Legislature(2017 - 2018)BARNES 124


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Heard & Held
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Heard & Held
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                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON ARCTIC POLICY,                                                                          
               ECONOMIC DEVELOPMENT, AND TOURISM                                                                              
                       February 27, 2018                                                                                        
                           11:32 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative John Lincoln, Chair                                                                                              
Representative Andy Josephson                                                                                                   
Representative Chris Tuck                                                                                                       
Representative Gary Knopp                                                                                                       
Representative Mark Neuman                                                                                                      
Representative David Talerico                                                                                                   
MEMBERS ABSENT                                                                                                                
Representative Bryce Edgmon                                                                                                     
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Jonathan Kreiss-Tomkins                                                                                          
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 383                                                                                                              
"An Act establishing the Travel Alaska Board; relating to a                                                                     
tourism marketing assessment; and establishing a tourism                                                                        
marketing fund."                                                                                                                
     - HEARD & HELD                                                                                                             
HOUSE JOINT RESOLUTION NO. 33                                                                                                   
Urging  the   Alaska  delegation   in  Congress  to   pursue  the                                                               
establishment  of   an  Arctic  naval  station;   supporting  the                                                               
increase  in defensive  capabilities  in the  Arctic region;  and                                                               
encouraging the development of critical Arctic infrastructure.                                                                  
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 383                                                                                                                  
SHORT TITLE: TOURISM MARKETING:BOARD;ASSESSMENT;FUND                                                                            
SPONSOR(s): REPRESENTATIVE(s) GRENN                                                                                             
02/21/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/21/18       (H)       AET, FIN                                                                                               
02/27/18       (H)       AET AT 11:30 AM BARNES 124                                                                             
BILL: HJR 33                                                                                                                  
SHORT TITLE: DEVELOP ARCTIC INFRASTRUCTURE & DEFENSE                                                                            
SPONSOR(s): REPRESENTATIVE(s) TUCK                                                                                              
02/09/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/18       (H)       AET                                                                                                    
02/27/18       (H)       AET AT 11:30 AM BARNES 124                                                                             
WITNESS REGISTER                                                                                                              
REPRESENTATIVE JASON GRENN                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As prime sponsor, presented HB 383.                                                                      
BROOKE IVY, Staff                                                                                                               
Representative Jason Grenn                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During the hearing of HB 383, answered                                                                   
questions and presented an overview of the legislation on behalf                                                                
of Representative Grenn, prime sponsor.                                                                                         
JOHN LAMBETH, President                                                                                                         
Sacramento, California                                                                                                          
POSITION STATEMENT:  Testified during the hearing on HB 383.                                                                  
SARAH LEONARD, President/CEO                                                                                                    
Alaska Travel Industry Association (ATIA)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided information during the hearing on                                                               
HB 383.                                                                                                                         
COLEEN STEPHENS, Chair                                                                                                          
Alaska Tourism Marketing Board (ATMB);                                                                                          
Co-Chair, Government Relations                                                                                                  
Alaska Travel Industry Association (ATIA)                                                                                       
Valdez, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HB 383.                                                                  
MICHAL LOWE, Intern                                                                                                             
Representative Chris Tuck                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HJR  33   on   behalf   of                                                             
Representative Tuck, prime sponsor.                                                                                             
ACTION NARRATIVE                                                                                                              
11:32:43 AM                                                                                                                   
CHAIR JOHN LINCOLN  called the House Special  Committee on Arctic                                                             
Policy,  Economic Development,  and Tourism  meeting to  order at                                                               
11:32 a.m.  Representatives Lincoln,  Josephson, Tuck, Knopp, and                                                               
Talerico  were present  at  the call  to  order.   Representative                                                               
Neuman arrived as the meeting was in progress.                                                                                  
         HB 383-TOURISM MARKETING:BOARD;ASSESSMENT;FUND                                                                     
11:33:58 AM                                                                                                                   
CHAIR LINCOLN  announced that the  first order of  business would                                                               
be HOUSE  BILL NO.  383, "An Act  establishing the  Travel Alaska                                                               
Board;   relating  to   a  tourism   marketing  assessment;   and                                                               
establishing a tourism marketing fund."                                                                                         
11:34:40 AM                                                                                                                   
REPRESENTATIVE JASON  GRENN, Alaska  State Legislature,  as prime                                                               
sponsor,  presented HB  383.   He  paraphrased  from the  sponsor                                                               
statement,   which   read   as  follows   [original   punctuation                                                               
     House   Bill  383,   the  Travel   Alaska  Act,   is  a                                                                    
     collaboration between the  private tourism industry and                                                                    
     State  of Alaska  in support  of statewide  destination                                                                    
     Based  on a  Tourism Improvement  District (TID)  model                                                                    
     found  in  over  160 jurisdictions  across  the  United                                                                    
     States, House Bill 383 would  establish a Travel Alaska                                                                    
     Board  with  the  authority to  manage  a  new  funding                                                                    
     mechanism  through   which  the  industry   may  assess                                                                    
     themselves to generate revenue.  HB 383 would authorize                                                                    
     the Department  of Revenue to assist  the Travel Alaska                                                                    
     Board  with the  assessment process,  create an  Alaska                                                                    
     tourism marketing  fund, and manage  the capitalization                                                                    
     and expenditures of the fund.                                                                                              
     A  bright  spot  for   Alaska's  economy,  the  tourism                                                                    
     industry is  currently Alaska's second  largest private                                                                    
     sector  employer,  and  research  suggests  that  every                                                                    
     dollar  spent on  tourism marketing  results in  $58 in                                                                    
     visitor spending,  $21 in  income for  local residents,                                                                    
     and $2.84  in state  and local taxes.  Adequate funding                                                                    
     for  effective tourism  marketing  is  critical to  the                                                                    
     continued  health of  the industry  and keeping  Alaska                                                                    
     competitive  among  other   domestic  or  international                                                                    
     Due  to   Alaska's  recent  fiscal   challenges,  state                                                                    
     funding in  support of tourism marketing  in Alaska has                                                                    
     declined  significantly, from  $16 million  in FY14  to                                                                    
     just   $1.5  million   in   FY17.   The  Alaska   State                                                                    
     Legislature  included  intent   language  in  the  FY17                                                                    
     budget  calling on  the tourism  industry  to create  a                                                                    
     self-sustaining program  funded by  tourism businesses,                                                                    
     similar  to  the  Alaska  Seafood  Marketing  Institute                                                                    
     structure. In anticipation of  this shift, the Division                                                                    
     of  Legislative   Audit  has  recommended   the  Alaska                                                                    
     Tourism Marketing Board sunset on June 30, 2018.                                                                           
     Now  more  than ever,  the  State  of Alaska  needs  an                                                                    
     innovative solution to address  the lack of funding for                                                                    
     tourism  marketing.  HB  383 bridges  the  gap  between                                                                    
     tourism businesses  and the  State of  Alaska, offering                                                                    
     enabling  legislation   to  strengthen   the  long-term                                                                    
     sustainability  of  one   of  Alaska's  most  important                                                                    
     I urge your support of House Bill 383.                                                                                     
11:36:48 AM                                                                                                                   
REPRESENTATIVE  GRENN referred  to a  PowerPoint presentation  in                                                               
the committee  packet as he  continued.   He relayed that  HB 383                                                               
serves  as the  tourism industry's  response to  the call  by the                                                               
legislature in  fiscal year 2017 (FY  17) to make the  shift.  He                                                               
said the  funding structure  that would  be established  under HB
383  is based  on  a tourism  improvement  district (TID)  model,                                                               
which is  currently found in  167 jurisdictions  in the U.S.   He                                                               
opined  that  this  model  is  "an  innovative  path  forward  to                                                               
ensuring  the  long-term health  of  this  vital industry."    He                                                               
stated that the tourism industry,  as the second-largest employer                                                               
in  the state,  is "a  bright spot  for Alaska's  economy."   The                                                               
industry  brings  in  $2  billion   in  direct  visitor  spending                                                               
annually  and  represents a  total  economic  impact of  over  $4                                                               
billion  a year.   He  emphasized  the research  by the  McDowell                                                               
Group,  which  suggests  that  every   dollar  spent  on  tourism                                                               
marketing  in  Alaska yields  $58  in  visitor spending,  $21  in                                                               
income for residents, and $2.84 in state and local taxes.                                                                       
REPRESENTATIVE   GRENN  explained   that  adequate   funding  for                                                               
effective tourism  marketing is  critical for  two reasons:   for                                                               
the health of the state's  economy and to keep Alaska competitive                                                               
among other  domestic and international travel  destinations.  He                                                               
said  the proposed  legislation "offers  enabling legislation  to                                                               
strengthen  the   long-term  sustainability   of  one   our  most                                                               
effective  industries, while  bridging  the  gap between  tourism                                                               
businesses and  the state to  address Alaska's  marketing needs."                                                               
He  advised  that  taking  steps to  ensure  a  thriving  tourism                                                               
industry  is  key  to  helping  Alaska end  its  recession.    He                                                               
described  tourism as  "a  renewable resource  that  can only  be                                                               
developed  through marketing."   He  concluded that  "now is  the                                                               
time to build momentum."                                                                                                        
11:39:27 AM                                                                                                                   
REPRESENTATIVE KNOPP  requested information regarding  the makeup                                                               
of the  existing tourism  board and  the rationale  in sunsetting                                                               
that board to create another board.                                                                                             
11:39:47 AM                                                                                                                   
BROOKE  IVY,  Staff,  Representative Jason  Grenn,  Alaska  State                                                               
Legislature,  presented  an  overview  of HB  383  on  behalf  of                                                               
Representative Grenn,  prime sponsor.   She prefaced  her remarks                                                               
by  saying she  may  defer to  the current  chair  of the  Alaska                                                               
Tourism  Marketing  Board (ATMB),  who  was  in  the room.    She                                                               
related that ATMB  was established under Senate  Bill 194 [passed                                                               
in  the  Twenty-Eighth   Alaska  State  Legislature,  2013-2014],                                                               
comprises  21 members,  and  is housed  under  the Department  of                                                               
Commerce, Community & Economic Development  (DCCED).  Eighteen of                                                               
the  21  members are  industry  members,  and three  members  are                                                               
associated   with  the   legislature   and  the   administration.                                                               
Essentially, the board was tasked  to work directly with DCCED to                                                               
enact   the  Alaska's   tourism   marketing   program,  and   she                                                               
recollected that  for a  period of time,  it was  a state-managed                                                               
plan.   On  July 1,  2016,  the plan  was managed  by the  Alaska                                                               
Travel Industry  Association (ATIA),  and ATMB has  been advising                                                               
that independent  association and  the management of  that board.                                                               
She opined  that the recommendation  for the sunset of  the board                                                               
was offered  by the Division  of Legislative Audit, based  on the                                                               
intent language  from FY 17,  previously cited  by Representative                                                               
Grenn, that the tourism industry  should take a more upfront role                                                               
in the funding mechanism.                                                                                                       
REPRESENTATIVE KNOPP questioned why  the current board should not                                                               
be maintained.  He explained that  he is not particularly fond of                                                               
the idea  of putting  the board under  the Department  of Revenue                                                               
(DOR) rather  than leaving it  under DCCED, and he  asked whether                                                               
that was a topic of conversation when crafting HB 383.                                                                          
MS.  IVY said  she could  speak to  why the  proposed legislation                                                               
would house  the board under DOR.   She said discussion  did take                                                               
place about the  board being under DCCED, but  ultimately it came                                                               
down to  streamlining the  process.  She  said the  board largely                                                               
participates  in enacting  an assessment  that  will involve  DOR                                                               
rather  heavily in  terms of  helping to  collect information  on                                                               
gross revenues of  payers, determining the weighted  votes of the                                                               
payers  for  the  election process,  collecting  the  funds,  and                                                               
depositing  those  funds  into a  tourism  marketing  fund  being                                                               
created under HB  383.  The thought was that  there would also be                                                               
determination  of definitions  of  tourism  segments and  tourism                                                               
businesses, and  - considering all  those different  components -                                                               
the  choice was  to have  just  one department  involved, and  it                                                               
would be DOR.                                                                                                                   
11:43:52 AM                                                                                                                   
CHAIR LINCOLN imparted  that members of ATIA  would be presenting                                                               
on HB  383, which  would provide the  opportunity for  members to                                                               
ask questions of them.                                                                                                          
MS.  IVY reviewed  key terms  relevant to  HB 383:   ATIA  is the                                                               
leading  statewide non-profit  membership  trade association  for                                                               
the Alaska tourism  industry with 664 members, and  since July 1,                                                               
2016,  it  has  been  managing the  statewide  tourism  marketing                                                               
program  through  grants from  the  legislature.   The  ATMB  was                                                               
created in  October 2014 and is  set to sunset on  June 30, 2018.                                                               
The TID is  a structure in which the industry  pays an assessment                                                               
that is collected  by government.  Funding is  then allocated for                                                               
tourism promotion. The tourism marketing  efforts are governed by                                                               
and  benefit  those  who  are  assessed, can  be  managed  by  an                                                               
existing industry association, such as  ATIA, and payers can vote                                                               
to adjust  or terminate  an assessment.   She clarified  that the                                                               
key terms used in the  bill language are not official definitions                                                               
but are terms used within the  structure of the bill, as follows:                                                               
"tourism  industry"  represents  the  overall  tourism  industry;                                                               
"tourism  segment" is  a segment  of the  industry that  provides                                                               
similar goods and  services to travelers, such  as hotels, guided                                                               
tours, and so forth; and  "tourism business" means the individual                                                               
businesses that participate in one or more tourism segments.                                                                    
MS.  IVY   walked  through  the   main  concepts  of   the  bill,                                                               
underlining  that  it would  establish  the  Travel Alaska  Board                                                               
under  DOR, with  a range  of 21-25  members serving  a staggered                                                               
three-year  term.     The  voting   members  would  have   to  be                                                               
representatives of  assessed businesses  or payers, which  is the                                                               
foundation of  a TID, and be  members of ATIA.   The board, under                                                               
HB  383, would  be established  by  an election;  and ATIA  would                                                               
serve  to  establish  the board  officially  through  an  initial                                                               
election  and  with  a  vote  on  a  proposed  assessment.    She                                                               
explained that  for board  members to be  payers, the  board must                                                               
know what  the assessment  being proposed is  and who  the payers                                                               
are  in order  to  elect  board members  from  the  payers.   She                                                               
reiterated that  there would  be an  initial election,  and rates                                                               
for the  assessment for each  segment could  vary from zero  to 2                                                               
percent  in .25  percent  increments; different  segments of  the                                                               
tourism industry would  be permitted to be  assessed at different                                                               
rates.   She  advised that  industry payers  would have  weighted                                                               
votes,  and DOR  would help  determine their  vote weight,  which                                                               
would be  based on the  amount they are  projected to pay  in the                                                               
next calendar  year under the  assessment.  For an  assessment to                                                               
pass, be  changed, or  be terminated, it  would need  approval of                                                               
business  representing a  total of  at  least 50  percent of  the                                                               
weighted votes received.                                                                                                        
11:49:50 AM                                                                                                                   
MS. IVY offered  that subsequent to the initial  election, if the                                                               
assessment passes, board  member names would be  forwarded to the                                                               
governor,  at which  point  the governor  may  appoint from  that                                                               
list.  If the  governor choses to reject all or  a portion of the                                                               
list, it would revert to  the transition board, ATIA, which would                                                               
forward additional names, thereby  creating a loop process, which                                                               
has precedent in statute.   Assessments could be levied, changed,                                                               
or terminated  by the  election process  under the  weighted vote                                                               
system; assessments  would automatically  terminate in  six years                                                               
or sunset  on the  date on the  initial voting  ballot, whichever                                                               
comes first.   The  proposed legislation  would create  an Alaska                                                               
Tourism Marketing  Fund for  revenues to be  collected.   Ms. Ivy                                                               
offered that the first four sections  of HB 383 address a Vehicle                                                               
Rental Tax  Fund - an existing  vehicle rental tax -  which would                                                               
allow for  those entities subject  to the vehicle rental  tax the                                                               
opportunity to notify  the department that they  would like their                                                               
vehicle  rental tax  revenues deposited  into the  Alaska Tourism                                                               
Marketing Fund established under HB 383.                                                                                        
11:51:44 AM                                                                                                                   
REPRESENTATIVE  TUCK surmised  that the  existing vehicle  rental                                                               
tax funding would  not be increased for dues for  this board, but                                                               
companies could opt to have their  rental tax be deferred to this                                                               
MS. IVY  confirmed Representative Tuck  was correct.   She stated                                                               
that the intent is not to  include vehicle rental companies in an                                                               
assessment of a  proposal simply because they already  pay a tax.                                                               
She cited AS 43.52.080(c), which read as follows:                                                                               
          (c)  The legislature  may  appropriate the  actual                                                                    
     balance of  the vehicle rental tax  account for tourism                                                                    
     development   and  marketing.   This  section   is  not                                                                    
     intended to create a dedicated fund.                                                                                       
MS. IVY explained  that that was "the designated  intent of those                                                               
funds."  In response to  follow-up questions, she said that under                                                               
HB 383,  there would  be no  maximum on  the vehicle  rental tax;                                                               
[rental agencies]  would have to  be a member of  another tourism                                                               
segment that  was officially being  assessed in order  to qualify                                                               
as a voting  member on the Travel Alaska Board.   She added, "But                                                               
the  bill does  allow  for  non-voting members  -  an ex  officio                                                               
member  -  so, it's  possible  they  could  be involved  in  that                                                               
capacity."   She deferred to the  travel industry representatives                                                               
for further clarification.                                                                                                      
11:54:15 AM                                                                                                                   
REPRESENTATIVE NEUMAN  directed attention to language  on page 6,                                                               
beginning on line  20, which describes when  an assessment "shall                                                               
be levied  on the  gross revenue  of a  tourism business  that is                                                               
related to  an assessed business  segment".  He noted  that there                                                               
were various rates, and he asked how that would work.                                                                           
MS.  IVY answered  that  the  intent is  that  the Travel  Alaska                                                               
Board, in  consultation with ATIA,  would propose  the assessment                                                               
and communicate with  DOR, which would collect  the gross revenue                                                               
information and  help determine  what the rates  would be.   Then                                                               
the Travel Alaska Board would vote  "to pursue an election of the                                                               
11:56:17 AM                                                                                                                   
REPRESENTATIVE  GRENN,  in  response  to  Representative  Neuman,                                                               
clarified that  the board would choose  the fees and vote  on the                                                               
11:56:51 AM                                                                                                                   
REPRESENTATIVE  NEUMAN  asked  how  the board  would  handle  the                                                               
assessments with respective industries.                                                                                         
MS. IVY  directed attention to  a provision within Section  5, on                                                               
page 4, line  8, regarding AS 44.25.235.  She  said this language                                                               
would direct the board to  adopt definitions for both the tourism                                                               
industry  segment  and  tourism  businesses.    The  board  would                                                               
forward those definitions to DOR,  at which point DOR would adopt                                                               
or  reject those  definitions.   She  said the  board would  then                                                               
propose rates for those different segments.                                                                                     
REPRESENTATIVE NEUMAN  asked Ms.  Ivy to  confirm that  the board                                                               
would  set the  rates and  then the  commissioner [of  DOR] would                                                               
either approve  or not approve those  rates.  He asked,  "Do they                                                               
have the authority to do that?"                                                                                                 
MS.  IVY responded,  "At  this time,  the  commissioner of  [DOR]                                                               
would have the authority to help  determine ... whether or not to                                                               
adopt the  definition in the  tourism segments, ... but  it would                                                               
be  industry  that  would  vote  on  the  rates.    And  so,  the                                                               
legislation here, if it passed,  would dictate that the rates can                                                               
fall  between  zero  and  2  percent.    And  yes,  it  would  be                                                               
potentially different for the different segments of the fund."                                                                  
REPRESENTATIVE NEUMAN asked if it was  the intent of the chair to                                                               
move the bill today.                                                                                                            
CHAIR LINCOLN  answered no.   He said  the bill is  a complicated                                                               
one with which  he intended the committee take its  time and "get                                                               
it right."                                                                                                                      
11:59:13 AM                                                                                                                   
CHAIR LINCOLN announced that he would begin invited testimony.                                                                  
11:59:25 AM                                                                                                                   
JOHN  LAMBETH, President,  Civitas, stated  that his  company has                                                               
"worked on most  of the tourism improvement  districts across the                                                               
country."   He  said some  people  ask why  there is  a need  for                                                               
destination marketing  activities; they inquire why  the industry                                                               
cannot "do  this" on its  own.  He  explained that there  are two                                                               
primary compelling reasons why industries  must "get together and                                                               
do this."  He continued:                                                                                                        
     The first  is that the  primary motivator of a  trip is                                                                    
     the experience of  the destination - it's  not a single                                                                    
     business  - and  so,  it behooves  all  of the  tourism                                                                    
     industry across the  state of Alaska to  join forces to                                                                    
     market Alaska.   Second, the  big issue is scale.   Not                                                                    
     one business  alone can market  Alaska; it  takes folks                                                                    
     all getting together.                                                                                                      
MR.  LAMBETH  expressed  his  appreciation  for  the  committee's                                                               
consideration of the proposal that  ATIA has brought forward.  He                                                               
said there  has been a  lot of  debate and discussion  within the                                                               
industry  in response  to the  request of  the industry  to bring                                                               
back a solution for funding of the effort."  He continued:                                                                      
     This is not a new  concept.  The evolution of dedicated                                                                    
     promotion  funding actually  goes  back  to the  1930s.                                                                    
     That's  when the  first  agricultural marketing  orders                                                                    
     were established.   You may  be familiar with  these in                                                                    
     other contexts.   Essentially  it was  industry getting                                                                    
     together, levying an assessment  on the commodities and                                                                    
     using that money  for marketing.  In the  1960s, it was                                                                    
     expanded  to the  idea of  downtown organizations,  and                                                                    
     that  led  to the  birth  of  the very  first  business                                                                    
     improvement district.   There are about  2,000 of these                                                                    
     now across North America, and  you have many of them in                                                                    
     Alaska,  and essentially,  they are  assessing property                                                                    
     owners and providing clean and safe services.                                                                              
     ...  In  the  1990s,  that expanded  into  the  tourism                                                                    
     industry.    It  really  was an  idea  that  was  first                                                                    
     launched in California.   In the first 10  years it got                                                                    
     off to a very slow start,  but after that it has really                                                                    
     mushroomed.     There   are   now   101  districts   in                                                                    
     California.   As  Representative  Grenn mentioned  ...,                                                                    
     there are 167 of these  districts across the U.S. in 14                                                                    
     states,  and  there  are another  11  states  that  are                                                                    
     currently working  on legislation or looking  to pursue                                                                    
     these kinds of districts.                                                                                                  
MR.  LAMBETH  emphasized  that  the embrace  of  the  concept  of                                                               
districts has been  bi-partisan; most people realize  that one in                                                               
nine jobs is  dependent on this industry.   He further emphasized                                                               
that  the  destinations  that  have  adopted  this  concept  have                                                               
experienced  consistent,  stable  funding for  tourism  promotion                                                               
efforts; they don't have to go  back to apply to the general fund                                                               
or compete with other state  priorities that the legislature must                                                               
address.  He  concluded, "It really is a way  for the industry to                                                               
take  this into  their own  hands,  to vote  on it,  and then  to                                                               
manage that very important job of marketing tourism in Alaska."                                                                 
12:03:45 PM                                                                                                                   
REPRESENTATIVE KNOPP  offered his understanding that  Mr. Lambeth                                                               
had said that  101 of the [167] districts are  in California; the                                                               
rest are spread throughout the U.S.                                                                                             
MR. LAMBETH confirmed  that is correct.  He said  the main reason                                                               
for that is  timing, since the initial growth  was in California.                                                               
He predicted that many more would  be seen in other states in the                                                               
next  several years.   In  response to  a follow-up  question, he                                                               
said  some districts  are  statewide,  but it  is  common to  see                                                               
multi-jurisdictional districts  that combine cities  or counties.                                                               
He explained that where the districts  are drawn really has to do                                                               
with the destination that is being promoted.                                                                                    
12:05:49 PM                                                                                                                   
REPRESENTATIVE  TALERICO noted  that under  HB 383,  part of  the                                                               
funding  is  a  tax  credit or  designation,  and  he  questioned                                                               
whether that is a fairly common funding mechanism.                                                                              
MR. LAMBETH  replied that he has  not seen a specific  tax credit                                                               
or diversion  of tax revenue  like that before; however,  he said                                                               
it seems to  make sense as a reasonable  alternative to assessing                                                               
that industry.  He continued:                                                                                                   
     It is  essentially the same  effect as if  you assessed                                                                    
     that  industry  and  used  that  assessment  money  for                                                                    
     marketing  and  weren't  taxing   them.    And  so,  we                                                                    
     certainly  have  seen  trade-offs like  that  in  other                                                                    
     places where  certain industries have come  in and been                                                                    
     assessed, where they  had different tax rates  ....  In                                                                    
     fact,  we saw  that in  California with  vehicle rental                                                                    
12:07:39 PM                                                                                                                   
SARAH LEONARD, President/CEO,  Alaska Travel Industry Association                                                               
(ATIA),  thanked   the  committee   for  hearing  the   bill  and                                                               
Representative   Grenn  for   his   help   in  facilitating   the                                                               
conversation.  She  characterized ATIA as "a  chamber of commerce                                                               
for Alaska's  tourism industry."   She said ATIA is  the contract                                                               
manager  for   the  Alaska  tourism  marketing   program  and  is                                                               
responsible  for  statewide   marketing,  planning,  and  program                                                               
development.    She  said  ATIA  is a  bright  spot  in  Alaska's                                                               
economy,  largely  because of  past  state  investment in  ATIA's                                                               
marketing program.   She said  there has  been a long  history in                                                               
supporting statewide  tourism marketing.   Unfortunately, between                                                               
2014 and 2017,  that state funding has decreased,  resulting in a                                                               
decrease  in  Alaska's  investment in  destination  marketing  of                                                               
approximately 90  percent.  She  said while most  states' support                                                               
of destination  marketing nationally has increased  over the last                                                               
five years,  Alaska is at the  bottom in terms of  state funding,                                                               
just  before Delaware.    She related  that  State of  California                                                               
spent $119 million on tourism marketing in 2017.  She continued:                                                                
     When  you  look  at  total  dollars  spent  in  tourism                                                                    
     marketing  nationally,  Alaska  accounted for  only  .3                                                                    
     percent  of  all  national spending  on  state  tourism                                                                    
     promotion in  2017.   That's down  from 2.5  percent in                                                                    
     2014.    Those  seem  like small  percentages  -  small                                                                    
     numbers -  but what that  means is our market  share is                                                                    
     declining while the industry is growing nationally.                                                                        
     And while  Alaska visitor numbers  have been  growing -                                                                    
     especially in  the cruise  sector ...,  our independent                                                                    
     travel  [sector] is  stagnant.   We're  losing what  we                                                                    
     could  have   been  capturing  with   more  competitive                                                                    
     marketing funding.  ...  That's translating to Alaska's                                                                    
     losing  the  competition  to   other  states  that  are                                                                    
     actively pursuing the traveling public.                                                                                    
MS. LEONARD stated that Alaska  is "a long-haul destination" that                                                               
requires advanced  planning.  She  said, as  Representative Grenn                                                               
mentioned,  today's marketing  efforts  pay  in future  dividends                                                               
through economic impact and return on investment.                                                                               
12:10:20 PM                                                                                                                   
MS.  LEONARD  said ATIA  engaged  with  a research  group  called                                                               
Tourism  Economics  to conduct  an  independent  analysis of  the                                                               
state's  competitiveness   in  terms  of   destination  marketing                                                               
investments  and Alaska's  tourism sector  performance.   Tourism                                                               
Economics  used existing  data from  national and  local sources,                                                               
such as  the McDowell Group,  and reported that Alaska  lost $189                                                               
million  in  visitor spending  between  2012  and 2016,  and  $57                                                               
million in visitor spending in 2016 alone.                                                                                      
MS. LEONARD said the legislature  instructed the tourism industry                                                               
to come up  with a funding solution, and the  industry "took that                                                               
challenge to heart."  She  said that mandate from the legislature                                                               
was a wake-up call for the industry.  She continued:                                                                            
     We took  that mandate from you  and looked at it  as an                                                                    
     opportunity  to  have  some  certainty  around  tourism                                                                    
     promotion dollars  each year  and have  industry manage                                                                    
     the program ... [in] collaborations with the state.                                                                        
MS. LEONARD said ATIA and industry  leaders with ATMB, as well as                                                               
other   stakeholders,   considered   several   possible   funding                                                               
mechanisms  ranging from  flat fees,  a statewide  bed tax,  to a                                                               
state  lottery.   While  considering  the  model, the  parameters                                                               
were, and  continue to  be, that "any  new funding  solution that                                                               
industry would  bring to the table  should not be reliant  on one                                                               
industry  segment  or  funding  source";  revenue  should  "focus                                                               
primarily  on   visitor  activity,  with  the   least  impact  on                                                               
Alaskans";  "an assessment  can be  passed on  to the  customer";                                                               
and,  perhaps most  important, "any  successful plan  would be  a                                                               
package  of this  new revenue  we were  willing to  bring to  the                                                               
table,  potentially  assessing  tourism-related  businesses,  but                                                               
that  we also  wanted a  continued collaboration  with the  state                                                               
through the vehicle rental car tax."   She said the state already                                                               
collects that  tax, and ATIA  thinks that  is in part  because of                                                               
"healthy  marketing  promotion."    She explained  that  ATIA  is                                                               
increasing visitation  to Alaska, and those  visitors are renting                                                               
vehicles,  which results  in more  revenue into  that fund.   She                                                               
said  as  Ms.  Ivy  noted,  intent  language  outlines  that  the                                                               
legislature  may appropriate  the balance  of the  vehicle rental                                                               
tax to tourism development and marketing.                                                                                       
12:12:56 PM                                                                                                                   
COLEEN STEPHENS,  Chair, Alaska  Tourism Marketing  Board (ATMB);                                                               
Co-Chair,   Government   Relations,    Alaska   Travel   Industry                                                               
Association  (ATIA), related  that she  also runs  a family-owned                                                               
business - Stan Stephens Cruises -  so her perspective is both as                                                               
an  industry member  and as  an individual  passionate about  the                                                               
survival of marketing in the industry.                                                                                          
MS. STEPHENS  said since the  idea of  TID was broached  in 2017,                                                               
she  has  worked  with  the industry  and  heard  concerns  about                                                               
equity, costs  to business and how  that cost could be  passed on                                                               
to  customers,  performance  evaluations, and  metrics.    [Some]                                                               
questions  that have  been  addressed  in phase  two  of TID  are                                                               
regarding how much  a business would be  paying, which businesses                                                               
would be included,  how a business could benefit from  a TID, and                                                               
how  the  Travel  Alaska  Board   would  be  selected  and  would                                                               
represent the payers.  Ms. Stephens continued:                                                                                  
     Moving  forward, we're  still continuing  to meet  with                                                                    
     industry.   We have monthly  Q&A sessions to  make sure                                                                    
     they're  up to  date  on  where we  are,  and [we  are]                                                                    
     working with  you all.   We're also working  in one-on-                                                                    
     one  meetings with  many businesses,  as well  as we've                                                                    
     created a  TID work group  that exists as  multiples of                                                                    
     our  board   members,  as  well  as   industry  segment                                                                    
     members, whether  they're members of  ATIA or not.   If                                                                    
     they are  potential payers and  want to  participate in                                                                    
     the conversation, we have opened  the doors for them to                                                                    
     do so.                                                                                                                     
MS. STEPHENS said  that HB 383 is a complex  piece of legislation                                                               
that may not be  perfect.  She said it is  important to know that                                                               
a TID has two stages.   Stage one is the enabling legislation, HB
     Stage  two  is  the  piece  that  falls  on  industry's                                                                    
     shoulders, which  is to  decide the  sector definitions                                                                    
     to move  towards the Department  of Revenue  to approve                                                                    
     and  then   take  that  suggested  assessment   to  the                                                                    
     industry for both approval of  the assessment level and                                                                    
     who  will be  paying, as  well as  the approval  of the                                                                    
     board members,  which would  be representatives  of the                                                                    
     payers.   ... What we're asking  is for you to  give us                                                                    
     the tools  to get to  stage two, which is  the enabling                                                                    
MS. STEPHENS  stated that  as a small  business owner  and likely                                                               
payer  of the  TID, she  is asking  the legislature  "to help  us                                                               
create  that tool  to  really sustain  businesses  in Alaska  and                                                               
industry for Alaska into the future."                                                                                           
MS. STEPHENS, regarding the slide  Representative Grenn had shown                                                               
depicting what one dollar of  investment in marketing can mean to                                                               
Alaska,  said she  would like  to convey  what it  would mean  if                                                               
there was no  marketing in Alaska.  She stated,  "We're at a very                                                               
crucial  point  in time  to  create  that  next generation  of  a                                                               
sustainable  and predictable  tourism  marketing  program."   She                                                               
said  large  corporations  and   large  businesses  invest  money                                                               
because  they "have  the resources  to fill  their assets."   Not                                                               
having a  marketing program will  affect smaller  businesses, she                                                               
said,  and  smaller  communities  that  do  not  have  sufficient                                                               
resources  but  depend  on  the   state  to  entice  people  into                                                               
imagining Alaska  as a travel  destination.  She  concluded, "So,                                                               
we're  looking  forward  ... [to]  continuing  this  process  and                                                               
working with you  guys to help get that  enabling legislation for                                                               
all of us to promote Alaska."                                                                                                   
12:17:35 PM                                                                                                                   
REPRESENTATIVE  TUCK, after  asking  Ms. Leonard  to restate  the                                                               
information  she had  given regarding  the loss  of $57  million,                                                               
said he knows that the  tourism industry has been setting records                                                               
in Alaska,  and he  asked if that  means that  tourism industries                                                               
are also setting records elsewhere.                                                                                             
MS. LEONARD  answered that  it depends on  the destination.   She                                                               
said ATIA  tracks information  on visitors  inbound to  the U.S.,                                                               
which fluctuates depending on what  is happening with the federal                                                               
administration.   She said  there have  been record  numbers, and                                                               
they have been  driven by the cruise partners.   Alaska continues                                                               
to be a popular cruise destination.  She continued:                                                                             
     What we're  focusing on ...  is not only the  volume of                                                                    
     visitors our  cruise partners  are bringing  to Alaska,                                                                    
     ... [but also]  the market share that  Alaska is losing                                                                    
     at a rate compared to our competitors domestically.                                                                        
REPRESENTATIVE TUCK  offered his  understanding that  Ms. Leonard                                                               
was saying that the market share  for cruises in Alaska is rising                                                               
proportionally [higher than] other types of tourism in Alaska.                                                                  
MS. LEONARD  responded that cruise  partners are  bringing bigger                                                               
ships  and increasing  volumes  of visitors  to  Alaska; ATIA  is                                                               
beginning  to see  numbers stagnating  in other  segments of  the                                                               
REPRESENTATIVE TUCK  summarized that Ms. Leonard  was saying that                                                               
"other  than  cruise lines,  you've  seen  other sectors  of  the                                                               
tourism industry suffer."                                                                                                       
MS. LEONARD confirmed that is an accurate statement.                                                                            
REPRESENTATIVE  TUCK asked  if there  are studies  that show  the                                                               
decrease of Alaska's market share over the last several years.                                                                  
MS.  LEONARD  indicated  that  the  numbers  she  had  previously                                                               
shared, regarding  the Alaska's having  lost out on  $189 million                                                               
and $57 million in visitor spending  alone in one year [were from                                                               
a study].   She  reiterated that this  loss has  resulted because                                                               
Alaska is  not kept up  with a  market share competitive  to what                                                               
other destinations are spending in destination marketing.                                                                       
REPRESENTATIVE  TUCK asked  if that  data shows  a state-by-state                                                               
MS. LEONARD said she could  share the full report, which analyzes                                                               
"like  destinations,"  such   as  other  wilderness  destinations                                                               
compared to  Alaska, but it does  not compare all 50  states in a                                                               
state-by-state comparison.                                                                                                      
12:21:46 PM                                                                                                                   
REPRESENTATIVE NEUMAN  asked what the current  vehicle rental car                                                               
tax is and where it goes.                                                                                                       
MS. LEONARD answered  that the current vehicle rental  car tax is                                                               
approximately $10 million and is  expected to grow.  She deferred                                                               
to Ms. Ivy to answer where the funds go.                                                                                        
12:22:14 PM                                                                                                                   
MS.  IVY directed  attention  to  the first  page  of a  two-page                                                               
graph,  which  shows  the  vehicle  rental  tax  that  was  first                                                               
collected in FY 06.  She said at  first some of the funds went to                                                               
the  tourism  marketing  program,  but they  have  also  gone  to                                                               
Department  of   Natural  Resources   (DNR)  and   Department  of                                                               
Transportation  and  Public  Facilities (DOT&PF),  Alaska  Marine                                                               
Highway System (AMHS),  and a small capital grant from  FY 07 for                                                               
the  Chilkat  Indian  Village  Cultural Center.    She  said  the                                                               
sponsor's office reached  out to DOT&PF and DNR  to inquire where                                                               
those  funds  had  gone  in   recent  years.    She  offered  her                                                               
understanding  that  the  funds  to  DOT&PF  were  allocated  for                                                               
maintenance and  operation of highway  and aviation  runways, and                                                               
DNR spent  their resources on personnel  services for maintenance                                                               
and operations of parks in four different regions.                                                                              
12:24:25 PM                                                                                                                   
REPRESENTATIVE  NEUMAN expressed  concern that  there would  be a                                                               
hole  in funding  of DNR  and DOT&PF  when the  money is  instead                                                               
given  to ATIA.   He  offered his  understanding that  there were                                                               
bonds due  for a  parking garage  in Anchorage,  and some  of the                                                               
vehicle rental  tax was being  used to pay  off those bonds.   He                                                               
asked if those bonds had been paid in full.                                                                                     
MS.  IVY said  she would  have to  do some  research to  find the                                                               
answer.  Regarding  current spending of vehicle  tax revenues for                                                               
general government services, she  said the sponsor does recognize                                                               
that [switching  allocation of  vehicle fund  tax to  ATIA] would                                                               
create "somewhat  of a hole in  the general fund."   She deferred                                                               
to the industry  to speak to why it is  important for the vehicle                                                               
rental companies  "to be included  in this."   She noted  that on                                                               
page  16  of  the  Legislative  Finance overview  of  the  FY  19                                                               
governor's request, the vehicle rental  tax was a designated fund                                                               
being used for non-designated purposes,  therefore was flagged as                                                               
a  misuse of  funds.   She said  the previously  mentioned intent                                                               
language  of the  FY  17 budget  emphasized  reduced reliance  on                                                               
unrestricted  general  funds.    She further  noted  that  in  AS                                                               
43.52.080,  the rental  tax  statute, it  is  stated that  "those                                                               
funds   may  be   appropriated   for   tourism  development   and                                                               
12:26:33 PM                                                                                                                   
REPRESENTATIVE NEUMAN said  Alaska is a state  of 730,000 people,                                                               
and that number can swell to 4-5  million in the summer.  He said                                                               
he thinks  the original intent of  the vehicle rental tax  was to                                                               
counteract the  impact of  that influx of  people on  the state's                                                               
infrastructure.   He  added that  the legislature  would have  to                                                               
figure out whether "to swap those funds around."                                                                                
12:27:15 PM                                                                                                                   
REPRESENTATIVE  KNOPP asked  whether taxicabs  and Uber  and Lyft                                                               
vehicles would be part of the vehicle rental tax someday.                                                                       
MS. IVY  responded that  she would have  to investigate  that and                                                               
get back to Representative Knopp with an answer.                                                                                
12:28:22 PM                                                                                                                   
CHAIR LINCOLN asked  if the industry thinks [the  tax] applies to                                                               
MS. STEPHENS  answered that  as far as  the assessment,  she does                                                               
not know  the specifics of  the existing vehicle rental  car tax;                                                               
however, she  said industry has not  specifically identified what                                                               
those segments would be.  She said it is a continuing dialogue.                                                                 
REPRESENTATIVE  KNOPP said  that for  years he  dealt with  Kenai                                                               
Peninsula Tourism Marketing Council  (KPTMC) and has address many                                                               
of the issues  being discussed.  He  said he is glad  to see this                                                               
being brought  forward at  the state level  because trying  to do                                                               
this at the municipal level can  be difficult.  He explained that                                                               
one city enacted  a bed tax for  a short period of  time, and the                                                               
next city advertised that their  prices were cheaper because they                                                               
had no  bed tax.  He  said his decision regarding  the support of                                                               
HB  383 would  depend  on  the feedback  he  hears from  industry                                                               
MS. IVY relayed  that she had found the  answer to Representative                                                               
Knopp's previous question.  She  said AS 43.52.020 identifies the                                                               
rate of the tax  levied as 10 percent of the  total fees and cost                                                               
charged  for  the  lease  or rental  of  the  passenger  vehicle.                                                               
Further  into  that statute,  she  noted,  is the  definition  of                                                               
passenger vehicle, which does not include a taxicab.                                                                            
12:30:11 PM                                                                                                                   
REPRESENTATIVE TUCK asked if there  has been any consideration of                                                               
allowing the cruise ship tax "to  be deferred, as well, into this                                                               
MS.  LEONARD  said that  idea  was  explored  but tabled  due  to                                                               
perceived   challenges  in   "the  federal   commerce  laws   and                                                               
regulations  that apply  to  those type  of  businesses that  are                                                               
subject to interstate travel and  the use of any revenue assessed                                                               
or  taxed to  those  companies and  the  limitations around  that                                                               
use."   She added, "And  it was honestly  too big of  a challenge                                                               
for our  industry to take  on those federal laws  and regulations                                                               
at the  time when  we were  proposing a pretty  new idea  for our                                                               
12:31:40 PM                                                                                                                   
REPRESENTATIVE TUCK asked if  other tourism improvement districts                                                               
do seasonal assessments.                                                                                                        
MS. STEPHENS answered that there  is a variety of equations based                                                               
on  the  districts  and  their  model for  tourism.    Some  have                                                               
"seasonality,"  while  some  have  exemptions for  a  variety  of                                                               
reasons.  She said Mr. Lambeth  has counseled the bill sponsor to                                                               
look at the  individual district and work with  the businesses in                                                               
it to set  up a successful stage  two.  She said HB  383 would be                                                               
the  enabling  legislation  needed  to   get  to  the  stage  two                                                               
conversation  to determine  "who's in,  who's out,  and who's  at                                                               
what level."  She said,  "That becomes that industry assessor pay                                                               
REPRESENTATIVE TUCK  asked for confirmation that  phase two would                                                               
"take the control away from us; you would be determining that."                                                                 
MS.  LEONARD  stated  that the  identification  of  the  business                                                               
segment - the level of assessment  based on the range in the bill                                                               
that the legislature would approve  - is proposed by industry but                                                               
would still  need to be  approved by  DOR, and the  appointees to                                                               
the  board  would  have  to go  through  the  governor  appointee                                                               
process.  She  said it is a collaboration driven  by the needs of                                                               
12:33:42 PM                                                                                                                   
CHAIR  LINCOLN asked  how the  distinction is  made between  "in-                                                               
state visitors to hotels and  vehicle ... rentals and things like                                                               
that, versus tourists."   He said, "A lot of  this is a balancing                                                               
act of governance  between the state government  and industry and                                                               
keeping an eye  out for everyday Alaskans."  He  said he does not                                                               
have a sense of what the volume  is in terms of how many Alaskans                                                               
use  hotels in  Anchorage and  rent  vehicles for  business.   He                                                               
surmised that urban centers that  enjoy business from rural areas                                                               
may have  "a disproportionate amount  of power or  influence with                                                               
MS. STEPHENS  stated, "Our goal  ... was  to look at  things that                                                               
least impact  Alaska travelers."   She said  interstate travelers                                                               
currently pay local  assessments or vehicle rental car  tax.  She                                                               
said, "This would  be a very small percentage added  on to that."                                                               
She  stated, "Our  guidance  ...  is to  write  an exemption  for                                                               
Alaskans, create some equity  challenges in legal interpretation,                                                               
but that would be something we'd have to look more into."                                                                       
12:36:03 PM                                                                                                                   
REPRESENTATIVE  NEUMAN asked  how much  money ATIA  received from                                                               
the state last year and the year before.                                                                                        
MS. LEONARD  answered that in  FY 17, ATIA received  $1.5 million                                                               
from the  state, and  this year  it will  implement a  $3 million                                                               
state  grant,   in  addition  to   what  the  industry   pays  to                                                               
participate in the program.                                                                                                     
REPRESENTATIVE NEUMAN  remarked that  the legislature  was [using                                                               
for comparison]  what the state  was giving the  tourism industry                                                               
out of  its limited  amount of  revenue.  He  said he  thinks the                                                               
intent was  that the tourism  industry fund itself to  the extent                                                               
possible.   He observed that HB  383 would take $10  million from                                                               
vehicle rental  tax currently being  collected to help  cover the                                                               
impact of  millions of extra  tourists coming  to the state.   He                                                               
     ATIA, well  it's a nice  plan to just say,  "Well, give                                                                    
     me $10  million of that  and now we'll get  $10 million                                                                    
     from  the start  when we  were getting  like one  and a                                                                    
     half or  two ...."   I wish we  could afford to  try to                                                                    
     get you  $10 million,  but ... I  don't think  that the                                                                    
     state can,  because ... [there]  are a lot of  needs in                                                                    
     the state  right now,  and I don't  think that  was the                                                                    
     original  intent  that  we  were  asking  the  industry                                                                    
12:38:05 PM                                                                                                                   
MS. LEONARD  responded that she  thinks the industry  would argue                                                               
that the vehicle  rental car tax is part of  the visitor industry                                                               
and the  industry is contributing to  that fund, and there  is an                                                               
economic return  from a healthy  visitor industry.  She  said the                                                               
industry brings visitors to the  state that utilize the resources                                                               
and  infrastructure also  utilized by  Alaska residents,  and the                                                               
economic  return from  a  healthy visitor  industry  is shown  in                                                               
healthy  businesses,  the  ability  to  hire  Alaskans,  and  the                                                               
ability to  support locally that  infrastructure need.   She said                                                               
it  is a  priority of  the industry  to maintain  a collaboration                                                               
with the state.  She said,  "We think that state should have some                                                               
skin  in  the game.    ...  It is  an  important  and, we  think,                                                               
reasonable investment,  just like in other  industries, to market                                                               
your industry  and your businesses,  so that you can  continue to                                                               
provide  those  economic  returns  at the  local  and  ...  state                                                               
REPRESENTATIVE  NEUMAN  said  he   does  appreciate  the  tourism                                                               
industry  but  thinks about  the  state  parks that  cannot  even                                                               
afford to take care of garbage.  He continued:                                                                                  
     I  think  that  that  was the  intent  to  support  the                                                                    
     industry     through     infrastructure,    ...     the                                                                    
     infrastructure  that  is   the  state's  responsibility                                                                    
     through highways  and roads and  ferries and  parks and                                                                    
     those types of programs.                                                                                                   
REPRESENTATIVE  NEUMAN  said  it  is  obvious  that  the  tourism                                                               
industry does  a lot for  Alaska, but he  knows there has  been a                                                               
reduction of  state money to  other industries, for  example, the                                                               
seafood industry.  The state can afford only so much, he said.                                                                  
12:40:12 PM                                                                                                                   
REPRESENTATIVE TUCK asked  Ms. Leonard if she  could not envision                                                               
the  industry  "doing  this  on  their  own"  without  government                                                               
MS. LEONARD  answered that the  priority of the industry  is that                                                               
it needs a  partnership with the state at some  level through the                                                               
vehicle rental car tax.                                                                                                         
REPRESENTATIVE  TUCK stated,  "It's really  difficult to  see the                                                               
return on investment  on this, and I think that's  the reason why                                                               
we've put intent languages in; that's  the reason why you see ...                                                               
some of  the declines."  He  asked if the reason  the industry is                                                               
coming to  the legislature  with HB 383  is because  the industry                                                               
has tried but "can't get it together."                                                                                          
MS. LEONARD  answered that part  of the reason for  the framework                                                               
and  this  proposed  legislation   is  that  "through  government                                                               
collection there implies some fairness  and equity among whatever                                                               
business sectors are  potentially being assessed."   She said the                                                               
state  is already  set  up to  have those  fees  collected.   She                                                               
     Through  a private  industry association,  it would  be                                                                    
     based on voluntary contributions  and agreements.  With                                                                    
     the  state framework,  and then  collaboration, ...  we                                                                    
     are  asking government  to help  us, so  that there  is                                                                    
     some  fairness and  equity  and  transparency with  the                                                                    
     state system.                                                                                                              
12:41:55 PM                                                                                                                   
MS.  STEPHENS added  that  the other  piece  that the  assessment                                                               
model offers is  predictability.  She said it  can be challenging                                                               
not knowing  [the funding  source], which  is what  happened this                                                               
past year when the budget cycle was implemented later.                                                                          
12:42:53 PM                                                                                                                   
CHAIR LINCOLN  summarized that the  industry is asking  the state                                                               
to delegate its  taxing authority to the industry,  such that the                                                               
industry can  levy an assessment and  "compel broad participation                                                               
in the assessment and the marketing."   It is also asking for the                                                               
vehicle rental tax  to be an automatic part of  that funding.  He                                                               
surmised  that the  need for  state  participation in  HB 383  is                                                               
MS.  LEONARD opined  that Chair  Lincoln's  summary captures  the                                                               
partnership being asked of the legislature by the industry.                                                                     
12:43:42 PM                                                                                                                   
REPRESENTATIVE KNOPP said the industry  is asking the legislature                                                               
to  allow the  industry  to "define  the  participants in  this,"                                                               
which  he said  he  thinks is  "a slippery  slope."   He  offered                                                               
     So, the  cruise line  industry, because of  the federal                                                                    
     legislation, may  not allow  you to  go that  path, but                                                                    
     what about the hotels and lodges?   ... If, in fact ...                                                                    
     they are exempt, as well,  as part of the organization,                                                                    
     then it puts  an undue burden on all  those other ones.                                                                    
     ...  And then  I think  about all  the stores  that are                                                                    
     selling  retail  gift  items  -  part  of  the  tourist                                                                    
     industry -  we have a  separate sales  tax.  ...  I say                                                                    
     that,  because   that  goes  to   my  point   of  being                                                                    
     undefined.   I'm pretty skeptical  of that.  If  it was                                                                    
     brought to us  with specifics, I'm much  better at that                                                                    
12:44:52 PM                                                                                                                   
MS. STEPHENS said  she understands, and she  thinks businesses in                                                               
Alaska "have some of that same hesitation."  She continued:                                                                     
     What we're  asking for  is to  be able  to get  to that                                                                    
     second stage  of conversation.  Preliminarily,  we have                                                                    
     had  conversations  with  hoteliers.   We've  had  some                                                                    
     regions of Alaska discuss retail.   We've ... looked at                                                                    
     tourism  attractions.   We've  looked at  all of  those                                                                    
     options,  and  what  we've learned  is  that  in  every                                                                    
     region in  Alaska there's  a complexity  to that.   ...                                                                    
     So, that's  why you  don't see  those specifics  in the                                                                    
     legislation; it's  up to  us as  an industry,  at stage                                                                    
     two, to  find that  correct equation  to put  forward a                                                                    
     successful vote.   And the  onus is  on us to  do that,                                                                    
     otherwise we ... don't have the additional funding for                                                                     
        the program.  ... So, I think you will find the                                                                         
     passion from the industry to get to that level.                                                                            
REPRESENTATIVE  KNOPP said  the problem  is that  the legislative                                                               
process has been taken out of "step two."                                                                                       
12:46:20 PM                                                                                                                   
REPRESENTATIVE   TUCK  said   an  often-heard   remark  is   that                                                               
government is  not the solution but  is the problem.   He said he                                                               
thinks  in  this  situation,  government is  the  solution.    He                                                               
explained that although he knows  that the industry has a problem                                                               
with the government imposing regulations  and getting involved in                                                               
taxation, "this is a perfect  example where government can be the                                                               
MS.  LEONARD  expressed  appreciation  for the  comment  made  by                                                               
Representative Tuck, because she said  the industry is sincere in                                                               
its effort to collaborate with the state.                                                                                       
MS.  STEPHENS  said currently  there  is  just over  $11  million                                                               
coming from the  vehicle rental car tax, and the  goal is to grow                                                               
that number, as  well as other contributions to  the state, which                                                               
are  currently at  approximately  $110 million.   She  concluded,                                                               
"And  as  we  continue  to  grow  our  industry  with  successful                                                               
marketing, we hope to be a  positive influence on that growth, as                                                               
[HB 383 was held over.]                                                                                                         
         HJR 33-DEVELOP ARCTIC INFRASTRUCTURE & DEFENSE                                                                     
12:47:54 PM                                                                                                                   
CHAIR LINCOLN  announced that the  final order of  business would                                                               
be HJR  33, Urging  the Alaska delegation  in Congress  to pursue                                                               
the  establishment of  a  U.S.  Coast Guard  port  in the  Arctic                                                               
region; supporting the increase  in defensive capabilities in the                                                               
Arctic  region;  and  encouraging  the  development  of  critical                                                               
Arctic infrastructure.                                                                                                          
CHAIR LINCOLN stated  his intent to bring before  the committee a                                                               
committee substitute.                                                                                                           
12:48:21 PM                                                                                                                   
REPRESENTATIVE  TUCK  moved  to   adopt  the  proposed  committee                                                               
substitute  (CS)  for  HJR   33,  Version  30-LS1350\D,  Radford,                                                               
2/14/18, as a working document.                                                                                                 
CHAIR LINCOLN objected for purposes of discussion.                                                                              
12:48:56 PM                                                                                                                   
The committee took an at-ease from 12:49 p.m. to 12:51 p.m.                                                                     
12:51:04 PM                                                                                                                   
MICHAL  LOWE, Intern,  Representative  Chris  Tuck, Alaska  State                                                               
Legislature, presented  HJR 33 on behalf  of Representative Tuck,                                                               
prime sponsor.   He outlined the changes made in  Version D:  [On                                                               
page 1,  line 1,  "Arctic naval station"]  was changed  to ["U.S.                                                               
Coast Guard  port in the  Arctic region"];  and [on page  2, line                                                               
30, "naval  station"] was changed  to ["Coast Guard  port capable                                                               
of supporting naval contingency operations"].                                                                                   
12:52:23 PM                                                                                                                   
CHAIR  LINCOLN  removed his  objection  to  the motion  to  adopt                                                               
Version  D.   There being  no  further objection,  Version D  was                                                               
before the committee.                                                                                                           
12:53:02 PM                                                                                                                   
REPRESENTATIVE TUCK expressed appreciation  for the work Mr. Lowe                                                               
had done as his intern.                                                                                                         
12:53:15 PM                                                                                                                   
MR.  LOWE  spoke to  the  importance  of resolutions  as  talking                                                               
points to highlight what a  state wants.  He said bi-partisanship                                                               
and unanimity  are important in  showing "the intent  of Alaska."                                                               
He began a  PowerPoint presentation, and drew  attention to slide                                                               
2, which  covered the purpose  and scope of the  presentation and                                                               
offered the following bullet points:                                                                                            
        • Introduce HJR 33 to AET Committee                                                                                     
        • Cover evolving situation in the Arctic                                                                                
        • Provide primary sources and relevant information                                                                      
          to support claims                                                                                                     
        • Discuss benefits of port to the state                                                                                 
        • Major challenges impeding implementation                                                                              
MR. LOWE said  the next few slides are overlays  he acquired from                                                               
the Internet.  He said receding  polar sea ice has opened new sea                                                               
lanes for  vessels, which reduces  intercontinental routes  by as                                                               
much as  5,000 miles.   He  said, "The basis  for the  U.S. Coast                                                               
Guard port  stems from the opening  of sea lanes in  the Arctic."                                                               
He said one route  that is important is shown in  lime green on a                                                               
map on slide 3, and it is right above Russia.                                                                                   
12:57:39 PM                                                                                                                   
MR. LOWE directed  attention to slide 4, which  shows mineral and                                                               
economic potential of  the Arctic.  He said the  U.S. conducted a                                                               
survey  in 2008  which  showed  that 13  percent  of the  world's                                                               
undiscoverable  oil and  30 percent  of the  world's natural  gas                                                               
lies in  the circumpolar  Arctic.   This potential  is attracting                                                               
interest from  other nations; Russia  has the most land  north of                                                               
the Arctic  circle, and much of  its economy lies in  the Arctic.                                                               
He  said Russia  already  gets approximately  20  percent of  its                                                               
gross  domestic  product  (GDP)  from   the  Arctic.    China  is                                                               
involved, as well, and he said he would talk about that later.                                                                  
MR. LOWE  turned to slide 5,  which shows an overlay  of military                                                               
facilities in  the Arctic, and he  pointed out that the  U.S. has                                                               
none.   In contrast,  Russia has  about 20  [military] facilities                                                               
lining the northern  sea route.  He said it  is clear that Russia                                                               
regards this sea route as "a  very important route in the future"                                                               
and wants  to ensure its  presence there.   Mr. Lowe  opined that                                                               
[the U.S.] should have a presence there as well.                                                                                
1:00:22 PM                                                                                                                    
MR. LOWE  showed slide  6, which  depicts China's  involvement in                                                               
the  Arctic.   He  said  China  has  written its  Arctic  policy,                                                               
declares  itself a  "near-Arctic  state," and  seeks  to build  a                                                               
"polar silk  road."  He said  China has built an  ice breaker and                                                               
desires to  "regulate and manage  affairs of the Arctic."   China                                                               
has joined forces with Russia,  he said.  Further, China recently                                                               
filed for permanent observer status  in the Arctic Council, which                                                               
it was  granted.  Mr. Lowe  stated that China sees  the potential                                                               
of the Arctic.                                                                                                                  
MR.  LOWE directed  attention  to slide  7,  which addresses  the                                                               
National  Defense   Strategy  [of   the  U.S.],   which  replaces                                                               
terrorism with  nation-state strategic  competition as  a primary                                                               
concern.    He  said  reading   this  document  is  important  in                                                               
understanding  the  shift  happening  in  the  nation's  military                                                               
strategy  and   the  need  for   facilities  and   investment  in                                                               
infrastructure to shift, as well.                                                                                               
MR.  LOWE, showing  slide 8,  stated that  federal investment  is                                                               
good for Alaska's economy, and a  U.S. Coast Guard base would add                                                               
to that  and provide  not only initial  stimulus but  would boost                                                               
the  economy  over time.    He  mentioned Joint  Base  Elmendorf-                                                               
Richardson  (JBER)  is  one  of  the  reasons  Anchorage  is  the                                                               
population hub  of Alaska; the  military requires a  diverse work                                                               
force;  and the  base is  an  economy within  itself.   Directing                                                               
attention to  slide 9, Mr. Lowe  talked about the mission  of the                                                               
Department of  Military &  Veterans' Affairs  (DMVA).   He talked                                                               
about  The  Adjutant  Generals   (TAG)   vision  for  DMVA.    He                                                               
indicated  a [Venn  diagram] on  the slide,  which shows  "Viable                                                               
Arctic  Strategy,"  "Engagement  with  Alaska  Communities,"  and                                                               
"Emergency   Management   Capacity,"  with   "Rural   Engagement"                                                               
connecting them  all.  He said  the U.S. Coast Guard  does search                                                               
and  rescue,  and the  station  closest  [to  the Arctic]  is  in                                                               
Kodiak, Alaska.   He  said with  an increase  of oil  tankers and                                                               
cruise ships  through the  Arctic sea  lane, if  one were  to get                                                               
stranded, it  may be Canada  that would  have to help,  because a                                                               
U.S. Coast Guard  vessel would not be able to  get there in time.                                                               
In  other words,  he said,  U.S. capabilities  in the  Arctic are                                                               
1:05:23 PM                                                                                                                    
MR.  LOWE turned  to slide  10, and  he stated  that the  primary                                                               
challenge is get the U.S., as a  whole, to embrace its role as an                                                               
Arctic  nation.   Alaska  is the  reason the  U.S.  is an  Arctic                                                               
nation, but  the rest of the  country does not have  that fact in                                                               
its  consciousness or  realize the  importance of  protecting the                                                               
nation's interest in the region  and providing emergency response                                                               
capabilities  to the  region.   He said  there are  extended time                                                               
horizons for  construction in the  region because of  the extreme                                                               
weather.   He said the  U.S. is behind  in its investment  in the                                                               
Arctic, and  he opined that  the nation  should invest soon.   He                                                               
said there are  so many threats that face the  nation that it can                                                               
be  difficult to  bring attention  to  the Arctic,  but Mr.  Lowe                                                               
stated, "I still think we should try."                                                                                          
MR. LOWE showed  slide 11, which recapped the  PowerPoint and the                                                               
following ideas  that had  been covered:   the  evolving tensions                                                               
and rising  opportunities in the  Arctic; primary  documents from                                                               
federal agencies;  and benefits to  the state economy as  well as                                                               
to the state military missions.                                                                                                 
1:07:32 PM                                                                                                                    
REPRESENTATIVE  KNOPP offered  his  understanding  that the  U.S.                                                               
Coast Guard  had, for the  last few years, maintained  a seasonal                                                               
station in Nome, Alaska.                                                                                                        
MR.  LOWE confirmed  that that  station  has been  seasonal.   He                                                               
explained that  HJR 33  proposes a  permanent deep-water  port in                                                               
Nome, with infrastructure development.                                                                                          
1:08:27 PM                                                                                                                    
CHAIR LINCOLN  asked Mr. Lowe if  he has an opinion  regarding an                                                               
ideal location for an [Arctic] port in Alaska.                                                                                  
MR.  LOWE answered  he  does  not.   He  said  Nome has  graphite                                                               
development; he mentioned the Chinese  and a natural gas pipeline                                                               
and  streaming  the natural  gas  there  instead of  to  Nikiski,                                                               
Alaska; and  development of a  U.S. Coast  Guard base there.   He                                                               
added that he was not advocating the  idea, but it was one he had                                                               
heard  that  would  give  a  deep-water  port  in  Nome  multiple                                                               
1:09:36 PM                                                                                                                    
REPRESENTATIVE TUCK, as  prime sponsor of HJR  33, commented that                                                               
the United  States would not  be an Artic nation  without Alaska.                                                               
He   said  that   even  though   the   federal  government   owns                                                               
approximately  60 percent  of Alaska  and gives  Alaska a  lot of                                                               
federal  money, he  thinks the  federal government  overlooks the                                                               
economic  potential  of  the  Arctic,   as  well  as  overlooking                                                               
national  security  needs.    He  noted that  there  had  been  a                                                               
presentation  to  the House  Special  Committee  on Military  and                                                               
Veterans' Affairs by a retired  U.S. Coast Guard member regarding                                                               
the history  of the Coast Guard.   He opined that  it makes sense                                                               
to have a base "up here."   He said the guard had revenue cutters                                                               
that  were  small, two-sail  ships  that  collected revenue  from                                                               
merchant  ships.   Eventually that  became the  U.S. Coast  Guard                                                               
that  exists today  in Alaska.   He  said the  guard has  brought                                                               
reindeer to people  starving on islands; it  has brought building                                                               
supplies and  built infrastructure.   He said  it makes  sense to                                                               
have a  U.S. Coast Guard  base [in Nome]  so that "we  can police                                                               
our waters."                                                                                                                    
1:11:40 PM                                                                                                                    
REPRESENTATIVE NEUMAN talked about  the tremendous amount of work                                                               
that was  put into  the Alaska Arctic  Policy Commission  and his                                                               
work on this  issue, and he emphasized that there  is a strategic                                                               
plan  laid out  within  the commission  regarding development  of                                                               
infrastructure, including telecommunications,  what resources are                                                               
available,  and how  they  can  be marketed  and  developed.   He                                                               
encouraged  the  committee  to  look   at  the  findings  of  the                                                               
commission.  He concluded, "There is a plan for this set out."                                                                  
1:12:38 PM                                                                                                                    
CHAIR LINCOLN announced that HJR 33 was held over.                                                                              
1:12:58 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Special  Committee On  Arctic Policy,  Economic Development,  and                                                               
Tourism meeting was adjourned at 1:13 p.m.                                                                                      

Document Name Date/Time Subjects
HB383 ver O -- 2.23.18.PDF HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Sectional Analysis ver O -- 2.23.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Sponsor Statement -- 2.23.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Supporting Document - ATIA Frequently Asked Questions -- 2.23.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Supporting Document - ATIA TID Handout -- 2.23.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Supporting Document - Legislative Audit Report on ATMB -- 2.23.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HJR033 ver A -- 2.15.18.PDF HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Draft Proposed CS ver D -- 2.15.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Sponsor Statement -- 2.15.2018.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Supporting Document 1 -- 2.15.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Supporting Document 2 -- 2.15.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Additional Document - NDS 2018 -- 2.15.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Additional Document -China Arctic Policy -- 2.14.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HJR033 Additional Document - USGS -- 2.15.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33
HB383 Fiscal Note DOR-TAX -- 2.26.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Supporting Document - Letters of Support -- 2.26.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HB383 Supporting Document - Tourism Marketing Fund History - REV -- 2.26.18.pdf HAET 2/27/2018 11:30:00 AM
HB 383
HJR033 PowerPoint Presentation -- 2.26.18.pdf HAET 2/27/2018 11:30:00 AM
HJR 33