Legislature(2003 - 2004)

03/12/2003 09:07 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 12, 2003                                                                                      
                              9:07 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 19, Side A                                                                                                             
SFC 03 # 19, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:07 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending:   BOB DINDINGER, President,  Alaska Travel  Industry                                                          
Association,  and  Owner,  Alaska  Travel   Adventures;  CARL  ROSE,                                                            
Executive Director, Association of Alaska School Boards;                                                                        
                                                                                                                                
Attending  via Teleconference:   From Anchorage:  DAN FAUSKE,  Chief                                                          
Executive  Officer and Executive  Director,  Alaska Housing  Finance                                                            
Corporation                                                                                                                     
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
Alaska Travel Industry Association                                                                                              
                                                                                                                                
The Committee heard a presentation by this organization.                                                                        
                                                                                                                                
SB  25-AHFC LOANS TO EDUCATORS                                                                                                  
                                                                                                                                
The Committee heard testimony  from the Alaska Association of School                                                            
Boards. A committee  substitute and  an amendment were adopted.  The                                                            
bill moved from Committee.                                                                                                      
                                                                                                                                
                                                                                                                                
Presentation by the Alaska Travel Industry Association                                                                          
                                                                                                                                
BOB  DINDINGER,  President,   Alaska  Travel  Industry  Association                                                             
(ATIA),  and Owner,  Alaska Travel  Adventures,  utilized a  handout                                                            
                                                                   rd                                                           
titled "Alaska Tourism: An Industry in Decline,  A Report to the 23                                                             
Alaska  State Legislature,  March 12,  2003" [copy  on file]  in his                                                            
presentation as follows.                                                                                                        
                                                                                                                                
Mr. Dindinger  reminded the Committee  of the direction it  gave the                                                            
ATIA  to research  the trends  in tourism  in the  aftermath of  the                                                            
events of September 11, 2001.                                                                                                   
                                                                                                                                
     What Happened in 2002?                                                                                                     
        · "Survival was how we measured success this year." Kirk                                                                
          Hoessle, Alaska Wildland Adventures, Oct. 2002                                                                        
        · "The preliminary data for 2002 shows an end to any                                                                    
          growth." Eric McDowell, Oct. 2002                                                                                     
                                                                                                                                
Mr. Dindinger  declared that the year 2002 "as far  and away not the                                                            
only  bad year  we've had."  He informed  that growth  has  declined                                                            
since the middle 1990s.                                                                                                         
                                                                                                                                
Mr. Dindinger ascertained  that the events of September 11, 2002 are                                                            
not the only factor  affecting tourism, asserting  "we believe there                                                            
is a  direct correlation  between our  lack of  growth and the  lack                                                            
investment in tourism marketing."                                                                                               
                                                                                                                                
     ATIA 2002 Tourism Survey, The McDowell Group                                                                               
        · Surveyed:                                                                                                             
             o 315 businesses                                                                                                   
             o All five regions of the state                                                                                    
             o ATIA    and   non-ATIA    tourism   businesses    for                                                            
                statistically reliable sampling                                                                                 
                                                                                                                                
      Survey revealed that tourism growth is flat, or worse…                                                                    
          Nearly 50% of businesses surveyed statewide experienced a                                                             
          decline in business volume.                                                                                           
                                                                                                                                
Mr.  Dindinger   furthered  that   40  percent  of  the   businesses                                                            
experiencing  a decline,  reported  that decline  is  "in excess  of                                                            
double digits."                                                                                                                 
                                                                                                                                
     Key Regional Observations                                                                                                  
        · 87% of Alaska Interior businesses experienced declining                                                               
          volume                                                                                                                
        · Despite 4% increase in cruise passengers, 61% of Alaska                                                               
          businesses that depend primarily on cruise traffic                                                                    
          experienced decreased volume                                                                                          
               Source: McDowell 2002 Visitor Survey                                                                             
                                                                                                                                
Mr. Dindinger  remarked that the decline  is not evenly distributed                                                             
throughout   the  State,  noting   that  the  Interior  region   has                                                            
experienced the largest  decline. He furthered that various types of                                                            
business experienced different degrees of decline.                                                                              
                                                                                                                                
Mr.  Dindinger  informed   that  cruise  ship  passengers   comprise                                                            
approximately one-half  of all visitors to Alaska. He qualified that                                                            
although the number of  cruise ship passengers increased, the travel                                                            
fares were  reduced significantly,  which "attracted a lesser  value                                                            
client." These  clients, he attested,  spent less money per  person,                                                            
spent  fewer  days  in Alaska,  and  did  not travel  "as  far  into                                                            
Alaska".                                                                                                                        
                                                                                                                                
     Tourism Sectors in Decline                                                                                                 
          Percentage of businesses reliant on the following sectors                                                             
          that reported a decline last summer:                                                                                  
             · 96% for overseas travelers                                                                                       
             · 81% for adventure travel                                                                                         
             · 65% for sportfishing                                                                                             
                Source: McDowell 2002 Business Survey                                                                           
                                                                                                                                
Mr. Dindinger  stated that businesses  that deal with international                                                             
and  overseas  visitors  were  most affected  by  the  declines.  He                                                            
commented  that in  2002, many  people  were reluctant  to fly  over                                                            
oceans. He added that businesses  dealing with independent travelers                                                            
were also affected.                                                                                                             
                                                                                                                                
     Convention & Visitor Bureau Impacts - Summer 2002                                                                          
        · Anchorage hotel revenues             down 4-6%                                                                        
        · Fairbanks hotel revenues             down 17.6 %                                                                      
        · Petersburg visitor counts            down 9%                                                                          
        · Kenai visitor counts                 down 4% June                                                                     
                                               down 7% July                                                                     
                                             but up 11% August                                                                  
                                                                                                                                
Mr. Dindinger  asserted, "It didn't  make any difference  whether it                                                            
was an urban or a rural  community…a large city or a small town," as                                                            
tourism  activities   were  "down"  in  "all  areas  with  very  few                                                            
exceptions."  He furthered that even  those communities that  had an                                                            
increase   in   the   number   of  visitors   realized    "decreased                                                            
expenditures" from those travelers.                                                                                             
                                                                                                                                
     Highway in 2002                                                                                                            
          Highway traffic to Alaska down 14.3 %                                                                                 
                                                                                                                                
Mr.  Dindinger  shared  that  this  information  was  garnered  from                                                            
"Canadian  and U.S. Immigration  numbers."  He stressed that  at one                                                            
time,  highway travel  was "the  largest single  source of  visitors                                                            
into Alaska".                                                                                                                   
                                                                                                                                
     Airport Enplanements Statewide                                                                                             
          down 3 %                                                                                                              
                                                                                                                                
Mr. Dindinger  stated that Anchorage "held up the  best" because the                                                            
Ted Stevens  Anchorage  International  Airport is  the terminus  for                                                            
many of the cruise  itineraries. He listed Juneau  enplanements were                                                            
down eight  percent, Ketchikan enplanements  were down four  percent                                                            
and Fairbanks  enplanements were down  approximately three  percent.                                                            
                                                                                                                                
     Tourism Means Economic Hope to Alaskan Communities - Large &                                                               
     Small                                                                                                                      
     "Tourism  in  Haines  is  declining.  Businesses  are  closing,                                                            
     people  are losing  jobs. Despite  this,  we remain  optimistic                                                            
     that  tourism offers  hope for  our economy."  Michelle  Glass,                                                            
     Haines CVB Feb. 2003                                                                                                       
                                                                                                                                
Mr. Dindinger  described  the transition of  economic dependence  in                                                            
recent years  from resource extraction  to other types of  business,                                                            
stating that  tourism has  become "much sought  after by many  small                                                            
communities like Wrangell  and Haines, Dutch Harbor, Talkeetna, as a                                                            
new source  of employment,  a new source  of economic stimulus."  He                                                            
remarked these efforts  have been "challenging" due to the declining                                                            
growth rate.  He perceived Haines  residents to consider  tourism to                                                            
be "their only and best hope for future growth."                                                                                
                                                                                                                                
     Tourism Budget Trends 1992 - 2002                                                                                          
          Is the growth gone?                                                                                                   
                                                                                                                                
Mr. Dindinger  spoke "for  those of us in  the tourism industry"  as                                                            
believing   that  growth   could  "return…but   only  by   increased                                                            
investment."                                                                                                                    
                                                                                                                                
     State Tourism Budgets                                                                                                      
        · Average 2001/2002 U.S. state tourism budget was $13.1                                                                 
          million                                                                                                               
        · Public sector dollars are sole source of tourism funding                                                              
          in 35 of 48 states (73 % of ALL states)                                                                               
        · Of 13 states that receive some private-sector funding,                                                                
          80.5 % of their funding comes from public-sector dollars                                                              
        · Alaska private sector contributions account for 60% of                                                                
           the ATIA statewide tourism marketing budget.                                                                         
                Source: 2001-2002 Survey of the U.S. State &                                                                    
                Territory Tourism Office Budgets                                                                                
                                                                                                                                
Mr. Dindinger  commented that Alaska  is "significantly against  the                                                            
trend."                                                                                                                         
                                                                                                                                
                     th                                                                                                         
     Alaska Ranks 38 in State Tourism Funding                                                                                   
          Source: NCSTD Poll Re. FY2002-03 Projected Total Tourism                                                              
          Office Budget                                                                                                         
          [Bar graph indicating the following:                                                                                  
          Hawaii          $56 million                                                                                           
          Illinois         50 million                                                                                           
          New York         48 million                                                                                           
          Pennsylvania     35 million                                                                                           
          Texas            32 million                                                                                           
          Florida          29 million                                                                                           
          Alaska           4.6 million]                                                                                         
                                                                                                                                
Mr. Dindinger  pointed  out that  Alaska  is "more  similar" to  the                                                            
State of  Hawaii "in terms  of what we have  to overcome to  attract                                                            
visitors."  He explained  that  visitors  must travel  thousands  of                                                            
miles to reach  these two states.  He compared this to the  State of                                                            
Oregon, where  most visitors to that state travel  from the State of                                                            
Washington  or the  State  of California.  However,  he stated  that                                                            
visitors to Alaska  and Hawaii tend to spend more  money and spend a                                                            
longer amount of time than travelers to other states.                                                                           
                                                                                                                                
Senator Bunde  asked the  total amount of  public and private  funds                                                            
spent on tourism efforts in Alaska.                                                                                             
                                                                                                                                
Mr. Dindinger  answered that  the Association  intends to spend  $10                                                            
million in the current  year, with $6 million of that amount private                                                            
funds and $4 million State funds.                                                                                               
                                                                                                                                
     State of Alaska General Fund Dollars to Tourism Marketing                                                                  
      [Bar graph indicating amounts for FY 90 through FY 03]                                                                    
                                                                                                                                
Mr. Dindinger  stated  that the  general fund  spending for  tourism                                                            
marketing has  been "generally declining  since the early  '80s." He                                                            
recalled approximately  $17 million of State funds  was spent in the                                                            
"early  '80s."   He  understood  this  occurred   "in  the  days  of                                                            
prosperous  oil wealth." However,  he pointed out that growth  rates                                                            
in tourism were "double digit" during those years.                                                                              
                                                                                                                                
     Combined Marketing Funding: State & Industry Contributions                                                                 
     [Bar graph indicating the amount of private and State                                                                      
     contributions for FY 01, FY 02 and FY 03.]                                                                                 
Mr. Dindinger  noted the  fiscal years reflected  on this graph  are                                                            
the New  Millennium  Plan years. He  asserted that  while the  State                                                            
funding  has been  reduced, "the  industry has,  as aggressively  as                                                            
possible,  tried  to pick  up  the difference  by  investing  more."                                                            
However, he  remarked that these efforts  have "still have  not kept                                                            
pace with inflation".  He continued,  "We have still not  managed to                                                            
maintain our competitiveness  with other destinations,  other states                                                            
and countries.  Our marketing presence  in the domestic marketplace                                                             
has consistently been reduced."                                                                                                 
                                                                                                                                
     FY 03 Funding: State & Private Sector Contributions                                                                        
     [Bar graph listing the following:                                                                                          
     State Contract            $4.0 million                                                                                     
     Adv/Mkt Prog               3.0 million                                                                                     
     Cruiseline Contrib         2.0 million                                                                                     
     CVBs                        .6 million                                                                                     
     Other*                      .4 million                                                                                     
     *Other category is comprised of member dues, convention,                                                                   
     travel auction and interest]                                                                                               
                                                                                                                                
Senator  Hoffman   asked  the  amount  contributed   by  the  cruise                                                            
industry.                                                                                                                       
                                                                                                                                
Mr.  Dindinger  referenced   the  chart,  listing   $2  million.  He                                                            
clarified  that the  cruise companies  contribute  this amount  as a                                                            
"direct contribution  to this marketing  program" but informed  that                                                            
these  companies also  purchase almost  one-half  of advertising  as                                                            
reflected in the  "Adv/Mkt Prog" component. Other  than State funds,                                                            
he remarked,  the cruise  companies are the  largest contributor  to                                                            
the marketing effort.                                                                                                           
                                                                                                                                
     Visitor Industry Growth                                                                                                    
     [Bar graph indicating the increased number of visitors each                                                                
     year from 1990 through 2002.]                                                                                              
                                                                                                                                
Mr.  Dindinger indicated  the  growth rate  was "over  five  percent                                                            
consistently  through the  first half  of the '90s"  and that  after                                                            
1996, the growth rate "started  to tail down; '96 being a great year                                                            
with ten-percent  growth."  He stated that the growth  as "flattened                                                            
out" over the  past three or four years, from below  four percent to                                                            
less than one percent in each of the past three years.                                                                          
                                                                                                                                
Mr. Dindinger reiterated  that the events of September 11, 2001 were                                                            
not the first indicators of decline.                                                                                            
                                                                                                                                
     Visitor Industry Growth by %                                                                                               
     [Bar graph indicating the increased percentage of visitors                                                                 
     each year from 1990 through 2002.]                                                                                         
                                                                                                                                
Mr. Dindinger noted the  growth rates have declined at the same time                                                            
as "more  people have  gotten into  the travel  industry"  including                                                            
significant   investments  by  Native   Corporations  into   tourism                                                            
infrastructure and development.  As a result, he stated, "individual                                                            
pieces of the pie have gotten smaller."                                                                                         
                                                                                                                                
     State Tourism Marketing Allocation                                                                                         
          Marketing Expenditures Indexed on '91 Buying Power                                                                    
          [Bar graph indicating the amount for each year from 1991                                                              
          through 2002.]                                                                                                        
                                                                                                                                
Mr.  Dindinger  explained  this  graph  details  inflation-adjusted                                                             
buying power.  He argued  that despite  the industry-contributed  $6                                                            
million into  the marketing  program in the  current year,  the ATIA                                                            
does not have  "near the marketing  presence, or the ability  to buy                                                            
into  the market  at  the same  place  as we  did during  the  early                                                            
1990s."                                                                                                                         
                                                                                                                                
     Comparing Visitor Growth and Total Tourism Spending                                                                        
     [Two bar graphs: "Marketing Expenditures Indexed on '91 Buying                                                             
     Power" and "Percentage of Visitor Growth"]                                                                                 
                                                                                                                                
Mr. Dindinger  commented  that  as "we  fail to  grow our  marketing                                                            
budget,  that's  when we  appreciably  start to  see  a fall-off  in                                                            
visitor  growth."  He  added  that   the  funds  spent  for  tourism                                                            
marketing  in any  one  year affects  the next  several  years.   He                                                            
explained that approximately  one-half of the people impacted by the                                                            
marketing efforts  travel to Alaska the following  season, while the                                                            
remaining travel  to the State two or three years  later. Therefore,                                                            
he ascertained  that  the  cumulative affects  are  realized in  the                                                            
future rather than during the present.                                                                                          
                                                                                                                                
     Tourism Benefits Alaskans                                                                                                  
        · Provides Jobs                                                                                                         
        · Generates NEW Dollars                                                                                                 
             NOT a reallocated dollar                                                                                           
        · Renewable Resource                                                                                                    
                                                                                                                                
Mr. Dindinger declared, "Tourism benefits all Alaskans."                                                                        
                                                                                                                                
     Tourism Provides Jobs                                                                                                      
        · 78% local hire rate (the highest of all key Alaska                                                                    
          industries)                                                                                                           
        · Leading industry in Southcentral, Southeast and Interior                                                              
        · Provides 1 in 8 private sector jobs                                                                                   
        · Directly & indirectly employs 30,700 Alaskans                                                                         
        (The McDowell Group: Economic Impacts of Alaska's Visitor                                                               
        Industry, May 1999)                                                                                                     
                                                                                                                                
     Visitors Contribute to the Economy (2001)                                                                                  
     [Bar graph showing visitor spending was $1.8 million]                                                                      
                                                                                                                                
Mr. Dindinger corrected the amount is $1.8 billion.                                                                             
                                                                                                                                
     Instate Expenditures                                                                                                       
     Fall 2000 to Summer 2001 (Millions)                                                                                        
          Alaska Visitor Expenditures & Opinions, Fall/Winter 2000-                                                             
          01 & Summer 2001                                                                                                      
          [Pie chart listing the following:                                                                                     
          Lodging                    $589                                                                                       
          Food & Beverage             192                                                                                       
          Transportation              237                                                                                       
          Recreation                  247                                                                                       
          AK  Native Arts/Crafts      180                                                                                       
          Gifts/Souvenirs             164                                                                                       
          Clothes/Personal/Other      231]                                                                                      
                                                                                                                                
Mr. Dindinger  noted the  wide distribution  of these funds  through                                                            
the  economy.  He described  the  "lodging"  category  as  including                                                            
hotels, campgrounds,  bed and breakfasts  and lodges. He  added drug                                                            
stores  and  hospitals  as  businesses  that  benefit  from  tourism                                                            
expenditures.                                                                                                                   
                                                                                                                                
     Growing Alaska's Economy through Increased Tourism Marketing                                                               
     Dollars, Missions & Measures                                                                                               
                                                                                                                                
Mr. Dindinger  stressed this is a "science" and "not  something that                                                            
is done without research."                                                                                                      
                                                                                                                                
     ATIA's Marketing Strategy                                                                                                  
        · Use goals & objectives to maximize marketing program                                                                  
          effectiveness                                                                                                         
        · Constantly re-evaluate programs to ensure continued                                                                   
          success                                                                                                               
        · Good marketing = great visitor turnout                                                                                
                                                                                                                                
Mr.  Dindinger  told of  the  time,  effort and  money  invested  in                                                            
researching the effectiveness of the marketing program.                                                                         
                                                                                                                                
     What a Difference a Dollar Makes: An Additional $10 Million                                                                
     will:                                                                                                                      
        · Generate over 290,000 visitors                                                                                        
        · Produce $366 million in visitor spending                                                                              
        · Create new business opportunities                                                                                     
        · Put more Alaskans to work!                                                                                            
                                                                                                                                
Mr. Dindinger asserted  that at least $10 million additional funding                                                            
is necessary to "get us back on track."                                                                                         
                                                                                                                                
     Where Do We Go From Here?                                                                                                  
        · We MUST Regain Market Share                                                                                           
        · We MUST Support and Further Develop Alaska's Independent                                                              
          Tourism Businesses                                                                                                    
        · We MUST Fund Alaska's Independent Tourism Businesses                                                                  
        · We MUST Fund Alaska's Tourism Marketing Program… Now and                                                              
          Into the Future…                                                                                                      
                                                                                                                                
     The Alaska Travel Industry Association:                                                                                    
         · Supports Broad Based Tourism Taxes to Fund Alaska's                                                                  
              - We MUST Act Now to Prevent Further Decline of                                                                   
                 Alaska's Second Largest Industry                                                                               
         · Opposes: Targeted Tourism Taxes on Any One Tourism                                                                   
            Segment                                                                                                             
                                                                                                                                
Mr. Dindinger  corrected that  the ATIA board  of directors  did not                                                            
vote to support broad based  taxes. Rather, he said, the Association                                                            
voted to  "work with you  and the Governor's  Office to investigate                                                             
long-term  funding  sources  of a  tourism  marketing  program."  He                                                            
continued,  "We  are  not  necessarily   opposed  to  taxes  on  our                                                            
industry, but we feel that  those taxes, in whole or in part, should                                                            
be  used to  support  the  marketing  program  that will  grow  this                                                            
industry into the future."                                                                                                      
                                                                                                                                
Senator Bunde noted the  opposition of targeted tourism taxes to one                                                            
segment  of the  industry and  asked how  this would  relate to  the                                                            
proposed watchable wildlife license.                                                                                            
                                                                                                                                
Mr. Dindinger  opposed this proposal,  as he constituted  it to be a                                                            
head tax.   He asserted,  "Head  taxes in the  tourism industry  are                                                            
considered   to  be   punitive;  they   are   unattractive  in   the                                                            
marketplace"  and would be  "the most aggressive  tax levied  by any                                                            
state against  the visiting public." He relayed the  ATIA preference                                                            
for a sales tax approach.  He stated a sales tax would be "much more                                                            
acceptable, much broader  based in terms of what types of businesses                                                            
would contribute."                                                                                                              
                                                                                                                                
Senator Bunde  envisioned the proposed  license fee would  amount to                                                            
$10-15  per person,  and questioned  the witness's  assessment  that                                                            
this would  be punitive.  He made a comparison  to car rental  taxes                                                            
levied in the State of Hawaii.                                                                                                  
                                                                                                                                
Mr. Dindinger  countered  the comparison  to car  rentals, "It  only                                                            
affects you if  you rent a car and it's a sales tax  approach, which                                                            
is considered by the industry,  not just the Alaska industry but the                                                            
industry  worldwide, as  being a  more acceptable  approach  because                                                            
sales taxes  lay evenly relative  to the  economic activity  of that                                                            
visitor, whereas head taxes do not spread as evenly."                                                                           
                                                                                                                                
Senator  Bunde commented  that although "appreciative"  of  the jobs                                                            
provided  by the  tourism  industry, the  Legislature's  task is  to                                                            
manage the State's  general fund. He requested the  ATIA investigate                                                            
means  by  which  the industry  could  return  money  to  the  State                                                            
treasury.  He clarified that  the ATIA is  requesting a $10  million                                                            
general fund appropriation for FY 04.                                                                                           
                                                                                                                                
Mr.  Dindinger  affirmed  the  request  is  for  an  additional  $10                                                            
million.                                                                                                                        
                                                                                                                                
Senator Bunde  noted that  given the State's  fiscal situation,  the                                                            
source of funds  would be from: other services, the  earnings of the                                                            
Alaska Permanent Fund, or "the people" in the form of a tax.                                                                    
                                                                                                                                
Mr. Dindinger responded  that the Legislature could better make that                                                            
determination,   but  he   anticipated   that  all   three  of   the                                                            
aforementioned sources  should be tapped for this purpose. He stated                                                            
that the ATIA  "is not opposed to exploring taxation  options on the                                                            
visitor industry as long  as those taxation options do help grow the                                                            
industry into  the future." He spoke  as a businessperson,  "When we                                                            
are in  stress, as we  have been  in the last  few years, we  do cut                                                            
back and we cut back on  our operational costs and we invest more in                                                            
marketing. That's how we  survive hard times. That's where Alaska is                                                            
in the tourism industry now."                                                                                                   
                                                                                                                                
Mr.  Dindinger referenced  an  unspecified  study conducted  by  the                                                            
McDowell Group  several years prior stating, "direct  State receipts                                                            
from tourism exceed  $50 million" including revenue  from the Alaska                                                            
Marine Highway  System, airport  landing fees,  fishing and  hunting                                                            
licensing,  etc. He warned  that if tourism  activity declines,  the                                                            
same revenue  would  not be generated.  He remarked  that the  State                                                            
"owns some of the most dramatic tourism infrastructure."                                                                        
                                                                                                                                
Senator Hoffman  commented that in prior years predator  control has                                                            
been considered,  although it has been perceived that  such activity                                                            
would have a negative  impact on tourism to Alaska.  He relayed that                                                            
the Murkowski  Administration  has indicated  predator control  is a                                                            
priority. He asked  if a serious decline in the number  of travelers                                                            
would occur as a result of any predator control actions.                                                                        
                                                                                                                                
Mr.  Dindinger  replied that  the  ATIA  has chosen  not  to take  a                                                            
position  on this  matter. He  personally  deemed there  would  be a                                                            
minimal  impact.  He spoke  to  the  timing,  during the  months  of                                                            
October  through December,  of  previous consideration  of  predator                                                            
control  action and  the resulting  national press  coverage on  the                                                            
issue.  He stated  this is the  time of  year that  many people  are                                                            
scheduling  vacations  for  the  following  summer.  Contrarily,  he                                                            
stated, the current discussions  are occurring after the majority of                                                            
vacation scheduling  for the summer  of 2003 has been completed  and                                                            
therefore, there should be no significant consequences.                                                                         
                                                                                                                                
Co-Chair Green  suggested that more people would come  to the Alaska                                                            
if predator control were enacted.                                                                                               
                                                                                                                                
Co-Chair Green  recalled actions taken  during previous legislative                                                             
sessions of four and five  years past and understood that the matter                                                            
of State funding for tourism marketing was "behind us".                                                                         
                                                                                                                                
Mr. Dindinger  responded, "The conversation  was behind us  for most                                                            
of  four  years"   referring  to  the  Millennium   Plan,  which  he                                                            
characterized  as an agreement between the tourism  industry and the                                                            
State  to "scale back"  State funding  and increase  private  sector                                                            
funding over a "four-year  cycle". He remarked that an exception was                                                            
made as a result  of the events of  September 11, 2001, because  the                                                            
ATIA requested additional State funding.                                                                                        
                                                                                                                                
Mr. Dindinger  determined,  "However, four  years later and  looking                                                            
forward into the  future, that agreement and that  plan will fail to                                                            
meet the needs of the industry  and the State." He explained this is                                                            
"because  our position  with regard  to world  tourism and  national                                                            
tourism  is  declining;  our  ability  to  meet  the  needs  of  the                                                            
entrepreneurs  in the State of Alaska  has declined and those  needs                                                            
are unmet  now." He asserted  that visitor  industry businesses  are                                                            
going bankrupt  and  that the ATIA  has an  obligation to  represent                                                            
those businesses.                                                                                                               
                                                                                                                                
Co-Chair  Green  did not  argue  whether  a need  for  this  funding                                                            
exists.  However, she concluded  that amending  the Millennium  Plan                                                            
would be a  more appropriate consideration.  She qualified  that the                                                            
information given in the  presentation was "helpful", although it is                                                            
misleading  to  those legislators  who  were  not serving  when  the                                                            
original legislation was passed.                                                                                                
                                                                                                                                
Mr. Dindinger  agreed that the Millennium  Plan must be revised.  He                                                            
informed that the industry's  lobbyists have been "exploring options                                                            
of how best to pursue those changes."                                                                                           
                                                                                                                                
Co-Chair  Green asked if  the events of September  11, 2001  had not                                                            
occurred, whether the visitor  industry growth would have continued.                                                            
                                                                                                                                
Mr.  Dindinger  replied  that  if  expenditures  for  the  marketing                                                            
program had been  consistent with inflation, the anticipated  growth                                                            
rate would have had been between five and ten percent.                                                                          
                                                                                                                                
Co-Chair Green asserted  this was the intent of the Millennium Plan.                                                            
                                                                                                                                
Mr. Dindinger  responded,  "in hindsight"  the  Millennium Plan  was                                                            
"not aggressive  enough; it didn't allow us to get  back to where we                                                            
were". He remarked  that the Plan was conceived "because  we saw the                                                            
decline  beginning." However,  he admitted,  "We underestimated  the                                                            
task;  we  underestimated  the  erosion  caused  by  inflation".  He                                                            
furthered,  "We  needed the  State  to hang  in  there  with us  and                                                            
continue  to spend similar  resources to what  they had done  in the                                                            
past and at the same time the industry putting in more."                                                                        
                                                                                                                                
Senator Olson  spoke of global issues and asked the  expected impact                                                            
military action in Iraq would have on visitor travel to Alaska.                                                                 
                                                                                                                                
Mr. Dindinger  informed that  global instability  tends to  increase                                                            
cruise traffic,  as it is  perceived as a  safer mode of travel  and                                                            
because  ships  are  redeployed  from the  Middle  East  to  Alaska.                                                            
However, he stated  that other people "hunker down"  during times of                                                            
stress  and do not  travel. He stated  that although  the number  of                                                            
cruise  passengers  increased  the summer  following  September  11,                                                            
2001,  the number  of  air travelers  and  highway  travelers,  i.e.                                                            
independent travelers, decreased.                                                                                               
                                                                                                                                
Senator  Taylor  told of  cancellations  of  repeat customers  to  a                                                            
fishing  lodge  who  listed  the  reason  as  their  poor  financial                                                            
situations.  Senator Taylor  stressed  this had no  relation to  the                                                            
amount  of money  spent on  marketing  efforts or  improved  tourism                                                            
infrastructure. He noted  the ATIA presentation gave no reference to                                                            
the national economy as a whole.                                                                                                
                                                                                                                                
Senator  Taylor also  noted the  decline  in growth  rates from  ten                                                            
percent in 1994 to 3.7  percent in 1995, and the subsequent increase                                                            
to ten  percent in  1996. He surmised  these changes  had no  direct                                                            
relationship  to  expenditures,  as  the  expenditures  were  fairly                                                            
constant during this time period.                                                                                               
                                                                                                                                
Senator Taylor  asked about  the impact of  the overall economy  and                                                            
other variables, such as the price of gasoline.                                                                                 
                                                                                                                                
Mr. Dindinger  answered that the predicted increase  in the price of                                                            
gasoline  would  definitely  impact   travel  to Alaska,   including                                                            
Recreational Vehicles (RV)  travelers and rentals of RVs. He said of                                                            
relatives and friends of  Alaskans who might drive to the State: "as                                                            
their cost  of travel increases their  desire to travel decreases."                                                             
                                                                                                                                
Mr. Dindinger  continued  that the "lackluster  economy" has  caused                                                            
businesses  to spend less on company  "perks and incentives",  which                                                            
has substantially affected the charter fishing industry.                                                                        
                                                                                                                                
Mr.  Dindinger  warned  however  that  spending  less  on  marketing                                                            
efforts  could  not  uniformly  solve  these  problems.  Rather,  he                                                            
asserted  that more must  be spent on marketing  activities  to "get                                                            
your share" of those people who would be traveling.                                                                             
                                                                                                                                
Senator Hoffman asked if  the request for the additional $10 million                                                            
is a one-time  request. If not, he asked about the  ATIA's intent of                                                            
State participation for the next four years.                                                                                    
                                                                                                                                
Mr. Dindinger  answered  that the  request  is not for  one year  of                                                            
funding.  He perceived that  an additional  $10 million State  funds                                                            
plus  additional private  sector  funds are  necessary  to make  the                                                            
industry competitive  and viable.  He emphasized that these  efforts                                                            
must  be  maintained  into  the future  and  that  the  amount  must                                                            
increase relative to inflation.  "As we grow the economy in Alaska,"                                                            
he  said, "as  the tourism  industry  in  Alaska provides  more  for                                                            
Alaskans  and for  government revenues,  a share  of that  marketing                                                            
should also continue to  grow." He opined, "Some type of broad based                                                            
tax policy  can be worked out here  that will provide for  our needs                                                            
and your  needs as  well. That  is the  dialog that  we are open  to                                                            
exploring with you now."                                                                                                        
                                                                                                                                
AT EASE 9:43 AM / 9:45 AM                                                                                                       
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 25(HES)                                                                                             
     "An Act relating to the teachers' housing loan program in the                                                              
     Alaska Housing Finance Corporation; and providing for an                                                                   
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.  A motion to adopt  a committee  substitute was  made but                                                            
not acted upon.                                                                                                                 
                                                                                                                                
Senator Taylor  renewed his motion  to adopt CS SB 25, 23-LS0080/Q,                                                             
3/3/03, as a working draft.                                                                                                     
                                                                                                                                
Co-Chair Wilken  reiterated the changes as detailed  in the previous                                                            
hearing.                                                                                                                        
                                                                                                                                
There was no objection  and the committee substitute  was ADOPTED as                                                            
a working draft.                                                                                                                
                                                                                                                                
AT EASE 9:47 AM /9:48 AM                                                                                                        
                                                                                                                                
Co-Chair Wilken reminded of the adoption of Amendment #2 as                                                                     
amended.                                                                                                                        
                                                                                                                                
Amendment  #3:  This  amendment  deletes  "teachers'   housing  loan                                                            
program" and inserts  "acquisition of teachers' housing  by regional                                                            
educational   attendance  areas  and   to  teachers'  housing   loan                                                            
programs" in the title of the bill to read as follows.                                                                          
                                                                                                                                
     An Act  relating to the teachers'  housing loan program  in the                                                            
     Alaska  Housing  Finance  Corporation;  and  providing  for  an                                                            
     effective date.                                                                                                            
                                                                                                                                
This amendment also inserts a new bill section on page 1, line 4 to                                                             
read as follows.                                                                                                                
                                                                                                                                
     Section 1. AS 14.08.101(9) is amended to read:                                                                             
                (9) provide housing for rental to teachers, by                                                                  
     leasing  existing housing  from a local  agency or individual,                                                             
     [OR]  by entering into  contractual arrangements  with  a local                                                            
     agency or individual  to lease housing that will be constructed                                                            
     by  the  local  agency  or individual  for  that  purpose,  or,                                                          
     without  using for the  purpose that  portion of public  school                                                          
     funding  that consists of state  aide provided under  AS 14.17,                                                          
     by constructing  or otherwise  acquiring housing that  is owned                                                          
     and  managed by the  regional educational  attendance  area for                                                          
     rental to teachers                                                                                                       
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
This amendment also inserts a new bill section on page 2, following                                                             
line 6 to read as follows.                                                                                                      
                                                                                                                                
     Sec. 3. AS 18.56.580(a) is amended to read:                                                                                
          (a) In addition to the powers authorized by AS 18.56.400,                                                             
     the  corporation  shall adopt  regulations  under AS  18.56.088                                                            
     allowing  the use of money in the housing assistance  loan fund                                                            
     to  make loans  to  regional educational  attendance  areas  or                                                          
     other  borrowers for  the purchase  or development  of  teacher                                                          
     housing  in small communities.  The regulations must  implement                                                            
     the  requirements of  (b) of this section  and establish  other                                                            
     terms  and  conditions  for teacher  housing  loans,  including                                                            
     those relating to  borrower eligibility and the number of loans                                                            
     that  may be made  to a  single borrower.  The corporation  may                                                            
     require the borrower to pay costs associated with a loan.                                                                  
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Senator Hoffman moved for adoption.                                                                                             
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Senator Hoffman recalled  SB 181 of the previous legislative session                                                            
that amended the Housing  Assistance Loan Fund (HALF) program of the                                                            
AHFC and limited the amounts  of loans under this program to no more                                                            
than $250,000.  The HALF program provides for an interest  rate one-                                                            
percent  lower than  the average  rate  on loans  for properties  in                                                            
rural areas.  He informed  that the limitation  prevents REAAs  from                                                            
obtaining  loans for multi-family  housing  for teachers. He  stated                                                            
that this amendment  attempts to clarify the HALF  program, assuring                                                            
that it does  not change the teacher  housing loan program  proposed                                                            
in this legislation.                                                                                                            
                                                                                                                                
Senator Hoffman  further assured that  this amendment prohibits  the                                                            
use of foundation  funding to pay  debt incurred under this  program                                                            
and provides that other revenue must be used.                                                                                   
                                                                                                                                
Senator  Hoffman was  not convinced  that REAAs  could utilize  this                                                            
provision  as  a feasible  means  to provide  teacher  housing,  but                                                            
expressed that it offers an option.                                                                                             
                                                                                                                                
Co-Chair  Wilken noted the  limited amount  of "fee-simple  land" in                                                            
some REAA areas  and therefore it is difficult to  obtain financing.                                                            
                                                                                                                                
Senator Bunde  understood the committee substitute  limits borrowers                                                            
under the  proposed  teacher housing  loan program  to one loan.  He                                                            
asked  if this would  apply  to the number  of loans  an REAA  could                                                            
secure.                                                                                                                         
                                                                                                                                
Senator Hoffman  again stressed this  amendment does not  affect the                                                            
proposed  teacher  housing  loan program.  Rather,  he  stated,  the                                                            
amendment applies to the HALF program.                                                                                          
                                                                                                                                
Co-Chair  Wilken explained  this amendment  applies  to Title  14 in                                                            
granting  REAAs authorization  to borrow  money for  the purpose  of                                                            
teacher housing, and to  Title 18 in establishing the amount an REAA                                                            
could borrow.                                                                                                                   
                                                                                                                                
Co-Chair  Green asked if  REAAs regularly  upkeep, maintain  and own                                                            
properties.  She also wanted  to know if REAAs  have the ability  to                                                            
obtain insurance  for maintenance  purposes, and whether  additional                                                            
staff is employed to perform maintenance and upkeep.                                                                            
                                                                                                                                
Co-Chair  Wilken  answered  that  current   statutes  provide  REAAs                                                            
authority  to  lease   or  rent  existing  housing  facilities   for                                                            
teachers. He explained  that this amendment would allow REAAs to own                                                            
such facilities.                                                                                                                
                                                                                                                                
Co-Chair Wilken  continued that regardless of whether  a borrower is                                                            
an REAA or an educator,  the loan requirements of AHFC must still be                                                            
met.                                                                                                                            
                                                                                                                                
DAN  FAUSKE,  Chief Executive  Officer/Executive   Director,  Alaska                                                            
Housing  Finance  Corporation,  testified  via  teleconference  from                                                            
Anchorage and affirmed.                                                                                                         
                                                                                                                                
Co-Chair Wilken  clarified that an  REAA would not be given  special                                                            
consideration in obtaining approval for a loan.                                                                                 
                                                                                                                                
Mr. Fauske again affirmed.                                                                                                      
                                                                                                                                
Co-Chair Green  referenced the portion  of the amendment  pertaining                                                            
to  AS  18.56.580  (a),  which  inserts  "to  regional  educational                                                             
attendance areas or other  borrowers." She asked for a definition of                                                            
"other borrowers" in this context.                                                                                              
                                                                                                                                
Senator Hoffman  understood this could  include Native corporations                                                             
and stressed  that any borrower  must meet  the requirements  of the                                                            
program to provide  housing for teachers. He surmised  that no other                                                            
party  would construct  housing  for  teachers  that would  only  be                                                            
occupied for nine months of a year.                                                                                             
                                                                                                                                
Co-Chair Wilken requested Mr. Fauske further explain.                                                                           
                                                                                                                                
                                                                                                                                
SFC 03 # 19, Side B 09:57 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr.  Fauske defined  "other  borrower" as  "any entity  eligible  to                                                            
enter  into  a  contractual  arrangement;  it  could  be  a  village                                                            
corporation,  it could be  a private construction  corporation  that                                                            
has entered into  an agreement with the REAA to build  the unit at a                                                            
certain cost and potentially  own them." He informed that the latter                                                            
arrangement was made with the REAA in Kotzebue.                                                                                 
                                                                                                                                
Senator Bunde  noted that  REAAs do not have  taxing authority,  and                                                            
asked  if upkeep  and maintenance  expenses  would be  borne by  the                                                            
rental income.                                                                                                                  
                                                                                                                                
Senator Hoffman  surmised it would,  unless a Native corporation  or                                                            
other entity subsidized the cost of these services.                                                                             
                                                                                                                                
Senator Bunde suggested REAAs should become taxing authorities.                                                                 
                                                                                                                                
Senator Taylor  questioned the applicability  of zero down  payments                                                            
on loans made to corporations.                                                                                                  
                                                                                                                                
Co-Chair Wilken reiterated  that this amendment is entirely separate                                                            
from the provisions  relating to the  proposed teacher housing  loan                                                            
program.                                                                                                                        
                                                                                                                                
Co-Chair  Wilken  removed  his  objection  to the  adoption  of  the                                                            
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Green objected.                                                                                                        
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Bunde,  Senator Hoffman, Senator Olson, Senator B.                                                            
Stevens, Senator Taylor and Co-Chair Wilken                                                                                     
                                                                                                                                
OPPOSED: Co-Chair Green                                                                                                         
                                                                                                                                
The motion PASSED (6-1)                                                                                                         
                                                                                                                                
The amendment was ADOPTED.                                                                                                      
                                                                                                                                
CARL ROSE, Executive Director,  Association of Alaska School Boards,                                                            
testified  in  support of  the  bill as  amended.  He  spoke to  the                                                            
difficulties  in recruiting  and  retaining qualified  teachers.  He                                                            
stressed,  "The inability to  keep pace with  supply and demand  has                                                            
resulted  in a serious  shortage  of professionals  in the  teaching                                                            
area." Therefore,  he stated the Association  is seeking  incentives                                                            
to assist in this matter.                                                                                                       
                                                                                                                                
Mr. Rose informed  that the concerns  with the original legislation                                                             
have been alleviated with the adoption of Amendment #3.                                                                         
                                                                                                                                
Mr. Rose referenced a recently  completed survey, in which 43 of the                                                            
53 school districts  participated  [copy not provided]. He  reported                                                            
that 25  percent of  respondents  provide or  subsidize housing  for                                                            
teachers.   He commented that this  relates to the responsibilities                                                             
and duties of school boards.                                                                                                    
                                                                                                                                
Mr. Rose stated  that the provisions of Amendment  #3 to allow REAAs                                                            
in conjunction  with corporations, to provide teacher  housing could                                                            
be viable.                                                                                                                      
                                                                                                                                
Mr.  Rose informed  that  the median  base  salary for  teachers  is                                                            
$34,100,  according  to the  aforementioned  survey.  Therefore,  he                                                            
opined  that  an  ability  to  provide  adequate  housing  would  be                                                            
beneficial to attract teachers.                                                                                                 
                                                                                                                                
Senator  Bunde  asked  if witness  is  aware  of  any teacher-owned                                                             
private homes in rural areas of Alaska.                                                                                         
                                                                                                                                
Mr. Rose knew of some such  homes in organized communities, although                                                            
he was  unfamiliar  whether any  teachers own  homes in unorganized                                                             
areas.                                                                                                                          
                                                                                                                                
Senator Bunde indicated  Senator Olson's comments about depreciation                                                            
and maintenance  on  homes that  are vacant  for  three months  each                                                            
year. He therefore asked the feasibility of this program.                                                                       
                                                                                                                                
Mr. Rose surmised that  those teachers who would invest in a home do                                                            
so in a  community in which  they intend to  live and are  likely to                                                            
stay year-round.                                                                                                                
                                                                                                                                
Senator Olson asked the  witness' concerns about a subsidized rental                                                            
program for teachers operated by an REAA.                                                                                       
                                                                                                                                
Mr. Rose stated  this is a decision  that each school district  must                                                            
consider, stressing  that some district must provide  housing, as no                                                            
other facilities are available.  He stated that maintenance expenses                                                            
are a concern. Noted that  some teachers accept jobs in rural Alaska                                                            
because  this  is were  jobs  are  "readily available."    As  these                                                            
teachers  gain one or two  years of experience,  he noted that  many                                                            
consider accepting jobs elsewhere.                                                                                              
                                                                                                                                
Senator  Taylor offered  a  motion to  report  CS SB  25 (FIN)  from                                                            
Committee with  individual recommendations  and zero fiscal  note #1                                                            
from the Department of Revenue, AHFC.                                                                                           
                                                                                                                                
There was no objection and CS SB 25 (FIN) MOVED from Committee.                                                                 
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:09 AM                                                                          

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