr.  Lambeth stated  that the  Washington State  Legislature                                                                    
had  not taken  action, but  there was  proposed legislation                                                                    
that utilized  part of  the existing  sales tax  revenue for                                                                    
tourism  promotion.  The  legislation required  an  industry                                                                    
funding match.                                                                                                                  
                                                                                                                                
Co-Chair Hoffman  asked what budget was  associated with the                                                                    
tourism office in Washington.                                                                                                   
                                                                                                                                
Ms. Leonard agreed  to provide the details on  the amount of                                                                    
funds that were eliminated at  a later date. She thought the                                                                    
state of Washington currently had a $1 million budget.                                                                          
                                                                                                                                
Co-Chair  MacKinnon discussed  the market  downturn in  2007                                                                    
and 2008, and  considered that the slides  reflected some of                                                                    
the reaction  to the  market. She  observed that  Alaska had                                                                    
continued  to invest  during that  time frame,  and was  now                                                                    
facing its own recession.                                                                                                       
                                                                                                                                
Ms.  Leonard thought  that the  economic benefits  that were                                                                    
seen were due  to healthy investments in  marketing that the                                                                    
legislature and the administration  had made in the previous                                                                    
2 to  4 years.  She conveyed  that marketing  strategies did                                                                    
not show  adverse effects from reductions  till years later.                                                                    
She commented on the unique  nature of the state, reiterated                                                                    
that the  state was seeing  benefits of the  investment that                                                                    
had been made in the state's marketing efforts.                                                                                 
                                                                                                                                
9:28:51 AM                                                                                                                    
                                                                                                                                
Senator  Dunleavy asked  if  it could  be  assumed that  the                                                                    
industry did  not replace  the funds  reduced in  the states                                                                    
cited in the examples on the slides.                                                                                            
                                                                                                                                
Ms.  Leonard  answered in  the  negative,  and thought  that                                                                    
tourism  marketing entities  were  working with  legislative                                                                    
leaders on  how to  fund sustainable tourism  marketing. She                                                                    
wanted  to  discuss  the  model of  TIDs,  which  relied  on                                                                    
industry  to  partner  with government  funding  to  support                                                                    
statewide destination marketing programs.                                                                                       
                                                                                                                                
Ms. Leonard reviewed slide 13, "What If,":                                                                                      
                                                                                                                                
     Pennsylvania's tourism funding declined 77% from 2008-                                                                     
     2015                                                                                                                       
          Projected loss of $600 million in state and local                                                                     
          tax revenue that travelers would have generated                                                                       
                                                                                                                                
     In 2013, San Diego held off on tourism promotion                                                                           
     funding                                                                                                                    
          $560 million in lost visitor spending and $24                                                                         
          million in reduced tax revenues                                                                                       
                                                                                                                                
Ms.  Leonard  indicated  that  the City  of  San  Diego  had                                                                    
eventually allocated the funds mentioned in the slide.                                                                          
                                                                                                                                
Ms. Leonard showed slide 14:                                                                                                    
                                                                                                                                
        · Broad based, reaches different industry sectors                                                                       
        · Visitor activity vs impacts to Alaskans                                                                               
        · A mix of current and new revenue                                                                                      
                                                                                                                                
Ms. Leonard  shared that  the ATIA  Board of  Directors held                                                                    
several meetings  since the previous  March to  research and                                                                    
discuss  different  revenue  options while  working  on  the                                                                    
legislative mandate.  The bullets on the  slide were guiding                                                                    
principles  for  the  conversations.   She  noted  that  the                                                                    
conversations had gravitated toward  TIDs, which occurred in                                                                    
many jurisdictions  in the United States,  at local regional                                                                    
levels and at the statewide level in California.                                                                                
                                                                                                                                
Mr. Lambeth showed slide 16:                                                                                                    
                                                                                                                                
     Supporting 1 in 9 U.S. jobs and contributing $2.1T to                                                                      
     our economy                                                                                                                
                                                                                                                                
     The travel and tourism industry fuels economic growth                                                                      
     in the U.S.                                                                                                                
                                                                                                                                
Mr. Lambeth  cited $158  billion in  total tax  revenue from                                                                    
tourism, with over $100 million generated in Alaska.                                                                            
                                                                                                                                
9:32:09 AM                                                                                                                    
                                                                                                                                
Mr. Lambeth reviewed slide 17, "The Future is Built with                                                                        
Travel Promotion.":                                                                                                             
                                                                                                                                
     Travel Promotion's Virtuous Cycle                                                                                          
     1. Invest in Travel Marketing and Promotion                                                                                
     2. Create Demand                                                                                                           
     3. Generate Visitor Spending                                                                                               
     4. Spur New Jobs and Tax Revenues                                                                                          
                                                                                                                                
Mr. Lambeth turned to slide 18, "The Vital Role of                                                                              
Destination Promotion."                                                                                                         
                                                                                                                                
     CHALLENGE:                                                                                                                 
     1. The primary motivator of a trip is usually the                                                                          
     experience of a destination, beyond a single business                                                                      
                                                                                                                                
     SOLUTION:                                                                                                                  
     DESTINATION PROMOTION                                                                                                      
     Articulates the brand message that is consistent with                                                                      
     consumer motivations                                                                                                       
                                                                                                                                
     CHALLENGE:                                                                                                                 
     2. Effective marketing requires scale to reach                                                                             
     potential visitors                                                                                                         
                                                                                                                                
     SOLUTION:                                                                                                                  
     DESTINATION PROMOTION                                                                                                      
     Pools sustained resources to provide the economies of                                                                      
     scale and marketing infrastructure required to                                                                             
     generate impact                                                                                                            
                                                                                                                                
Mr. Lambeth discussed destination promotion and informed                                                                        
that individual businesses spent significant resources on                                                                       
marketing because it was important for returns.                                                                                 
                                                                                                                                
Mr. Lambeth discussed slide 19, "What is a TID?":                                                                               
                                                                                                                                
        1. TIDs are an evolution of the traditional                                                                             
          Special Assessment District concept                                                                                   
        2. Special  Assessment   Districts   (BIDs)   assess                                                                    
          property owners in a specific geographic area to                                                                      
          provide    additional    desired   services    and                                                                    
          improvements                                                                                                          
        3. TIDs assess tourism-related businesses to provide                                                                    
          additional promotion and marketing activities                                                                         
                                                                                                                                
                                                                                                                                
Mr. Lambeth showed slide 20, "How it Works":                                                                                    
                                                                                                                                
     Hotels & other tourism businesses pay an assessment...                                                                     
                                                                                                                                
     Collected by the state government...                                                                                       
                                                                                                                                
     And managed by the DMO.                                                                                                    
                                                                                                                                
9:34:00 AM                                                                                                                    
                                                                                                                                
Mr. Lambeth displayed slide 21, "History of TIDs":                                                                              
                                                                                                                                
        1. The TID concept began in 1989 in West Hollywood,                                                                     
          California                                                                                                            
        2. In the last decade TIDs have experienced rapid                                                                       
         expansion with over 160 TIDs in 11 states                                                                              
        3. TIDs are raising over $300 million per year to                                                                       
         pay for destination promotion activities                                                                               
                                                                                                                                
Mr. Lambeth reviewed slide 22, "National District                                                                               
Statistics." He informed that the smallest TID raised                                                                           
$30,000 per year, and the largest raised $120 million.                                                                          
                                                                                                                                
Mr. Lambeth discussed slide 23, "Case Study: Visit                                                                              
California."                                                                                                                    
                                                                                                                                
     4x - The statewide TID has been approved to continue                                                                       
     by assessed businesses four times since 1997                                                                               
                                                                                                                                
     Over the last three years, California moved from 28th                                                                      
     to 2nd among state tourism marketing budgets                                                                               
                                                                                                                                
     California has achieved overwhelming success without                                                                       
     the need to raise taxes or appropriate any money from                                                                      
     the state's general fund                                                                                                   
                                                                                                                                
Mr. Lambeth showed slide 24, "Approach to New Proposed                                                                          
Legislation":                                                                                                                   
                                                                                                                                
        1. Modeled after the Alaska Seafood Marketing                                                                           
          Institute statute                                                                                                     
        2. Utilized the best concepts in laws from other                                                                        
          states                                                                                                                
        3. Customized to the unique Alaska travel and                                                                           
          tourism industry                                                                                                      
                                                                                                                                
Mr.  Lambeth praised  the  Alaska  tourism industry,  noting                                                                    
that it had worked hard over  the previous year to develop a                                                                    
plan. He  stated that  the tourism industry  wanted to  do a                                                                    
TID,  and was  looking to  the state  for a  partnership. He                                                                    
discussed  budget  requests  and legislative  decisions.  He                                                                    
discussed the  possibility of dedicating the  VRT revenue to                                                                    
tourism promotion.                                                                                                              
                                                                                                                                
Ms. Stephens  discussed slide 25,  "How Much  Could Industry                                                                    
Generate?" Based on a 1  % Assessment as Example." She noted                                                                    
that she was a small  business owner in Valdez that employed                                                                    
5  full-time  employees  and   30  seasonal  employees.  She                                                                    
alleged that  small businesses  would feel  the impact  of a                                                                    
diminished marketing  budget. She  highlighted the  table on                                                                    
the  slide;  which  looked  at a  1  percent  assessment  on                                                                    
accommodations, tours,  and attractions. The  estimate would                                                                    
bring  in  approximately $7.5  million  of  new revenue  for                                                                    
tourism marketing funding. In  combination with the VRT, the                                                                    
new  revenues  would  create a  $17.2  million  budget.  She                                                                    
detailed that a budget of  $17.2 million had created success                                                                    
in the past.                                                                                                                    
                                                                                                                                
9:38:44 AM                                                                                                                    
                                                                                                                                
Senator  Micciche discussed  a $50  head tax  on the  cruise                                                                    
industry, and thought that the  tourism industry had opposed                                                                    
the  tax. He  wondered  if  the funding  could  have been  a                                                                    
resource such as was being presented on the slide.                                                                              
                                                                                                                                
Ms.  Stephens relayed  that there  were federal  regulations                                                                    
that  dictated how  taxes on  interstate  commerce could  be                                                                    
spent, which  did not allow  for spending on  marketing. She                                                                    
asserted that all  aspects of travelers could  be reached to                                                                    
help support  the marketing program  with the  TID approach,                                                                    
including independent travelers and cruise travelers.                                                                           
                                                                                                                                
Senator  Costello referred  to the  $17.2 million  listed on                                                                    
slide  25,  which   would  allow  ATIA  to  go   back  to  a                                                                    
comprehensive marketing  strategy that had been  used in the                                                                    
past. She  understood that the  past marketing  strategy had                                                                    
included   the   vacation   planner  in   which   individual                                                                    
businesses  could  purchase  advertising. She  did  not  see                                                                    
associated revenues  and reinvestment as a  component of the                                                                    
funding  on slide  25. She  added  that she  thought it  was                                                                    
important  to  understand   the  demographics  of  travelers                                                                    
coming to the state.                                                                                                            
                                                                                                                                
Ms. Stephens  referred to research  that indicated  that the                                                                    
planner was  used by  a wide demographic,  and was  used for                                                                    
more  than one  year. She  had found  through research  that                                                                    
travelers did want a physical  copy of a planner, regardless                                                                    
of demographic. She confirmed that  the main demographic for                                                                    
Alaska summer visitors  remained in the 60's  age range. She                                                                    
noted  that  the  demographic  was  becoming  younger,  more                                                                    
international, and more  multi-generational. Considering new                                                                    
numbers allowed for adaptation of the marketing program.                                                                        
                                                                                                                                
9:42:59 AM                                                                                                                    
                                                                                                                                
Senator Costello asked if businesses  would still be able to                                                                    
purchase advertisements  in the printed travel  planner, and                                                                    
if the revenues were included in the new program.                                                                               
                                                                                                                                
Ms.  Stephens answered  in the  affirmative, and  noted that                                                                    
the current  plan included revenues coming  from cooperative                                                                    
programs. She  shared that  the industry  contributions were                                                                    
close to $3  million when the budget had  previously been at                                                                    
the same level as what was proposed on the slide.                                                                               
                                                                                                                                
Senator  von Imhof  expressed  appreciation  for the  effort                                                                    
undertaken   in  developing   the   presentation.  She   was                                                                    
supportive  of  extending   economic  opportunities  in  the                                                                    
state.  She thought  tourism was  growing and  had a  lot of                                                                    
potential. She thought it would  have been helpful to review                                                                    
a   visitor  analysis   to   observe   changes  over   time.                                                                    
Additionally, she  expressed interest in  seeing information                                                                    
on  existing  bed  taxes at  a  statewide  and  municipality                                                                    
level,  how the  funds were  being  used, and  how it  might                                                                    
compare  to  other  states.  She   referred  to  a  proposed                                                                    
additional bed tax in Anchorage to fund police.                                                                                 
                                                                                                                                
Ms. Leonard  stressed that the  TID proposal referred  to an                                                                    
assessment  versus a  bed  tax. She  agreed  to provide  the                                                                    
requested  information, which  the state  already collected.                                                                    
She noted  that taxes supported general  services, while the                                                                    
TID  proposal  asked industry  to  assess  themselves to  be                                                                    
allocated  for tourism  promotion. She  continued that  ATIA                                                                    
was  communicating with  parties in  Anchorage to  ascertain                                                                    
how  the  proposed bed  tax  might  impact a  statewide  TID                                                                    
model.                                                                                                                          
                                                                                                                                
9:46:41 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman asked  which  components  of the  proposed                                                                    
plan would require legislation.                                                                                                 
                                                                                                                                
Ms.  Leonard expressed  that ATIA  was looking  for guidance                                                                    
and support for potential  legislation to create a statewide                                                                    
TID,  where  the  assessments  would   be  included  in  the                                                                    
language.                                                                                                                       
                                                                                                                                
Co-Chair Hoffman  asked if the association  had any proposed                                                                    
legislation to offer.                                                                                                           
                                                                                                                                
Ms.  Leonard  related  that  ATIA  was  in  the  process  of                                                                    
drafting legislation, and would  appreciate the guidance and                                                                    
support  of  the  legislature  to   move  forward  with  the                                                                    
concept.                                                                                                                        
                                                                                                                                
Co-Chair  Hoffman suggested  that  the  committee could  not                                                                    
give  outright approval,  and emphasized  the  need for  the                                                                    
public legislative process.                                                                                                     
                                                                                                                                
Mr.  Lambeth stated  that the  process had  been started  to                                                                    
identify   all  the   elements   to   include  in   proposed                                                                    
legislation.  He indicated  that the  stakeholders had  been                                                                    
hoping for  early feedback, and would  soon have legislation                                                                    
ready to be considered.                                                                                                         
                                                                                                                                
Senator  Dunleavy asked  for  clarification  of the  state's                                                                    
role in the collection of the contributions from industry.                                                                      
                                                                                                                                
Mr. Lambeth  stated that normally  the entity  would collect                                                                    
contributions. The  state would  approve the  mechanism, the                                                                    
industry  would  design the  program  and  vote on  it,  and                                                                    
typically the industry would be  responsible for making sure                                                                    
that collections happened.                                                                                                      
                                                                                                                                
Senator  Dunleavy asked  if the  state would  merely collect                                                                    
what  was given,  and use  the  funds for  helping with  the                                                                    
marketing program funding.                                                                                                      
                                                                                                                                
Mr. Lambeth  relayed that the  process varied from  state to                                                                    
state; in  some states the  industry was on the  front lines                                                                    
of  collection,  and  in  other   places  the  state  had  a                                                                    
department doing  collection. Normally, states that  did the                                                                    
collection of  assessments would  look for  reimbursement of                                                                    
associated costs.                                                                                                               
                                                                                                                                
Senator  Dunleavy   asked  what   model  that   Mr.  Lambeth                                                                    
envisioned for the collection of contributions.                                                                                 
                                                                                                                                
Ms. Leonard  had received industry  feedback that  favored a                                                                    
partnership;  with revenue  collected by  the state  and the                                                                    
program managed by the industry.                                                                                                
                                                                                                                                
9:50:59 AM                                                                                                                    
                                                                                                                                
Senator Olson  was supportive of  the idea  being presented.                                                                    
He recalled that eight years  previously, when the state was                                                                    
in deficit spending,  there was a significant  hotel tax put                                                                    
in place.  He discussed the  effects on residents  after the                                                                    
tax  was intended  to target  visitor spending.  He wondered                                                                    
how  the TID  model  would affect  residents throughout  the                                                                    
state who  would rent  cars, rent hotel  rooms, or  do other                                                                    
activities related to tourism.                                                                                                  
                                                                                                                                
Mr. Lambeth  discussed other states which  had imposed taxes                                                                    
that  effected all  people, whether  they were  residents or                                                                    
travelers.  He thought  public education  was important.  He                                                                    
emphasized that  the program was  designed to  increase out-                                                                    
of-state visitors and drive economic activity.                                                                                  
                                                                                                                                
Co-Chair Hoffman inquired about  the first footnote on slide                                                                    
25:                                                                                                                             
                                                                                                                                
     "Estimates are based on spending by non-Alaska                                                                             
     residents ONLY, not spending by Alaskans traveling in-                                                                     
     state"                                                                                                                     
                                                                                                                                
Ms. Leonard  indicated that the  intent had been  to project                                                                    
numbers to build  an example of a 1  percent assessment. She                                                                    
looked forward  to working with the  legislature on fleshing                                                                    
out  the details  of the  proposal. She  did not  know of  a                                                                    
solution  for having  less  or no  impact  on residents  who                                                                    
travelled the state.                                                                                                            
                                                                                                                                
Senator  Dunleavy  stated  that associated  funds  would  be                                                                    
designated and would still be going to the GF.                                                                                  
                                                                                                                                
Co-Chair MacKinnon understood the same.                                                                                         
                                                                                                                                
9:54:39 AM                                                                                                                    
                                                                                                                                
Senator Micciche  referred to the importance  of the visitor                                                                    
industry on  the Kenai Peninsula.  He thought that  ATIA had                                                                    
done a good job on  winter destination promotion. He thought                                                                    
that  an interesting  comment had  been  made on  interstate                                                                    
commerce. He  suggested that  it would be  possible to  do a                                                                    
discount of 5 or 10 percent  for Alaska residents as part of                                                                    
the  campaign, which  would  not  compromise the  interstate                                                                    
commerce issue. He  recounted working on the  budget for the                                                                    
Department  of  Transportation  and Public  Facilities,  and                                                                    
thought the  visitor numbers were heavily  influenced by the                                                                    
cost of  refined fuels.  He observed  the phenomenon  on the                                                                    
Alaska Marine Highway receipts,  as well as visitor numbers.                                                                    
He thought there was a direct correlation.                                                                                      
                                                                                                                                
Ms.  Leonard  discussed  fuel   prices  and  increased  road                                                                    
traffic to  the state.  She thought it  was possible  to see                                                                    
economic  results  at  the   statewide  level,  and  thought                                                                    
external  factors were  always at  play in  the marketplace.                                                                    
She thought it  was possible to prove  the economic benefits                                                                    
of a healthy tourism industry because of tourism promotion.                                                                     
                                                                                                                                
9:58:07 AM                                                                                                                    
                                                                                                                                
Mr. Lambeth  indicated that many  programs tried  to protect                                                                    
and grow market share. There  were many things that affected                                                                    
travel and  tourism; including the overall  economy and fuel                                                                    
prices. He  referred to locations that  had lost destination                                                                    
marketing,  which had  studies conducted  after the  fact to                                                                    
show lost  market share. He  thought the industry  wanted to                                                                    
make  sure  the  tourism  industry  was  thriving  into  the                                                                    
future, and an important  part was significant funding going                                                                    
toward destination marketing efforts.                                                                                           
                                                                                                                                
Senator Micciche  clarified that  he was not  advocating for                                                                    
or against  a tax.  He thought  that if  the self-assessment                                                                    
went  forward, travelers  were not  dissuaded from  visiting                                                                    
because  of an  additional percentage  point or  two on  the                                                                    
dollar  to  help  provide  the  funding.  He  suggested  the                                                                    
consideration  of a  residential discount  if the  plan went                                                                    
forward.                                                                                                                        
                                                                                                                                
Senator  Dunleavy  considered  it  was a  good  exercise  to                                                                    
review  the impacts  on  Alaskans. He  noted  that the  body                                                                    
would be  concurrently discussing massive direct  impacts to                                                                    
Alaskans through  potential revenue  enhancements of  a much                                                                    
greater magnitude.                                                                                                              
                                                                                                                                
10:00:52 AM                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon  commented  that  the  reason  ATIA  was                                                                    
before the  committee was that  the previous  session, there                                                                    
was  intent language  directing  the industry  to come  back                                                                    
with   self-funding   ideas   and   reduce   dependency   on                                                                    
Undesignated General  Funds. The idea being  presented would                                                                    
tax  the  industry itself,  and  also  impact Alaskans.  She                                                                    
thought  it  was up  to  industry  to discuss  the  economic                                                                    
benefit of a healthy tourism  industry. She remarked that an                                                                    
expectation  of  $9.5  million  of  GF  funds  was  probably                                                                    
unrealistic.                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon continued,  and  mentioned the  proposed                                                                    
industry/state partnership  including the VRT.  She referred                                                                    
to a debate on adding the  word "may" to designate a revenue                                                                    
stream  to  tourism. She  referred  to  comments by  Senator                                                                    
Costello  and  Senator  von  Imhoff  pertaining  to  tourism                                                                    
demographics. She thought the  committee would be interested                                                                    
to see who  would serve on the board to  allocate the funds.                                                                    
She thought  language pertaining to matching  funds would be                                                                    
more effective than the entire amount of the VRT.                                                                               
                                                                                                                                
Co-Chair  MacKinnon  relayed  that the  committee  would  be                                                                    
heavily  scrutinizing  any  spending on  forthcoming  fiscal                                                                    
notes. She mentioned ongoing  discussions in the legislature                                                                    
that considered taxation of Alaskans.                                                                                           
                                                                                                                                
10:06:03 AM                                                                                                                   
                                                                                                                                
Senator Costello  thanked the committee for  allowing her to                                                                    
be present  at the table  for her  position as chair  of the                                                                    
Senate  Labor  and  Commerce   Committee.  She  referred  to                                                                    
legislative  hearings  with   economists,  who  agreed  that                                                                    
certainty was  needed. She acknowledged  that the  state was                                                                    
having trying fiscal times, and  thought it was important to                                                                    
look at  diversification, including travel.  She appreciated                                                                    
comments related to how the  proposal would affect Alaskans.                                                                    
She noted that  it was the first time that  the industry had                                                                    
come to the legislature  with a proposal of self-assessment.                                                                    
She thought  there would  be an  issue with  the use  of the                                                                    
VRT, but applauded the proposal.                                                                                                
                                                                                                                                
Co-Chair  MacKinnon thanked  Senator Costello  for attending                                                                    
and prioritizing the conversation.                                                                                              
                                                                                                                                
Senator  Dunleavy praised  Co-Chair MacKinnon's  directness.                                                                    
He   echoed  Senator   Costello's  comments   and  expressed                                                                    
appreciation  for   the  industry  developing  a   plan  and                                                                    
considering  the fiscal  climate  in the  state. He  thanked                                                                    
ATIA for having a  solutions-based approach, and thought Co-                                                                    
Chair MacKinnon had given good advice.                                                                                          
                                                                                                                                
Senator  Micciche  referred  to  the fuel  cost  issue,  and                                                                    
agreed   that    tourism   diversified    Alaska's   economy                                                                    
significantly. He  thought there  was a  direct relationship                                                                    
to diversification.  He recounted  that most  industries had                                                                    
not been supportive of self-assessments.  He referred to the                                                                    
commercial fisheries industry, which  was looking at similar                                                                    
self-assessments to  help contribute towards what  they used                                                                    
in state resources. He  expressed appreciation for industry-                                                                    
led suggestions.  He thought the state  would experience the                                                                    
same budget struggles for a few more years.                                                                                     
                                                                                                                                
Ms.  Leonard reiterated  her thanks  to  the committee,  and                                                                    
looked forward  to working with members  on legislation. The                                                                    
industry viewed  the proposal as a  hopeful partnership with                                                                    
the legislature and the administration.                                                                                         
                                                                                                                                
Co-Chair MacKinnon  discussed the  agenda for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:12:28 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:12 a.m.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
012417 ATIA SFC Presentation.pdf SFIN 1/24/2017 9:00:00 AM
Operating Budget FY18