Legislature(2009 - 2010)BELTZ 211

03/19/2009 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 138(L&C) Out of Committee
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SB 138-TAX CREDIT FOR STATE TOURISM PROGRAM                                                                       
1:35:37 PM                                                                                                                    
CHAIR PASKVAN announced the consideration of SB 138.                                                                            
SENATOR MEYER, sponsor  of SB 138, moved to adopt  CS for SB 138,                                                               
labeled  26-LS0626\P,  as the  working  document.  There were  no                                                               
objections and it was so ordered.                                                                                               
CHRISTINE R.  MARASIGAN, staff  to Senator  Meyer, sponsor  of SB
138,  explained  that  each  year   the  Alaska  Travel  Industry                                                               
Association,  which  is   the  non-profit,  member-based  visitor                                                               
industry trade  association that conducts marketing  on behalf of                                                               
the State  of Alaska,  makes a  request for  funds to  promote an                                                               
Alaska  tourism  marketing  program. Last  year  the  legislature                                                               
applied  a three-year  sunset clause  to  the match  requirement,                                                               
which currently  has a 70/30 split  with the State of  Alaska and                                                               
private industry. Currently the  state-wide car rental tax brings                                                               
in about $9 million and is  combined with $2.7 million of private                                                               
industry match to make a  total tourism marketing budget of $11.7                                                               
million for FY09.                                                                                                               
Last  year the  legislature  requested the  travel industry  come                                                               
back  to the  table with  a long-term  tourism marketing  funding                                                               
growth plan. So, the committee  substitute (CS) would establish a                                                               
tourism  marketing  tax  credit  towards  the  recently  approved                                                               
water's  edge  corporate  cruise  income tax.  This  tax  is  one                                                               
portion of  the state's estimated  tourism revenues  and language                                                               
on page  2, line 2, makes  sure that any other  contributions can                                                               
not be included in this tax  credit. This also does not allow the                                                               
credits to carry over from year to year.                                                                                        
MS.  MARASIGAN said  this tax  is a  very specific  and would  be                                                               
reinvested  to  promote   the  State  of  Alaska   as  a  tourism                                                               
SENATOR  BUNDE asked  if the  fiscal note  for the  original bill                                                               
applied to the CS.                                                                                                              
MS. MARASIGAN answered yes.                                                                                                     
SENATOR BUNDE asked  if the maximum potential  liability would be                                                               
something under $16 million.                                                                                                    
MS. MARASIGAN answered yes.                                                                                                     
SENATOR MEYER  said in his  previous life as co-chair  of Finance                                                               
he worked  with the  Alaska Tourism Association  (ATA) to  find a                                                               
long-term funding  mechanism for  the tourism industry,  and this                                                               
is a  good match. The  dollar amount may  go up as  more tourists                                                               
come in; so he suggested looking at establishing a cap.                                                                         
1:42:26 PM                                                                                                                    
BRETT  CARLSON, Northern  Alaska  Tour Company,  said  he is  the                                                               
volunteer  chair  for  the  Tourism  Marketing  Association,  and                                                               
supported  CSSB 138(L&C).  Tourism plays  a big  part in  Alaskan                                                               
economy  and  has a  record  of  proven economic  development  as                                                               
indicated  in  the  pie  chart.  Last year  it  brought  in  $122                                                               
million.   He  said   the   travel   industry  provides   amazing                                                               
opportunities  for   small  businesses  to  participate   at  the                                                               
ownership  level.  Research  shows  that  the  tourism  marketing                                                               
program works in Alaska as well as around the world.                                                                            
1:45:18 PM                                                                                                                    
Chart  12  shows what  in  1990  inflation-adjusted dollars,  the                                                               
state's contribution  to the tourism  marketing program  was just                                                               
over  $24 million.  Over time,  it  went into  decline and  small                                                               
businesses were hurt the most.  They engaged with the legislature                                                               
on ways  to come  up with a  long-term tourism  marketing funding                                                               
model and the  legislature adamantly said if they come  up with a                                                               
model, those dollars need to  come from travel industry generated                                                               
The first step  was reinvestment of the vehicle  rental tax. That                                                               
is  essentially a  flow of  revenue  coming into  the state  from                                                               
independent travel  and the legislature.  This tax credit  is the                                                               
second  part  of the  solution  -  that  also comes  from  travel                                                               
industry generated taxes.                                                                                                       
MR.  CARLSON said  the economic  crisis is  affecting the  travel                                                               
industry, and this plan will  help the state's ability to balance                                                               
the budget. Travel intention studies  indicate a decline of 30-60                                                               
percent in  bookings for Alaskan  businesses. As you  get further                                                               
away from the  water those numbers become "most  scary." This tax                                                               
credit  is one  more tool  that will  help small  businesses help                                                               
1:48:35 PM                                                                                                                    
SENATOR BUNDE  remarked that  the maximum  project amount  if all                                                               
taxes were  claimed as  credit would  be $15  million and  he has                                                               
heard anecdotally that cruises are  seriously discounted now. How                                                               
low could this go?                                                                                                              
MR. CARLSON  replied that  the tax  credit could  go up  and down                                                               
year to  year. "Next year  we may be  able to determine  what the                                                               
floor on this tax credit is  going to be....One thing about it is                                                               
that tax  credit is  not going to  grow unless  tourism marketing                                                               
1:50:05 PM                                                                                                                    
RON PECK,  President, Alaska Travel Industry  Association (ATIA),                                                               
explained that the most recent  information indicates that cruise                                                               
bookings  are increasing,  but the  yields for  Alaska are  still                                                               
down by 20-30 percent.                                                                                                          
SENATOR THOMAS said the only concern  he has heard is the concept                                                               
that when the cruise  ship head tax was put in  place that it was                                                               
charged back to the customer as  an actual charge of $50 on their                                                               
ticket.  Prior  to  that,  the  cruise  ship  industry  had  been                                                               
contributing a  couple million dollars  to the  tourism marketing                                                               
effort  on an  annual  basis. So,  now they  would  be getting  a                                                               
credit  for the  couple  million they  had  been contributing  on                                                               
their own prior to the implementation of the cruise ship tax.                                                                   
MR.  CARLSON  responded  that  any time  you  increase  taxes  on                                                               
businesses in  Alaska, whether it's  shown to the  customer above                                                               
the  line or  below the  line, it  has to  be passed  on to  them                                                               
because there  is no other  place to get  it from. Last  year the                                                               
legislature moved  away from  that model  to a  new one  based on                                                               
reinvestment of a  portion of travel industry  revenues. It seems                                                               
to  make sense  that both  independent and  cruise travel  have a                                                               
revenue stream.                                                                                                                 
MR. PECK  added if  this bill  is passed,  it would  generate $10                                                               
million to $12  million, and the cruise industry  still buys into                                                               
ATIA programs  in the  amount of  $500,000 to  $600,000 annually.                                                               
Prior to this new plan,  their maximum annual contribution from a                                                               
donation  standpoint  was  $1.9  million  to  $2  million.  Their                                                               
contribution could grow substantially.                                                                                          
1:54:35 PM                                                                                                                    
JOHANNA  BALES,  Deputy  Director, Tax  Division,  Department  of                                                               
Revenue (DOR), added that the  commercial passenger vessel excise                                                               
tax is charged above the  line to passengers. This particular tax                                                               
credit  doesn't  offset  that  tax, but  rather  it  offsets  the                                                               
corporate income tax  that the cruise ships are  required to pay.                                                               
Normally those  types of taxes  get passed  on below the  line to                                                               
the customers in the industry.                                                                                                  
SENATOR THOMAS said that information helps.                                                                                     
1:55:53 PM                                                                                                                    
SENATOR BUNDE  said a few  years ago  he asked the  Department of                                                               
Revenue to  give the legislature  a report  on the net  return to                                                               
the state  by various industries. He  asked if her shop  did that                                                               
MS.  BALES  said  she  remembered   a  report  about  uncollected                                                               
corporate  income tax,  but didn't  recall doing  this particular                                                               
1:56:51 PM                                                                                                                    
DEBORAH KAY,  representing herself, said  she made her  living in                                                               
tourism  for the  last  20  years, and  this  bill  will help  to                                                               
continue the  growth of the  state's tourism industry  because of                                                               
the  marketing  dollars  it  will  have. It  will  allow  her  to                                                               
continue to support herself and her family.                                                                                     
1:57:48 PM                                                                                                                    
ETHAN  TYLER,  CIRI  Alaska  Tourism  Corporation,  said  with  a                                                               
shrinking world-wide  economy, it's more important  than ever for                                                               
Alaskans to have a strong  and competitive presence in the market                                                               
place. He supported SB 138.                                                                                                     
1:58:56 PM                                                                                                                    
DAVID  KASSER, Vice  President of  Tourism, Anchorage  Convention                                                               
and Visitor  Bureau, said he is  also a small business  owner and                                                               
supported SB  138. He  sees a  lot of alarm  and concern  in just                                                               
about every industry. He knows that  Alaska could work to be more                                                               
welcoming to this industry, especially  the cruise industry which                                                               
is being "wooed" globally.                                                                                                      
2:01:18 PM                                                                                                                    
DEB HICKOK, President and CEO,  Fairbanks Convention and Visitors                                                               
Bureau,  supported SB  138. She  said that  entrepreneurialism is                                                               
one of  the hallmarks of  the Alaska visitors'  industry. Tourism                                                               
has  a  ripple effect  throughout  the  communities in  terms  of                                                               
construction, transportation,  and countless other  life benefits                                                               
to our communities.                                                                                                             
She reminded  them that  winter tourism is  promoted by  ATIA and                                                               
she listed some of the  businesses that could benefit. The beauty                                                               
of a  state destination campaign is  that it reaches a  depth and                                                               
breadth of  potential customers that  is far beyond the  reach of                                                               
most small businesses.                                                                                                          
2:04:22 PM                                                                                                                    
MARY RICHARDS,  President, State  Bed and  Breakfast Association,                                                               
Fairbanks, said  the Association  has 211  members, and  they are                                                               
all  small business  owners that  depend  on the  help that  they                                                               
receive through ATIA  for destination marketing. There  is no way                                                               
they, as small  business owners, can market  independently to the                                                               
domestic,  European or  Asian markets.  Passing  this bill  would                                                               
help each of  them to reach a  market and be able  to continue to                                                               
sustain the living  they make. "If tourism ended  tomorrow, a lot                                                               
of us would be in a world of hurt."                                                                                             
2:07:12 PM                                                                                                                    
CHAIR PASKVAN closed public testimony.                                                                                          
SENATOR  BUNDE   pointed  out  that   there  could   possibly  be                                                               
unintended  consequences and  said there  is no  such thing  as a                                                               
free lunch. Businesses have to  worry about their bottom line and                                                               
he wants them  to succeed, but the legislature's job  is to worry                                                               
about the state's  bottom line. The bottom line for  the state is                                                               
that  tourism generates  $25 million  for the  general fund,  but                                                               
with this bill that will  decrease to about $15 million. Everyone                                                               
needs to  be aware  of that,  because in two  or three  years the                                                               
state  would be  hurting for  money. He  was hoping  they weren't                                                               
robbing  Peter to  pay Paul.  This model  is sustainable  only as                                                               
long as the cruise industry stays in Alaska.                                                                                    
2:09:29 PM                                                                                                                    
SENATOR THOMAS  moved to report  CS for  SB 138, version  P, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s). There were no objections and it was so ordered.                                                                        

Document Name Date/Time Subjects
SB 138 Bill Packet.pdf SL&C 3/19/2009 1:30:00 PM
SB 138
SB 149 Bill Packet.pdf SL&C 3/19/2009 1:30:00 PM
SL&C 3/31/2009 1:00:00 PM
SB 149
SB 97 Bill Packet.pdf SL&C 3/19/2009 1:30:00 PM
SB 97