Legislature(2007 - 2008)HOUSE FINANCE 519

02/14/2008 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 200 WORKERS' COMP: DISEASE PRESUMPTION TELECONFERENCED
Heard & Held
+= HB 147 TOURISM CONTRACT MATCHING FUNDS TELECONFERENCED
Moved CSHB 147(FIN) Out of Committee
<Teleconference Listen Only>
+= SB 72 COMMUNITY REVENUE SHARING TELECONFERENCED
Heard & Held
<Teleconference Listen Only>
+ Bills Previously Heard/Scheduled 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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