Legislature(1999 - 2000)

03/30/1999 01:52 PM Senate L&C

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

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