Legislature(1999 - 2000)
04/09/1999 03:24 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 136 - ABOLISH TOURISM MARKETING COUNCIL
Number 1004
CHAIRMAN ROKEBERG announced the committee's next order of business
is HB 136, "An Act relating to tourism and tourism marketing;
eliminating the Alaska Tourism Marketing Council; and providing for
an effective date." Representative Beth Kerttula joined the
committee just prior to the chairman's announcement. The chairman
indicated there was a Version K committee substitute for HB 136.
Number 1015
REPRESENTATIVE HALCRO moved that the committee adopt the proposed
Version K CS for HB 136 as a working document. Version K is
labeled 1-LS0616\K, Cook, 4/9/99. There being no objection,
Version K was before the committee.
Number 1044
JOE BALASH, Legislative Secretary to Representative Gene
Therriault, Alaska State Legislature, came forward to present HB
136 on behalf of the bill sponsor. Mr. Balash read the sponsor
statement into the record:
"House Bill 136 is based on a plan brought forward by the
tourism industry and is similar to legislation sponsored
last session by the House and Senate Finance Committees.
It consolidates the state's tourism marketing efforts,
reduces the size and functions of the Division of
Tourism, and allows the state to reduce its contribution
to tourism marketing over time.
"Currently, Alaska's statewide tourism marketing efforts
are carried out by three organizations - the Alaska
Tourism Marketing Council, the Alaska Visitors
Association, and the Division of Tourism in the
Department of Commerce and Economic Development. These
efforts, under our bill, will be consolidated into a
single marketing function that is broadly representative
of the various sectors of the visitor industry in the
state. This organization will put together a marketing
program to address media advertising, visitor inquiries,
publishing and distributing ["distribution"] information
regarding vacation planning, and establishing and
maintaining Internet sites that provide tourism
information.
"The Division of Tourism will continue to provide inquiry
assistance, administer visitor information centers, and
plan and advocate for tourism and tourism development in
coordination with the private sector, ... municipalities,
and state and federal agencies. They will enter into a
contract with a single, qualified trade organization for
the purpose of planning and executing the state's
destination tourism marketing campaign. The contract may
include promotion of distinct segments of tourism, such
as highway, seasonal, cultural, regional, rural, and
ecotourism. This will take the state out of the business
of marketing and reduce the number of employees required
to carry out the functions of the Division of Tourism.
"A central feature of the contract is that the
organization awarded it will be required to match the
state's effort with 30 percent of its own money in the
initial year. It is expected that the organization will
grow and its membership collections increase. Therefore,
the match will rise to 60 percent in 2002. The benefits
of this are twofold: first, the state will be able to
reduce its contribution without extreme harm to the
industry; second, the private sector will contribute more
of its own funds towards the marketing ["marketed"]
efforts they benefit from.
"The industry is coming forward with more of its own
dollars. Coupled with efficiencies provided by
consolidation, the marketing efforts to bring more
visitors to the state will be more effective. This is a
responsible approach to reduce the state's monetary
contribution without harming the growth of this vital
industry."
Number 1222
REPRESENTATIVE HARRIS questioned where they are currently at as far
as tourism marketing funding goes if this bill becomes law.
MR. BALASH answered that the state will continue the status quo in
the fiscal year (FY) 2000 beginning July 1, 1999, as it transitions
to this new effort. The total funds spent by the state are
approaching $6,700,000. In the year 2000 initial year, the
contract from the state is expected to be $5 million, with the
industry matching at 30 percent.
REPRESENTATIVE HARRIS asked if the New Millennium Plan people have
given fair assurance they will be able to raise that much money at
that period of time.
MR. BALASH answered in the affirmative. He believes cards went out
this week or the past week for the initial charter memberships to
create a board that will begin the fund-raising efforts.
REPRESENTATIVE HARRIS questioned if there is any fall-back plan on
the state's part if the amount of money needed in the following
years is not raised, or if it will be up to that legislature to
decide whether it wishes to provide additional funding.
Number 1323
MR. BALASH replied the match rate will be set in statute. This
will require the organization to come up with a suitable amount of
money if it wishes to retain the full amount appropriated by the
legislature. If the organization does not do this, there are
provisions allowing the division to enter into an additional or
further contract which would not require that same match.
REPRESENTATIVE CISSNA indicated the legislation has come before the
committee suddenly and close examination would be necessary to find
out the differences in the proposed CS from the earlier versions.
She indicated there were some questions already in terms of the
organization to be created. She asked if Mr. Balash had any
explanatory literature or a copy of the card that was sent out.
MR. BALASH pointed to the copies in the bill packets of "The New
Millennium Plan, A Concept for the Future of Tourism in Alaska,"
[Alaska Travel Industry Association Organizational Outline, revised
December 1998] put together by the Alaska Visitors Association
(AVA). Mr. Balash did not have an example of the card. He
indicated he would happy to explain further if Representative
Cissna wished, noting there are industry representatives available
to testify to that as well.
Number 1430
CHAIRMAN ROKEBERG indicated the committee would proceed to
teleconference testimony. He confirmed Allen LeMaster (ph),
Gakona, was no longer on teleconference. The chairman confirmed
Valdez was still participating via teleconference and requested
Lisa VonBargen's testimony.
Number 1462
LISA VonBARGEN, Executive Director, Valdez Convention and Visitors
Bureau (VCVB), stated via teleconference from Valdez that she did
not have comment at this time.
Number 1472
NANCY LETHCOE testified next via teleconference from Valdez. She
spoke from a statement faxed to the committee:
"My name is Nancy Lethcoe. My husband and I are
celebrating 25 years in the Alaskan tourism industry.
... I'm past President of the Alaskan Wilderness
Recreation and Tourism Association [AWRTA], and a member
of the Valdez and Anchorage CVB. However, I am speaking
as a private person.
"I support the work draft of 4/9/99 ["4/4/9"] ...
although I have some reservations about the funding.
Here in Valdez, because of budget constraints, we are
facing the loss of our community hospital. I'm sure you
can appreciate the potential significance of this upon
the community and visitors.
"So, though I would appreciate (indisc.) state funding
tourism as proposed by HB 136, I think as public policy,
the state should fund medical services before allocating
funds to tourism marketing.
"Therefore, I encourage you to consider alternative
sources of funding - such as proposed in Senator Elton's
bill [SB 122] - even though this means our business would
incur increased expenses."
CHAIRMAN ROKEBERG confirmed Valdez had copies of Version K.
Number 1548
MS. VonBARGEN asked to briefly add one item. Mentioning the
existence of legislation which suggested all tourism marketing
funding should cease at the end of this fiscal year, Ms. VonBargen
emphasized the need to have reduction in state funding come at a
graduated level. She indicated complete sudden elimination of
funding could be seriously detrimental to the state's efforts to
gain momentum in tourism marketing and she noted the necessity of
a backup plan. The proposed New Millennium Plan would go through
three fiscal years before the goal of $10 million in terms of
funding is reached. Ms. VonBargen indicated the gradual funding
reduction she thinks is important is represented in the legislation
and was outlined after Representative Harris's comments.
CHAIRMAN ROKEBERG confirmed there were no other witnesses on
teleconference. The chairman indicated Ms. Fay should come forward
to explain the changes in the very recent Version K.
Number 1642
GINNY FAY, Legislative Liaison and Acting Director of the Division
of Tourism, Department of Commerce and Economic Development(DCED),
came forward. She highlighted the most significant changes in
Version K from the original bill, as introduced. Ms. Fay indicated
there have been some change in section order from the original
bill; this could make it difficult to compare the two versions.
Section 1, findings and intent, has been simplified to say the
intent is that the private and public sectors cooperate and
condense it into one marketing effort. Section 2 is unchanged.
Section 3 is an exemption from procurement. In the original bill
this exemption was only extended to the contract with the qualified
trade association (QTA). So that it would be clearer to all the
contracted parties, it was decided that even if the QTA chooses not
take a portion of the contract with the state and DCED contracts
elsewhere, those other contracts would also be exempt from
procurement.
CHAIRMAN ROKEBERG asked, "Has the ATMC [Alaska Tourism Marketing
Council] exempt -- (indisc.) exempt (indisc.)?"
MS. FAY replied it is her understanding that they are.
CHAIRMAN ROKEBERG questioned if that was in the repealer.
MS. FAY responded that all the ATMC statute is repealed. She
questioned in an aside if ATMC is exempted.
TINA LINDGREN, Executive Director, Alaska Visitors Association,
answered that ATMC is not exempted; ASMI [Alaska Seafood Marketing
Institute] is exempt.
Number 1756
MS. FAY referred to Section 4, purposes. She indicated the
original bill had deleted purposes (2), (3) and the current (5)
from the existing statute, but these have been returned in Version
K. These were primarily concerning the purposes to retain benefits
in Alaska and to residents of the state. In Section 5, Ms. Fay
indicated the primary change was to ensure that research for
tourism development, and also assessing the contract, could be
done. Section 6 has been the most difficult to reach agreement on.
Section 6 of Version K read:
* Sec. 6. AS 44.33.120 is amended by adding a new
subsection to read:
(d) During the term of a contract with a qualified
trade association under AS 44.33.125(a), the Department
of Commerce and Economic Development may not execute
another tourism marketing campaign except as provided
under AS 44.33.125(b), (c), or (d).
MS. FAY indicated this section was changed from the original bill
by adding (b), (c) and (d) to allow the exceptions in the statute
for other contracting provisions. Ms. Fay further indicated the
portion of this section in the original bill prohibiting promotion
of Alaska travel by the department was deleted; the department
would be able to continue activities with the contract in place
like encouraging "Iceland Air" [Air Iceland?] to land in Anchorage.
Number 1833
MS. FAY noted the main changes in Section 7 of Version K. If a
contract is to be awarded, the department can review and has to
approve the marketing plan before the contract is executed. The
department can indicate important components of the contract; those
are contained in subsections (a) and (b). If the QTA does not want
to do a portion of the contract the department feels is essential,
the department can contract with another entity as long as the
terms of that contract are essentially the same as what was offered
to the QTA. Subsection (c) allows the QTA to have first right of
refusal on all subsequent contracts while the contract is in place.
The only change here is that this applies to marketing contracts,
not to all of the division's contracts. Subsection (c) also
basically requires that the terms not be materially different.
Subsection (e) is essentially unchanged.
Number 1927
MS. FAY explained that subsection (f) relates to use of the
materials that would be the joint property of the QTA and the
state. If these materials are sold or leased, they have to be used
for the promotion of Alaska. Subsection (i) requires the
contracted QTA to provide notice of availability and consider the
responses when it goes to subcontract. This new subsection was
requested by the House Special Committee on Economic Development
and Tourism (EDT) subcommittee. Ms. Fay indicated the list of
major sectors of the visitor industry had been expanded to include
some of the smaller operations. This was by the addition of "bed
and breakfast enterprises, wilderness lodges and outfitters, and
charter operations" in subsection (j), which was subsection (h) in
the original bill. Ms. Fay indicated Section 8 is the same as
Section 7, subsection (a), but the percentage has been increased to
60 percent. Ms. Fay continued, "Section 9 adds an amendment that
was agreed upon by the parties but did not get addressed earlier in
Senate Labor and Commerce that makes it so in the granting
provisions that the Division of Tourism has, that those grants
cannot be used for tourism marketing."
CHAIRMAN ROKEBERG asked for clarification on the effects of Section
9.
MS. FAY answered that the repealer section, now Section 10, had
originally repealed AS 44.33.135 because of AVA's concern that the
matching grant provision would be used a means to provide tourism
marketing money to competing entities. However, that repeal would
have removed the department's ability to provide its matching grant
to the Rural Tourism Center. Ms. Fay indicated AVA realized it
wanted to restrict the Division of Tourism from providing marketing
grants, not delete the division's granting ability.
Number 2067
REPRESENTATIVE CISSNA questioned that there is no specific entity
which would really supervise, monitor and evaluate this.
MS. FAY explained, "Currently what happens with our contract with
the AVA that is used to - for the matching grants for the matching
- the required match for the ATMC program, is the contract is
between the department and the AVA. In this situation, ... the
Division of Tourism would be involved in administering this but the
actual contract would be between the department through the
commissioner and the qualified trade association."
REPRESENTATIVE BETH KERTTULA questioned if they were currently
going out under competitive bid, under contract, and if they still
had procurement code requirements in that contract.
MS. FAY replied their contract with the AVA is not covered under
procurement.
REPRESENTATIVE KERTTULA indicated that was something the special
committee had been concerned about. Referring to subsection (i) on
page 6 of Version K, Representative Kerttula asked if that is the
same as a competitive bid or in what way does the department
envision that working. Subsection (i) read:
(i) A qualified trade association may, pursuant to
the performance of a tourism marketing contract awarded
under (a) or (c) of this section, award a subcontract
only on a competitive basis after providing adequate
notice of the availability of the subcontract and
considering all responses.
MS. FAY answered that this entity would not fall under state
procurement. She thinks a private right of action would occur if
someone protested this; the probable remedy would be legal action
if they did not feel there was adequate notice. Ms. Fay indicated
it would be the responsibility of the qualified trade association
to set a standard it felt reflected the legislature's intent in
requesting this.
CHAIRMAN ROKEBERG confirmed Ms. Lindgren had to leave soon.
REPRESENTATIVE HALCRO expressed the wish to have Ms. Lindgren join
the committee at the table, noting this might assist Representative
Kerttula. Representative Halcro indicated there are certain
functions the QTA would perform, as does the current organization
now, that would be difficult to bid. He indicated it was the
subcommittee's intent with subsection (i) to require the QTA to
provide notice of subcontracts and have a competitive format
criteria so that subcontracts would be open to more than one
bidding party, without tying the QTA's hands with regards to
weighing proposals differently for creativity. Representative
Halcro provided an example concerning advertising. Advertising
agency A's proposal for a television commercial using a star would
be more expensive than advertising agency B's proposal using an
unknown actor. He indicated Ms. Lindgren should comment where she
felt necessary.
Number 2249
TINA LINDGREN, Executive Director, Alaska Visitors Association,
answered that Representative Halcro is exactly right. She indicated
"bid" was interpreted to mean that the only weighting would be for
price. In the marketing field there are some things where price is
not the only consideration. However, the subcommittee had wished
to make sure it was done competitively and that that was spelled
out in the legislation.
REPRESENTATIVE KERTTULA asked if this is the only place in the
statute where competitive basis and adequate notice is discussed.
She questioned if there is any attempt to "flesh it out at all,"
noting she did not recall if there is any discussion in the New
Millennium Plan itself about how that would work. Her underlying
concern is still the large amount of state money coming in and
ensuring that it is monitored.
MS. LINDGREN responded that "competitive basis" does not appear
anywhere else in the statute. Ms. Lindgren indicated another way
to achieve this monitoring is through the contract. The
department's responsibility to oversee the contract and terms gives
it a lot of leeway to examine how the QTA is operating. However,
it is necessary to keep in mind the entire attempt was to privatize
this effort and work with the private sector, as opposed to it
remaining a state agency. She understands the concern.
CHAIRMAN ROKEBERG asked Ms. Lindgren if she wished to make any
general comments at this juncture.
Number 2342
MS. LINDGREN indicated many of the members present were on the EDT
subcommittee which reviewed the legislation on April 6, 1999. She
emphasized the years' worth of work that has gone into bringing the
plan forward at the request of the legislature, and the
approximately two years it took to bring the legislation itself
forward. Ms. Lindgren noted Version K is supported by the AVA and
the Administration. She added she believes AWRTA [Alaska
Wilderness Recreation and Tourism Association] has not seen the
competitive bid clause but, with that exception, supports the bill
as written. Ms. Lindgren, therefore, does not think they will ever
be able to do much better than this. She hopes the committee will
pass the legislation out as written to the House Finance Standing
Committee, indicating it is the result of serious effort and has
been closely examined. The legislation sets up a mechanism for the
new organization to contract with the state; it does not contain
other items that are part of what the new organization will have to
create. In addition, there are funding challenges ahead for that
organization.
REPRESENTATIVE HALCRO thanked Ms. Fay and Ms. Lindgren for their
patience and efforts on this.
REPRESENTATIVE MURKOWSKI indicated she understands the legislation
provides a right of first refusal for every other tourism marketing
contract offered by the department. However, she believed Ms. Fay
had commented this would not include something like encouraging Air
Iceland to come in. Representative Murkowski sought clarification
on what the QTA has the full right of refusal to.
Number 2434
MS. FAY answered that the QTA would have had the first right of
refusal on every other tourism contract offered by the department
in the earlier draft, in what is now subsection 125(c) [Section 7].
She noted, for example, the organization would have had to be
offered first right of refusal for printing letterhead. Ms. Fay
said, "We requested and they accepted changing it to marketing
because the idea behind the bill is to consolidate tourism
marketing, not to consolidate all the tourism-related functions..."
[TESTIMONY INTERRUPTED BY TAPE CHANGE]
[From tape log notes: 'government to government' 'in terms of
airline routes']
TAPE 99-36, SIDE B
Number 0001
MS. FAY continued, "...(indisc.) things of that nature that are not
marketing, but they're maintaining sort of the foundation of the
tourism industry and tourism development, especially on public
lands in Alaska, and we wanted to be able to maintain our ability
to do that."
CHAIRMAN ROKEBERG commented it was approaching 6:00 p.m., inviting
the last witness forward. The chairman announced the committee
would not be moving the legislation at this hearing because the
fiscal note has not been received and because of the chairman's
commitment to Representative Kerttula. The committee will take up
HB 136 as the first order of business at the next meeting.
Number 0048
PHIL GREENEY came forward to testify. He is a bed and breakfast
(B&B) operator in Juneau and his wife is past president of the
Alaska Bed and Breakfast Association, chair of the INNside Passage
Chapter. He is present on his own behalf, indicating he also
speaks for some of the many people in his business who are
extremely concerned with the effects of the most current version of
HB 136. Mr. Greeney stated, "Mr. Chairman, if you're going to
completely change the process of destination marketing for the
state of Alaska, I suggest you must do so only with a concrete
plan, and certainly with secure funding. And so far, with HB 136,
it appears you cannot guarantee the level of funding, if any at all
from the state. ... What then happens to marketing if all the
funding's coming from the industry? Doesn't this then invite the
question of why the industry should allow any controls under that
scenario? And please ask yourselves where that then leaves the
thousands upon thousands of smaller tourism businesses. B&Bs were
mentioned frequently in earlier testimony as representative of one
end of the economic scale in the tourism industry."
MR. GREENEY continued, "As a representative of that component, I
can confirm that it appears that AVA has already begun to march
away from small businesses and their needs and concerns, pricing
themselves, perhaps out of necessity, out of our market. There are
signs that JCVB [Juneau Convention and Visitors Bureau] is
following, and, according to a spreadsheet I believe compiled by
JCVB, we can see some of the reasons for that concern. They're
projecting some near future increases in the participation, say
from Anchorage CVB [Anchorage Convention and Visitors Bureau] -
that would increase, I believe, 830 percent. Juneau's increase is
projected at 541 percent, and Homer's increase ... will be 4,445
percent."
CHAIRMAN ROKEBERG confirmed this was from the spreadsheet in front
of the committee and he asked if Mr. Greeney was referring to the
figure of $135,000 from Homer.
Number 0141
MR. GREENEY indicated the bottom of the spreadsheet gives the
dollar amounts and the percentage increases they represent. Mr.
Greeney further indicated all of the increases are substantial - in
the three and four digit range - with the possible exception of
Wrangell at 9 percent.
CHAIRMAN ROKEBERG noted the spreadsheet is from the Alaska Society
of Convention and Visitors Bureaus. He sought clarification as to
whether these percentage increases are the budget projections to
meet the commitment.
MR. GREENEY replied he believes so.
CHAIRMAN ROKEBERG requested assistance from Ms. Lindgren.
MS. LINDGREN indicated this spreadsheet was prepared by all of the
convention and visitors bureaus at the AVA's request. It was
prepared for a board meeting where the CVBs could discuss current
programs, expenditures, and the relationship of this to some of the
budget numbers in the plan. Homer is in support of the plan; it
has mentioned it knows the city has been receiving a "free ride"
for a long time and is very willing to come to the table with more
money. Ms. Lindgren indicated the amounts on the spreadsheet are
not necessarily reflective of what these organizations will end up
paying; it was against one set of numbers. She explained this was
an informational piece and there were problems with some of the
information because different CVBs reported differently. Ms.
Lindgren noted many of these organizations currently use the
statewide program and marketing to fulfill their own information:
in other words, these organizations receive names generated by the
statewide program and base their own entire programs on this. She
indicated the lack of a statewide program puts some of these
organizations in serious trouble because, with the possible
exception of Anchorage, they cannot generate visitors on their own.
Ms. Lindgren noted, therefore, this is very useful information in
speaking with the CVBs but it is ongoing discussion.
Number 0253
MR. GREENEY continued his testimony, commenting that their concern
with these figures is higher convention and visitor bureau fees
because of the increased necessity for participation from these
organizations.
CHAIRMAN ROKEBERG questioned if that means bed tax.
MR. GREENEY answered not necessarily, indicating he was speaking of
the fees to belong to these organizations. He related he had
recently had a conversation with two other small business
operators, one the operator of a flying service and the other a
guide service operator. Mr. Greeney commented all three of them
had had to drop out of AVA because AVA had priced itself out of
their market. He noted advertising in the state planner has become
prohibitively expensive as well. Mr. Greeney said, "These things
are very, very difficult, and we're looking at a time when only big
business will be able to afford these organizations, and receive
the benefits of these organizations."
CHAIRMAN ROKEBERG asked how the JCVB is funded, questioning if it
is a bed tax, a percentage of sale tax, or what.
Number 0306
MR. GREENEY answered that Juneau has a 7 percent bed tax in
addition to a 5 percent sales tax, equaling 12 percent on every
room night they sell. In response to the chairman's further
question, Mr. Greeney confirmed the 7 percent goes into the CVB,
noting he believes much of that goes to finance Centennial Hall and
the other JCVB functions.
CHAIRMAN ROKEBERG noted, then, it is an allocation formula.
MR. GREENEY replied to the best of his knowledge, commenting he is
not fairly versed in that.
REPRESENTATIVE HALCRO indicated the breakdown shows none of the
sales tax Mr. Greeney's customers pay goes to support the JCVB.
MR. GREENEY noted he does not believe that is the case.
REPRESENTATIVE HALCRO indicated the spreadsheet shows 70 percent of
JCVB's budget comes from the bed tax and 0 percent comes from sales
tax. He asked if the 7 percent bed tax all went into JCVB and some
to Centennial Hall.
MR. GREENEY replied to the best of his knowledge.
REPRESENTATIVE HALCRO noted, then, the 5 percent would go to the
city for roads, tourism, (indisc.).
Number 0368
MR. GREENEY continued his testimony, stating, "Our fears [are] that
if HB 136 passes without a secure funding source, we can anticipate
that within a relatively short time funding may well dry up due to
lack of matched industry funds or state funding, and we'll be back
to square one, leaving Alaska with no tourism marketing for a few
years while those involved try to put something else in place ...
Meanwhile, the state's second largest industry will be left with no
destination marketing. The impact would be devastating. And, on
a personal note, I mean I have to struggle to comprehend the
reasoning of those who want to take the state out of the business
of tourism marketing, marketing the cleanest industry we could
have. ... Whether or not we like the idea, we must compete with
states and nations who have the foresight to vigorously promote
their own tourist industries, and in view of that, I have to ask
you, Mr. Chairman and the committee, to please put the brakes on HB
136. ... At least give us time to review the different committee
substitutes, which I believe we're now up to Version K, and put the
brakes on long enough to firm up a stable and secure funding
source. I have to ask, 'What is the rush?' I mean, true, the New
Millennium Plan has been discussed for years, but HB 136 has not
and I - and certainly the committee revisions have not. And I ask
you to allow this bill to follow due process, take it off the fast
track, and let the system work. And again, I thank you for your
time."
Number 0438
REPRESENTATIVE HALCRO commented HB 136 does have another committee
of referral so he would not say the legislation is rushed.
However, he explained the reason for the legislation's pace is that
tourism funding has been zeroed out, and the only funding the state
is going to provide for tourism is with a fiscal note attached to
this bill. To Representative Halcro's knowledge, if this
legislation does not pass, there will not be any tourism dollars
for FY 2000. He indicated the legislation's intent is to reduce
the state's contribution to tourism marketing in the next three
years while gaining contributions from the private sector.
Representative Halcro asked Mr. Greeney to expand on the request to
slow HB 136's progress to shore up funding sources. He commented,
"If you're a company and I'm going to come to you say I have this
plan, you're going to need to make an investment, that to my
knowledge that would be how you'd shore up funds, but it sounds
like it's a concern to you and I just wanted to know..."
MR. GREENEY noted it was a concern, certainly in his own thought
and in what he heard expressed at, he believes, the previous
meeting. Mr. Greeney indicated there are two current pieces of
legislation on this topic, HB 136 and SB 122. He commented, "We
need some solid funding and certainly Senator Elton's bill provides
some mechanism for that."
CHAIRMAN ROKEBERG commented, "On top of your 12 percent?"
Number 0528
REPRESENTATIVE HALCRO requested to follow up. Noting he is in the
tourism industry, he said, "When I saw SB 122, I immediately
started crunching the numbers in ... the estimates - and I know
that's not the bill we're discussing here - but his revenue
estimates are way out of line. ... His forecasts for tax revenue
are so overly optimistic there is no way you're gonna achieve 14
and a 1/2 million dollars in three years. (Indisc.) there's just
no way. I come from Anchorage, we have an 8 percent bed tax. Last
year ... there was $100 million in room and bed revenue in 12
months, so 8 percent of that was split 50/50 between the ACVB and
the city, out of 100 million. With his projections you'd have to
do - I think it is - it came out to like $280 million in 6 months.
I mean, there's absolutely no way that those figures would work.
And what his bill does, is his bill simply shifts the costs to the
larger hotels and larger operators, so they're gonna be paying ...
more of the share. And so, it's not a pay as you play, it's if
you're a big hotel with 600 rooms, you pay more. And to me, ...
that seems unfair rather than going out and saying, if your - if
you want to invest in tourism, you're gonna have to invest in
tourism. So I mean, and I've heard a lot of testimony on this ...
and a lot of comments over two public hearings over this SB 122,
and I'm gonna tell you, I've run the numbers and they don't work
out at all."
CHAIRMAN ROKEBERG confirmed that concluded Mr. Greeney's testimony
and thanked him for his patience. The chairman indicated to both
Ms. Fay and Ms. Lindgren that he is concerned over the concept of
the first right of refusal. He has used this concept in business
for many years and it is not a favorite of his. He mentioned
another method, a first right of offer. The chairman expressed
that his concern with the first right of refusal is it requires a
bonafide third party. He commented, "Because when you have a first
right of refusal, you have to have a bonafide third party that's
standing in place. (Indisc.) which -- in this instant, the
department would say to the qualified trade association, 'If you
want to do this,' and I'm not sure they would do that - they'd have
to go out and find a third party, do an RFP [request for proposal]
and then go back to the qualified trade association to say
(indisc.) give you the first right of refusal after they have
already made the deal out over here, and then you have to say yes
or no. So, ... under a first right of offer, they would just
offer, 'Do you want to do this deal?' and you say, 'No,' and then
they go get somebody else. ... That may be a problem because of
the concern about what the substantially similar terms are, and
that may have been part of the history of the problems of reaching
an agreement, so, I'm just kind of curious about some feedback from
both of you around the concept of what you mean and how the first
right of refusal would operate."
Number 0664
MS. LINDGREN responded she believes their intent is to consolidate
marketing, as Ms. Fay had said. The reason that was added was in
the event of a serious disagreement about what should be done to
promote Alaska. It is the hope that clause never "kicks in."
However, Ms. Lindgren indicated this would, if there is a
disagreement, provide another option besides complete refusal of
the contract by the QTA or complete refusal to contract by the
department. Ms. Lindgren further indicated the concern and part of
the difficulty with the previous year's bill had been that if it
was offered to other organizations, these organizations were not on
the same terms - there wasn't a level playing field. Therefore,
that language was added so that if there was a component and there
was a disagreement, the department had the latitude of contracting
elsewhere as long as the terms were the same, so that one
organization wasn't penalized compared to others.
CHAIRMAN ROKEBERG indicated he wanted the record to reflect that if
one goes through a traditional first right of refusal, there has to
be a bonafide third party. He noted there is an avenue (indisc.)
that but he thinks in this instance using the traditional
interpretation of first right of refusal may be most beneficial.
He noted, "Because it would smoke out the basic terms that you'd
have to live with, and I think that was part of point of contention
... in the previous negotiations, is that not correct? That's what
you just testified to, so rather than try to tweak with this ... I
think we should leave the first right of refusal in there, but ...
I want to make sure everybody understands what that means in having
the bonafide third party. " He asked Ms. Fay if that was her
understanding of Ms. Lindgren's comments.
Number 0753
MS. FAY answered in the affirmative. She indicated she thinks the
department was actually the one that came up with the notion of
first right of refusal. Ms. Fay commented on the recognition that
the industry has to raise funds if it is to receive this match and
that it is not a very homogeneous industry. It is probably worse
than the fishing industry in terms of different sizes and
interests. Ms. Fay indicated the department understood the
industry's concern about splinter groups that would not want to
contribute to the whole well-being. She further indicated giving
the qualified trade association the first opportunity on a contract
offered by the department was intended to be an encouragement, an
incentive for all the players to work together in their industry to
reach an agreement on things that satisfied everyone's needs.
Number 0815
CHAIRMAN ROKEBERG requested that Ms. Lindgren and Ms. Fay each
explain what Section 6 means to them. [Both Ms. Fay's and Ms.
Lindgren's responses were transcribed verbatim per the chairman's
request.]
MS. FAY answered, "What Section 6 means, okay. I think this is --
I think throughout - throughout the bill in almost every single
section that you have in here is the intent that tourism marketing
be consolidated and conducted primarily by - or entirely by one
contract that the department has with a single qualified trade
association. I think that's in the findings and intent, and as you
work through, every - all signs are pointing you to Rome, and I
think this is one more place where it's basically saying that while
this contract is in effect, you cannot execute any other tourism
marketing campaign except for these exceptions that we've allowed
for you. And that's our understanding of it, and so if we want to
do tourism marketing, we will contract with the qualified trade
association in order to do it, unless there's something they don't
want to do."
CHAIRMAN ROKEBERG addressed the question to Ms. Lindgren.
MS. LINDGREN responded, "Our intent in this section is that while
there is a contract in place for tourism marketing - if there's no
contract the department does it - but while there is a contract,
the department is not doing tourism marketing."
CHAIRMAN ROKEBERG requested both responses and the follow-up
questions on this issue be transcribed verbatim for the record. He
asked, "If I might then - to both of you - one of the points of
contention as I understand it, has been the fear that if you do go
out, or if the department's allowed to go out after the (indisc.)
right of refusal provision is denied by the qualified trade
association and the department awards another contract which
requires the contractor to - the contractee to go out and get
additional funding from various other tourism-related businesses in
that particular niche, let's say, it's been my understand that was
one of the fears, that there'd be competition for funding outside
of the depart[ment] -- in other words, non-state funds. Is - is
that a fear? And I direct this question to Ms. Lindgren. Was that
- was that one of your fears (indisc.)?"
Number 0961
MS. LINDGREN replied, "Mr. Chairman, I'm not maybe - I'm not
following quite the way you're stating it, but one of the fears was
that in an effort to consolidate what we didn't want to do was
start breaking it up into lots of pieces and many contracts. The
intent language now still reads a tourism contract with the ability
if there's a disagreement to have some other contracts, but, as
Ginny said, the intent is to have a single contract. There is a
fear that if - exactly as you stated - that if it's split up into
multiple contracts, this new organization will not be able to raise
these kinds of funds because many people will be out there trying
to raise funds for different purposes, and also, rather than having
a cohesive tourism marketing program for the state, we'll have
different people doing different things, so that is a concern that
we both have, I think."
CHAIRMAN ROKEBERG noted, "And Ms. Fay, do you think the department
on July first of this coming year will go out - assuming this bill
passes - and be interested in expanding beyond the single
contractor out of the get-go?"
MS. FAY questioned, "I'm not sure I understand (indisc.) - would we
[be] interested in expanding beyond a single contractor?"
CHAIRMAN ROKEBERG replied, "Right, initially. In other words - in
other words we're - you're going - the department will generate the
actual contract with the specific discrete elements of it - of
different marketing goals, and if - if I take it correctly, the
qualified trade association would then bid on it and then if they
refused to do or did not want to do a certain provision of that
contract, could they turn down a portion of that contract?"
Number 1060
MS. FAY answered, "That's correct, the - if - if there was an
element that the department perceived to be essential in marketing
Alaska as a destination, and the qualified trade association did
not want to do that portion of it, or did not want to provide match
for that portion of it, then we would have the option of going out
and letting a contract for that component. I think, though, it is
still, when you -- as an example, if there was a group of
sportfishing lodges in Western Alaska who thought there should be
more marketing towards rural sportfishing in Alaska and they were
ready - they were willing to put up match for it, then it would
still probably work better for them to work through this new trade
association to let them know that this is an area of niche
marketing that's critical for the industry, and work with them to
get this money leverage, and have it be part of an overall
coordinated package. In a sense though this - this bill contains
a safety valve that if - if they - if it was really considered to
be important, people were willing to pay for it and the qualified
trade association was not willing to be responsive to the needs of
those businesses, then we could potentially contract with them. I
think our interest as a department, though, is when this
legislation passes is to - is to encourage every single business in
Alaska to become a member of this organization because every single
business will have a vote on who the - who the - will be on the
board of directors and how the marketing plan will unfold and so it
would be -- if we want it to be truly representative of all the
needs in Alaska, the best thing that could happen is all the
businesses who are - who stand to benefit from this organization
would join and become involved in it."
Number 1183
Chairman Rokeberg asked, "And then, if you'll allow me, if - if
this contract and this bill had passed last year and it was already
in place, and we had a circumstance like we have with the
unfortunate situation in the Mediterranean, which to me seems to be
a - a marketing opportunity here, where you wanted to appeal to
Mediterranean cruise passengers who are canceling their trips and
the potentiality of the cruise lines to relocate vessels that were
going to Mediterranean cruises into the Alaska traffic, how would
you be able to generate any funding? Or how would that work?
Would you have a - an additional addendum to the contract with the
qualified group or would you go out your own or how would you
handle it under this bill?"
MS. FAY answered, "Well, my understanding that the - the bill
allows for us under section d to be - to be able to allocate
additional funds for that kind of special situation - this is page
5, d, - and that we could amend the contract and specify the work
that would be done, but that we would not have to have the matching
requirements be identical to the original contract. In the case in
point that you're talking about now, I'm not sure there would be
any problem getting the cruise industry to put in extra money to
take advantage of the situation, there -- we wanted to have this be
flexible because there may be circumstances like similar to when
the Malaspina blockade occurred, that it might not be possible for
the - for those funds to be immediately generated because the
people who see the most benefit from that might not be able to - to
put in - raise that additional funds on - on that quick a basis."
Number 1290
CHAIRMAN ROKEBERG noted, "And finally from the Chair, one of the
key problems, or one of the key things that always seems to
(indisc.) have been control of the - the finances and the whole
process. Is the department satisfied with their level of control
over this legislation, and I'll ask the same question to the - to
Miss Lindgren. Miss Fay?"
MS. FAY responded, "Well, I think that throughout our whole
negotiations we have been doing a very balancing act between -- I
mean I think some of our obstacles have been in balancing out that
- that level of control because both parties will come to the table
with substantial investments of resources and want to have - each
of us want to make sure that the other side can't, you know, blow
the money, (indisc.) sense. I think I feel fairly comfortable now
with - with the - the terms that we recently worked out, where even
though we're limited to only having one contract, being able to
approve the marketing plan and to be able to specify what needs to
be in it is helpful for us because we didn't feel - without those
provisions we didn't feel that we really could -- if you can only
negotiate with one party and you can't say what's the terms of the
contract, then you aren't really negotiating a contract, but now
that we have a little more leeway about being able to specify some
of the terms of the contract we feel fairly comfortable with that."
CHAIRMAN ROKEBERG asked, "Tina?"
Number 1382
MS. LINDGREN answered, "Mr. Chairman, I - I would have to believe
that the - the members of the tourism industry have the most to
gain or lose by what happens, I don't think that - that the
Department of Commerce probably has any more at stake than members
do of the industry, and so there's a - there is a concern that they
have enough control over their destiny to use the funds that they
see fit and that they not be regulated as to how those funds are
used, but they also recognize that there are substantial state
dollars involved, and that that money comes with strings and that
what you see in the bill are the strings that are attached to
those."
REPRESENTATIVE MURKOWSKI asked, "... The qualified trade
association has the right to refuse - or not - not the right to
refuse, but if there's a component in the contract that they don't
want to do -- let's say we (indisc.) are handling it, they can opt
out of that and the state goes somewhere else. Is there any
provision that the state could say, 'We don't want you as the
qualified trade association to do this aspect of it.'"
MS. LINDGREN replied, "Yes there is because they approved the
marketing plan in advance."
REPRESENTATIVE MURKOWSKI noted, "So that's where it is at the very
get-go. And then, let's see what else was I going to ask you?"
Number 1472
REPRESENTATIVE KERTTULA commented, "Could - could I ask a question
about that, though in my mind it kind of raises - but they can't
then..."
CHAIRMAN ROKEBERG recognized Representative Kerttula.
REPRESENTATIVE KERTTULA replied, "Pardon me, thank you, yeah, just
on that point. But if they don't have it in the plan to begin with
they can't just go out to another group to do something, right? I
mean, it's either in the plan or it's not, and if it's not in the
plan, they can't go to another group to market, it has -- all the
marketing has to be through this one group unless you refuse it, is
that right?"
AN UNIDENTIFIED SPEAKER responded very softly, "Correct."
REPRESENTATIVE MURKOWSKI commented, "And then, if in fact..."
CHAIRMAN ROKEBERG recognized Representative Murkowski
REPRESENTATIVE MURKOWSKI continued, "Thank you - and this is my
last question - if in fact your - your - your QTA says, 'I don't
want this component, I don't want this component, I don't want this
component,' at what point do you say, 'Wait a minute, this contract
isn't working because we're having to look elsewhere to handle all
these aspects of what we had agreed to be our - our plan. I - I
don't know enough about this to say how do you get out of it if it
- if it's not working."
Number 1532
MS. FAY confirmed Representative Murkowski was referring to either
party and answered, "Well, I think the way this whole system is set
up - and I think it's a good thing - is that we both have a great
deal of incentive to work these things out with each other. I
mean, ultimately, both of our objectives is to support and promote
tourism in Alaska. Where - I would guess that where our
differences might come in is that our mission at the Department of
Commerce is especially directed towards Alaska-based businesses,
Alaska jobs and protecting small businesses in Alaska. So, I think
from our standpoint, as long as their marketing plan addresses
those basic elements and missions that Department of Commerce has,
we probably should - we probably won't have very many
disagreements. That's - that's where we see our - sort of our
oversight role (indisc.)."
CHAIRMAN ROKEBERG asked if there were further questions from
committee, recognizing Representative Cissna.
REPRESENTATIVE CISSNA responded, "Thank you, Mr. Chair. And I
guess that - for either of you - there is, in at least what I saw,
was no specified time of the contract. Is there a standard time
period that contracts are normally let for with the state, or how
does that work?"
MS. FAY replied, "Through the Chair, Representative Cissna,
(indisc.) basically the - the legislation states that on August 1
of each year, so we - there would be one-year contracts."
Number 1646
CHAIRMAN ROKEBERG confirmed there were no more questions from the
committee. He complimented the department, the industry members,
and the House Special Committee on Economic Development and Tourism
subcommittee for their work on the legislation. He personally is
much more comfortable with this now. The chairman indicated the
public hearing would be kept open and the legislation taken up as
the first item of business on April 12, with the intention being to
move the legislation at that time.
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