04/05/2010 01:30 PM House FINANCE

HOUSE BILL NO. 167                                                                                                            
                                                                                                                                
     "An  Act relating  to a  corporation income  tax credit                                                                    
     for  contributions by  a person  owning or  operating a                                                                    
     commercial  passenger  vessel   to  a  qualified  trade                                                                    
     association  that   was  awarded  a  contract   by  the                                                                    
     Department   of  Commerce,   Community,  and   Economic                                                                    
     Development,  and used  for  planning  and executing  a                                                                    
     destination tourism marketing campaign."                                                                                   
                                                                                                                                
5:15:31 PM          AT EASE                                                                                                   
5:16:40 PM          RECONVENED                                                                                                
                                                                                                                                
Representative Fairclough introduced  the bill and solicited                                                                    
public testimony.                                                                                                               
                                                                                                                                
GENEVIEVE  WOJTUSIK,  STAFF, REPRESENTATIVE  MILLET,  stated                                                                    
that the tourism industry had  encouraged the development of                                                                    
HB  167. Alaska's  tourism industry  had informed  lawmakers                                                                    
that  Alaska had  failed  to maintain,  and  grow, a  market                                                                    
share  in  national  and  international  markets.  Competing                                                                    
destinations  were  outspending  the state  with  increasing                                                                    
marketing budgets.  All sectors of Alaska's  travel industry                                                                    
were  reporting  an  unprecedented  drop  in  summer  season                                                                    
bookings.  The  bill  attempts to  secure  funding  for  the                                                                    
marketing of  Alaska by taking  money from the  industry and                                                                    
giving a tax  credit back, which would  create a sustainable                                                                    
source  of  income. The  bill  would  ensure that  a  person                                                                    
making  a contribution  would not  receive a  direct benefit                                                                    
from the  contribution while also  receiving the  income tax                                                                    
credit.  The  bill  deals  only  with  commercial  passenger                                                                    
vessel income, and a credible passenger vehicle tax.                                                                            
                                                                                                                                
REPRESENTATIVE  CHARISSE MILLETT  (via teleconference),  she                                                                    
stressed state  investment in marketing the  Alaska product.                                                                    
She reiterated  that the state  was competing on  the global                                                                    
market  with international  destinations. Alaska  has unique                                                                    
wildlife attractions,  but other  areas often have  the same                                                                    
attributes.  She stated  that the  tourism industry  created                                                                    
jobs and sustained the economy,  and that infrastructure for                                                                    
tourism  had been  built that  should not  go to  waste. The                                                                    
bill provided  a mechanism  for a  steady stream  of revenue                                                                    
for  marketing, which  would alleviate  the need  for future                                                                    
legislative allocations in the area of marketing.                                                                               
                                                                                                                                
5:22:08 PM                                                                                                                    
                                                                                                                                
Representative  Doogan  asked  how  much  revenue  would  be                                                                    
generated  by the  tax to  spend on  tourism marketing.  Ms.                                                                    
Wojtusik  replied  that  Title  44.33.125  defined  how  the                                                                    
marketing  would  be  done  with   both  private  and  state                                                                    
dollars.                                                                                                                        
                                                                                                                                
JOHANNA  BALES,  DEPUTY  DIRECTOR,  DEPARTMENT  OF  REVENUE,                                                                    
explained  that  the bill  would  allow  credit against  the                                                                    
corporate  income  tax  paid   by  operators  of  commercial                                                                    
passenger  vessels, which  would be  the difference  between                                                                    
the tax  already paid  without the excise  tax, and  the tax                                                                    
paid   including  the   excise  tax.   The  department   had                                                                    
encountered  2 problems  when trying  to  figure the  actual                                                                    
numbers.   First,  there   were  only   3  tax   payers,  so                                                                    
confidentiality was an  issue. Second, it the  nature of the                                                                    
corporate  income   tax  made   it  difficult  to   make  an                                                                    
approximation.                                                                                                                  
                                                                                                                                
Representative Doogan  requested the amount that  the cruise                                                                    
industry  would pay  the state  under  the legislation.  Ms.                                                                    
Bales responded the ships were  often subsidiaries of larger                                                                    
corporations  which  made  estimating the  funds  the  state                                                                    
would receive difficult.                                                                                                        
                                                                                                                                
5:26:40 PM                                                                                                                    
                                                                                                                                
Representative  Kelly noted  that  the version  of the  bill                                                                    
before the committee  referred to the 3  major recipients of                                                                    
the credit. The  governor's version was much  broader in the                                                                    
amount of  businesses that could  take part. He  queried the                                                                    
department's position on including  larger groups. Ms. Bales                                                                    
responded that  the governor's bill  was crafted  to include                                                                    
any corporation  engaged in tourism  activity in  the state.                                                                    
House Bill 167 was crafted  to include only 3 companies, and                                                                    
one small  segment of  the corporate  base, that  could take                                                                    
advantage  of  the  credit.  The  department  had  suggested                                                                    
putting a cap  on the credit, but opening the  credit to all                                                                    
corporations that were engaged in tourism in the state.                                                                         
                                                                                                                                
5:29:13 PM                                                                                                                    
                                                                                                                                
SANDRA LOOMIS,  BUSINESS MANAGER, TALKEETNA AIR  TAXI, spoke                                                                    
in favor  of the  legislation. She  stated that  the tourism                                                                    
industry  was  vital  to the  community  of  Talkeetna.  She                                                                    
shared  her  experience with  ATIA  and  the marketing  help                                                                    
provided by  the association. She  contested that  there was                                                                    
no  end to  the benefits  for the  state from  the marketing                                                                    
work done by ATIA.                                                                                                              
                                                                                                                                
ROARK BROWN,  OWNER, HOMER OCEAN CHARTERS,  HOMER, supported                                                                    
the  bill.  He stated  that  ATIAs  board of  directors,  on                                                                    
behalf of the 1,100  member businesses in Homer, unanimously                                                                    
endorsed  the  governor's  plan to  restore  the  health  of                                                                    
Alaska's travel  industry. If the  bill were amended  to add                                                                    
the  governor's  language   the  state's  tourism  marketing                                                                    
program  would  be  adequately funded.  He  noted  that  the                                                                    
program  had  extensive   state  oversight,  including  veto                                                                    
power.                                                                                                                          
                                                                                                                                
Representative Kelly  pointed out to the  committee that the                                                                    
element  differences between  HB  167 and  HB  422, was  the                                                                    
discussion  of  the 3  taxpayers  versus  the broader  based                                                                    
plan, he wondered which method  the testifier supported. Mr.                                                                    
Brown supported the broad based plan.                                                                                           
                                                                                                                                
5:36:34 PM                                                                                                                    
                                                                                                                                
BRETT CARLSON,  COOK, COLDFOOT  AND DEADHORSE,  testified in                                                                    
support  of the  bill. He  shared that  in his  region there                                                                    
were many  small businesses that  were not  primarily cruise                                                                    
related  businesses.  The  businesses  focus  on  non-cruise                                                                    
visitors and  were dependent on a  tourism marketing program                                                                    
that   reached  out   to  non-cruise   travelers.  Declining                                                                    
marketing  funding  over  the  past 20  years  had  made  it                                                                    
increasingly  difficult for  the  non-cruise businesses.  He                                                                    
stated that  the tourism  numbers in  the northern  areas of                                                                    
the  state  were  dismal.  He noted  that  the  low  tourism                                                                    
numbers were  expounded by  the weak  economy. He  felt that                                                                    
Alaska  was comparable  to other  destinations like  Hawaii,                                                                    
New  Zealand,  and Australia.  He  concluded  that the  bill                                                                    
offered a  long term sustainable funding  plan for marketing                                                                    
the state.                                                                                                                      
                                                                                                                                
5:42:19 PM                                                                                                                    
                                                                                                                                
ALAN  LEMASTER,  ATIA,  GLENALLEN, urged  supported  of  the                                                                    
governor's HB  422, but not  HB 167.  He argued that  HB 167                                                                    
was fragmented  and contained no fiscal  impact information.                                                                    
He divulged that in his  business experience, a reduction of                                                                    
marketing equaled  a reduction in visitation,  which equated                                                                    
to a reduction in jobs.  He believed marketing was the first                                                                    
step in reenergizing the tourism industry in Alaska.                                                                            
                                                                                                                                
COLLEEN   STEPHENS,   VALDEZ,   voiced   support   for   the                                                                    
legislation. She  stated that the  reduction of  visitors to                                                                    
the  state had  negatively  affected  10 full-time  seasonal                                                                    
jobs, and 1 full-time  year-round position in the community.                                                                    
She  believed that  seasonal  employment  help young  people                                                                    
develop a work ethic which  would continue with them through                                                                    
life. Scarce  entry level jobs  for young people  across the                                                                    
state would affect the work force  in to the future, as well                                                                    
as the economy and the viability of the state.                                                                                  
                                                                                                                                
SCOTT REISLAND,  DENALI GRIZZLY BEAR, DENALI  NATIONAL PARK,                                                                    
testified  in  support  of  the  bill.  He  said  that  ATIA                                                                    
marketing  was  critical  for marketing  his  business.  The                                                                    
funding  received by  the passage  of the  legislation would                                                                    
help with increasing the independent travel market.                                                                             
                                                                                                                                
MARY RICHARDS, ALL SEASON'S INN,  FAIRBANKS urged support of                                                                    
the bill. She  explained that the only way the  inn could be                                                                    
effectively  marketed  was  in  cooperation  with  the  ATIA                                                                    
marketing  plan. She  used her  money  to reach  out to  the                                                                    
association,  who in  turn reached  out to  the rest  of the                                                                    
world on her behalf.                                                                                                            
                                                                                                                                
MATT ATKINSON, FAIRBANKS spoke in  support of the governor's                                                                    
bill.  He offered  accolades to  ATIA for  the association's                                                                    
ability  to maximize  available funds.  He believed  the tax                                                                    
credit  would  allow  the  state to  direct  more  focus  on                                                                    
marketing  the   state  and  less  on   requesting  one-time                                                                    
appropriations.                                                                                                                 
                                                                                                                                
5:53:20 PM                                                                                                                    
                                                                                                                                
LOIS WIRTZ, SELF,  spoke in support of  the legislation. She                                                                    
stated  that statewide  marketing  was  crucial for  tourism                                                                    
development  in Nome,  Kotzebue,  and  Gamble. Reducing  the                                                                    
head  tax was  only  one  aspect of  what  was necessary  to                                                                    
foster tourism  in the state.  She believed that  an ongoing                                                                    
marketing effort was necessary  to bring back non-cruise and                                                                    
independent visitors.                                                                                                           
                                                                                                                                
JILLIAN  SIMPSON, ALASKA  TRAVEL  INDUSTRY ASSOCIATION  (via                                                                    
teleconference),  testified in  support of  the broad  based                                                                    
bill  for  tourism  marketing tax  credits.  She  felt  that                                                                    
Alaska  needed  sustainable  marketing funding  for  to  the                                                                    
domestic and international market in  order for the state to                                                                    
continue to grow.                                                                                                               
                                                                                                                                
TOM    HALL,    KLONDIKE    GOLD   DREDGE    BREWERY    (via                                                                    
teleconference), offered support for  the bill. He testified                                                                    
that ATIA offered unique  opportunities for collaboration in                                                                    
marketing the Alaska  product to visitors from  far away. He                                                                    
felt  that   there  would  be  significant   return  on  the                                                                    
marketing investment.                                                                                                           
                                                                                                                                
5:58:28 PM                                                                                                                    
                                                                                                                                
TAMMY  GRIFFIN, DIRECTOR  OF  OPERATIONS,  ALASKA HOTEL  AND                                                                    
LODGING  ASSOCIATION  (via  teleconference),  supported  the                                                                    
legislation. She  stated that  the association  supported an                                                                    
amended HB 167 that included  the participation of a broader                                                                    
selection  of  industry  players  in  the  tax  credit.  She                                                                    
concluded that an increase in  tourism marketing funding was                                                                    
imperative for the future of the industry in Alaska.                                                                            
                                                                                                                                
FRANK FLAVIN, PHOTOGRAPHER supported  the bill. He cited the                                                                    
marketing spending  increases made by other  destinations in                                                                    
the  past 6  years. He  revealed that  Alaska had  spent $10                                                                    
million in  2005, with an  additional $5 million  match from                                                                    
the  industry, but  had only  increased to  11.7 million  in                                                                    
2010.                                                                                                                           
                                                                                                                                
6:02:46 PM                                                                                                                    
                                                                                                                                
SHANNON   HAMRICK,  EXECUTIVE   DIRECTOR,  KENAI   PENINSULA                                                                    
TOURISM  MARKETING COUNCIL  (via teleconference),  testified                                                                    
in support  of the legislation.  She opined the  downturn in                                                                    
the  tourism  economy  of  2009,  and  the  equally  abysmal                                                                    
forecast for  2010. She explained  that her  family business                                                                    
relied  on the  building  of lodges  and  bed and  breakfast                                                                    
establishments,  which were  is less  demand because  of the                                                                    
industry slump.  She said  that the loss  of visitors  had a                                                                    
ripple effect of loss throughout the community.                                                                                 
                                                                                                                                
Co-Chair Stoltze closed public testimony.                                                                                       
                                                                                                                                
Co-Chair Stoltze discussed housekeeping.                                                                                        
                                                                                                                                
HB  167  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.