Legislature(1999 - 2000)
03/30/1999 01:52 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 107-ABOLISH TOURISM MARKETING COUNCIL
CHAIRMAN MACKIE called the Senate Labor and Commerce Committee
meeting to order at 1:52 p.m. and brought up SB 107, which would
abolish the Tourism Marketing Council and create a new Milennium
Plan. He noted the committee's sponsor statement in the packets,
and announced the committee would hear public testimony from
members of the tourism industry and the Administration.
He explained his office has been working with the Alaska Visitors
Association and Department of Commerce to devise and implement the
new Milennium Plan. This bill version is different than the bill
last year because it has worked out the department's issues and
concerns. CHAIRMAN MACKIE said the committee would consider
several amendments later in the hearing.
MR. KEN DOLE, Alaska Visitors Association (AVA), stated that after
a lot of negotiation with the Administration, they have reached a
compromise to move the bill forward. The AVA looks forward to the
consolidation of marketing and what it can do for the state, and
AVA's ability to bring some private dollars to the table. He said
the AVA would continue to work with the Legislature to move the
bill.
Number 54
CHAIRMAN MACKIE asked Mr. Dole to describe how the marketing entity
would work and the contribution by the industry, noting that
several members of the Legislature have urged the industry to begin
paying for some marketing.
MR. DOLE replied the goal of the program was to bring all marketing
together. In the proposed initial funding, 30% would come from the
private sector, and it would increase to 60% from the private
sector over a three-year period. He said it would create a $10
million marketing program that, hopefully, would continue to grow
after that third year.
CHAIRMAN MACKIE stated that currently the state is paying about $6
million in General Funds to the tourism marketing programs. Over
three years, the state would step down to $4 million and the
industry would step up from zero to $6 million.
MR. DOLE said the industry hoped to have that three-year transition
period to increase the budgets.
CHAIRMAN MACKIE said the small Convention and Visitor Bureaus
(CVBs), particularly Skagway, but also Kodiak and Haines, have some
real concerns about the formula that would be used. He told the
CVBs it was not the committee's intent to legislate formulas, but
that it was incumbent upon the industry to work together to find a
fair formula so that everyone who benefits from tourism could pay.
CHAIRMAN MACKIE expressed concern that there is still work to be
done on the formula, and asked if the association would work with
the affected communities.
MR. DOLE responded the funding formula is not in the legislation.
The new organization, not yet formed, will be adopting a funding
formula that is not yet established. The AVA has heard from the
CVBs that they would like their funding to be based more on a "pay
to play" type program, hopefully still trying to meet the same
level of funding that is the Association's goal. There won't be a
program unless they can raise that amount of money. MR. DOLE
asserted that AVA is committed to working with the CVBs, DMOs,
chambers of commerce and city councils to get everyone to sign off
on it.
The AVA has been involved in getting public comment and received
over a 5% return on 6000 surveys sent out last month. The AVA
treated Skagway's information as a survey response while, he
admitted, it should have been treated more proactively as a
separate issue.
CHAIRMAN MACKIE asked if there would be an elected board of
directors from within the industry and by-laws charging the board
with responsibility to devise the formula.
MR. DOLE answered, "Exactly." Everybody would be an initial member
and the Board would have representation from around the state, with
one business license equaling one vote.
CHAIRMAN MACKIE asked if the AVA supports the amendments the
committee will offer to meet the concerns of the Department. MR.
DOLE said that is correct. The AVA voted on those amendments and
they received concurrence.
SENATOR LEMAN asked if it is the intent to have a line function in
the year 2001 to increase 30%-45%-60%, or would it be 30% for two
years and then 60%.
MR. DOLE answered, from 30% to 60% to provide the capability to
increase in year 2002. The goal would be to raise their
contributions in the second year, but in case they can't meet the
match that quickly, the third year would be at 60%.
SENATOR LEMAN expressed concern about this year's budget and next
year's budget goals and said this legislation could mean as much as
$1 million.
CHAIRMAN MACKIE said he needs to confer with the Finance Committee
on how to deal with it. He assumed it would be included in the
fiscal note of SB 107 and removed from the Department of Commerce's
budget, providing more incentive for passage of the bill.
SENATOR LEMAN asked if Section 4 in the CS deletes existing
Purposes (2) through (8), leaving only the former Purpose (1), and
asked why those were removed.
MR. DOLE replied a proposed amendment will address putting some of
those purposes back in the bill. He would defer to Ms. Ginny Faye
to explain the amendment.
Number 190
MS. DEBORAH SEDWICK, Commissioner of the Department of Commerce &
Economic Development, stated she was delighted to express the
industry's and the Department's concurrence with the Committee
Substitute for SB 107. The Department's difficulties have been
resolved through compromise and the bill will create the dollars
for tourism marketing in Alaska. A lot of people have worked hard
on the legislation and she said, "I'm very happy that we have a
proposal that makes sense and will work."
SENATOR LEMAN asked when the CS could be reviewed. CHAIRMAN MACKIE
explained the agreement was reached today, but there wasn't time to
have it drafted for the meeting. It will be identical to Rep.
Therriault's bill introduced in the House, and it will be addressed
conceptually by the committee as a CS and redrafted.
MR. STEVE BEHNKE, Executive Director of Alaska Wilderness
Recreation Tours & Association (ARTA), said his trade association
represents about 300 small businesses and tourism operators
statewide. These range from bed & breakfasts to a small cruise line
company with 7 ships in the state. ARTA has followed this issue
closely for two years and expressed concerns about the approach AVA
has taken in developing the new Milennium Plan.
The proposed amendments today address only about one-third of
ARTA's concerns with the bill. The concerns that are addressed by
the amendments involve flexibility in the Plan, the role of the
Division of Tourism, and the role of the State in overseeing the
contract.
MR. BEHNKE said he's not too sure about the other two-thirds of
their concerns. The legislation should address the structure of the
organization in order for it to work. It will be very difficult to
get the support from the CVBs and the ARTA business members without
more assurance of how it will be structured. While it's difficult
to put into legislation, some sideboards could be identified and
ARTA is developing recommendations it will pass along.
The other major concern is that this will weaken rather than
strengthen funding for tourism at a time when the state and private
partners should be marketing, particularly to independent travelers
who bring the most benefits to the State. The State could play a
big role and money could make a difference in promoting economic
development. ARTA members are convinced the funding mechanism
isn't going to work and many feel the issue of taxation should be
considered.
CHAIRMAN MACKIE asked if Mr. Dole had specific suggestions. The
industry needs to come together to have a $10 million marketing
program versus the current funding program that could be zeroed
out.
MR. BEHNKE observed that the legislation proposes a public-private
partnership, with the public having a significant say in how the
state money is used. ARTA members believe the only successes in
the past few years have come from the Division of Tourism
addressing their concerns and needs. The AVA has tried to bring
people along on this, and he appreciates their efforts, but the
tourism industry is fractured with a huge range of interests. He
would submit specific suggestions to the committee.
CHAIRMAN MACKIE said he'd appreciate getting Mr. Behnke's
recommendations from the ARTA.
SENATOR LEMAN asked what type of tax Mr. Behnke alluded to in his
comments.
MR. BEHNKE replied it's premature to say. Senator Elton has
proposed an idea that many ARTA members have commented would raise
more money for marketing. It ought to be on the table, with a
consideration of the returns if the industry were willing to tax
itself. He asked the committee to look into what options exist for
a tax.
MS. CAROL KASZA, Vice President of ARTA, spoke on behalf of the
ARTA President, Kurt Kessel, and as an individual small tourism
business owner. On behalf of ARTA, she expressed that AVA did not
involve everyone in the process and it doesn't represent or speak
for the entire tourism industry. Only one-third of ARTA's concerns
have been addressed in the CS.
Speaking as an owner of a wilderness guiding business, she strongly
supported a system for destination tourism marketing. Her business
primarily advertises on the Internet now. Effective destination
marketing would entice travelers to select Alaska as one of their
top search choices. She doesn't support this bill because there
isn't the money available, as in the 1970s, to truly promote Alaska
on a really wide scale. Generic advertising intended to benefit
all segments of the tourism industry isn't happening because there
isn't the money to saturate the market. Instead, decisions are
being made on which segments to target, which publications, which
age groups...Her own and other small businesses feel the focus is
slanted to serve cruise ships and other forms of mass package
tourism.
MS. KASZA asked, "Who controls those marketing decisions and for
what purposes?" Small businesses have not been effectively
represented within AVA and the Tourism Marketing Council, and she
would not feel offended by the State stepping in to help ensure
that the legislation addresses the specific structure of the
proposed organization. It would do a lot to relieve her concerns.
She's highly concerned about the funding mechanism because if
everyone doesn't support this, it's not going to work.
Consolidating and amplifying AVA's power will further alienate
small businesses. There is not enough industry support now to
sustain this plan, because many feel their interests won't be
served by marketing plans; of more concern, many will figure on
getting a free ride whether they pay or not. She suggested more
research into states or provinces such as Alberta who attempted to
implement privatization schemes with disastrous results.
She expressed interested in Senator Elton's SB 122, proposing a
broad-based tax to support marketing.
MS. DIANE MCBRIDE, Homer, stated she's been a small business owner
in tourism for 30 years. She's concerned about SB 107 which
appears designed not to tax the industry. She felt relief when
Commissioner Sedwick said there was agreement and concurrence on
the new version of the bill. The Division of Tourism and Department
of Commerce must be involved for checks and balances and retained
authority to develop new markets and to evaluate the effectiveness
and performance of marketing contracts. Local communities must
have their tourism goals considered. AVA needs to be more proactive
and involve small tourism businesses. She supported SB 350 last
year which she felt had flexibility and she encouraged the
committee to look at it again as a model. She supported a bed tax
and Senator Elton's bill.
Number 509
MS. WANETTA AYERS stated she works for Afognak Native Corporation
which has several tourism holdings on Afognak Island. While she
supports consolidation of tourism marketing programs and applauds
AVA for taking the lead, she cannot support SB 107 because it
doesn't reflect the compromises reached by AVA and other sectors of
the industry. SB 350 as presented last year was much more
representative of industry-wide concerns. It is a fragmented
industry and she cautioned the committee to not think that one
organization, such as the AVA, can be truly representative. Some
of the most successful tourism destination programs on a community
level are funded by a tax. She suggested reframing the question:
how to create the most effective tourism development program, not
just a tourism marketing program. She thought they would have a
different result from the New Milennium Plan and she urged them not
to advance SB 128.
CHAIRMAN MACKIE said he shared her concerns. He asked if she had
a choice between doing nothing and seeing the whole marketing plan
go away or this type of an approach, which would she prefer.
MS. AYERS responded that she thought the State should have a role
to play in terms of public policy and promotion of tourism. She
thought that many interests had not been represented in the New
Milennium Plan which she thought was a loosely woven, social
contract with no compelling reasons to participate. Communities
could opt not to participate, but what options are there if the
private sector fails to buy in to the program. She thought
eventually the customers would be the ones who would pay the cost
of this program.
Number 578
MS. NANCY LETHCOE, Alaska Wilderness Sailing and Kayaking, said
they are former members of AVA and are active members of the Valdez
Convention and Visitors Bureau and of the Alaskan Wilderness
Recreation and Tourism Association. She said she preferred Senator
Elton's bill, because if you ask the tourism industry to contribute
money, then the industry should have the say in the marketing plan,
not the State.
TAPE 99-10, SIDE B
Number 590
Larger businesses who contribute more have had a much greater say
in how the state's money is spent on marketing. She opposed the
legislation saying they need something that is funded in a
different manner. She recounted her experience with AVA and how it
accepted her money, but did not really help her. They came to
Valdez during their annual meeting with their Millennium Plan, but
questions from the audience were discouraged in a very rude manner;
there was no vote on whether the members of the Valdez Visitors and
Convention Bureau accepted or rejected or wanted to see changes in
the plan. She thought that ARTA had the same difficulties.
MS. LETHCOE said that SB 128 might be the State micromanaging a
private organization, but she is in favor of it if it's under the
Department of Commerce, Division of Tourism. It is the only way
all segments of the Alaskan tourism would be represented in the
market plan and see a fair share of the budget, along with having
research done to determine the efficacy of the marketing program.
There needs to be a program that will market for everyone.
Number 520
MS. DEROTHA FERRARO, Executive Director, Homer Chamber of Commerce,
said they are a self supporting organization of 412 members. They
receive a $20,000 grant from the City of Homer to purchase adds and
do marketing for Homer. Their Board of Directors voted to adopt
the intent of SB 107, as well, as the public and private effort of
cooperative marketing.
She noted that members from small communities have been invited to
participate in this discussion. They cannot afford to not have
this happen. She said that numbers of visitors to Homer has been
declining recently and that is because of a decline in marketing
the state. Her local marketing dollars aren't large enough to
market Homer as a destination. We need a big pot of money to
market the state and then the small communities take care of moving
them around once they are here. The hurt to small communities by
not doing something will be far greater than any perceived hurt in
the details of how we are doing it. AVA has worked hard to include
small businesses and the communities in the process.
MR. TODD BUREAU, Hope tourism businessman, said he appreciated the
work by AVA to come up with some solutions for private enterprise.
He feels somewhat slighted in that his comments and others have not
been included in the final plan as it is being presented. He has
great concern that the proposed entity, the Travel and Tourism
Association, is supposed to single handedly receive, administer,
and dictate planning for the future, but is still an amorphous
entity. His greatest hesitation comes from the perception that
AVA's plan is mostly for the larger operators and those who are
dealing with a different type of tourism than many of the smaller
operations in the State who reside here. He has a great hesitation
to think that the volunteer portion of the plan would be
universally embraced. The Division of Tourism in the past has been
a single source of keeping the playing field level.
He didn't think the taxation issue was fully discussed as an
alternative. Taxation is something that people initially discount,
because nobody wants new taxes, but many people think it would be
one of the fairest ways for the Division of Tourism or the State to
derive a greater amount of monies from a greater and wider variety
of representatives and administer it in a more equitable and useful
fashion.
The bills before this committee give him even greater pause given
the fact that AVA has worked for so long on their plan. It seems
like an end run. He said he would prefer nothing, because that
would force the issue of taxation which is a much more equitable
way of administering tourism funds and serving the smaller
operators and independent travels, the backbone of the economic
benefit to the State.
Number 300
MR. DAVE KARP, Executive Director, Alaska Tourism Marketing
Council, asked them to look good at the new committee substitute;
it's not supposed to be the New Millennium Plan and all the rules
of the game and, what amounts to, bylaws and incorporation in
statute. There is a high level of awareness on the part of all the
parties that have been involved that there is a lot of work that
has to be done, yet. One of the new pieces of language that
appears twice in the CS is the wording "prior to execution the
marketing plan shall be approved by the department." There are
some controls.
MR. KARP said that people need to understand that there's going to
be a new organization established. It's $25 to join; it's one
member, one vote. Cruise lines contribute about a third of the
overall visitor traffic to the state. These companies on their own
go out into the national and global market place and spend over $30
million creating an image that cruising to Alaska is a good thing
to do.
MR. KARP reminded the committee that right now the tourism industry
is stalled and the more we wait, the more market share we lose.
Forty percent of the other states who are having economic problems
are increasing their allocation of public money to tourism
marketing.
SENATOR MACKIE said the only thing this legislation does is put
into place a contract and a match, but the industry needs to work
together and come up with a plan that works.
MR. BOB DINDINGER, Alaska Travel Adventures, commented that lack of
will to adequately fund tourism marketing in the State of Alaska
has turned operators against each other. It's because we are no
longer driving the number of bodies the industry needs to support
itself. We're growing, but in single digit numbers. In the 70's
and 80's we grew in double digit numbers. At the same time our
growth rate is declining, the amount of money that is being dumped
into the tourism industry for new operations by Native corporations
and people who have moved their resources out of timber, fishing,
and mining is phenomenal. "We need more of your money," he said.
He said there isn't the will to have a dedicated tourism tax in the
State of Alaska. "Everyone is honest when there's more than enough
to go around." When there was lots of oil money, that comment held
more water. If a tax is in place, there is no mechanism that would
dedicate that for the next 50 years. If it's voluntary, it's for
sure.
In conclusion, he asked the committee to move the Committee
Substitute from committee.
MR. ALAN LEMASTER, Gakona small businessman, said the AVA has
helped him tremendously in building a very viable business. Since
his hotel burned down, he is using the same marketing plan to help
him reestablish his business. He supported the New Millennium Plan
and said that SB 107 concerns him greatly. First, the Board would
be appointed by the Governor and could be anyone in the State and
there are no restrictions. The taxation plan as laid out is
discriminatory and doesn't cover the bases, to say nothing of the
fact that the people in the industry are placed with the burden of
taxing themselves hoping government would give it back to them.
SENATOR LEMAN move to adopt the CS to SB 107. There were no
objections and it was so ordered.
SENATOR LEMAN reiterated that he would like to see a multi-step
increase from 30 percent to 60 percent instead of one big step
after two years.
SENATOR LEMAN moved to pass CSSB 107(L&C) from committee. There
were no objections and it was so ordered.
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