Legislature(2009 - 2010)BARNES 124
02/05/2009 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Office of Economic Development, Department of Commerce, Community & Economic Development | |
| Alaska Seafood Marketing Institute | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 5, 2009
8:02 a.m.
MEMBERS PRESENT
Representative Bob Herron, Co-Chair
Representative Cathy Engstrom Munoz, Co-Chair
Representative Charisse Millett
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
Representative John Harris
Representative Wes Keller
COMMITTEE CALENDAR
OVERVIEW(S): OFFICE OF ECONOMIC DEVELOPMENT, DEPARTMENT OF
COMMERCE, COMMUNITY, & ECONOMIC DEVELOPMENT; ALASKA SEAFOOD
MARKETING INSTITUTE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOE AUSTERMAN, Manager
Anchorage Office
Office of Economic Development (OED)
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the Office of
Economic Development.
CARYL MCCONKIE, Tourism Development Manager
Juneau Office
Office of Economic Development
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: During overview of OED, answered questions.
RAY RIUTTA, Executive Director
Alaska Seafood Marketing Institute (ASMI)
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Provided an overview of ASMI.
ACTION NARRATIVE
8:02:04 AM
CO-CHAIR BOB HERRON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:02 a.m.
Representatives Herron, Munoz, and Gardner were present at the
call to order. Representatives Millet and Cissna arrived as the
meeting was in progress.
^Overview(s): Office of Economic Development, Department of
Commerce, Community & Economic Development
8:02:33 AM
CO-CHAIR HERRON announced that the first order of business would
be an overview of the Office of Economic Development, Department
of Commerce, Community & Economic Development (DCCED).
8:03:00 AM
JOE AUSTERMAN, Manager, Anchorage Office, Office of Economic
Development (OED), Department of Commerce, Community, & Economic
Development, explained that he hopes this presentation will
provide the committee with a better understanding of the work
OED is doing on behalf of Alaskans. Mr. Austerman related that
the formal mission of OED is to promote and advocate for the
industries of film, minerals, tourism, commercial fisheries,
forestry, and small business development. However, internally
that [mission] has been broadened to be for the benefit of all
Alaskans. The OED has a unique position in state government as
it serves as a conduit between industry and government offices.
8:05:34 AM
CO-CHAIR HERRON inquired as to the situation prior to 2004 when
OED was established.
MR. AUSTERMAN related that prior to [2004] there was an entire
department of economic development, and reminded the committee
that several years ago the Department of Economic Development
and the Department of Commerce were merged. Essentially, OED is
what's left of the former Department of Economic Development, he
said. He then opined that OED, although it's one of the
smallest divisions, has one of the largest missions.
8:06:31 AM
MR. AUSTERMAN, returning to his overview, highlighted that OED
has a focused tool set as economic development covers an
extremely broad spectrum. The OED has industry specialists that
are focused on developing specific aspects of Alaska's economy.
The OED is very actively involved in the analysis of Alaska's
economy and its development. Mr. Austerman then highlighted
that OED serves as a resource as illustrated in the
organizational chart entitled "OED: WHO WE ARE." At this point,
OED has a staff of 17 with which it produces information in the
form of reports such as the "Alaska Economic Performance Report
and Net Rate of Return." The aforementioned report offers a
snapshot of the health and well being of the state's industries,
including oil and gas. Although OED doesn't have an emphasis of
developing oil and gas, the Department of Natural Resources
(DNR) has meet with OED regarding its model. He noted that the
aforementioned report also includes the Net Rate of Return which
provides analysis of the impact of industry, specifically on a
general fund perspective. He reviewed other reports that OED
publishes, including the Film Office annual report that will be
available in a couple of weeks. Mr. Austerman related that OED
has become a focal point for information gathering, which is a
role that Commerce hasn't historically played very often.
However, it's a great fit for OED. He noted that last year an
economic analysis component was added. Within OED, it has
become apparent that Alaska is lacking in timely information,
which he attributed to the lack of administrative mechanisms in
Alaska. Alaska doesn't have an income tax or a sales tax, which
are mechanisms that other states use to gather reliable economic
data quickly. Therefore, OED is working with other
organizations to gather data since there isn't a central
warehouse of information, which is an initiative that OED is
working on currently. The OED is working to broaden its
economic expertise and analysis capabilities largely for the
benefit of the legislature.
8:12:39 AM
MR. AUSTERMAN then turned to tourism and relayed that the
economic indicators predict that there's going to be a severe
drop in tourism this summer. He informed the committee that OED
put together an analysis regarding how in-state marketing money
might impact Alaska. The aforementioned was prepared in about a
week and was provided to legislators who are interested [in the
use of in-state marketing funds].
8:13:24 AM
REPRESENTATIVE GARDNER recalled that last year the legislature
changed the funding formula for the Alaska Travel Industry
Association (ATIA) and provided for a state match. She inquired
as to how the aforementioned has changed the fundraising for
ATIA and how it looks for the coming year.
MR. AUSTERMAN said that OED, which has a large tourism
component, administers that contract. Last year the cruise
industry, which was a large component of ATIA's matching
component, pulled out as a result of the cruise head tax.
Therefore, ATIA has lobbied and petitioned for a change in the
state's matching funds such that ATIA would produce 30 percent
of its overall budget and the state would match 70 percent. He
clarified that it's an independent contract that OED merely
administers and thus ATIA lobbies on its own behalf.
8:15:33 AM
CARYL MCCONKIE, Tourism Development Manager, Juneau Office,
Office of Economic Development, Department of Commerce,
Community, & Economic Development, specified that she, along
with Mr. Austerman, manages the tourism marketing contract with
ATIA. In response to Representative Gardner, Ms. McConkie
informed the committee that last year ATIA would've raised close
to $5 million. However, early on in the legislative session the
anticipation was that there would be difficulty in meeting the
match. The official end of the year match was $4.2 million to
match the state's appropriation. She explained that last year
there was a decrement in the supplemental budget. This year
ATIA is on target to raise $2.7 million, which will allow access
to the state's appropriation of $9 million. The legislation
changing the match that passed last year had a three-year life
span. Therefore, if the appropriation stays the same, she said
she anticipated that ATIA will raise $2.7 million in 2010.
8:18:00 AM
REPRESENTATIVE CISSNA expressed concern with including the
independent traveler in tourism efforts. She then inquired as
to whether Alaska is comparing itself to other states in terms
of the [ATIA] arrangement and making assessments regarding how
the state can help the industry while providing good oversight.
MS. MCCONKIE noted that she worked [in this field] in another
state and is well aware that every state studies the funding
source of other states. About 10 years ago Alaska was quite
behind in [tourism] spending as compared to other states, and
thus the intent with the change was to increase spending. With
respect to the independent traveler, the current model directs
the marketing organization to do a broad marketing program, an
image campaign, which creates awareness of Alaska as a desirable
destination. In fiscal years 2007-2008, independent traveler
grants were used to target independent travelers, but there
wasn't a move in the market as a result of the aforementioned
campaign. However, it's difficult to measure the full effects
of a campaign so immediately. Furthermore, the economic
environment has an impact. Although there is room for some
focused efforts, the primary directive of ATIA is a broad
marketing campaign.
8:23:50 AM
CO-CHAIR MUNOZ inquired as to whether there's a strategy to
target the yacht sector of the tourism market.
MS. MCCONKIE related that OED has a Developing Alaska Rural
Tourism Program with the communities of Petersburg, Wrangell,
and Coffman Cove. The OED staff working with that program felt
the yacht sector has some real potential. While OED doesn't
work with ATIA on that particular issue, OED does work with it
through development programs. The way the various segments of
the market are targeted is primarily through public relations
and press releases. To reach each specific segment would
diminish the ability to send out a broad message. Therefore,
it's nearly impossible to target each specific product in the
different regions. She relayed that typically it's the state's
role to bring everyone in while it's the region's role to
develop the products and bring people to the area. Ms. McConkie
highlighted that OED works with a number of rural communities
through a federal grant and it's a state/federal partnership.
8:26:59 AM
CO-CHAIR HERRON asked if the $2.7 million industry match is
historically high, low, or about the same.
MS. MCCONKIE related that in the early 1990s there was an
infusion of marketing funding, which was likely the high period.
In comparison to states such as Colorado, [Alaska's state
contribution to tourism] is on the lower scale. She pointed out
that Hawaii is identified as a competitor of Alaska because
Hawaii and Alaska are often competing with international
destinations. She pointed out that in most states tourism
funding is on the line.
8:28:48 AM
REPRESENTATIVE MILLETT related her assumption that the cruise
ships are doing their own marketing campaigns.
MS. MCCONKIE replied yes, and clarified that they've always done
their own marketing. She recalled hearing that the cruise ships
have spent $70 million or more collectively on marketing.
Therefore, they aren't dependent on the state's marketing.
REPRESENTATIVE MILLETT asked if ATIA coordinates with cruise
ship destination marketing in order to avoid overlapping or
duplicate marketing efforts.
MS. MCCONKIE responded that she didn't believe there is any
coordination. In fact, ATIA and the cruise ship campaigns are
distinct and separate from each other. The primary coordination
has been that there are two-three members of the board from the
cruise industry who sit on the board of directors as well as
participate in the marketing committee. However, ATIA doesn't
market directly to the cruise industry, which returns to the
broad brush campaign. Ms. McConkie opined that it's inevitable
that the same visitors are being reached through advertising in
the same publication.
8:32:07 AM
CO-CHAIR HERRON inquired as to how Alaska can take advantage of
Governor Palin's celebrity status to encourage visitors to
Alaska.
8:33:15 AM
MR. AUSTERMAN highlighted that one of OED's roles is to
compliment ATIA. He further highlighted that OED doesn't manage
marketing budgets but rather programs such as the Developing
Alaska Rural Tourism (DART) project, the Tourism Mentorship
Assistance Program, and the Alaska Visitor Statistics Program.
The DART project is a partnership between OED and U.S. Economic
Development Administration (EDA) that has been going on for a
couple of program cycles. He said that a well known result of
the DART program is the Chevak bird watcher. Mr. Austerman
related that tourism is the low lying fruit to diversify
Alaska's economy and the state is just now scratching the
surface of what tourism can do to stabilize Alaska's economy.
Tourism offers a lot of potential, he opined.
8:36:06 AM
MR. AUSTERMAN, in response to Representative Cissna, explained
that the DART program offers workshops to help people flesh out
their business plan. Since it's difficult to cover all the
scenarios with a staff of three, [OED] addresses that by
producing publications, such as how to run a bed and breakfast
in Alaska, to provide assistance in entering the tourism
business.
8:38:04 AM
REPRESENTATIVE GARDNER related her understanding that ATIA
largely focuses on reaching independent travelers, which she
opined is to the benefit of local Alaskan-owned businesses.
MR. AUSTERMAN said he believes that's correct. He related that
independent travelers drop more money in the state than almost
any other traveler.
8:39:23 AM
MR. AUSTERMAN, returning to his presentation, informed the
committee that last week OED staff was in Nome providing a DART
workshop, which was very well-attended. He reiterated that
tourism is one of the most underdeveloped aspects of the state's
economy. Mr. Austerman then moved on to forestry development
for which OED has one industry expert who has been around for
some time. After working with a very large value-added
hardwoods manufacturer in the Lower 48, OED staff introduced
birch as a replacement hardwood for veneers and the like. The
manufacturer has recently committed a sizable amount of money in
Petersville to develop a hardwoods plant, primarily to provide
feedstock to its Lower 48 operation.
8:42:09 AM
MR. AUSTERMAN, in response to Representative Gardner, confirmed
that the initial intent was to take the raw resource to the
Lower 48. However, now this Lower 48 manufacturer has
[coordinated] with a mill that has value-added potential. There
is the prospect of developing a more efficient business model in
which the value-added portion could occur in Alaska. There is
the possibility of wood floor plank and veneer coming out of
this arrangement, he relayed.
8:43:18 AM
CO-CHAIR MUNOZ asked if OED works with small businesses to
obtain capital.
MR. AUSTERMAN replied yes, adding that OED works closely with
agencies such as the Alaska Industrial Development and Export
Authority (AIDEA). In fact, OED staff is evaluating Seward's
pellet proposal in terms of whether Seward's reliance on Chugach
Electric and Matanuska Light & Power (ML&P) for power could be
augmented by pellets. The two agencies that may be involved in
the aforementioned are AIDEA and the Division of Investments.
The Division of Investments provides low income loans for small
business development, especially with a rural emphasis. In
fact, OED steers a lot of its tourism business people that need
capital to start a project to the Division of Investments.
CO-CHAIR MUNOZ recalled meeting with a Ketchikan resident who is
developing a wood chip product to use as an alternative heating
source.
MR. AUSTERMAN said that OED has knowledge of that project and
has offered its resources. He explained that OED through its
industry experts and its economist offers its economic analysis
to the public and steers those interested in starting a business
to available resources.
CO-CHAIR MUNOZ pointed out that the Alaska Energy Authority
(AEA) energy funding criteria is narrowly focused to just
government and government-supported enterprises, which leaves
out businesses. She requested comment on that and asked if OED
has a position regarding expanding the eligibility criteria to
promote entrepreneurs making significant impacts on energy.
MR. AUSTERMAN said that although OED sees opportunity for
private involvement in addressing some of the energy issues
throughout the state, the criteria, or program guidelines of the
renewable energy fund is a question for AEA staff. He offered
to obtain that answer [from AEA] for the committee. He then
commented that OED believes the private sector can be more
efficient in solving some of these problems than the public
sector, and therefore [the state] should be aggressive in
helping those with ideas that would address some of the
challenges to energy in rural Alaska.
8:47:14 AM
MR. AUSTERMAN, continuing his presentation, moved on to minerals
development, which has a staff of two. He emphasized that OED
is an industry advocate to the extent that it's good for
Alaskans. The OED offers it's expertise to industry with regard
to developing a certain deposit in a particular area, to the
permitting process, to the licensing process, to the
environmental process, and the tax model.
8:48:05 AM
REPRESENTATIVE GARDNER inquired as to what tax loading is as
referenced on the document in Mr. Austerman's presentation
entitled "Minerals."
MR. AUSTERMAN related that currently there's a community
evaluating an extraction tax and OED staff is evaluating the
impact such may have on industry and its decisions. The
evaluation also takes into account what it will really take to
administer the tax as well as what it will bring to the
community. In further response, boroughs have severance tax
ability and thus can add a tax on top of the state tax if the
land is in the borough.
8:49:26 AM
MR. AUSTERMAN, continuing his presentation, said that OED
performs a lot of outreach regarding minerals in order to
encourage Alaska as a favorable location for investment. Mr.
Austerman opined that there's a fine line between advocating for
industry and ensuring [development] is good for Alaskans. He
noted that OED strongly encourages local hire. He then
suggested that one way to address local hire and obtain
information would be the imposition of a small income tax tied
to the permanent fund dividend (PFD) such that those who qualify
for the PFD get the tax back while those who don't won't.
Alaska is essentially a reverse tax state as people are paid to
live here, he pointed out. The PFD application should be used
as a tool to gather better information about the state's
economy.
8:51:28 AM
MR. AUSTERMAN moved on to fisheries development, and pointed out
that OED works a lot with the Alaska Seafood Marketing Institute
(ASMI). Although there are lots of areas of concern in
fisheries, it continues to have much potential as well. The OED
attempts to help with policy so that local fishing communities
can keep more of the fishing dollars at home. The OED staff has
been working on the Regional Seafood Development Associations
(RSDAs), which bring fishermen together to tax themselves and
allow the state the ability to re-appropriate the tax back to
the region so that it can use it as it sees fit. He pointed to
the Copper River Seafoods region as an example of good promotion
of regional advantages of seafood. For example, Bristol Bay is
looking at more icing and cooling capability with the
aforementioned self-assessed tax. Cook Inlet is just looking
into becoming an RSDA while Aleutia is a new RSDA.
8:54:30 AM
REPRESENTATIVE CISSNA recalled that the fishing industry was the
second highest employer in the state. She then inquired as to
whether there's a ranking of the state's industries.
MR. AUSTERMAN explained that without administrative mechanisms
that other states have, OED has to rely on surveys. He pointed
out that often these surveys are industry centric. He then
reiterated that the PFD provides a mechanism that the state
could use.
8:56:38 AM
REPRESENTATIVE MILLETT congratulated OED on some of the
expansion in the tourism industry.
8:56:57 AM
REPRESENTATIVE GARDNER related that she has received a flurry of
e-mails regarding farmed salmon in Alaska. She then highlighted
the wild and free marketing of Alaska's salmon, which she
suggested would be impacted by farmed salmon.
MR. AUSTERMAN informed the committee that OED has been involved
in evaluating the potential of shellfish aquaculture in Alaska.
With regard to fish farming versus wild stocks, Mr. Austerman
deferred to the ASMI representative.
8:58:28 AM
CO-CHAIR MUNOZ related that she has recently been asked to
intervene and advocate on behalf of residents from other nations
who want to establish a business. She encouraged some thought
in regard to whether OED could play a role in helping
individuals with communication difficulties in establishing a
business.
MR. AUSTERMAN acknowledged that OED does have a Small Business
Assistance Center web site and perhaps there could be review of
how to address those with cultural challenges in navigating
business development in Alaska.
9:00:31 AM
MR. AUSTERMAN, continuing his presentation, turned the
committee's attention to film development, which is a new
initiative. He opined that the film industry seems to respond
to incentives. The regulations to support this new program are
just being rolled out. He noted that the intent was to ensure
[the program] is Alaska centric and good for Alaska. In doing
so, the regulations were crafted tightly. He explained that OED
will issue tax credits for 30 percent to 44 percent of the
qualifying expenditures. The intent with the tax credit is to
ensure that Alaska receives twice the amount of the tax credit
in new money. Although the regulations are in the public
comment process, the effective date of the initiative was last
September. A prequalifying process was established and four
production companies have [qualified]. In fact, Disney has
already done work in Sitka and about $5 million will be coming
to Alaska. The estimated tax credit for the aforementioned four
productions is about $1.5-$2 million, but the exact amount won't
be known until the productions are complete. Disney has
completed its production and is waiting for OED to finalize its
regulation process to further define what will qualify for a tax
credit.
9:04:05 AM
CO-CHAIR MUNOZ inquired as to what kind of tax credit, in the
absence of a sales tax or income tax, it is.
MR. AUSTERMAN, using Disney as an example, explained that OED
would issue a certificate to Disney with a value of $150,000 and
Disney would broker those funds to entities that have a
corporate tax obligation and sell it at a discounted rate. He
characterized the aforementioned as a win-win situation and
acknowledged that most of the production companies won't have a
tax obligation as their taxes are realized in California.
9:05:04 AM
REPRESENTATIVE GARDNER surmised then that basically it doesn't
cost the state dollar-for-dollar in terms of loss from corporate
income tax because the funds spent benefit the local community.
Therefore, she characterized the tax credit as the state
subsidizing the benefits to whatever community the [production
company] is working.
MR. AUSTERMAN replied yes. He explained that the Department of
Revenue (DOR) will administer this tax credit in the same way as
oil tax credits for exploration. He noted that there are also
commercial fisheries tax credits for equipment upgrades.
Although this program is developed in a manner to hopefully
broaden Alaska's economy, it's a net cost to the general fund.
9:06:14 AM
MR. AUSTERMAN, continuing his presentation, moved on to the
Alaska Regional Development Organization (ARDOR) program. He
explained that the ARDOR program provides economic development
outreach opportunities to the various regional communities
throughout the state. Therefore, [those communities] would
benefit from OED's industry expertise in identifying resources
that could be developed in the area. There is also the Small
Business Assistance Center (SBAC), which serves as a great
resource for those interested in doing business in Alaska. The
OED also administers the Made in Alaska program. In fact, the
Made in Alaska logo was just legally trademarked, which provides
some legal teeth to enforce its use as there's a lot pirating of
the logo. A recent survey of those who pay the fee to use the
Made in Alaska logo related that they definitely see the value
in that logo. He noted that the Alaska Product Preference
Program is an important program.
9:07:26 AM
CO-CHAIR HERRON then requested that Mr. Austerman provide the
committee with any legislation that's of interest to OED as well
as some of OED's budget observations. He noted that he would
ask Mr. Austerman back for a future meeting to fully flesh out
[OED and what it offers].
9:07:56 AM
REPRESENTATIVE CISSNA expressed interest in regard to the cost
of fuel and how AIDEA provides assistance. She further
expressed interest in ensuring a competitive or equalizing
advantage since the costs are often so much higher in rural
Alaska, although the products of rural Alaska are what those in
urban Alaska live off of.
^Alaska Seafood Marketing Institute
9:10:32 AM
CO-CHAIR HERRON announced that the final order of business would
be an overview from the Alaska Seafood Marketing Institute
(ASMI).
9:11:31 AM
RAY RIUTTA, Executive Director, Alaska Seafood Marketing
Institute (ASMI), Department of Commerce, Community, & Economic
Development, began by informing the committee that ASMI is a
public private partnership similar to the Alaska Railroad
Corporation. He explained that ASMI is guided by a seven-member
board of directors who are appointed by the governor. The ASMI
is affiliated with DCCED. He noted that one of the ex-officio
members of the ASMI board is the commissioner of DCCED. By
statute, ASMI is the official seafood promotional arm for the
state. The current mission of ASMI is to increase the economic
value of the Alaska seafood resource and ASMI has been
relatively successful with that mission. Mr. Riutta related
that ASMI's role is to reposition the [seafood] industry as a
competitive and market driven organization. The increase in
seafood products produced in Alaska was made possible through an
infusion of funds and tax incentives from the state and federal
government. The aforementioned has dramatically improved the
market position of the Alaska seafood industry over the last
four to five years. In 2002 salmon was in deep trouble, but now
it's in a better position.
9:14:51 AM
MR. RIUTTA, referring to a chart labeled "Funding," pointed out
that ASMI has experienced some erratic funding from Outside,
mainly federal, sources. He highlighted the [dark] blue bar on
the chart that illustrates the large amount of federal funding
that was received in 2005, which was parsed out over numerous
years in order to have a multi-year marketing campaign. He then
highlighted the red bar on the chart that illustrates what the
industry has provided. As the value of the harvest has
increased and the industry has increased its self-assessment,
the industry contribution has steadily grown. Additionally,
because of the additional funds from the industry and recently
from the state, ASMI has been able to attract federal Market
Access Program funds. The federal Market Access Program is how
the overseas marketing for seafood is funded. He explained that
for every $1 [ASMI] provides, the federal government provides
$2. Therefore, ASMI is buying money from the federal government
in order to perform the federal overseas marketing activity. He
explained that ASMI's budget line is flat because it has managed
to utilize some of the funding. However, in fiscal year (FY)
2010 the federal funding, save the Market Access Program
funding, will be gone. Therefore, ASMI is asking for some
general funds (GF) to offset some of those lost federal funds.
MR. RIUTTA then referred to a recent report from Northern
Economics, which specifies that Alaska's seafood industry is
worth $5.8 billion in direct and indirect induced economic
output to the state. That $5.8 billion worth of output includes
$84 million in tax revenues, which includes a number of self-
assessments. Some of the self-assessments that are included are
ASMI, hatchery enhancement, and RSDA funds. This direct revenue
to the state goes into the treasury to be dispersed as the
legislature sees fit. The amount of revenue going to the
boroughs and municipalities is in the $14 million range. Mr.
Riutta emphasized the importance of understanding that the
aforementioned amount of funds is left to the discretion of the
boroughs and the municipalities to spend on whatever it deems
necessary. According to the Northern Economics report, the
seafood industry is the number one employer in the state, which
employs 54,000. He indicated that [the seafood industry] is the
number three industry in overall economic value.
9:19:12 AM
MR. RIUTTA then turned attention to the salmon fishing sector,
which is the largest sector that employs Alaskans, although it's
not the most valuable part of the industry in terms of dollars.
In fact, nearly three-quarters of all active salmon fishermen
are Alaska residents. The ex-vessel value, the price fishermen
receive at the dock, was $1.6 billion in 2007 of which salmon is
about a quarter of that total while pollock and Pacific cod
account for about 37 percent. He noted that the aforementioned
is by value not volume, but the volume of the ground fishery
represents about three-quarters of the total.
9:20:41 AM
REPRESENTATIVE CISSNA expressed interest in having the data
available over time in order to review the changes in the
fisheries growth and production.
MR. RIUTTA offered to make that information available.
9:21:28 AM
MR. RIUTTA moved on to slide entitled "Alaska Seafood
Accomplishments", and opined that although the seafood industry
has some good news, it faces some challenges in the coming year.
Mr. Riutta then highlighted that the wholesale value for
seafood, the value when the seafood leaves the state, is $3.6
billion. That wholesale value is calculated after the harvest
and with the in-state value added prior to further processing or
distribution outside of the state. He then turned the
committee's attention to the chart that illustrates the price
paid to fishermen for Alaska's seafood harvest, the ex-vessel
value, has risen from $1.2 billion in 2003 to $1.6 million in
2007. Although there have been some very large harvests during
that time, the value has increased more than the increase in the
harvest. He then turned to the graph entitled "Alaska Salmon
Value Growth: Ex-Vessel and First Wholesale," which illustrates
that the higher the wholesale value of the product, particularly
with salmon, the more the fishermen can keep. In fact, when the
first wholesale was around $900 million for salmon, nearly 46
percent of that went to the fishermen themselves. Therefore, if
the price can be kept up, more money goes to the fishermen and
increases the ex-vessel value, which also increases the tax
return to the state. Mr. Riutta highlighted that [ASMI] is
active in the U.S. as well as the overseas market. He related
that the growth in overseas sales has been about 34 percent in
value from 2003-2007. The aforementioned is important since a
little over half of Alaska's products go to the overseas market.
9:24:50 AM
MR. RIUTTA opined that ASMI has been successful in making the
Alaska brand well known. He informed the committee that ASMI
has been in business for well over 25 years and serve as the
brand managers for the state's seafood. The ASMI, he further
opined, has placed Alaska seafood on the menus of most of the
restaurants in the U.S. In fact, Alaska seafood is the number
two most menued brand among the top U.S. restaurant chains.
9:25:38 AM
MR. RIUTTA, in response to Co-Chair Herron, specified that
Alaska's seafood is in [competition] with beef, pork, and
chicken. However, Alaska's seafood is also in competition with
Oreo cookies, Haagen Dazs ice cream, and other such popular
branded items found on menus. He noted that some recent surveys
of restaurants found that 77 percent of those surveyed who see
the Alaska seafood brands in restaurants have a very positive
impression. A recent survey regarding farmed versus wild salmon
revealed that 84 percent will choose wild Alaska salmon over
farmed Atlantic salmon from the menu of U.S. restaurants.
9:27:24 AM
CO-CHAIR HERRON asked if Alaska seafood is competing well in the
foreign markets.
MR. RIUTTA replied yes, but he highlighted that Alaska competes
as a state against countries. Therefore, Alaska is competing
against the Norwegian Seafood Export Council that has a $40-$50
million budget and has fewer products to market than Alaska.
Alaska is also competing with the Chileans, the Spaniards, the
Canadians, and any other country who sells seafood overseas.
9:28:19 AM
REPRESENTATIVE GARDNER surmised then that if Alaska was to break
its own farmed salmon rules, there would be a few who would
benefit while the salmon industry as a whole would take a huge
hit.
MR. RIUTTA confirmed that such would undercut ASMI's marketing
message, which is based upon salmon from Alaska being wild and
never farmed. If farmed salmon were allowed in Alaska, the
entire marketing program would have to be changed.
9:28:58 AM
REPRESENTATIVE CISSNA remarked that responsibilities come with
popularity, in terms of making a name for a product. She then
recalled being in Paris in the 1970s and seeing beautiful
Norwegian fish in the markets and messy Alaska fish. She
inquired as to what is being done to help fishermen maintain the
value that has been assured.
MR. RIUTTA informed the committee that quite a few years ago
ASMI started a quality program that provides tools, training,
and information from the point of harvest through to the point
of sale. Moreover, ASMI has developed the seafood university
that evolved from a seafood training program with Kroger's, a
grocery store chain on the East Coast. The aforementioned was
such a success that it evolved into an on-line training program
for counter staff. He noted that there is a similar program for
wait staff. While there are still cases of mishandling of
Alaska's seafood, he opined that the presentation of Alaska's
seafood in the market place has vastly improved.
9:33:47 AM
CO-CHAIR MUNOZ asked if ASMI has considered marketing low value
good quality Alaska salmon, such as pink salmon, to countries
with a major consumption of seafood.
MR. RIUTTA informed the committee that in the last three-four
years industry has decreased production of pink salmon in a can
from 70 percent to about 50 percent with the remainder produced
as frozen filets. The industry itself has changed the product
form of pink salmon and raised its value, although the value of
pink salmon still isn't as high as sockeye. There is also a
U.S. Department of Agriculture food aid program that ASMI took
over. The aforementioned program looks for opportunities in the
U.S. food aid program to provide canned salmon, and other less
saleable products, to various countries in order to provide more
protein in those markets. Through this program private
volunteer organizations can place orders with the U.S.
Department of Agriculture which then go out to the industries
for bids. In answer to Co-Chair Munoz, Mr. Riutta confirmed
that ASMI has explored marketing low value good quality Alaska
salmon, but the aforementioned avenue has been found.
Furthermore, the industry itself has also taken on the role of
trying to raise the value of pink salmon through new value-added
products.
9:36:59 AM
MR. RIUTTA, continuing his presentation, turned the committee's
attention to the "Cook it Frozen" program, which has dispelled
the myth that frozen seafood is bad. Much work has been done
with chefs in order to show them how good Alaska's frozen
seafood products can be through the Culinary Institute of
America and other culinary schools. In fact, ASMI has a
curriculum that it provides to culinary schools throughout the
U.S. Mr. Riutta opined that the Cook it Frozen program is one
of best programs in terms of changing attitudes and allowing
Alaska's frozen products to demand a higher price because most
of the seafood leaving the state does so in frozen form.
MR. RIUTTA then showed a slide from the Brussels Seafood Show,
which is the largest seafood show in the world. In Brussels,
Alaska competes against countries. However, the Alaska pavilion
has the same footprint as the rest of the U.S. pavilion. The
aforementioned stand to reason since Alaska produces over half
of the seafood in the U.S. Most of the major companies in
Alaska are present at the show as are many of the state's
smaller seafood companies. The result of the investment in the
three-day show in Brussels was $31 million in on-site sales and
$125 million in follow-on sales. He then highlighted the
various tactics used to work with consumers, including a
tremendous amount of promotional materials
9:40:19 AM
CO-CHAIR HERRON inquired as to what ASMI has found to be the
most favored advertisement by those in the business.
MR. RIUTTA answered that the most popular advertisement was an
insert in various cooking magazines that had facts about Alaska
seafood as well as a similar advertisement with chefs. Although
there was a popular television advertisement with Ben Stein, it
didn't receive nearly the positive feedback as the one-page
inserts. In further response to Co-Chair Herron, Mr. Riutta
related that the wild Alaska salmon image and wild Alaska image
is huge in the marketplace. He pointed out that the reasons
people want to visit Alaska are the same reasons people want to
eat Alaska seafood, which is because it's a pristine
environment.
9:43:21 AM
MR. RIUTTA, returning to his presentation, informed the
committee that ASMI works with almost every retail chain, food
service distributor, and restaurant chain in the country. He
then presented a slide illustrating the advertisement with Jack
in the Box in which pollock is promoted. This past summer a
sustainability forum was held in Anchorage; all of Alaska's
fisheries managers were brought together to talk with ASMI's
major customers. He noted that although there's a growing
interest in the market place about sustainability, there's also
some confusion with regard to third party certifiers who have
begun to espouse what is and isn't sustainable. Work began last
year to clarify sustainability. He explained that ASMI wants to
ensure that everyone understands that seafood from Alaska comes
from a sustainably managed resource. Sustainability, he
emphasized, is specified in the Alaska State Constitution and is
fundamental to the way business is done in Alaska. Still,
organizations such as Green Peace have said that all Alaska
pollock should be taken off the shelf because it isn't
sustainable by its criteria. However, ASMI doesn't believe
that, he opined.
9:45:42 AM
CO-CHAIR HERRON characterized [what some non-governmental
organizations (NGOs) are saying in relation to sustainability]
as a form of outside of Alaska influence that sends the wrong
message about Alaska.
9:46:49 AM
REPRESENTATIVE CISSNA opined that quality is a hard standard to
maintain and the best thing to do with critics is to listen to
ensure that nothing is being missed. She then highlighted that
in tourism marketing there are different niches. She suggested
that there should be a gourmet fish tourism niche in which
people learn how to cook Alaska's seafood.
MR. RIUTTA informed the committee that the aforementioned
already exists. The ASMI has worked with Holland America, which
has an onboard Iron Chef-type of cooking demonstration. In
Juneau, there is a company that does celebrity chef cooking
events with Alaska seafood. Mr. Riutta related his agreement
with Representative Cissna regarding taking criticism and
realizing that quality is key to the marketplace. The problem
is that the premise of some of the nongovernmental organizations
(NGOs) is that government can't be trusted, and thus the NGO has
to be hired to ensure government is doing its job. The
aforementioned is objectionable, he said.
9:50:02 AM
CO-CHAIR HERRON requested that Mr. Riutta share his observations
with regard to the following: the recent community development
quota (CDQ) groups with tax consequences on unrelated businesses
[realized] with the profits of fishing; the Yukon king run that
looks to be in trouble next year; and the new rural advisor who
has strong ties to the fishing industry.
9:50:55 AM
MR. RIUTTA, continuing his presentation, pointed out that ASMI
works a lot with celebrity chefs. For example, ASMI has been
working with Alton Brown who has become a champion of Alaska
seafood and sustainability. He then presented a slide that
shows ASMI doing cooking frozen demonstrations, which generates
much interest. He informed the committee that ASMI works with
the university system. In fact, ASMI's food service director
and technical director gave presentations to University of
Massachusetts students and food service staff. In terms of the
number of meals served annually, the University of Massachusetts
is one of the largest campuses. At this point, wild Alaska week
is part of the aforementioned university's menu. Most recently,
ASMI has reached out to Stanford. He mentioned the Alaska
seafood university that's located on ASMI's web site. He then
reviewed the national campaigns, which were discussed earlier in
regard to magazine inserts. However, in order to fit into the
2009 budget, ASMI moved away from the $3-$4 million domestic
[magazine] campaign to about a $1 million public relations
campaign. Given last year's numbers with public relations
marketing, this year's budget, a no-growth budget, seeks to
maintain that marketing. Mr. Riutta said, "But we think that
we're really at bare bones level with our budget to maintain our
brand position." The rule of thumb in advertising is that for
every year a brand isn't in the market, 25 percent of that brand
power is lost each year. Mr. Riutta then turned to the
international program, which he characterized as a big
component. He reviewed the overseas contract offices, and added
that ASMI actively markets in all of the overseas markets.
Although Japan continues to be the largest customer of Alaska's
seafood, it has decreased dramatically over the last four to
five years. The markets in Europe and China are growing. In
fact, China is the largest seafood consuming and producing
nation. He highlighted that ASMI translates its materials. He
also highlighted the Mr. Fish campaign in Japan. Moreover, ASMI
does media tours both domestically and internationally. He
pointed out ASMI's overseas efforts to educate and attend trade
shows. He noted that ASMI has discovered an emerging roe market
in Russia.
9:57:53 AM
MR. RIUTTA opined that ASMI has built up a very powerful brand
and enviable position in the market over the last few years.
One of the largest threats facing [Alaska's seafood industry] is
the credit crunch. He explained that many who want to purchase
Alaska's seafood products need lines of credit to do so. Since
there's not much that can be done about that, hopefully it will
resolve itself. The credit crunch is resulting in some
stagnation and price pressure. He said that ASMI will try to
work with the industry to dampen that in the months and years
ahead. Mr. Riutta said that since [Alaska's seafood industry]
is facing uncertain and challenging times, he encouraged keeping
Alaska's name out there to encourage purchase of the state's
seafood products at a higher price.
10:00:18 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 10:00 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ASMI Overview2.5.9.PDF |
HCRA 2/5/2009 8:00:00 AM |
|
| 2.5.09 OED Presentation- FINAL - Legislature.ppt |
HCRA 2/5/2009 8:00:00 AM |