Legislature(1999 - 2000)

04/19/2000 09:53 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
     SENATE BILL NO. 308                                                                                                        
     "An Act relating to certain passenger vessels                                                                              
     operating in the marine waters of the state."                                                                              
                                                                                                                                
                                                                                                                                
This  was the  first hearing  for  this bill  in the  Senate                                                                    
Finance Committee.                                                                                                              
                                                                                                                                
Co-Chair Parnell moved  to adopt CS SB 308,  1-LS1617\D as a                                                                    
workdraft.  There   was  no  objection  and   the  committee                                                                    
substitute was ADOPTED.                                                                                                         
                                                                                                                                
JOE GELDHOF,  Juneau Attorney,  retained by  the legislature                                                                    
to advise on constitutional issues  relating to a tax on the                                                                    
cruise ship industry, explained the committee substitute.                                                                       
                                                                                                                                
Mr. Geldhof told  the Committee a proposed  tax is contained                                                                    
in Section 1  of the committee substitute. He  said this tax                                                                    
is  simple and  strait  forward on  passengers  who come  to                                                                    
Alaska in commercial cruise ships.                                                                                              
                                                                                                                                
Mr. Geldhof noted there are  some legal concerns, such as an                                                                    
equal protection  issue related to an  exemption for vessels                                                                    
that  have less  than 50  berths. However,  in his  opinion,                                                                    
there is  no problem with  equal protection. He  stated this                                                                    
is  because the  legislature has  discretion to  set certain                                                                    
standards  and  that  this exemption  is  well  within  that                                                                    
constitutional authority.                                                                                                       
                                                                                                                                
Mr. Geldhof explained the liability  for payment of this tax                                                                    
falls  on  the  vessels   that  are  engaged  in  commercial                                                                    
activities  within   Alaskan  waters.  In  that   sense,  he                                                                    
surmised this is a self-executing  tax the operators collect                                                                    
on behalf or  from the passengers and pay  to the Department                                                                    
of Revenue.                                                                                                                     
                                                                                                                                
Mr. Geldhof  pointed out that  this legislation  avoids some                                                                    
of the  difficulties under the  "nearly archaic  and perhaps                                                                    
almost dead"  tonnage clause in  the US  Constitution, since                                                                    
the tax  is not  related to  the length or  the weight  of a                                                                    
vessel.  He explained  that under  the clause,  any revenues                                                                    
generated  under  a  tonnage  tax   must  be  used  to  fund                                                                    
services, such  as fireboats, that  are directly  related to                                                                    
the marine trade.                                                                                                               
                                                                                                                                
Mr.  Geldhof described  how revenues  generated  by the  tax                                                                    
proposed in  this bill would  be deposited into  the general                                                                    
fund  and  would  pre-empt municipalities  and  other  local                                                                    
governments from engaging in other  passenger head taxes. In                                                                    
this sense, he  said, the state tax  is rationalized because                                                                    
the  industry is  not  subject to  multiple  tax schemes  at                                                                    
different rates.                                                                                                                
                                                                                                                                
Mr.  Geldhof  continued that  this  bill  provides that  the                                                                    
Department  of Revenue  directs a  portion of  the collected                                                                    
taxes  to the  affected communities  where the  cruise ships                                                                    
visited.                                                                                                                        
                                                                                                                                
Co-Chair  Torgerson   clarified  that   of  the   total  tax                                                                    
collected for each passenger, $5  is given to the first five                                                                    
ports of call.                                                                                                                  
                                                                                                                                
Mr. Geldhof  affirmed and  emphasized that  this legislation                                                                    
also places a prohibition on local levies.                                                                                      
                                                                                                                                
Co-Chair Torgerson wanted to know  if the municipalities are                                                                    
also blocked from imposing a wharfing or docking fee.                                                                           
                                                                                                                                
Mr. Geldhof  answered the bill would  not restrict municipal                                                                    
fees for  those activities relating to  providing a service,                                                                    
such as delivering water.                                                                                                       
                                                                                                                                
Co-Chair Torgerson asked if  this legislation would prohibit                                                                    
a municipality from charging a disembarking tax.                                                                                
                                                                                                                                
Mr. Geldhof responded that there  are a variety of different                                                                    
ways to describe  this type of charge, such  as fees, taxes,                                                                    
embarkation,  disembarkation,  etc. but  that  "a  tax is  a                                                                    
tax." He stated that this  legislation creates the state tax                                                                    
and prohibits municipalities from  imposing a similar charge                                                                    
although  a portion  of the  revenues would  be shared  with                                                                    
those municipalities.                                                                                                           
                                                                                                                                
Mr.  Geldhof next  addressed the  definitions prescribed  in                                                                    
the bill.   He said the intent is to  enact this legislation                                                                    
directed at  the large cruise  ships that travel  in Alaska.                                                                    
He  noted that  the language  specifically exempts  dayboats                                                                    
and the small vessels that have 50 berths or less.                                                                              
                                                                                                                                
Mr. Geldhof shared  that an argument could be  made that the                                                                    
vessel  size stipulations  violate the  US Commerce  clause,                                                                    
but  countered that  no violation  is committed  so long  as                                                                    
favor is  not granted to  local commerce. He  commented that                                                                    
legislatures repeatedly  get into  trouble when they  try to                                                                    
favor local commerce over businesses from other states.                                                                         
                                                                                                                                
Co-Chair  Torgerson   said  the   remainder  of   the  bill,                                                                    
beginning  on page  three, addresses  environmental concerns                                                                    
and provide record keeping requirements and emissions.                                                                          
                                                                                                                                
Mr.   Geldhof  affirmed   but  stated   that   he  was   not                                                                    
knowledgeable on this portion of the bill.                                                                                      
                                                                                                                                
Senator  Phillips  asked how  much  revenue  this tax  would                                                                    
generate.                                                                                                                       
                                                                                                                                
Mr. Geldhof  responded that although  a fiscal note  had not                                                                    
yet  been  prepared,  he  knew  that  approximately  600,000                                                                    
passengers passed through Juneau,  which is the largest port                                                                    
of call in the state.                                                                                                           
                                                                                                                                
Senator Phillips  asked if $30  million was  the approximate                                                                    
amount that this tax would collect.                                                                                             
                                                                                                                                
Mr.  Geldhof replied  that amount  is  a useful  approximate                                                                    
figure.                                                                                                                         
                                                                                                                                
Co-Chair Torgerson clarified that  the legislation imposes a                                                                    
$50  fee per  passenger per  voyage. He  continued that  the                                                                    
first five  ports the  vessel visits  would receive  $5 each                                                                    
from the $50.                                                                                                                   
                                                                                                                                
Mr. Geldhof affirmed.                                                                                                           
                                                                                                                                
Co-Chair Torgerson  asked if some vessels  visited less than                                                                    
five ports would the tax remain $50.                                                                                            
                                                                                                                                
Mr.  Geldhof  said   the  tax  would  be   the  same  amount                                                                    
regardless  of  the  number  of stops  a  vessel  makes.  He                                                                    
explained this bill  puts an excise tax on  the commodity of                                                                    
Alaska. He stressed  that the cruise ship  is responsible to                                                                    
pay the  $50 tax  even if  the vessel  begins its  voyage in                                                                    
Canada, travels  directly to Glacier Bay  without making any                                                                    
ports of call. However, he  noted that no municipality would                                                                    
receive  a $5  portion of  that fee.  He explained  that the                                                                    
state is still "selling the water."                                                                                             
                                                                                                                                
Amendment #1: This amendment makes  the following changes to                                                                    
the committee substitute.                                                                                                       
                                                                                                                                
     Page 1, line 4                                                                                                             
     Insert new bill sections to read:                                                                                          
     Sec. 1. AS 43.20 is amended to read:                                                                                       
          Sec. 43.20.021. Internal Revenue Code adopted by                                                                      
     reference. (a) Sections  26 U.S.C. 1 - 1399  and 6001 -                                                                    
     7872 (Internal  Revenue Code)  as amended,  are adopted                                                                    
     by reference  as part of  this chapter.  These portions                                                                    
     of  the  Internal  Revenue Code  have  full  force  and                                                                    
     effect  under  this  chapter   unless  excepted  to  or                                                                    
     modified   by  other   provisions   of  this   chapter.                                                                    
     (However,  nothing  in  this chapter  or  in  AS  43.19                                                                    
     {multistate  tax  compact}  may   be  construed  as  an                                                                    
     exception to or modification of 26 U.S.C. 883.)                                                                            
          Sec. 43.20.074. All business income of a taxpayer                                                                     
     engaged  in  the  cruise  ship  industry  derived  from                                                                    
     gambling  operations  and   activities  as  allowed  by                                                                    
     federal law  in the State  Of Alaska shall be  taxed at                                                                    
     the rate  of 2% of  the gross revenues of  the gambling                                                                    
     operations and activities conducted in Alaska.                                                                             
                                                                                                                                
     Renumber following sections accordingly.                                                                                   
                                                                                                                                
Senator Adams moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Torgerson objected.                                                                                                    
                                                                                                                                
Senator  Adams explained  this amendment  allows the  cruise                                                                    
ship industry  an opportunity  to provide  an "entertainment                                                                    
donation"  by imposing  a tax  on the  proceeds of  gambling                                                                    
operations conducted on  board ships. He spoke  to the well-                                                                    
defined restrictions  on gambling  in Alaska except  for the                                                                    
unknown  amount   of  gambling  done  aboard   cruise  ships                                                                    
traveling in state waters. He  told the Committee how the US                                                                    
Congress allowed  gambling in Alaska  waters at  the request                                                                    
of  the cruise  ship industry.  He was  concerned about  the                                                                    
federal government's  interjection on this matter  saying it                                                                    
raises  issues   about  state  sovereignty   since  congress                                                                    
authorized an activity  that the state does  not endorse. He                                                                    
thought it important that the  state extract a small portion                                                                    
of  the  wealth generated  by  gambling  within the  state's                                                                    
waters that otherwise goes to foreign-owned corporations.                                                                       
                                                                                                                                
Senator Adams  continued that funds collected  could be used                                                                    
for future cleanup  of oil spills or  other pollution damage                                                                    
or perhaps to fund ports  and harbor facilities. He reminded                                                                    
the  Committee that  this issue  was considered  in 1998  at                                                                    
which time it was estimated  this tax would generate between                                                                    
$3 to  $8.5 million. However,  he pointed out that  with the                                                                    
increase  in   cruise  ship  activity  the   minimum  amount                                                                    
collected would be $8.5 million.                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Phillips, Senator Leman, Senator Adams,                                                                       
                                                                                                                                
OPPOSED: Senator  Wilken, Senator  P. Kelly,  Senator Green,                                                                    
Co-Chair Parnell and Co-Chair Torgerson                                                                                         
                                                                                                                                
ABSENT: Senator Donley                                                                                                          
                                                                                                                                
The motion FAILED (3-5-1)                                                                                                       
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Amendment  #2:  This  amendment changes  the  title  of  the                                                                    
committee  substitute  and  adds   a  new  bill  section  as                                                                    
follows.                                                                                                                        
                                                                                                                                
     Page 1, line 1                                                                                                             
     Delete:                                                                                                                    
     "An Act relating to certain passenger vessels                                                                              
     operating in the marine waters of the state."                                                                              
                                                                                                                                
     Insert:                                                                                                                    
     "An Act  relating to certain  vessels operating  in the                                                                    
     marine waters of the state."                                                                                               
                                                                                                                                
     Page 1, line 4                                                                                                             
     Insert a new bill section to read:                                                                                         
     Section 1. AS 46.03 is  amended by adding a new section                                                                    
     to read:                                                                                                                   
          Sec. 46.03.072. Exception for certain United                                                                          
     States  Navy vessels  from state  marine water  quality                                                                    
     standards applicable to  the discharge of hydrocarbons.                                                                    
     (a) Until  September 1, 2010 the  state's water quality                                                                    
     standards,  adopted as  regulations under  authority of                                                                    
     AS  46.03.020(10) to  effectuate the  purposes of  this                                                                    
     chapter and  under authority of other  sections of this                                                                    
     chapter,  establishing  limits  on  the  total  aqueous                                                                    
     hydrocarbons    and    total   aromatic    hydrocarbons                                                                    
     permissible in  the marine water  column that  are more                                                                    
     stringent  than the  requirements  of comparable  water                                                                    
     quality standards set out in  federal law or adopted in                                                                    
     federal  regulation do  not apply  to a  vessel of  the                                                                    
     United States  Navy operating in  the marine  waters of                                                                    
     the state  if the  vessel uses a  seawater compensation                                                                    
     system.                                                                                                                    
          (b) Notwithstanding the exemption provided by (a)                                                                     
     of this  section, a  vessel of  the United  States Navy                                                                    
     operating in the  marine waters of the  state that uses                                                                    
     a seawater  compensation system  may not  discharge oil                                                                    
     into state waters in violation  of 33 U.S.C. 1321 (sec.                                                                    
     311, Federal  Water Pollution Control Act,  as amended)                                                                    
     and  regulations   adopted  under  authority   of  that                                                                    
     section.                                                                                                                   
                                                                                                                                
Senator Leman moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Torgerson objected for an explanation.                                                                                 
                                                                                                                                
Senator   Leman  explained   that   current  Department   of                                                                    
Environmental   Conservation    regulations   require   that                                                                    
discharged sea  water used by  marine vessels  for stability                                                                    
contain  less than  15 parts  per  billion hydrocarbons.  He                                                                    
stated that  this standard  is significantly  more stringent                                                                    
than federal law,  which dictate that no vessel  may leave a                                                                    
visible sheen.  He said  that in recent  years, the  US Navy                                                                    
has  curtailed operations  in Alaska  because of  the strict                                                                    
regulations. He  listed the three  classes of  Navel vessels                                                                    
equipped with seawater compensating  systems and saying that                                                                    
this amendment is an opportunity  to invite the Navy back to                                                                    
the state.                                                                                                                      
                                                                                                                                
In  response   to  the   department's  concerns   with  this                                                                    
amendment, Senator Leman said he  found part of the argument                                                                    
compelling.                                                                                                                     
                                                                                                                                
Senator Leman  moved to  amend the  amendment to  change the                                                                    
sunset date of the exemption  from "2010" to "2005". He said                                                                    
this  would   provide  ample  opportunity  to   conduct  the                                                                    
necessary  scientific  studies  to determine  if  a  further                                                                    
extension would be necessary.                                                                                                   
                                                                                                                                
Without objection the amendment was AMENDED.                                                                                    
                                                                                                                                
There  was  no  objection  and  the  amended  amendment  was                                                                    
ADOPTED.                                                                                                                        
                                                                                                                                
Amendment #3:  This amendment adds  a new subsection  to the                                                                    
committee substitute as follows.                                                                                                
                                                                                                                                
     Page 2, line 6                                                                                                             
     Insert:                                                                                                                    
               (a) The proceeds from the tax on travel on                                                                       
     commercial   passenger   vessels  providing   overnight                                                                    
     accommodations  in the  state's marine  water shall  be                                                                    
     deposited in a special  commercial vessel passenger tax                                                                    
     account  in  the  general  fund.  The  legislature  may                                                                    
     appropriate money  from this  account for  the purposes                                                                    
     described in  (b) of this  section and  for state-owned                                                                    
     port and harbor facilities.                                                                                                
               (b)                                                                                                              
                                                                                                                                
Senator Phillips  moved for adoption  and stated  this issue                                                                    
is  commonly  called "a  white  picket  fence approach."  He                                                                    
explained  it  isn't  exactly  a  dedicated  fund  but  does                                                                    
indicate  to  future  legislatures  that the  money  may  be                                                                    
appropriated  for  the  purposes of  state-owned  ports  and                                                                    
harbor  facilities. He  expressed  that because  the tax  is                                                                    
derived from  vessels, it  is appropriate  to use  the funds                                                                    
for facilities the vessels use.                                                                                                 
                                                                                                                                
Co-Chair  Parnell asked  if this  amendment applies  only to                                                                    
the portion of the head tax  retained by the state and if it                                                                    
in any way circumvents the local government's portion.                                                                          
                                                                                                                                
Senator  Phillips  surmised  that the  amendment  would  not                                                                    
utilize the  local portion  of the tax  because of  the word                                                                    
"may" in the language.                                                                                                          
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
Amendment #4: This amendment adds  an effective date of July                                                                    
1, 2000 to the legislation.                                                                                                     
                                                                                                                                
Co-Chair Parnell moved for adoption.                                                                                            
                                                                                                                                
Co-Chair Torgerson explained  this amendment establishes the                                                                    
effective date of the bill.                                                                                                     
                                                                                                                                
There was no objection and the amendment was ADOPTED.                                                                           
                                                                                                                                
ROBERT  REGIUS, Attorney,  spoke  in favor  of  the bill  on                                                                    
behalf of  the non-profit  organization, Cruise  Control. He                                                                    
told of  his 15  years practicing environmental  and natural                                                                    
resources law. He  stated that he is pleased  with Section 1                                                                    
and that  the state  is "stepping  up to  the plate"  to get                                                                    
fair  market value  for  Alaskans of  the  "experience of  a                                                                    
lifetime"  that is  sold  to the  hundreds  of thousands  of                                                                    
visitors.                                                                                                                       
                                                                                                                                
Mr.  Regius  next  addressed  Section  2  of  the  committee                                                                    
substitute emphasizing  it is intended  to ensure  that non-                                                                    
Alaskans  take  as  good  of  care of  the  state  as  local                                                                    
citizens  do. He  spoke of  the other  industries, including                                                                    
mining, oil  development, municipal water supply,  etc, that                                                                    
must provide information about the  wastes produced by their                                                                    
operations. He stressed  that this section of  the bill does                                                                    
not impose performance standards.                                                                                               
                                                                                                                                
Co-Chair Parnell offered a motion  to report from Committee,                                                                    
CS SB 308, 1-LS1617\D as amended.                                                                                               
                                                                                                                                
Senator Adams objected.  He stated that he did  not know the                                                                    
impact this legislation  would have on tourism,  and that no                                                                    
fiscal  note was  presented  to show  the  revenues the  tax                                                                    
would generate.                                                                                                                 
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Green, Senator Phillips, Senator Leman,                                                                       
Senator Wilken, Co-Chair Parnell and Co-Chair Torgerson                                                                         
                                                                                                                                
OPPOSED: Senator Adams, Senator P. Kelly and Senator Donley                                                                     
                                                                                                                                
The motion PASSED (6-3)                                                                                                         
                                                                                                                                
The bill MOVED from Committee.                                                                                                  
                                                                                                                                
Senator Phillips  asked if a  fiscal note would  be prepared                                                                    
for this bill.                                                                                                                  
                                                                                                                                
Co-Chair  Torgerson   answered  a   fiscal  note   would  be                                                                    
available before the Senate body hears the bill.                                                                                
                                                                                                                                
AT EASE 10:21 PM / 10:22 PM                                                                                                     
                                                                                                                                

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