Legislature(2007 - 2008)HOUSE FINANCE 519
02/14/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| 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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