Legislature(2007 - 2008)HOUSE FINANCE 519
02/14/2008 01:30 PM House FINANCE
Audio | Topic |
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Start | |
SB72 | |
HB147 | |
HB200 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | HB 200 | TELECONFERENCED | |
+= | HB 147 | TELECONFERENCED | |
+= | SB 72 | TELECONFERENCED | |
+ | TELECONFERENCED |
HOUSE BILL NO. 147 "An Act relating to matching funds in state tourism marketing contracts with trade associations." Vice-Chair Stoltze MOVED to ADOPT the work draft to HB 147, labeled 25-LS0560\E, Bannister, 2/11/08. There being NO OBJECTION, it was so ordered. 2:17:27 PM SUZANNE ARMSTRONG, STAFF, CO-CHAIR MEYER, explained that the CS proposes to change the tourism marketing campaign contract between the state and the qualified trade association, Alaska Travel Industry Association (ATIA). In current statute it is a 50/50 matching grant. The CS proposes to change the distribution to 30 percent of the state funds that are used to pay for the marketing campaign described in the contract. It becomes a 70/30 ratio; however, the percentage is on the funds the state provides and not on the total cost of the contract. The intent is to limit the amount of state money used for the marketing campaign to $8 million; however, the appropriation power cannot be limited in statute. Ms. Armstrong related that the second section sunsets the 70/30 program and puts the 50/50 program back into place. 2:19:00 PM Representative Harris recalled that the ratio was 90/10 when the bill was first introduced. That bill said for ATIA to qualify for whatever money the state appropriated, it would only have to contribute 10 percent. Ms. Armstrong replied it was 10 percent of the total marketing campaign. The CS proposes to change that to 30 percent of the state's contribution to the marketing campaign. Representative Harris asked if that is acceptable to ATIA. Co-Chair Meyer remarked that public testimony would be opened up later on. Vice-Chair Stoltze asked what ecotourism means. He wondered about competition with other state management policies if ecotourism is promoted. Speaker Harris defined ecotourism as people who come to Alaska to view and experience nature. 2:21:57 PM Representative Gara pointed out that the non-cruise ship tourism industry paid $2.5 million in FY 07. Under this bill they would pay even less because of the new formula: 30 percent of the amount the state pays, not 30 percent of the marketing campaign which is $10 million. He explained he had a problem with that, as well as with not accounting for the burden companies face for their own marketing campaigns. He requested to know if there is a need, that the program is effective, and that it is a priority. He maintained that it lessens the payments even from last year. Co-Chair Meyer noted the intent to limit the state's contribution, and not have this item in the capital budget, but in the operating budget. In the past the match was 50/50 and companies were not able to meet the match. Representative Gara clarified that the non-cruise ship industry would pay less than two years ago. 2:25:15 PM BRETT CARLSON, CHAIRMAN, NORTHERN ALASKA TOUR COMPANY, related that the state can support tourism marketing in order to help Alaska travel businesses help themselves grow the private sector economy and contribute to local and state governments. The challenge is that the tourism marketing funding model is broken. The first phase of the plan to fix it is the survival plan, which is to ensure that Alaska's tourism marketing program continues to exist. He maintained that a $10 million funding level for the core program represents survival-level funding. Two elements make survival a reality: in FY 09, reinvestment of $8 million into the core tourism marketing program, and the industry must be able to access those funds. The CS for HB 147 does represent a workable comprise for ATIA. Mr. Carlson agreed with Representative Harris's comment that ATIA's original request was for 90/10 based on a $2 million contribution from private industry. Mr. Carlson addressed Representative Gara's question about money from the private sector. The $2.5 million came from cruise contributions, $2 million came from non-cruise businesses, and an additional $500,000 came from destination marketing. He spoke of the comprise requiring the small businesses to contribute $2.4 million, a substantial contribution. 2:28:57 PM Mr. Carlson pointed out that only 16 states make a private sector contribution. Only in California and Florida does the private sector contribute more than $2.4 million. He pointed out that the model of sustainability is focused on matching dollars generated by the vehicle rental tax. Co-Chair Meyer pointed out that most states have a state sales tax or bed tax that contributes to tourism marketing. RON PECK, PRESIDENT AND CHIEF OPERATING OFFICER, ALASKA TRAVEL INDUSTRY ASSOCIATION (ATIA), agreed that some states have those taxes, but only 16 have voluntary contribution programs. Mr. Carlson noted that 34 states do not require private sector matching. Co-Chair Meyer pointed out the three-year sunset in the bill. The state's contribution would be $8 million over the next three years, which would allow for gradually matching on small business's part. 2:32:13 PM In response to a question by Representative Gara, Mr. Carlson reported that the $2 million comes primarily from small Alaskan companies. The other $550,000 comes from DMO's, which are essentially chambers of commerce and convention and visitors bureaus. Representative Gara inquired if, under the new match, they would contribute again. Mr. Carlson clarified that they would be asked again. Representative Gara asked if that would be included in the new formula. Mr. Carlson said that is under discussion. He noted that the $2 million from private companies are non-voluntary contributions. A portion, $350,000, comes from cooperative marketing contributions. Over and above that they are contributing $500,000 voluntarily. Representative Gara summarized the math. He asked if the $2 million, plus the $500,000 counts toward the 30 percent match. Mr. Carlson said that was correct. Representative Gara maintained that the companies would contribute less. Mr. Peck replied that those same companies would be contributing at the $2 million level. Representative Gara thought that the contribution would be $100,000 less than the amount two years ago. Co-Chair Meyer thought Representative Gara was counting contributions made by DMO's, which the industry is not certain of collecting. Mr. Peck agreed. 2:35:50 PM Representative Harris asked what kind of revenue tourism marketing brings to the state of Alaska. Mr. Peck replied that a traveler in Alaska spends $934. That nets more than $1.5 billion dollars each summer to the state. Representative Harris asked how much stays in state. Mr. Peck said all of it. Representative Harris inquired what happens to Alaska's economy if small tourism folds. Mr. Carlson replied that global capital plays an important role. He encouraged a seat at the table for small Alaskan businesses in attempting to make a more diversified product. He hoped to see the entire package sold with a balanced opportunity. Representative Harris asked how much Alaska donated 15 years ago for marketing. Mr. Carlson replied that in 1990, it was $23 million. He stated that it has declined over the years. Representative Harris asked about tourism's affect on rural Alaska. Mr. Carlson replied it injects new private sector dollars into the economy. Representative Harris noted that all parts of Alaska are affected by tourism. He acknowledged that rural Alaska is one of the more difficult places to do business. He questioned if advertising were to be removed for rural destinations, if that would have an effect on rural economy. Mr. Carlson said it would. Representative Harris stated that if the legislature contributes more effort toward tourism marketing, it would help the entire state economy. Mr. Carlson agreed. 2:40:55 PM Representative Gara agreed that the state's contribution was useful; however, the question is how much should be contributed. He asked if there had been a study determining how effective tourism marketing has been. He inquired how much the state could make without the state match. Mr. Peck stated that ATIA reaches out to a substantial number of people, impacting 560,000 tourists. Of the 1.7 million visitors that come to Alaska, 1 million take a cruise and 55 percent do things on an independent basis. About 30-40 percent of the people that are reached by ATIA come to Alaska. Representative Gara wanted to know the type of campaign ATIA funds. He disliked the "before you die campaign. Mr. Peck stated that was their campaign, it cost less than $200,000, and was not being continued, even though it was successful. 2:44:03 PM Vice-Chair Stoltze commented on the contribution to the small scale businesses statewide. Representative Joule noted he had been a tour guide when he was young. He believed that the face on Alaska Airlines has a lot to do with tourism investment. He appreciated the effort to get tourists to the rural village areas. He pointed out that that effort no longer exists. If the investment is not made, the effort to build it back up will be extensive. He stated that Alaska is a great destination, but it must be marketed. 2:48:00 PM Co-Chair Meyer explained the intent was to extend the state's contribution for three years and to list the total amount, maximizing the contribution. CHIP TOMA, JUNEAU, pointed out that the draft proposed by the committee is a drastic change from the current package. There is not a crisis at this time; the visitors keep increasing. There has been no diminishment in the number of tourists coming to the state. Each year, the forecast is "rosey" for coming to Alaska. He noted the ads occurring in all magazines throughout the United State. He emphasized that ATIA is becoming less effective with the amount of dollars placed into advertising Alaska. Mr. Toma stated that the request is a subsidy and that the state should no longer request the subsidy. He supported the efforts of ATIA in the rural areas and in Fairbanks. He encouraged a redirection of the focus of the industry. Co-Chair Meyer closed public testimony. 2:53:03 PM Representative Kelly commented that Alaska is in a state of flux for the tourism program. He remarked about the progress in addressing the confusing split between the capital and operating budget. He stated that the program has diminished over the years. The fear of going under the "critical mass" should be addressed. He said that the proposal is accountable and that the industry should stabilize within the timeframe. He encouraged the 70/30 match and urged passage of the bill. 2:55:14 PM Representative Gara asked how the formula works for an individual company's contribution. Mr. Peck replied that there is a membership program based on size. The participant, depending on the level of advertising and marketing level, also purchases ads in the vacation planner and access to the web site. Each business makes that determination individually. Representative Gara asked if there is any plan to address the concern that rural communities are not getting enough marketing attention. Mr. Peck responded that the marketing plan is reported to the Department of Commerce, Community and Economic Development annually. ATIA recognizes the concern about tourism in rural areas and has taken extra effort to promote long-haul highway travel. He hoped to identify areas to grow small businesses in tourism in communities that are interested in promoting tourism. Representative Thomas asked how many jewelry stores are members of ATIA. Mr. Peck did not know the number but thought it was very small. Representative Thomas recommended getting them to join. 2:58:56 PM Representative Kelly asked Mr. Carlson for a response to previous testimony. Mr. Carlson replied that he had not had a conversation with Mr. Toma. He reiterated that ATIA is effective. Mr. Peck added that ATIA does not focus on one area or destination. He thought it was unfair to portray it as focusing only on one area. Representative Gara wondered if an inflation adjustment contribution should be added. He thought that the match should be closer to a 35 percent match. Mr. Carlson thought such a match would be $2.8 million. He added that $2 million would work for ATIA. The program is focused on bringing the independent traveler to Alaska. The marketing budget has declined and has hurt the independent segment of the market. Representative Gara did not accept that the private match should be less than it was two years ago. He asked what was going to change from last year to this year with emphasis on rural Alaska. Mr. Peck stated that there is a committee of 35 marketing persons who ultimately make the recommendation to the Department of Commerce, Community and Economic Development and it does change every year. Mr. Carlson added that the program can focus on bringing those independent travelers to rural Alaska; that is what the dollars do at this time. The program does not need to change focus. Representative Gara asked if the program does not need to change the focus and it was not good enough for rural Alaska last year, how would it be good enough this year with the same amount of money. Mr. Carlson emphasized that it was good enough for rural Alaska; it was just underfunded. Vice-Chair Stoltze referenced previous passionate testimony. He noted that his community wants private sector funding, seasonably. He commented that it is an opportunity to promote tourism into interior Alaska. Co-Chair Meyer pointed out that it is a three-year program. He thought of the $8 million as ATIA's share of the car rental tax which is to be used to market tourism. 3:07:16 PM Representative Thomas said the Alaska Marine Highway has dropped travel to Bellingham. He wondered if that would impact tourism. Mr. Peck responded that the focus could be to drive to Prince Rupert. Representative Thomas asked if Mr. Peck had ever driven the road. He commented that many had never driven the road. The ferry is the way to go. Mr. Peck voiced concern about the ferry schedule. Representative Kelly emphasized that you can't force business. He thanked ATIA for the high energy presentation and spoke in support of the bill. Representative Crawford commented on driving the Alaska Highway. 3:11:09 PM Speaker Harris MOVED to REPORT CSHB 147(FIN) from committee with individual recommendations and the accompanying fiscal note. Representative Gara OBJECTED. He commented that he still has a problem with private industry's contribution. He suggested moving private industry's match to 33 percent, which would bring their contribution from $2.5 million to $2.64 million, an amount equal to past contributions with an inflation factor included. He thought there should be an amendment to that effect. Co-Chair Meyer thought that was only a $200,000 difference. He recalled testimony that DMO's could not be counted on. Representative Gara reported that he has not heard testimony that the DMO's would not continue. Representative Kelly agreed that is the struggle. He pointed out that last year the expectation was about 10.9 and they ended up with 1.6. He maintained that the industry took a hit last year. 3:15:23 PM Representative Gara WITHDREW his OBJECTION. CSHB 147(FIN) was REPORTED out of Committee with a "do pass" recommendation and with a new zero fiscal note by the Department of Commerce, Community and Economic Development. 3:16:23 PM
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