Legislature(2009 - 2010)BARNES 124
02/19/2009 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Overview: Office of Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 19, 2009
8:05 a.m.
MEMBERS PRESENT
Representative Bob Herron, Co-Chair
Representative Cathy Engstrom Munoz, Co-Chair
Representative Wes Keller
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
Representative John Harris
Representative Charisse Millett
COMMITTEE CALENDAR
OVERVIEW: OFFICE OF ECONOMIC DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOE AUSTERMAN, Director
Office of Economic Development (OED)
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Completed his overview of the Office of
Economic Development.
CARYL MCCONKIE, Tourism Development Manager
Office of Economic Development
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: During overview of OED, provided additional
information.
ACTION NARRATIVE
8:05:30 AM
CO-CHAIR BOB HERRON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:05 a.m.
Representatives Herron, Munoz, Keller, and Gardner were present
at the call to order. Representative Cissna arrived as the
meeting was in progress.
^Overview: Office of Economic Development
8:05:43 AM
CO-CHAIR HERRON announced that the only order of business would
be the completion of the February 5, 2009, overview of the
Office of Economic Development.
8:06:32 AM
JOE AUSTERMAN, Director, Office of Economic Development (OED),
Department of Commerce, Community, & Economic Development
(DCCED), began by providing the committee with a document
regarding the tourism activities that the Office of Economic
Development (OED) provides. He recalled that at the prior
hearing there were questions regarding how OED could further
develop its program into other sectors. The tourism programming
works well as it's adequately staffed for the programs delivered
and the interest in those programs. He noted that much of the
funding [for tourism in rural areas] comes from the U.S.
Economic Development Administration (EDA). Much of the program
development comes from inquiries from rural Alaska. At the last
hearing, Co-Chair Munoz suggested developing the yacht sector of
tourism, which he indicated is fairly active in Alaska. Mr.
Austerman acknowledged that OED would like to emulate the
tourism process with other programs. However, funding is a
component. For instance, there is one person in OED who is the
conduit between the commercial fisheries industry and state
government. Two staff focus on minerals and one staff person
focuses on forestry. He pointed out that OED is a small and
nimble organization that's effective with the resources it has.
8:10:56 AM
MR. AUSTERMAN then turned to the film sector. He reminded the
committee that Alaska doesn't have the traditional
administrative mechanisms for gathering information.
Furthermore, not much was know about the film industry other
than that the states and countries that engage in the film
industry and offer incentives end up with film being a large
component of their economy. British Columbia, he highlighted,
is a perfect example of an area that uses a similar incentive
program that encourages the producers to spend production
dollars on site. He indicated that Alaska's incentive has drawn
film activity to the state. He then noted that OED has worked
quite extensively with Evergreen Studios, which invested in
Alaska even prior to the incentive program. In fact, Evergreen
Studios made a sizable investment in Anchorage in 3-D
technology. He highlighted that on the East Cast theatres are
beginning to show live sports broadcasts. The technology has
made a big come-back. Furthermore, 3-D film is said to be the
next generation of film. Evergreen Studios has chosen Alaska to
develop its 3-D production studios. Had the incentive program
not been in place, OED likely would not have heard about the
aforementioned. The initiative, he explained, provides a tax
credit of a minimum of 30 percent of the qualifying [production]
expenditures in the state and up to 44 percent for off-season
production work or production work in rural Alaska. He informed
the committee that Evergreen Studios has produced a salmon shark
documentary with National Geographic.
MR. AUSTERMAN pointed out that one of the drawbacks with
encouraging more production is that Alaska doesn't have much
film industry infrastructure. One of the main items missing is
a sound stage. At this point, there seems to be a strong
possibility that private money will develop this sound stage.
This film initiative has certainly brought new dollars to the
state. He said that it's up to legislators to determine whether
allowing the initiative is worth lost income tax revenue in
exchange for the new dollars coming to the state. The OED's job
is to administer the program as best it can and report to the
legislature the progress of the film industry annually. Mr.
Austerman highlighted that there is an administrative mechanism
in the initiative that allows for evaluation. To qualify for
the tax credit film production companies will have to show their
books and share how much money they've spent in Alaska. The tax
incentive, he noted sunsets in five years. Thus far this year,
a mechanism for companies doing production work in Alaska has
been created to allow production despite an incomplete
regulations process. The regulations process would further
define what exactly would be a qualifying production expenditure
in Alaska. To date, OED has received four applications from
production companies that want to work in Alaska. The estimated
qualifying spending of those four applicants is just under $5
million of which $1.5 million would be the tax credit.
8:20:08 AM
MR. AUSTERMAN, in response to Co-Chair Herron, explained that
when OED considered the film industry regulations it did so in
an Alaska centric manner. He acknowledged that there were some
concerning components of the law, but the regulations seemed to
address those without changing the intent of the law. He noted
that OED has spoken with the film industry about concerns of
potential abuse with the program and relayed that if the program
isn't working for Alaska, then it would end. Mr. Austerman
informed the committee that one of the concerns with the [film
incentive] is the removal of the cap on the "superstar" clause.
At one point there was a $2 million cap for superstars doing
work in Alaska; the removal of that cap is a large hit without
realizing any economic benefit. However, those in tourism would
argue that there would be an inferred benefit in terms of
Alaska's exposure through film.
8:23:27 AM
CARYL MCCONKIE, Tourism Development Manager, Office of Economic
Development, Department of Commerce, Community, & Economic
Development, explained that DCCED is required to notify the
legislature when $100 million in tax credits based on existing
productions has been identified. She posed a scenario in which
the production companies say they will spend $50 million, but
only end up spending $20 million in the state. That extra $30
million has been set aside so that upon the sunset date or the
$100 million in tax credits has been reached, the final audit
would reveal, in this case, that not all of the funds were
spent. The aforementioned may be an issue that needs to be
addressed at some point.
8:25:26 AM
REPRESENTATIVE GARDNER opined that the aforementioned is similar
to Alaska Housing Finance Corporation's (AHFC) weatherization
program.
MS. MCCONKIE noted her agreement.
8:26:06 AM
CO-CHAIR HERRON inquired as to those who merely want to capture
Alaska on film and might not take advantage of the tax credit
because they don't know about it or it's too much of a hassle.
MR. AUSTERMAN clarified that the tax credit doesn't apply to
news broadcasts. He then related that the film industry is
fairly efficient and it's unlikely that a production company
would work in Alaska without taking advantage of the tax credit,
which represents 30 percent of production costs. He mentioned
that it's likely that the production company wouldn't receive
the entire 30 percent since the production company has to broker
the certificate.
8:28:34 AM
CO-CHAIR MUNOZ asked if the tax credit includes an incentive for
local hire.
MR. AUSTERMAN replied yes, adding that labor is a qualifying
expense. The base incentive for all qualifying expenses is 30
percent. Alaska hire results in an additional 10 percent while
filming off season or filming in a rural location result in an
additional 2 percent tax credit for each. Mr. Austerman pointed
out that if a production company spent $1 million, it could
receive a tax credit in the amount of $440,000. The production
company would receive the tax credit as a certificate. Since
it's likely that the production company doesn't pay taxes in
Alaska, it would likely sell the certificate to a company that
does pay taxes in Alaska.
8:30:16 AM
MR. AUSTERMAN mentioned that a local Juneau writer Dave Hunsaker
is working with Evergreen Studios on a production. One of the
challenges is determining when the qualifying activity starts.
At this point, OED is sticking to the rule that no expenses
qualify prior to approval of the application. Mr. Austerman
explained that there is difficulty with regard to the actual
purchase of the screen write, which clearly occurs prior to
production in the state. However, the deal is generally
consummated on the first day of production. Mr. Austerman
opined that he doesn't want to provide any incentive for screen
plays that are written outside of the state, although the deal
was consummated in Alaska. However, he questioned whether local
writers should be encouraged to build their business as part of
this tax incentive. He suggested that some of these issues
won't play out until some of the work has been done. The
motivation behind this tax incentive is to capture some of the
funds from films set in Alaska that are actually filmed
elsewhere and thus funds spent elsewhere.
8:33:48 AM
CO-CHAIR HERRON identified "The Guardian" as such a movie. He
then inquired as to how to help communities attract the film
industry.
MR. AUSTERMAN opined that in rural Alaska part of the difficulty
is that there are no new dollars and the cost of living
continues to increase.
8:35:45 AM
REPRESENTATIVE GARDNER asked if the tax incentive is changing
the behavior of the film industry, especially when one considers
companies such as Evergreen Studios that is already doing
business in the state.
8:36:33 AM
CO-CHAIR HERRON indicated that it would be more important for
the state to lose a bit of revenue in order to have the film
industry in the state.
MR. AUSTERMAN noted his agreement that there will be situations
in which some companies will come to Alaska no matter the
existence of the incentive. He relayed that the staff person
leading the film industry component of OED just went to a tax
credit symposium/forum in Los Angeles, California. This staff
person found that since many states are scaling back [film
industry programs]; Alaska's tax incentive program is receiving
a lot of national attention.
8:38:43 AM
REPRESENTATIVE CISSNA recalled living in San Diego, which she
characterized as a "film crazy" area. She then turned attention
to the Developing Alaska Rural Tourism (DART) program and some
of the programs under it that hold out the Alaska experience to
the world without requiring putting money aside. She noted that
the independent traveler will spend money on such experiences
and then come into town and spend money.
MR. AUSTERMAN highlighted that tourism, unlike almost any
industry, offers a way to bring new money into the state.
Moreover, tourism is a renewable industry for which he holds
much pride. He noted that those in urban Alaska don't need as
much help with tourism as those in rural Alaska. This incentive
is a mechanism to get new money out to communities, which is
certainly part of the governor's legacy initiative.
8:43:16 AM
REPRESENTATIVE CISSNA pointed out that DART gets people into
rural communities. She then inquired as to whether the
anthropological camp in Afognak is still in business.
MS. MCCONKIE answered that she believes it's still in business.
Certainly, such a program is the type of [tourism] those in the
rural areas are interested in because these are unique to the
areas and attracts the independent traveler. She pointed out
that in the rural communities a new business employing a couple
of people is important.
8:45:11 AM
REPRESENTATIVE CISSNA expressed interest in knowing more about
the DART program and possibly meeting with OED staff regarding
what activities exists [in rural Alaska].
8:45:48 AM
CO-CHAIR HERRON noted his agreement, adding that there might be
activities going on in his district that he doesn't know about
and could share in his newsletter. He requested that OED
provide the committee with the activities occurring and the area
in which they're occurring. He then directed attention to the
Alaska Regional Development Organization (ARDOR), and inquired
as to how an ARDOR accomplishes anything with the budget it has.
MR. AUSTERMAN said that most ARDORs are very successful in using
state funds to match and leverage other funds. The ARDORs
provide OED with an outreach opportunity to rural Alaska.
Technically, OED merely administers the ARDORs much like the
Alaska Travel Industry Association's (ATIA) contract. He
highlighted the value in having the on-the-ground intuition for
a region. He then noted that tourism folks are good about
working with the ARDORs.
8:48:42 AM
REPRESENTATIVE KELLER related that he has been impressed with
how ARDOR personnel link with the chamber.
8:49:11 AM
CO-CHAIR HERRON inquired as to how OED measures the
effectiveness of the ARDORs throughout the state.
MR. AUSTERMAN answered that the statute doesn't establish
performance measure criteria. However, in an attempt to bring
the ARDOR program on the radar, OED has encouraged ARDORs to
include in their report all their activities, financial
standing, and objectives. The report is provided to the
legislature. Although OED has tried to work with the ARDORs in
establishing some performance measures, the statute doesn't
necessarily require it and OED is a coordinating agency not a
policing agency.
8:51:36 AM
MR. AUSTERMAN, in closing, informed the committee that OED
maintains a small business assistance center, a web site, and
manages the Made in Alaska program and the Alaska product
preference program. The Made in Alaska symbol was just legally
trademarked, which provides a bit more teeth with regard to
enforcing the use of it. He related that the Made in Alaska is
gaining value as a marketing tool. Mr. Austerman told the
committee that OED is available to answer questions or address
specific industry or economic development issues. He then
related that many years ago a small business grant was passed,
but never funded. It's an annual appropriation of up to $3
million per year that can go toward helping small businesses
start through a grant program that would be co-administered
through OED and the Alaska Industrial & Export Authority
(AIDEA). He opined that the aforementioned would be effective
tool for starting small businesses in rural Alaska.
8:54:21 AM
CO-CHAIR HERRON remarked that perhaps some funding could be
obtained from Alaska Growth Capital, which the state could
match.
8:55:12 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 8:55 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2.19.09 OED Presentation- FINAL - Legislature.ppt |
HCRA 2/19/2009 8:00:00 AM |