Legislature(2009 - 2010)SENATE FINANCE 532

04/14/2010 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 168 TRAUMA CARE CENTERS/FUND TELECONFERENCED
Scheduled But Not Heard
+= HB 306 STATE ENERGY POLICY TELECONFERENCED
<Above Bill Removed from Agenda>
+= HB 114 USE STATE TRANS FACILITY FOR DISASTER AID TELECONFERENCED
Moved SCS CSHB 114(TRA) Out of Committee
+= HB 186 AK FIREARMS EXEMPT FROM FED. REGULATION TELECONFERENCED
Moved CSHB 186(FIN) AM Out of Committee
+= HB 319 FIREARMS TELECONFERENCED
Moved CSHB 319(FIN) Out of Committee
+= HB 315 PUBLIC ACCOUNTING TELECONFERENCED
Moved SCS HB 315(FIN) Out of Committee
+= SB 312 VESSEL PASSENGER TAX TELECONFERENCED
Moved CSSB 312(FIN) Out of Committee
*+ SCR 19 LEGIS. TASK FORCE: HIGHER ED SCHOLARSHIPS TELECONFERENCED
Moved SCR 19 Out of Committee
+ SB 309 GAS EXPLORATION\DEVELOPMENT TAX CREDIT TELECONFERENCED
Scheduled But Not Heard
+ HB 365 FISH PROCESSOR FEES, LICENSES, RECORDS TELECONFERENCED
Scheduled But Not Heard
+ HB 424 G.O. BONDS:EDUC./LIBRARY/RESEARCH FACIL. TELECONFERENCED
Scheduled But Not Heard
+ HB 280 NATURAL GAS: STORAGE/ TAX CREDITS TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 312                                                                                                            
                                                                                                                                
     "An Act authorizing an advisory vote on use of Alaska                                                                      
     permanent fund earnings for an in-state natural gas                                                                        
     pipeline; and providing for an effective date."                                                                            
                                                                                                                                
9:37:44 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  proposed committee substitute,  work draft                                                                    
#26-LS1633\S, Bullock, 4/13/10. Co-Chair Stedman OBJECTED.                                                                      
                                                                                                                                
MILES BAKER,  STAFF, CO-CHAIR  STEDMAN discussed  CS version                                                                    
S. He  noted title changes  conforming to the CS.  Section 1                                                                    
and 2  remain unchanged.  Section 3 was  added to  the bill.                                                                    
The  term  "passenger" has  changed.  Section  4, 5,  and  6                                                                    
address  the commercial  passenger vessel  head tax  account                                                                    
and its  uses. The proceeds of  the head tax route  into the                                                                    
commercial passenger  vessel head tax account.  He commented                                                                    
that Page  3, Lines 3 and  4 state that the  legislature may                                                                    
appropriate  from the  account for  two purposes.  The first                                                                    
purpose is  listed in Section  5, Line 10, "first  five port                                                                    
of call  payments." Section 6  addresses the  second purpose                                                                    
of  the fund.  The mechanism  of the  fund has  not changed.                                                                    
With  the CS,  the first  five  port of  call payments  once                                                                    
allocated  to  the  communities,   must  be  used  for  port                                                                    
facilities,  harbor   infrastructure,  and   other  services                                                                    
provided  to  the  commercial   passenger  vessels  and  the                                                                    
passengers on board.                                                                                                            
                                                                                                                                
Mr.  Baker continued  that Section  D addresses  any balance                                                                    
remaining in the fund for  appropriation by the legislature.                                                                    
The  language on  Page  3 states  that  the legislature  may                                                                    
appropriate money from the  commercial passenger tax account                                                                    
to  projects that  improve port  and harbor  infrastructure,                                                                    
provide  services to  commercial passenger  vessels and  the                                                                    
passengers aboard  the vessels,  and improve the  safety and                                                                    
efficiency   of   the   interstate  and   foreign   commerce                                                                    
activities in which the vessels  and the passengers on board                                                                    
those  vessels  are engaged.  The  language  was changed  to                                                                    
clarify that  the funding is intended  for services provided                                                                    
to those vessels  and their passengers and  the structure of                                                                    
the statute has been changed to clarify.                                                                                        
                                                                                                                                
9:45:13 AM                                                                                                                    
                                                                                                                                
Mr. Baker  continued with  Section 7  and the  Department of                                                                    
Revenue's (DOR) responsibility  in distributing the payments                                                                    
subject  to appropriation.  Section  8  addresses the  local                                                                    
levees. The  communities with  the local  head tax  in place                                                                    
prior to  the passage  of the original  citizen's initiative                                                                    
were grandfathered in. The original  bill proposed that if a                                                                    
vessel travels to one of the  two ports, the local taxes are                                                                    
credited  out of  the  $34.50 tax  paid  per passenger.  The                                                                    
previous CS  allowed the grandfathered communities  to raise                                                                    
the local  taxes a  combined total  of $2.25  establishing a                                                                    
grandfather  floor of  half of  the $34.50.  The current  CS                                                                    
instead allows  the communities to  be grandfathered  in and                                                                    
the  local  taxes to  be  credited  against the  state  tax.                                                                    
Communities will  not be  allowed to  raise the  local taxes                                                                    
against  the state  tax. Section  12  changes the  effective                                                                    
date to October 31, 2010.                                                                                                       
                                                                                                                                
9:50:31 AM                                                                                                                    
                                                                                                                                
Mr.  Baker  noted  that  the   port  of  call  payments  are                                                                    
addressed in  Section 5.  The first five  ports of  call are                                                                    
eligible  for the  revenue sharing  payments. Those  revenue                                                                    
sharing payments in the CS have  been reduced from $5 to $4.                                                                    
Because Juneau is a unified  city with an existing head tax,                                                                    
they do not receive  the revenue sharing payments. Ketchikan                                                                    
with  two separate  governments has  not received  payments,                                                                    
but the borough receives $2.50.                                                                                                 
                                                                                                                                
9:52:56 AM                                                                                                                    
                                                                                                                                
Senator Thomas noticed that language  was altered to address                                                                    
the reduced tax  and the first five ports of  call. He asked                                                                    
about Section 6  and the detailed listing  of potential uses                                                                    
for  the  revenue.  Mr.  Baker   responded  that  Section  5                                                                    
provides   direction  to   communities  subject   to  annual                                                                    
appropriation  by the  legislature. Upon  appropriation, the                                                                    
section clarifies  the language  on Page  3, Line  24, where                                                                    
three types of expenses are  eligible for funding. The funds                                                                    
must be provided to the  vessel and the passengers on board.                                                                    
Changing  the word  "or" to  "and"  creates the  stipulation                                                                    
that  the   money  be  spent  on   port  facilities,  harbor                                                                    
infrastructures, and  other services. Section 6  states that                                                                    
the legislature  may appropriate  for projects  that improve                                                                    
port   and  harbor   infrastructure,  provide   services  to                                                                    
commercial passengers,  or improve safety and  efficiency of                                                                    
interstate and foreign commerce  activities on those vessels                                                                    
and passengers.                                                                                                                 
                                                                                                                                
Senator   Thomas  opined   that   the   CS  language   lacks                                                                    
flexibility.                                                                                                                    
                                                                                                                                
9:57:48 AM                                                                                                                    
                                                                                                                                
Senator  Egan requested  an explanation  of the  spreadsheet                                                                    
"Port of  Call Payment Scenarios"  (copy on file).  He asked                                                                    
for a prediction of the port of call payment for Juneau.                                                                        
                                                                                                                                
Mr. Baker  reviewed the mentioned  spread sheet  which lists                                                                    
the communities and the passenger  port of call numbers from                                                                    
the revenue,  ranked in  total for  the three  year program.                                                                    
Juneau  is the  number one  port of  call with  2.97 million                                                                    
passengers in  three years. He  noted that  the Municipality                                                                    
of Anchorage may have 125  thousand visitors. He stated that                                                                    
a projection for Anchorage could  be obtained by multiplying                                                                    
125,000 by $5  or $4 as it  is in the current  CS. The DOR's                                                                    
forecasted passenger traffic  in the 2010 column  shows a 15                                                                    
percent  reduction  from  2009.   The  bottom  half  of  the                                                                    
spreadsheet shows  the passenger  numbers and  the community                                                                    
sharing amounts  to the ports  of call. Juneau and  the City                                                                    
of Ketchikan  have not  received money  from the  $5 revenue                                                                    
sharing program. The right side  of the spreadsheet exhibits                                                                    
the port of call payment  amounts under the status quo using                                                                    
the  15  percent traffic  reductions  estimated  by DOR.  He                                                                    
noted that  if the port  of call  payment remains at  $5 and                                                                    
the  restriction on  Juneau and  Ketchikan  is removed,  the                                                                    
difference is apparent.                                                                                                         
                                                                                                                                
10:05:59 AM                                                                                                                   
                                                                                                                                
Mr. Baker reviewed  spreadsheet "SB 312 Version  A" (copy on                                                                    
file)  which addresses  the cash  flow into  the state.  The                                                                    
current excise  tax is $46.  The two local taxes  for Juneau                                                                    
and Ketchikan are listed. Under  the current bill, a visitor                                                                    
to  both  towns  allows  for  $19.50  per  passenger  to  be                                                                    
distributed in  port of call  payments. If the port  of call                                                                    
payments are  reduced 25  percent, the  new amount  would be                                                                    
$3.75. The proposed amount in the  CS is $4 which is simpler                                                                    
to divide.                                                                                                                      
                                                                                                                                
10:08:44 AM                                                                                                                   
                                                                                                                                
Mr. Baker  continued to  describe the  graph. Using  the DOR                                                                    
passenger  traffic   forecast  for  2010  of   850  thousand                                                                    
passengers  and  a three  port  of  call itinerary,  a  five                                                                    
dollar port of  call payment would allow  sixty four percent                                                                    
of the  passengers paying an  excise tax of $19.50  to equal                                                                    
$10,500,000 in state revenue. The  port of call payments for                                                                    
the  three ports  of call  equals  $8 million  and leaves  a                                                                    
balance  of  $2.4  million.  He  mentioned  other  itinerary                                                                    
scenarios via the spreadsheet.                                                                                                  
                                                                                                                                
Senator  Egan requested  the amount  received  by the  state                                                                    
last year. Mr.  Baker responded that the  2009 cruise season                                                                    
amounted to  approximately $41.2 million with  $10.3 million                                                                    
allocated  to  the  regional  cruise  ship  fund  and  $30.9                                                                    
million to  the commercial passenger vessel  tax account. He                                                                    
explained  that  $10  million  were paid  in  port  of  call                                                                    
payments. The legislature and  the governor appropriated $54                                                                    
million  in last  year's capital  budget  and $500  thousand                                                                    
from the  regional fund for  the Whittier  tunnel operation.                                                                    
He  mentioned that  the balances  have  rolled forward  with                                                                    
more   revenue  than   was  appropriated.   The  legislature                                                                    
appropriated $15 million in the 2009 capital budget cycle.                                                                      
                                                                                                                                
10:13:40 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  offered  an additional  spreadsheet  with                                                                    
2009 project information.                                                                                                       
                                                                                                                                
Senator Egan  asked if the  CS precludes Sitka,  Haines, and                                                                    
Hoonah  from instituting  a fee.  Mr. Baker  understood that                                                                    
nothing  precludes  establishment  of   a  standard  fee  or                                                                    
raising a current fee.                                                                                                          
                                                                                                                                
Senator Egan asked if industry  will continue the lawsuit if                                                                    
the CS is adopted. He  mentioned the recent news release and                                                                    
whether industry would accept the CS as a compromise.                                                                           
                                                                                                                                
Co-Chair  Stedman responded  that the  legislation does  not                                                                    
alter the  dollar amount  of $34.50. He  stated that  he did                                                                    
not expect opposition. Mr. Baker  added that the CS does not                                                                    
alter  the $34.50;  only the  distribution by  the state  is                                                                    
changed. He commented  that the CS tightens  up the language                                                                    
in terms of allowable uses of  the funds. He opined that the                                                                    
industry would be amenable to the changes.                                                                                      
                                                                                                                                
10:17:40 AM                                                                                                                   
                                                                                                                                
Senator Thomas asked about an  estimation of funds available                                                                    
for  Denali  Park  or  the   Interior  where  one  third  of                                                                    
passengers  arrive.  Mr.  Baker  responded  that  the  money                                                                    
available  based on  the 2010  traffic  projections is  $4.3                                                                    
million. He was unsure about the division of funds.                                                                             
                                                                                                                                
Senator Huggins  commented that many of  the visitors travel                                                                    
through Wasilla and Palmer.                                                                                                     
                                                                                                                                
Co-Chair  Stedman  removed  his OBJECTION.  There  being  NO                                                                    
OBJECTION, it was so ordered. Version S adopted.                                                                                
                                                                                                                                
Co-Chair  Stedman   mentioned  one  fiscal  note   from  DOR                                                                    
reflecting the  annual loss  of $22  million in  cruise ship                                                                    
passenger receipts  and one fiscal note  from the Department                                                                    
of Commerce, Community and  Economic Development (DCCED) for                                                                    
$10 million to conduct periodic reviews.                                                                                        
                                                                                                                                
Co-Chair  Hoffman  moved  amendment  one.  Co-Chair  Stedman                                                                    
OBJECTED.                                                                                                                       
                                                                                                                                
10:20:29 AM                                                                                                                   
                                                                                                                                
Mr. Baker explained Amendment 1.  He noted that the gambling                                                                    
tax  proceeds  are  general fund  proceeds.  The  commercial                                                                    
passenger vessel  tax account is  restricted on its  use and                                                                    
will  become more  restrictive under  this  bill. The  money                                                                    
remains in  the account  and has  not been  appropriated. He                                                                    
believed that past gambling tax  proceeds have lapsed to the                                                                    
general fund  or become part  of a reverse sweep.  He stated                                                                    
that approximately  $12 million  of gambling tax  money will                                                                    
be available at the end  of 2010 in the commercial passenger                                                                    
vessel  tax   account.  Amendment  1  simply   deposits  the                                                                    
gambling tax funds into the general fund.                                                                                       
                                                                                                                                
Co-Chair Stedman  removed his  OBJECTION. Amendment  one was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman referenced  the port  of call  spreadsheet                                                                    
calculations. The  CS shows a  $4 port of call  amount which                                                                    
gives  the   communities  less   than  expected.   He  asked                                                                    
committee members'  opinions regarding  raising the  port of                                                                    
call number to $5.                                                                                                              
                                                                                                                                
10:24:24 AM                                                                                                                   
                                                                                                                                
Mr.  Baker commented  that the  difference between  the four                                                                    
and  the five  dollar head  tax  based on  the 2010  traffic                                                                    
projections leaves a  balance of $7.1 million at  the end of                                                                    
the  year leading  to a  $3 million  difference from  the $4                                                                    
port of  call payment. He  pointed out the  principal change                                                                    
in  the  balance  of  the  fund is  not  a  product  of  the                                                                    
adjustment  to  the port  of  call  payments. He  noted  the                                                                    
increased  revenue  due  to  the   addition  of  Juneau  and                                                                    
Ketchikan.                                                                                                                      
                                                                                                                                
10:26:43 AM                                                                                                                   
                                                                                                                                
Senator   Huggins  advocated   for   the   "path  of   least                                                                    
resistance."                                                                                                                    
                                                                                                                                
Senator Olson  advocated for local  control. He  opined that                                                                    
money  at the  local level  allows for  proper spending.  He                                                                    
stated that the $5 port of call tax would be best.                                                                              
                                                                                                                                
Senator Egan  appreciated the lower  $4 tax and the  need to                                                                    
work with the  industry to implement the  fee. He understood                                                                    
that needs  exist in all  of the various ports  in Southeast                                                                    
Alaska.   The  cruise   ships   directly  affect   community                                                                    
infrastructure. He preferred the $5 tax.                                                                                        
                                                                                                                                
10:29:13 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman   Moved  Amendment  2.   Co-Chair  Stedman                                                                    
OBJECTED.                                                                                                                       
                                                                                                                                
Mr.  Baker explained  that Amendment  2  replaces the  three                                                                    
sections of the  bill identifying the amount of  the port of                                                                    
call payments. The  current CS states that the  port of call                                                                    
payments are  $4 for each  passenger. The  amendment changes                                                                    
the amount  to $5. Line  19 and 20  of the same  page splits                                                                    
the $5 to  $2.50 bringing the CS back to  revenue amounts in                                                                    
the current law.                                                                                                                
                                                                                                                                
Senator  Egan supported  the  amendment as  he  felt it  was                                                                    
unfair  for  certain  communities  to be  left  out  as  the                                                                    
infrastructure   needs   are   universal   among   southeast                                                                    
communities.                                                                                                                    
                                                                                                                                
Co-Chair  Stedman removed  his  objection.  Amendment 2  was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Co-Chair   Hoffman  MOVED   Conceptual   Amendment  3   with                                                                    
corresponding numeric changes on  Line 7 changing the "five"                                                                    
ports  of   call  to  "seven."  There   being  no  OBJECTION                                                                    
Amendment 3 was adopted.                                                                                                        
                                                                                                                                
Co-Chair Hoffman MOVED to report  CS SB 312 out of Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
notes.                                                                                                                          
                                                                                                                                
Senator Egan  OBJECTED for further information  on Amendment                                                                    
3.  Mr. Baker  suggested reviewing  the spreadsheet  and the                                                                    
concern regarding  the current law. The  additions of longer                                                                    
cruise  routes necessitate  the  change from  five to  seven                                                                    
ports of call.  The effect of the amendment is  to allow the                                                                    
sixth  and  seventh  port  to  receive  a  payment  with  an                                                                    
incremental difference of $100  thousand. Senator Egan asked                                                                    
if  the current  average was  3.4 ports  of call  visited by                                                                    
cruise ship passengers. Mr. Baker concurred.                                                                                    
                                                                                                                                
Senator  Egan   removed  his   OBJECTION.  There   being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
HB 312 was REPORTED out  of Committee with no recommendation                                                                    
and with one  new fiscal impact note from  the Department of                                                                    
Commerce,  Community and  Economic Development  and one  new                                                                    
zero fiscal note from the Department of Revenue.                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SCR19_SponsorStatement.pdf SFIN 4/14/2010 9:00:00 AM
SCR 19
SB 315 Amendment 1 SFIN R.1.pdf SFIN 4/14/2010 9:00:00 AM
SB 315
HB 168 Amendment 2 Ellis 041410.pdf SFIN 4/14/2010 9:00:00 AM
HB 168
2010 04 12 SB312 Port of Call Payments.pdf HFIN 4/15/2010 8:30:00 AM
SFIN 4/14/2010 9:00:00 AM
SB 312
SB 312 CS Proposed CS FIN Verion S 041410.pdf SFIN 4/14/2010 9:00:00 AM
SB 312
SB 312 Amendment 1 Stedman.pdf SFIN 4/14/2010 9:00:00 AM
SB 312
SB 312 Amendment 2 Stedman.pdf SFIN 4/14/2010 9:00:00 AM
SB 312
2010 04 15 SB312 Cruise Cash Flow Revised.pdf SFIN 4/14/2010 9:00:00 AM
SB 312