Legislature(2007 - 2008)BUTROVICH 205
05/12/2007 05:15 PM Senate JUDICIARY
| Audio | Topic |
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| SB168 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | SB 168 | ||
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
May 12, 2007
5:26 p.m.
MEMBERS PRESENT
Senator Hollis French, Chair
Senator Bill Wielechowski
Senator Lesil McGuire
Senator Gene Therriault
MEMBERS ABSENT
Senator Charlie Huggins, Vice Chair
COMMITTEE CALENDAR
SENATE BILL NO. 168
"An Act providing a credit for the payment of certain municipal
passenger taxes or fees against the excise tax on travel aboard
commercial passenger vessels; and providing for an effective
date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 168
SHORT TITLE: PASSENGER VESSEL TAX CREDIT
SPONSOR(s): FINANCE
05/02/07 (S) READ THE FIRST TIME - REFERRALS
05/02/07 (S) FIN
05/04/07 (H) FIN AT 1:30 PM HOUSE FINANCE 519
05/04/07 (S) Heard & Held
05/04/07 (S) MINUTE(FIN)
05/07/07 (S) FIN RPT 2DP 5NR
05/07/07 (S) DP: STEDMAN, ELTON
05/07/07 (S) NR: HOFFMAN, THOMAS, DYSON, HUGGINS,
OLSON
05/07/07 (S) FIN AT 9:00 AM SENATE FINANCE 532
05/07/07 (S) Moved SB 168 Out of Committee
05/07/07 (S) MINUTE(FIN)
05/09/07 (S) JUD REFERRAL ADDED
05/12/07 (S) JUD AT 2:00 PM BUTROVICH 205
05/12/07 (S) JUD AT 5:15 PM BUTROVICH 205
WITNESS REGISTER
Miles Baker, Staff
Senate Finance Committee
Alaska Capitol Building
POSITION STATEMENT: Presented SB 168
Chip Thoma
Juneau, AK
POSITION STATEMENT: In opposition to SB 168
Jerry Burnett, Director
Administrative Services Division
Department of Revenue
Juneau, AK
POSITION STATEMENT: In opposition to SB 168
Bruce Botelho, Mayor
City & Borough of Juneau
Juneau, AK
POSITION STATEMENT: Commented on SB 168
Mike Barnhill, Assistant Attorney General
Civil Division
Labor and State Affairs Section
Department of Law
Juneau, AK
POSITION STATEMENT: Available for questions on SB 168
Alan Sorum, City Manager
City of Skagway
Skagway, AK
POSITION STATEMENT: In support of SB 168
Bob Weinstein, Mayor
City of Ketchikan
Ketchikan, AK
POSITION STATEMENT: In support of SB 168
Tom Dow
Carnival Corporation
POSITION STATEMENT: Available for questions on SB 168
Vanta Shafer, Mayor
City of Seward
POSITION STATEMENT: In support of SB 168
Gershon Cohen
Haines, AK
POSITION STATEMENT: In opposition to SB 168
Joe Geldhof
Juneau, AK
POSITION STATEMENT: In opposition to SB 168
ACTION NARRATIVE
CHAIR HOLLIS FRENCH called the Senate Judiciary Standing
Committee meeting to order at 5:26:25 PM. Present at the call to
order were Senators Therriault, McGuire, Wielechowski, and Chair
French.
SB 168-PASSENGER VESSEL TAX CREDIT
CHAIR FRENCH announced the consideration of SB 168.
MILES BAKER, Staff to the Senate Finance Committee, sponsor of
SB 168, said that the bill was introduced to address a perceived
issue with the $50 passenger excise tax imposed on cruise ship
passengers. The tax is attached to the price of the ticket; four
dollars are required to go to the Department of Marine
Conservation and 25 percent of the balance goes to the Regional
Cruise Ship Impact Fund; SB 168 addresses the remainder which is
supposed to be distributed to ports of call. Juneau and
Ketchikan are the two most visited ports and already levy local
municipal taxes on passengers; the tax revenue has been used to
secure revenue bonds for port improvements and service
provision. The money can only be used for boat or passenger
support to stay within federal law. The initiative envisioned
that the first five ports of call could claim five dollars per
passenger.
5:30:16 PM
CHAIR FRENCH asked which provision Mr. Baker was referring to.
MR. BAKER replied that he didn't know the exact provision, but
there were several people in the audience who could answer the
question.
He explained that the sponsors intended for $25 of the balance
to be allocated to the first five ports of call. Usually only
three or four ports are visited, so there may be money left
over; however, the initiative only addresses the requirement
that a municipality has to give up its local tax to receive the
initiative tax. Most of this money is already secured with bonds
and can't be given up, so communities are not eligible to accept
any of the head tax funds. In essence a passenger is buying a
ticket while paying $50 in addition to the taxes imposed by the
municipalities they visit. The bill will allow a credit against
the head tax of up to ten dollars per port for municipal taxes.
5:34:29 PM
CHIP THOMA, representing himself, said that he supported the
head tax initiative. He explained that the bill before committee
would rebate the cruise ship tax before it's even collected, and
would deprive smaller Alaskan ports of locally-collected
funding. Ships are getting bigger, more numerous and need more
ports of call; existing ports are maxed-out. Cruise ship docks
need to be built in other parts of the state.
5:36:37 PM
CHAIR FRENCH asked if there are no cruise ship docks in
Whittier.
MR. THOMA replied that regardless, more docks will be needed in
places like Valdez and Kodiak.
CHAIR FRENCH asked for the total list of places where ships stop
in Alaska.
MR. THOMA replied that ships stop in Ketchikan, Hoonah, Juneau,
Skagway, Sitka, Whittier, and Seward.
5:37:27 PM
MR. THOMA continued to say that the bill will deny funding to
smaller and future ports to build facilities. Under current
statute, communities can choose to be included in the state
passenger fee program or impose tax locally; they can't and
shouldn't do both, but SB 168 would impose a double-dipping
program. It would squeeze out small competitor ports that need
money to expand their services.
5:39:00 PM
SENATOR WIELECHOWSKI asked where the remaining $21 of the tax
fees goes.
MR. THOMA replied that half goes into a regional fund, and the
rest remains in the passenger fee fund.
SENATOR WIELECHOWSKI asked what would happen if the bill is
passed.
MR. THOMA replied that the refund money would go back to the
cruise companies which would devise a way of crediting
passengers.
SENATOR WIELECHOWSKI asked if the five dollars per port of call
would count as the money shared with municipalities cited in
statute.
MR. THOMA concurred.
SENATOR WIELECHOWSKI asked if the law is changed it would change
the initiative as well.
MR. THOMA replied that the paragraph in question was the
explanation from the Department of Revenue; what would be
changing was on another page.
5:41:28 PM
SENATOR WIELECHOWSKI said that it seems as if the changes lay
out a general scheme of revenue distribution.
MR. THOMA replied that it's an outline; revenues haven't been
collected yet. It's up to towns whether or not they want to keep
their local taxes.
He then gave examples of different towns and the way their taxes
are collected. The bill is designed to help emerging ports
develop their docks.
5:43:25 PM
CHAIR FRENCH asked if money is taken from the head tax a town
can't have its own tax.
MR. THOMA replied that that was correct. The real effect is that
Juneau and Ketchikan can raise their fees to total 20 dollars
off the top of the head tax. He advised that the improvements
needed by the Juneau dock be paid for from the state fund.
5:44:48 PM
SENATOR WIELECHOWSKI asked if any money collected goes outside
of the ports.
MR. THOMA replied that if Anchorage wants to be a cruise ship
port it will receive money.
SENATOR WIELECHOWSKI said that there are many cruise ship
passengers in Anchorage, but there's no dock.
MR. THOMA replied that one could be built with available funds.
SENATOR WIELECHOWSKI said that if there's a needed way to break
up funding, some could be given to towns that have a lot of
tourist impact like Anchorage.
MR. THOMA replied that if Anchorage could demonstrate impact, it
would get funding.
5:46:10 PM
CHAIR FRENCH said that he could imagine people saying that money
should be used solely to pay vessel-related costs.
MR. THOMA replied that services also include accrued uses.
5:46:46 PM
SENATOR McGUIRE said that the initiative allows for funding for
public safety costs, agreed that Anchorage is impacted by
visitors, and wondered if the impact has ever been measured.
MR. THOMA replied that Juneau pays for services but the cost has
never been tested.
5:48:00 PM
JERRY BURNETT, Director, Administrative Services Division,
Department of Revenue (DOR), said that the DOR doesn't support
the bill because it reduces revenue by $15 million in 2007 and
ultimately $34 million including all ports of call.
5:49:21 PM
SENATOR WIELECHOWSKI referenced a paragraph and asked if the
lost money would come from shared revenues.
MR. BURNETT replied that the $15 million lost would be from the
head-taxes for Ketchikan and Juneau.
SENATOR WIELECHOWSKI said that the voters had a description of
how they wanted the revenues to be spent, and asked if the bill
would change what was voted on in that ballot measure.
MR. BURNETT replied that it would; Ketchikan and Juneau
currently charge taxes which would come out of the vessel tax,
and that would reduce the other numbers available for
distribution.
SENATOR WIELECHOWSKI asked if that change would be
unconstitutional.
MR. BURNETT replied that he couldn't answer the question.
5:51:15 PM
SENATOR THERRIAULT asked for an explanation of the constraints
on the extra money accruing to the state treasury, and if there
are funds that can't be accessed because the local governments
are charging their own taxes.
MR. BURNETT said that someone from the Department of Law could
best answer.
SENATOR THERRIAULT asked if, without changes, there will be a
balance in the state treasury with limitations to access.
MR. BURNETT replied that without the change there will be a
larger balance in the state treasury. However the legislature
chooses to appropriate the money is at its discretion.
5:53:05 PM
SENATOR THERRIAULT asked if there are federal limitations on how
the money can be spent.
MR. BURNETT replied that to the extent that expenditures can be
made, the bill would reduce the amount available for the
legislature to spend.
5:53:56 PM
BRUCE BOTELHO, Mayor, City and Borough of Juneau, said that the
committee should analyze the way the legislature can spend the
tax money. There's no doubt that many communities could make use
of the money; he said he has no disagreement in that respect
with the initiative's sponsors or Mr. Thoma. The issue is the
extent to which the monies collected under the initiative can be
spent by the legislature.
MAYOR BOTELHO referenced the 2002 Maritime Transportation
Security Act sponsored by Representative Don Young regarding how
taxes are levied on cruise ship passengers. The difficulty with
the issue is how the fees are used to pay only watercraft
maintenance; he explained how Juneau has a system for using
passenger fees for public facilities and that the city has made
a judgment that it has satisfied law in using funds to do so.
5:58:00 PM
SENATOR WIELECHOWSKI said that he can't recall the federal
government telling the state that it can't tax something, and
asked if the federal statute is constitutional.
MAYOR BOTELHO said that the general proposition is probably
correct, but there's a clause within the constitution that
allows the statute to be constitutional; the wisdom is
questionable but not the constitutionality.
MAYOR BOTELHO continued to say that one of the problems in the
initiative is that the language makes the tax only available to
communities impacted by tourism, but it's in opposition to the
law that the funds must be available only to the vessel.
6:01:42 PM
CHAIR FRENCH said that the federal statute says how the fees are
to be charged, and wondered whether the construction of a dock
in a town without one would be considered to be in service to
the vessel.
MAYOR BOTELHO said that under rules of statutory construction,
the statute would have said "a" vessel rather than "the" vessel
if it meant to refer to future construction.
6:02:47 PM
SENATOR THERRIAULT said that if a dock is constructed, a vessel
and its passengers would be using the facility; he doesn't see
the connection between the people paying the fee and the
facility yet to be built.
CHAIR FRENCH said that of the seven ports of call, there is
still the possibility of distributing funds to ports not visited
by the ship. The language regarding "the" vessel may cause
trouble for fund distribution.
6:04:28 PM
MAYOR BOTELHO said that in each case there are vessels that
might not call on certain ports in one trip. The entitlement
will depend on whether there is a port of call and if the
community has decided not to charge its own passenger fee.
6:05:37 PM
MIKE BARNHILL, Assistant Attorney General, Civil Division, Labor
and State Affairs Section, Department of Law, said that he was
available for questions.
CHAIR FRENCH asked if the bill is constitutional.
MR. BARNHILL said that should the initiative in its current form
be challenged in court or in an amended form, it would fall to
the Department of Law to defend it. Thus the department needs to
be cautious and not undermine its position, so he couldn't
categorically say that it's either. However he could share the
cases that the court would turn to evaluate the issue.
He explained that the court would try to determine whether the
bill was an unconstitutional repeal. He referenced a historical
case regarding a voter initiative, and said that it was not
found to be repealing the constitution. It does seem that the
legislature has the power to amend the initiative, but without
frustrating the initial purpose. In this particular case,
arguments could be made either way. The bill essentially caps
the total tax that can be imposed on a passenger to $46.
CHAIR FRENCH asked if he was speaking about the bill or the
initiative.
MR. BARNHILL replied that he was talking about the initiative.
6:10:16 PM
CHAIR FRENCH asked if Juneau voted overwhelmingly for the cruise
ship tax initiative.
MR. THOMA replied that the city supported it by 62 percent in
downtown and 60 percent overall.
SENATOR THERRIAULT asked if the numbers were reversed in
Ketchikan.
MR. THOMA replied that it was supported at 48 percent in
Ketchikan.
CHAIR FRENCH said he was trying to figure out the intent of the
local voters in terms of exceeding $50.
6:11:15 PM
SENATOR THERRIAULT said that one couldn't jump to conclusions
because Juneau voters might not have had a clear idea of the
repercussions.
MR. BARNHILL said that it's hard to define the intent of voters
on an initiative.
SENATOR THERRIAULT asked for Mr. Barnhill's opinion on whether
there will be a balance in the treasury that won't be
accessible, and if it would be sweepable.
MR. BARNHILL replied that the balance will grow, and it would be
sweepable. The appropriations from the fund could be challenged,
and the legal risk would depend on to what purposes the fund
could be spent. If the services are closely tied to the vessel,
the legal risk would be low. More attenuated expenses mean an
increased risk, but the Department of Law is there to defend the
legislature no matter what.
CHAIR FRENCH asked each online testifier to limit their
testimony to two minutes.
6:14:23 PM
ALAN SORUM, City Manager, City of Skagway, said that there is no
municipal head tax in that city; there were 750,000 visitors
last yeah and the city looks forward to funding from the
initiative to move forward with development projects. Skagway
does not oppose the bill.
6:15:39 PM
BOB WEINSTEIN, Mayor, City of Ketchikan, said he's in support of
the bill, which will correct a clause in the initiative and will
make sure that the funds are spent in a manner consistent with
federal law. He quoted extensively from the ballot for the head
tax initiative and the initiative's sponsor statement, and how
it provides for spending of the head tax funds. The funds can't
be used in another manner; SB 168 makes sure the funds are spent
in the original manner intended.
MAYOR WEINSTEIN continued to explain the manner in which the tax
money will be divvied up and spent. The bill doesn't touch the
regional impact fund. Under the initiative, each port of call is
entitled to $5 per passenger; thus $25 of the $46 would go to
local ports. In reality few vessels visit five ports;
realistically only $17 goes to ports. The ballot measure also
denies funds to any port that assesses local fees, so Juneau and
Ketchikan don't receive any money. On average only $7 of the $35
can be used for the purpose determined in the bill, so the rest
of the money is idling in the general fund. Small communities
should be able to benefit from the tax, and $46 would be
adequate for all port communities.
He added that federal law requires a marine vessel fee; the best
way of complying with such requirements is making realistic use
of the money in the tax account by ensuring that taxes go to
local communities for improving infrastructure. While opponents
are entitled to their opinion, the language in the initiative is
the best indication of what the voters intended.
6:23:27 PM
CHAIR FRENCH asked if Tom Dow was only there to answer
questions.
TOM DOW, with Carnival Corporation, said yes.
6:23:52 PM
VANTA SHAFER, Mayor, City of Seward, urged the passage of SB
168. Seward has several projects it would like to fund with head
tax fees but it would be difficult to retry for appropriations
every year. Passage of the bill will meet the intent of the
voters.
6:24:48 PM
GERSHON COHEN, Haines resident, said that the purpose of the
statewide head tax is to remedy the fact that smaller
communities don't have the power to have their own municipal
taxes. He explained how the cruise industry prevented Haines
from imposing a head tax, and how without political clout it's
impossible to fight the industry. There are many tourism impacts
in communities without ports, which are borne by local property
taxes.
MR. COHEN said that SB 168 would allow the cruise lines to
receive part of the head tax; it's completely out of line with
the intent of the voters. On-board credits would allow the ships
to pocket millions in head-tax money.
He said that he doesn't deny the right of the legislature to
amend the initiative, and that the tonnage clause in the
constitution won't affect the tax.
6:32:07 PM
JOE GELDHOF, Juneau resident, said that Mr. Barnhill's testimony
was appropriate. He gave an example of how certain uses of the
tax money could be found constitutional or not; there is an
intermediate ground subject to interpretation, and the
legislature should be mindful of state and federal law in its
decision. Passage of the bill will impair the revenue coming
into the general fund; there are special interests behind the
drive to amend the bill. There is clear and convincing evidence
that some testimony is influenced by the Northwest Cruise
Association. The tax is not related to tonnage; it's an excise
tax on individuals. The federal law is implicated but the
tonnage tax is not.
MR. GELDHOF re-stated that the issue is not a tonnage tax case,
and the legislature should work around the issue for the
betterment of Alaskans. There's nothing wrong with collecting
the taxes and using them judiciously.
6:39:01 PM
SENATOR WIELECHOWSKI agreed that the issue doesn't seem to
address the tonnage tax, and there would be tenth amendment
implications; he asked if there are other states that charge
head taxes, and if they have been challenged.
MR. GELDHOF said that there's a variety of taxes in the US; some
are similar and some are much higher. They're all port fees, and
are collected and presumably paid.
6:41:41 PM
SENATOR THERRIAULT said that the language in the constitution
allows the legislature to make modifications to deal with such
issues. He referenced contradicting pieces of legislation, and
said that an initiative writer can't determine what an amendment
is and what an appeal is; that's the issue that the legislature
is dealing with.
6:43:48 PM
MR. GELDHOF said he understood the point, and agreed that all
votes don't go through people like him. The legislature has the
ability to amend, and has a fair amount of discretion. His
objection with 168 is that it reduces the amount of money the
state has to spend; the mayors involved will probably raise
their municipal fees. It's bad public policy and should be put
to an interim study.
6:46:18 PM
SENATOR THERRIAULT asked Mr. Dow how on-board credits work.
MR. DOW explained how refunds would be processed. He added that
his statement regarding refunding was improperly represented
earlier; he clarified how port fees are re-credited to
customers.
CHAIR FRENCH closed public testimony on SB 168 and recessed the
meeting to the call of the chair at 6:48:38 PM.
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