Legislature(1999 - 2000)
03/29/1999 05:10 PM House EDT
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT AND TOURISM March 29, 1999 5:10 p.m. MEMBERS PRESENT Representative Gail Phillips, Chair Representative Norman Rokeberg Representative Fred Dyson Representative Andrew Halcro Representative Sharon Cissna Representative Beth Kerttula MEMBERS ABSENT Representative Ramona Barnes COMMITTEE CALENDAR * HOUSE JOINT RESOLUTION NO. 20 Urging the Congress to amend the Internal Revenue Code of 1986 to eliminate the marriage penalty by providing that income tax rate bracket amounts, and the amount of the standard deduction, for joint returns shall be twice the amounts applicable to unmarried individuals. - MOVED OUT OF COMMITTEE * HOUSE BILL NO. 136 "An Act relating to tourism and tourism marketing; eliminating the Alaska Tourism Marketing Council; and providing for an effective date." - HEARD AND HELD: ASSIGNED TO SUBCOMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HJR 20 SHORT TITLE: FEDERAL INCOME TAX MARRIAGE PENALTY SPONSOR(S): REPRESENTATIVES(S) PHILLIPS, Green, Grussendorf, Kohring, Dyson Jrn-Date Jrn-Page Action 2/26/99 323 (H) READ THE FIRST TIME - REFERRAL(S) 2/26/99 323 (H) EDT, FINANCE 3/03/99 350 (H) COSPONSOR(S): KOHRING 3/17/99 (H) EDT AT 5:00 PM CAPITOL 124 3/17/99 (H) SCHEDULED BUT NOT HEARD 3/19/99 519 (H) COSPONSOR(S): DYSON 3/29/99 (H) EDT AT 5:00 PM CAPITOL 106 BILL: HB 136 SHORT TITLE: ABOLISH TOURISM MARKETING COUNCIL SPONSOR(S): REPRESENTATIVES(S) THERRIAULT Jrn-Date Jrn-Page Action 3/12/99 438 (H) READ THE FIRST TIME - REFERRAL(S) 3/12/99 438 (H) EDT, L&C, FIN 3/29/99 (H) EDT AT 5:00 PM CAPITOL 106 WITNESS REGISTER REPRESENTATIVE GENE THERRIAULT, Sponsor Alaska State Legislature Capitol Building, Room 511 Juneau, Alaska 99801 Telephone: (907) 465-4797 POSITION STATEMENT: Introduced HB 136 as the bill sponsor. DEBORAH SEDWICK, Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811 Telephone: (907) 465-2500 POSITION STATEMENT: Testified on HB 136. NANCY LETHCOE, Owner Alaska Wilderness Sailing and Kayaking P.O. Box 1313 Valdez, Alaska 99686 Telephone: (907) 835-5175 POSITION STATEMENT: Testified on HB 136. BILL COPELAND, Owner Raven Sailing Charters P.O. Box 2581 Valdez, Alaska 99686 Telephone: (907) 835-5663 POSITION STATEMENT: Testified on HB 136. CAROL KASZA, Owner Arctic Treks P.O. Box 73452 Fairbanks, Alaska 99707 Telephone: (907) 455-6502 POSITION STATEMENT: Testified in opposition to HB 136. BARBARA WINKLEY, Owner Bed and Breakfast [name not specified] 8120 Rabbit Creek Road Anchorage, Alaska 99516 Telephone: (907) 345-1954 POSITION STATEMENT: Testified in opposition to HB 136. KEN LEGHORN, Owner Alaska Discovery Incorporated 5449 Shaune Drive Juneau, Alaska 99801 Telephone: (907) 780-6505 POSITION STATEMENT: Testified on HB 136. STEVE BEHNKE, Executive Director Alaska Wilderness Recreation and Tourism Association (AWRTA) P.O. Box 22827 Juneau, Alaska 99802 Telephone: (907) 463-3038 POSITION STATEMENT: Testified on HB 136. MIKE MCBRIDE, Owner Kachemak Bay Wilderness Lodge P.O. Box 956 Homer, Alaska 99603 Telephone: (907) 235-8910 POSITION STATEMENT: Testified in opposition to HB 136. TINA LINDGREN, Executive Director Alaska Visitors Association (AVA) 3201 C Street Anchorage, Alaska 99503 Telephone: (907) 561-5733 POSITION STATEMENT: Testified on HB 136. TODD BUREAU, Small Business Owner [business name not specified] Hope, AK 99605 Telephone: (907) 782-3725 POSITION STATEMENT: Testified in opposition to HB 136. BOB DINDINGER, Vice-President of Government Relations Alaska Visitors Association (AVA); President, Alaska Travel Adventures (ATA) 9085 Glacier Highway Juneau, Alaska 99801 Telephone: (907) 789-0052 POSITION STATEMENT: Testified on HB 136. DEROTHA FERRARO Homer Chamber of Commerce P.O. Box 541 Homer, Alaska 99603 Telephone: (907) 235-7740 POSITION STATEMENT: Testified on HB 136. ANN CAMPBELL, Vice-President Alaska Village Initiatives 1577 C Street Anchorage, Alaska 99501 Telephone: (907) 274-5400 POSITION STATEMENT: Testified on HB 136. ACTION NARRATIVE TAPE 99-4, SIDE A Number 0001 CHAIR GAIL PHILLIPS called the House Special Committee on Economic Development and Tourism meeting to order at 5:10 p.m. Members present at the call to order were Representatives Phillips, Rokeberg, Dyson, Cissna and Kerttula. Representative Halcro arrived at 5:12 p.m. HJR 20 - FEDERAL INCOME TAX MARRIAGE PENALTY CHAIR PHILLIPS announced the first order of business was House Joint Resolution No. 20, urging the Congress to amend the Internal Revenue Code of 1986 to eliminate the marriage penalty by providing that income tax rate bracket amounts, and the amount of the standard deduction, for joint returns shall be twice the amounts applicable to unmarried individuals. REPRESENTATIVE ROKEBERG requested clarification on whether the resolution is intended to level the playing field or allow married couples to pay more or less than a single person. CHAIR PHILLIPS explained that the resolution proposes that a married couple will have the same deductions as two single people. Number 0138 REPRESENTATIVE CISSNA made a motion to move HJR 20 out of committee with individual recommendation. There being no objection, HJR 20 was moved out of committee. HB 136 - ABOLISH TOURISM MARKETING COUNCIL Number 0173 CHAIR PHILLIPS announced that the next order of business was House Bill No. 136, "An Act relating to tourism and tourism marketing; eliminating the Alaska Tourism Marketing Council; and providing for an effective date." REPRESENTATIVE GENE THERRIAULT, Sponsor, stated that he is introducing HB 136 with the intent of kicking off the debate, in the legislature, on an idea that was debated at length last year with SB 350. HB 136 is based on a plan that was brought forward last year by the tourism industry in similar legislation. It proposes to consolidate the state's tourism marketing efforts, reduce the size and function of the Division of Tourism and allow the state to reduce its contributions to tourism marketing and realize a general fund savings. REPRESENTATIVE THERRIAULT further stated that currently Alaska's statewide tourism marketing efforts are carried out my three organizations: Alaska Tourism Marketing Council (ATMC), Alaska Visitors Association (AVA), and the Division of Tourism. These efforts will be consolidated into a single marketing function that is broadly representative of the various sectors of the industry. The organization will put together a marketing program to address media advertising, visitor inquiries, publishing and distribution of information regarding vacation planning and establish and maintain Internet sites that provide tourism information. REPRESENTATIVE THERRIAULT continued, saying that the Division of Tourism will continue to provide inquiry assistance, administer the information centers and plan and advocate for tourism and tourism development in coordination with the private sector. It will enter into a contract with a single qualified trade association for the purpose of planning and executing the destination tourism marketing campaign. The contract may include promotion of distinct segments of the tourism industry: highway, seasonal, cultural, regional, rural, and eco-tourism. This would take the state out of marketing and reduce the number of employees. The association awarded will be required to match the state's effort with 30 percent of its own money. It is expected that the association will grow; therefore, the match from industry will rise to 60 percent by the year 2002, and that's where the state can gradually reduce its general fund contribution to the marketing effort. REPRESENTATIVE THERRIAULT concluded that the consolidation of overall marketing in the Division of Tourism is a responsible approach to reduce the state's monetary contribution without harming the growth of the industry. Furthermore, the trade association will involve those people who have the most to gain or lose by the effectiveness of the marketing, those being, the people in the industry itself. Number 0448 CHAIR PHILLIPS pointed out that the committee members should have in front of them a copy of the comparative analysis of SB 350, from last year, and HB 136, from this year. REPRESENTATIVE THERRIAULT referred to the comparison piece that Representative Phillips pointed out, and said that the people from the tourism industry will probably have comments on the accuracy of that comparison. He added that it is very likely that Representative Mulder will ask that the overall marketing effort be removed from the operating budget and that the overall state contribution to the marketing effort will be reflected in a fiscal note on HB 136. He noted that a lot is riding on HB 136 and he hopes the committee, which only meets every two weeks, will not act speedily as they are under a time crunch. CHAIR PHILLIPS explained that the committee is not set to the two week schedule and it can meet as often as necessary. REPRESENTATIVE THERRIAULT informed the committee that the Division of Tourism will be writing up a contract and how the different segments of the industry are marketed will have to be evaluated and whether the organization that gets the contract is following through. Keep in mind that the legislature and the Division of Tourism will be hearing from constituents, representing the different segments of the market, if they are being slighted. From year to year, in a continuing review, both the legislature and the Division of Tourism will be able to make changes if certain segments of the industry feel they have been left out. Number 0671 REPRESENTATIVE HALCRO pointed out that the goal is to raise a minimum of $10 million with $6 million coming from the private sector and $4 million coming from the state's general fund. He asked if the private sector is unable to raise the $6 million whether the state would still have to come up with $4 million. REPRESENTATIVE THERRIAULT explained that the Division of Tourism would be able to continue the marketing effort if the industry was unable to match the funds. REPRESENTATIVE HALCRO referred to a letter from Skagway in which the residents of Skagway voiced their concerns with regards to the costs they would have to bear in order to participate in the program and that they didn't think they would be able to participate. He said that this means some of the smaller communities may not have the resources to participate and it may be difficult to reach the $6 million. He asked how that would affect the program. Number 0727 REPRESENTATIVE THERRIAULT responded that in order for the contract to continue the awarded trade association would have to come up with the required match. REPRESENTATIVE CISSNA expressed concern with regards to Alaska's underdeveloped tourism sector in the individual small concessions and those opportunities that haven't been realized yet may be overlooked by the association that receives the contract. REPRESENTATIVE THERRIAULT pointed out that if a particular niche market is identified it could be negotiated into the contract. Number 0855 REPRESENTATIVE KERTTULA wondered if any other states run their tourism with contracts. REPRESENTATIVE THERRIAULT replied that he is not aware. REPRESENTATIVE KERTTULA requested clarification on whether the original contract, when awarded, will require matching funds of 30 percent, and if extra things are done thereafter whether matching funds will still be required. REPRESENTATIVE THERRIAULT responded that he is not sure what is meant by "extra things". He used the ferry incident in Canada as an example of where the state could do something extra and require a match from the trade association, although, the state can't require a match of the trade association and not require a match by some other means which could also address that need. Number 0943 REPRESENTATIVE ROKEBERG expressed concern about the prohibitions in HB 136. For example, in Section 6, AS 44.33.120 is amended by adding a new subsection which prohibits the Division of Tourism from entering into any other campaign or contract. It seems that there could be contract provisions that the division could put together that perhaps the qualified trade association (QTA) wouldn't want to entertain. He asked if the division would be allowed to reserve a percentage of those funds to have another contract and then the association is protected because there is the first right of refusal provisions in subsection (b) of HB 125. There are two sections of the bill that seem to be at odds with each other; the prohibition of contract and the first right of refusal. Number 1030 REPRESENTATIVE THERRIAULT explained that with Section 6 the main issue is whether the entire marketing effort is going to be pulled together in one spot with one entity doing it. He referred to the language on page 4, lines 9 and 10, where it reads, "If the qualified trade association refuses a contract offer, the state may not award the contract to another person under substantially different terms." This is the language, he believes, that Representative Kerttula was alluding to earlier. REPRESENTATIVE ROKEBERG requested clarification on the language in Section 6. He wondered if it prohibits another contract from being offered without there being a first right of refusal. REPRESENTATIVE THERRIAULT explained that the additional contracts, referred to on page 4, lines 9 and 10, are for other than general marketing. REPRESENTATIVE ROKEBERG asked, "Is that defined in the bill here?" Number 1119 REPRESENTATIVE THERRIAULT pointed out the language on page 4, subsection (b), where it reads, "the right of first refusal for every other tourism related contract." REPRESENTATIVE ROKEBERG asked how there can be other contracts if other contracts are prohibited in Section 6 of the bill. He stated that it seems there is a technical problem with the bill. REPRESENTATIVE THERRIAULT explained that it comes down to marketing versus other efforts of state money. He agreed that the language was confusing initially, and he thought that the language on page 4, subsection (b) should have said, other tourism marketing related activities, but realized that is not the way it is intended to work. The language only refers to other non-marketing efforts. Number 1178 REPRESENTATIVE HALCRO offered a scenario. If the state, after the contract date, receives money to promote a specific tourism function, say the Alaska Marine Highway System, he wondered if this legislation would prohibit the state, without taking money away from the tourism effort, from promoting the Alaska Marine Highway System. REPRESENTATIVE THERRIAULT responded, "I'm not sure of the answer." He was thinking that the general fund spending level would be set on a yearly basis. Number 1275 DEBORAH SEDWICK, Commissioner, Department of Commerce and Economic Development(DCED), introduced Jeff Bush, the Deputy Commissioner, and Ginny Fay, the Legislative Liaison, from the DCED, both of whom have worked hard over the past year on this legislation. She said that the hope was to work with the AVA on a piece of legislation that everyone could live with, but unfortunately the DCED cannot support HB 136 as written. She stated: We agree that the elimination of the Alaska Tourism Marketing Council [ATMC] is necessary with the industry. We also agree with the industry that more dollars need to be spent on tourism marketing. We have also told the industry from the very beginning that any reorganization should be guided by the following principles: that there be strong oversight of state marketing funds, that marketing performed be beneficial to all Alaska tourism businesses and communities, and that any changes made have the support of the entire industry in Alaska. The current purposes of the Division of Tourism include, among other things: to ensure the economic benefits are retained in state to the maximum extent possible, to maximize resident employment, to ensure consideration of local community goals and impacts, and to promote tourism opportunities along the highway system, including the Alaska Marine Highway System [AMHS] and in rural areas. These purposes that specifically pertain to ensure benefits go to all Alaskans, and are dispersed throughout the state and retained in Alaska, are deleted in HB 136. These goals are at the heart and the mission of all activities of the Department of Commerce and Economic Development [DCED]; we are committed to long-term sustainable growth in tourism and that those benefits flow from the urban centers to the rural areas. Under this bill the state is expected to turn over public money to private industry without any assurances that Alaskans or Alaska businesses will benefit. Because there is only one qualified trade organization [association] [QTA], there will be no competition for the contract. The state cannot contract out with anyone else. This is not privatization, it is outsourcing, something that is typically not done when there is only one entity capable of bidding or doing the work. the state needs the flexibility of more than one contract if the association is not willing or able to conduct all the pieces of the marketing plan developed jointly with the industry. It is in our interest to have one contract with a qualified trade organization [association] because it will leverage their money. So, to the extent possible we want as much money from the state coffers to go to be leveraged. However, it is worth noting that the Division of Tourism cooperative program with the Yukon government currently leverages other funds to a greater extent than will be required under this legislation. The ability to have more than one contract also helps ensure that the qualified trade organization [association] is responsive to all the players in Alaska. AVA members are currently 10 percent of the Alaska tourism businesses and membership is disproportionately skewed toward large, outside companies. The "no other contract" section is borne out of the fear that disgruntled local Alaskan players would leverage state funds for other marketing efforts that they believe would provide them with greater benefits. While we agree that marketing should be consolidated and intend to do just that, we do not believe that restricting the use of state funding and contracting should be used to force Alaska businesses to participate in or rely on a program if they do not believe it benefits them. It is poor public policy for us to turn over the money and not have the ability to have the kind of control/responsibility that should flow. There is a match requirement from industry, but no commitments have been made, so the money that would go to the qualified trade organization -- association, would be the contribution from the state at this point and that state only. The bill also removes the ability of the Division of Tourism to conduct research to evaluate the effectiveness of the marketing being done by the organization [association]. In an era when the legislature is adding more requirements for performance measures, why would we give out millions of dollars and not be able to hold the recipients accountable to the state? All that being said, I support SB 350 from last year, a hard fought compromise between the industry and the administration that protected Alaskans, Alaska businesses and Alaska jobs. It also gave the Division of Tourism the ability to retain the authority to conduct direct marketing for new market development or niche markets for small businesses, communities in rural Alaska as directed by the administration or legislature and allowed the division to retain the authority to evaluate marketing effectiveness and the performance of marketing contractors. That bill was passed 20-0 by the Senate and 28-9 by the House. We have not heard any persuasive arguments why that compromise bill is unacceptable today. We have spent the last three years consolidating our overseas trade and tourism offices. We have worked closely with the Alaska Marine Highway System and other departments to market our state assets. We hope to work this year with the Alaska Railroad on similar projects. The qualified trade organization [association] does not see the need to find every opportunity to partner with state agencies to get the job done. We think such partnering is completely reasonable and necessary and that anything less is poor public policy. We support this reorganization, we are not opposed to contracting with a qualified trade organization [association] for tourism marketing in Alaska, and we certainly hope that the millennium plan will raise the necessary dollars from the private sector. It is certainly in the state's best interest to contract out as much money as possible, as I said before, in order to leverage the private sector match. But while public and private interests have much in common, they don't completely coincide. The state needs to continue to take a strong oversight and leadership role in tourism marketing. It is essential to any agreement that we honor the state's role. Number 1579 REPRESENTATIVE ROKEBERG asked if Commissioner Sedwick, in her negotiations with people in the industry, has worked on an outline for the contract. He stated that if the terms and conditions of the contract were being discussed concurrently with HB 136, it would relieve a lot of fears. COMMISSIONER SEDWICK responded that the Division of Tourism put together a menu, so to speak, of things that it felt were important. One concern that the industry has is that the Division of Tourism will try to micro-management the account, but its real intention is to give broad goals and then evaluate them. REPRESENTATIVE ROKEBERG said that it seems the Division of Tourism would feel more comfortable entering into a new organization if it knew what was stated in the contract which guides the organization. Number 1651 COMMISSIONER SEDWICK replied absolutely. She feels that the industry folks are trying to do good things, but if there is a way to look out for the small player and protect the state's interest at the same time, it is worth it. REPRESENTATIVE KERTTULA asked if there are any other states that Commissioner Sedwick knows of that operate their tourism this way. COMMISSIONER SEDWICK responded that Colorado did it for a year and found out that it didn't work for them, because it didn't address the needs of the smaller players. REPRESENTATIVE KERTTULA wondered why SB 350, which was worked out last year and seemed to be a good starting place, was not being used this year. Number 1715 COMMISSIONER SEDWICK explained, "The industry came to us and ... expressed concern and I thought we were rolling down the path of taking a look at 350 and looking at the changes that maybe we could make to that particular bill, which is why we didn't ask for introduction of 350 again. I felt like it would be the administration acting in bad faith to propose that legislation when I knew that the industry had some concerns and some questions about it. ... Obviously we didn't move forward and weren't able to come to you with something intact, or something more like 350, which would be acceptable to us." COMMISSIONER SEDWICK continued, stating that she wanted to answer the question, possibly Representative Halcro's or Representative Cissna's, about the match. It is her understanding that if more funds became available, the Division of Tourism would be required to give that money to the qualified trade association and they would not have to match it. NANCY LETHCOE, Owner, Alaska Wilderness Sailing and Kayaking, testified via teleconference from Valdez. She thanked Commissioner Sedwick for her remarks, as they address many of her own concerns with HB 136. Her business is interested in seeing a version much closer to that of SB 350 reintroduced and it are also very supportive of Senator Elton's bill, SB 122. She expressed concerns with giving of a contract to an association that doesn't exist yet, because it is unknown how the board, that claims to have technical expertise in marketing, is going to be represented. Six years ago she looked at the efforts of the AVA and ATMC marketing program and found that the efforts were aimed at an age group that was ten years older than the average age of Alaskans. The percentage of independent travelers visiting the state had significantly declined, while packaged tours went up. They were not marketing to the independent traveler, and it is the independent traveler that brings the most business to bed and breakfasts, charter boat operators and back country tours. All over the state these type of businesses benefit from the independent traveler, not from the packaged tours which benefit the cruise ships, airlines and hotels. She stressed the importance of the reintroduction of the language that Commissioner Sedwick referred to which was deleted that said that the economic investments derived from tourism in the state are retained in the state and that they ensure that consideration is given, in the development and implementation of the tourism program, to local community goals and objectives. Number 1936 BILL COPELAND, Owner, Raven Sailing Charters, testified via teleconference from Valdez. He said that there are many small business owners, including himself, who are concerned with how they will be represented in the association that eventually develops. It doesn't seem that HB 136 is aiming toward the kind of representation that benefits small businesses, particularly by the funding structure, which tends to lean toward the entities with a lot of money and not small businesses. He is also interested in the funding provisions in SB 122, by Senator Elton, where it seems to spread the funding source over a larger area and lends itself more towards small businesses that collectively make up a large portion of Alaska's businesses. REPRESENTATIVE HALCRO asked if Mr. Copeland is currently a member of the Valdez Convention of Visitors Bureau. MR. COPELAND replied yes. REPRESENTATIVE HALCRO asked if Mr. Copeland is a member of AVA. MR. COPELAND replied that he is not sure, because his wife deals with those arrangements. Number 2012 REPRESENTATIVE HALCRO referred to Mr. Copeland's comment on SB 122 and wondered if he was talking about Senator Elton's Visitor Industry Stabilization Act (VISA) [SB 121 - Excise taxes on transient lodging]. MR. COPELAND responded yes and that the funding structure seems a lot more palatable. REPRESENTATIVE HALCRO requested clarification on whether the funding structure in that piece of legislation [SB 121] specifically targets hotels, motels, transient travelers and overnight stays by cruise ship passengers. Number 2042 MS. LETHCOE interjected, stating that it [SB 121] also targets her and Mr. Copeland's clients, meaning that their clients would also be paying. Number 2074 CAROL KASZA, Owner, Arctic Treks, testified via teleconference from Fairbanks. She thanked Commissioner Sedwick for expressing all of the same concerns that she has with HB 136. She feels that the goals of the Division of Tourism are essential to the survival of small businesses. She stated that she is opposed to HB 136. The funding formula is very likely to fail because it relies heavily on support by the tourism industry, which there isn't much of right now, especially from small businesses. It is a voluntary contribution, so people who are paying will be paying for the people who aren't. With regards to the question about whether another state has tried this approach to tourism, a business consultant from Canada said that a similar privatization plan implemented in Alberta failed miserably. Senator Elton's bill, SB 122, seems like a much more viable plan, especially in terms of the statewide marketing that small businesses really need. REPRESENTATIVE HALCRO asked Mrs. Kasza how she currently markets her business. Number 2174 MS. KASZA replied that they used the Vacation Planner, but it proved to be ineffective, so now they use the Internet primarily. REPRESENTATIVE HALCRO asked what the difference is between the current state expenditure for tourism and the proposed plan if Mrs. Kasza is targeting her specific niche market on her own. MS. KASZA responded that the situation seems to be going from bad to worse. She doesn't see how small businesses will benefit at all from this legislation and the power is going to be consolidated in the hands of one organization with no oversight, no checks and balances and no other ways of thinking about how to attract tourism. BARBARA WINKLEY, Owner, Bed and Breakfast [name not specified], testified via teleconference from Anchorage. She thanked Commissioner Sedwick for her comments on HB 136. She stated that she is in favor of the state keeping control over the state tourism industry and she doesn't feel that the small businesses in Alaska will receive any benefits from HB 136; therefore, she is opposed to it. KEN LEGHORN, Owner, Alaska Discovery Incorporated, and member of the AVA, Juneau Convention and Visitors Bureau and three-year member of the ATMC. Alaska Discovery has seven year-round employees, 60 seasonal employees and is approaching $2 million dollars in sales. He stated that he is frustrated with HB 136 because it seems to be misleading in four ways. One, it is not similar to SB 350, which was hammered out last year. The devil is in the details and the details are a long ways from SB 350. Two, it is misleading in purporting to lead to an increased funding level. The voluntary contributions are very unlikely to reach the levels that are being projected. TAPE 99-4, SIDE B MR. LEGHORN continued, three, it is misleading about the role of the Division of Tourism. The new millennium plan that was circulated to the AVA membership had a role in tourism policy for the Division of Tourism, and HB 136 guts the Division of Tourism and almost eliminates it. Four, it is misleading in terms of industry support that AVA has gotten on HB 136. Most people are in agreement on the marketing consolidation concept, but not in eliminating the role of the Division of Tourism to the extent that is happening in HB 136. He is supportive of SB 350, where it ended up last year. He referred to Representative Halcro's question about how the marketing is going to differ if it was bad in the past. The program elements that people have been complaining about are ones through the ATMC and none of the testimony today has been in support of retaining the ATMC, so there is a pretty widespread agreement that the ATMC needs to go. The Division of Tourism is the one entity that has really been supporting independent travel, small business development, rural tourism, native tourism, cultural tourism, winter travel and international travel, not the ATMC. A lot of the ideas that the Division of Tourism comes up with come in the middle of the year, so it is not necessarily preplanned, but, as Representative Halcro mentioned earlier, as opportunities arise the Division of Tourism is flexible in entering into quick opportunistic contracts. MR. LEGHORN further stated that the committee would find more support in going back to SB 350, and also the committee is probably going to find increasing support for a tourism taxation bill. He informed the committee that he has sat in on many industry meetings where they have talked about having a tax, and they always say, no, there can't be a tax, let's just try this voluntary payment plan. From the point of view of a business who would pay the tax, it is broad based because it hits every single visitor that pays to spend the night in Alaska, which means the day trips do not pay, and since it is not a tax on the business itself, but only on the clients, he said that he supports it. Number 2175 REPRESENTATIVE ROKEBERG noted that there have been comments in previous testimony, from other small tourism businesses, about the lack of effectiveness of the Vacation Planner. He asked Mr. Leghorn if he had any remarks with regards to that. MR. LEGHORN replied that what drives the ATMC is the need to generate names based on a business reply card that potential visitors send in. Those names can be bought and then become a part of a direct mail program, which large businesses benefit from because they can afford it. In order for the direct mail program to work a business has to be sending out a large volume of promotional material. The only thing that is really available through the direct mail program for small businesses is the Vacation Planner, but now that there are so many businesses in the Vacation Planner, it is not very effective. For most small businesses the program of the ATMC is not producing enough direct benefits, but they are producing good public relations for all of Alaska on independent travel and adventure travel, and that is what is beneficial to the small businesses. Number 2086 STEVE BEHNKE, Executive Director, Alaska Wilderness Recreation and Tourism Association (AWRTA), explained that AWRTA, founded in 1992, is a statewide trade association that consists of approximately 300 members and most of the AWRTA members are small Alaskan owned and operated tourism businesses. The mission of AWRTA is to support the state's highest potential market in the tourism industry, which is the independent traveler. AWRTA has worked closely with AVA and the Division of Tourism and has come to the decision that HB 136 is not going to work. AWRTA has consistently supported a new consolidated tourism marketing organization as long as it really represents the full range of Alaska's businesses and provides a strong role for the Division of Tourism in establishing a tourism development policy. It seems really short-sighted if the industry pushes for something that appears industry dominated, but doesn't reflect the public interest and those things need to be incorporated into the plan. HB 136 doesn't retain a strong role for the Division of Tourism in the state. Some of the key purposes that are in existing legislation, such as, the benefits derived from tourism are retained in the state, but have been dropped from this legislation and that is a mistake. For a lot of the reasons outlined by Commissioner Sedwick, AWRTA believes that HB 136 ties the state's hands in doing the things that are appropriate and necessary for the state to be doing. Also, HB 136 doesn't outline what the new organization is going to look like, and if the public are going to turn the roll over to a private group there needs to be more specifics about them. MIKE MCBRIDE, Owner, Kachemak Bay Wilderness Lodge, testified via teleconference from Homer. He noted that Commissioner Sedwick's testimony was very eloquent and advised the committee to study her comments carefully. He added that the testimony given by Nancy Lethcoe from Valdez, Carol Kasza in Fairbanks, Ken Leghorn and Steve Behnke consisted of the same points that him and his wife would like to make. He also is opposed to HB 136 and supports the concepts outlined in SB 350 and SB 122. His business, started 30 years ago, operates about 6 months out of the year and there are 5 or 6 year-round staff people and about 15 seasonal employees. His business receives approximately 300 clients per year, who usually add other trips onto their stay in Alaska. It is clear that the grassroots of the tourism economic structure that is the most vital part of the economic picture. He has not been involved with or supportive of AVA and many of the state's tourism programs, because they don't seem to do much good for small businesses. He determined that in order to survive as a small business you have to do it yourself. He referred to Representative Halcro's question about belonging to the AVA and use of the Vacation Planner, and said that a lot of things put out to small businesses as appropriate ways to participate really end up being blind leaps and bad advice. He encouraged the committee to seriously take into consideration the testimony that was given by AWRTA, because it was reasonable and carefully put forth. Number 1791 REPRESENTATIVE HALCRO asked Mr. McBride how he has kept his business alive without the help of the AVA or the Department of Tourism. MR. MCBRIDE responded that they have done it on their own. He did not intend to disparage the efforts of those organizations, because clearly they serve a purpose. They just aren't as effective in serving the grassroots of the state's tourism economic structure as they are in serving the mass market. REPRESENTATIVE HALCRO stated that in 1989 the state spent $15 million on marketing Alaska and this year it's $6.5 million, so we are talking about a $4 million match from the state. He asked how, if you're not satisfied with the results and direction of the program when the state is spending $15 million, are you going to be satisfied when the state is only matching $4 million. MR. MCBRIDE replied that the answer to that is in the testimony given previously today, specifically, that the money is not targeted to grassroots efforts which are more important to the economic structure than people realize. Number 1702 TINA LINDGREN, Executive Director, Alaska Visitors Association (AVA), stated: I'm partly responsible for the fiasco that you've heard about so far. In reality, this is the charge that the legislature has given to the visitor industry and especially to AVA over a number of years, which was, find a way to fund this because the state government is no longer going to step up to the plate to the level it has in the past. That was your specific charge to us, and over a number of years we've brought forward a proposal. It hasn't been easy, and as you can clearly see, it's still not easy. We did over a years worth of research on different funding mechanisms, on different tax proposals, on different alternatives. We surveyed the industry twice, not AVA members, but the entire industry. The most recent mailing was to 6,000 businesses to find out what they wanted to do and how they wanted to come forward and turn around this back slide in marketing. I think that many of the speakers that you've heard from have legitimate concerns about what happens when you go from $15 million down to the kind of budget level we have today, because you can't do nearly as much as you should be able to, and it's especially hard on the small businesses because the large ones have enough money that they can effectively market their own businesses, while the small businesses are totally reliant on some kind of a program that bring visitors to the state in general. There are some misconceptions I would like to clear up though. AVA is 90 percent small members today, it's not primarily made up of large members. The bill that you see before you is based on 350. One major change, there are several minor ones that are technical that were thought to be a way to clean up some of the things that were in there, but the major change is that it calls for all marketing to be consolidated rather than the ability to have multiple contracts. The original plan that was mailed out to the industry called for all marketing to be consolidated. The legislation that was introduced last year left the ability to have more than one marketing contract. That was legislation which we supported, but at the end of the day did not pass, did not make it through the final hours, and there were some legislators that voted against it for that very reason. We have been working with the department, over the last year, to try and figure out a way to build in enough safeguards that it was comfortable with having all the marketing in one place and unfortunately we have not figured it out, but that's the it central difference. What's in the contract or what's in HB 136 really sets up the mechanism for getting money to operate with the private sector. It doesn't set up the funding mechanism of how the industry comes up with money and it doesn't outline some things that are not in the legislation that you may want to know about, which is the new organization will only have one vote for one business. So the best way that people can insure their representation is to be a part of that organization. It is very difficult to do something that makes everyone involved and makes everyone happy, but I do feel that with the state having the contract with the department having control of that contract that they certainly have the opportunity to build in enough safeguards to feel comfortable. ... There is one clause in there that allows additional funds to be added throughout the year, and you were asking about that earlier, if a market need arises. There really isn't necessarily time to go out to the industry and raise the marketing funds if there's an emergency, but that does allow the state or the department to add money to that contract if there is a market need that arises. I don't know that there is a perfect formula out there. I don't know that there is a perfect plan, but I know that we have done our best to come to the table with a plan that we think will work and that 90 percent of the people that we've heard from have said that we should move forward with this plan and we're going to continue to work on where the problems are and when the new organization is constituted; I'm sure they will do the same. Number 1498 CHAIR PHILLIPS asked Ms. Lindgren if she would repeat the percentage of small businesses in AVA. MS. LINDGREN replied that 90 percent of the businesses in AVA are small, as is reflected throughout the Alaska tourism industry. REPRESENTATIVE CISSNA wondered how many members are in AVA and what their profile is and how the members participate in the AVA negotiations. Number 1451 MS. LINDGREN explained that AVA has approximately 650 members and they are business organizations not individuals. Those businesses employ about 25,000 Alaskans total. They are statewide and consist of everything from bed and breakfasts to airlines to cruise companies. The businesses that were referenced in the surveys consisted of, not only AVA members but AWRTA's members and every standard industrial classification code that has to do with tourism, so that way it wasn't only input from AVA members. REPRESENTATIVE CISSNA wondered what kind of response AVA got from the surveys. MS. LINDGREN replied that there were several different surveys with different response levels, meaning, not everybody responded to every survey. REPRESENTATIVE CISSNA asked what the cost is to be a member of AVA. MS. LINDGREN responded that it starts at $300 in its voluntary level and the new plan has a $200 entry level for the smallest businesses which includes an advertisement in the Vacation Planner. Presently, to have an AVA membership and an advertisement in the vacation planner the cost is $500. She added that AVA is not relying solely on the survey responses. They have also had public discussions and other organizations have held their own meetings as well. AVA has a contract presently with the DCED that sets up the ATMC and those contract negotiations have gone well. She suspects that with the new organization it would be similar. Number 1313 REPRESENTATIVE HALCRO pointed out that part of the concern of the department is that it is chipping in $4 million and there's no accountability for it. He asked Mr. Lindgren if she would discuss accountability. MS. LINDGREN explained that any time public money or state funds are received there has to be accountability, first to the legislature. As it is now, the legislature appropriates money every year to both the Division of Tourism and the ATMC. She presumes that the legislature would have no less accountability with the appropriation then they have currently. In addition, she expects that through the contract the legislature would have some goals that the Division of Tourism would set forth and hopefully the industry is in agreement as to what they want to pass. The Division of Tourism, currently, does not send out to the ATMC a list of guidelines nor does the industry have any control or say over what the Division of Tourism does. Number 1250 REPRESENTATIVE HALCRO stated that there are a lot of small businesses in the state that feel they are going to be overlooked, indicated by the testimony today, and small businesses in this state, where there are niche markets, are going to get overlooked unless they're out there banging the drum themselves. He asked Ms. Lindgren if she would talk about how HB 136 addresses the needs of the small businesses. MS. LINDGREN replied that the biggest need of the small business is to get people to come to Alaska. First, there needs to be an overall increase in marketing and, second, there needs to be an organization that the small business can participate in with one vote. The hope, by AVA dismantling itself, is that more people will step up and help decide what the marketing message needs to be. Number 1182 REPRESENTATIVE ROKEBERG referred to Ms. Lindgren's comment about a new organization. He asked if she was talking about a qualified trade organization (QTA) and how the new organization is going to be created. MS. LINDGREN referred to "The New Millennium Plan" where it states that a new organization will be created. She informed the committee that a transition team has been appointed and the hope is that the three existing organizations will remain in place while the new organization becomes established. REPRESENTATIVE ROKEBERG indicated that the biggest impediment, in terms of the industry and the Division of Tourism coming to an agreement, seems to be a control factor. MS. LINDGREN agreed. REPRESENTATIVE ROKEBERG asked, "What do you think the biggest problem is, within the industry, of trying to generate a comfort level to make the match; is it control factor again, or what?" Number 1112 MS. LINDGREN responded that she does believe that the control factor is a part of it. The industry has said that if they are required to come up with a certain amount of money then they believe that the plan should be industry led. She continued, "It's also true that if we try to get more money into the state now we can't necessarily even give more money, because you're not wanting to show an increase on the program receipt side. ... Some of the problems stem from, number one, change is hard; people are afraid of change. Number two, they're afraid of will I be represented in the end; are my interests going to be looked out for and whose going to control this. ... I think those are the things people are worried about." Number 1064 REPRESENTATIVE ROKEBERG pointed out that some of the provisions in HB 136 seem to be out of sync, because there are prohibitions on what the state can't do, not on what the new organization would do. It doesn't seem to represent the spirit of negotiation, but on the other hand if the Division of Tourism wants some control isn't the new organization going to grant some of the requests of the division. MS. LINDGREN pointed out that HB 136 had many changes that were requested by the Division of Tourism and the industry was probably willing to go to the table and make more changes. The change, that seems to be holding things up, is whether the state will get out of the marketing business. It will be very difficult to bring all of the dollars to bear and all of the players together, if the state has the ability to take money and do more than one contract. REPRESENTATIVE ROKEBERG wondered if the members of the transition team would be more comfortable if the terms of the contract were more clear. MS. LINDGREN stated that she was not sure she was understanding Representative Rokeberg's question. REPRESENTATIVE ROKEBERG clarified the question. He asked if the terms of the contract were more clearly spelled out would it generate more comfort with the AVA. MS. LINDGREN explained that the concern is whether or not there will be more than one contract, because the old legislation allowed for that. Number 0957 REPRESENTATIVE ROKEBERG expressed concern, "There could be certain niche areas or certain areas that the new QTA wouldn't be willing or may not -- may give short shrift to putting resources into and the department [division] may see that as a problem. ... I don't understand why there couldn't be parallel programs if, in fact, you didn't want to in the specifications of the contract, except that, that particular scope of work. ... If you had the scope of work attached to a monetary percentage amount, or something, then they could just opt in or out of the menu. I mean, I don't understand what the problem is here." MS. LINDGREN responded that in the past, competing programs have been set up are for different purposes, which leads to a situation like the current one where you don't know where to go for which program. In some cases, different departments are trying to raise funds from the same people. She believes that it would be feasible to have some of things discussed today implemented into the contract. Number 0866 REPRESENTATIVE KERTTULA wondered what Ms. Lindgren's definition is of a small business. MS. LINDGREN responded 50 employees. REPRESENTATIVE KERTTULA requested clarification on whether Ms. Lindgren meant 50 employees or under. MS. LINDGREN replied yes. REPRESENTATIVE KERTTULA inquired about whether it was 90 percent, of the 370 people that responded to the surveys, that favored "The New Millennium Plan". MS. LINDGREN replied that is correct. REPRESENTATIVE KERTTULA asked if those people got to review HB 136. MS. LINDGREN responded that the bill did not go out to them. The plan calls for many more details than HB 136. The bill sets up the mechanism whereby there is no ATMC and the Division of Tourism cannot contract, but the funding source is not in the bill. Number 0772 TODD BUREAU, small business owner [business name not specified], testified via teleconference from Hope. He said that he would like to echo Commissioner Sedwick's remarks. His business is a member of AVA, but he doesn't feel that his business has been entirely well represented. The common term used is "the industry does this, the industry does that," but in reality it is an element of the industry. He feels that HB 136 seems to circumvent many of the processes that were in SB 350 and deletes some of the terminology, but it does guarantee a certain level of representation. He is afraid to see the Division of Tourism reduced to a contract awarding committee, because he believes that the state is an important element in keeping control of a vital industry such as tourism. He stressed his opposition to HB 136 and said that the state should reconsider its role in the process. Number 0673 BOB DINDINGER, Vice-President of Government Relations, Alaska Visitors Bureau (AVA); President, Alaska Travel Adventures (ATA), stated that many of the comments were well dealt with by Tina Lindgren. He asked the committee to take a more global view on tourism marketing and where it is today. He has spent 30 years marketing Alaska tourism; ten of those years with the state tourism office during the 1970s. In those years there was money to burn, and much of it was spent on television marketing. More money was spent on television than is spent now on the entire tourism marketing program. There was very little conflict between small operators and large tour companies, because there was enough money to cover all the bases. Tourism was growing in Alaska at double digit rates of increase. MR. DINDINGER further stated that today half as much money is being spent and all the bases are not being covered. Some of the small niche markets are not being dealt with well. There is virtually no advertising for Alaska on national television and television is the most cost effective method for reaching people in North America, because you can buy an impression on television for more people than any other mechanism. Unfortunately, it's not possible to have a small television program. MR. DINDINGER continued, stating that it is tougher now for businesses to sell their product than it was in the 1970s. There are way more businesses, because, with the decline of other economies in Alaska, more money has been invested in tourism and it is a more competitive industry. We are beginning to feed on ourselves, instead of having a big enough pie so everyone can get a bite, now some people are getting smaller bites. The whole agenda to create a new marketing scenario for Alaska comes from trying to come up with a mechanism in which enough money can be invested. The $10 million is not enough money, but it is a start in the right direction and it provides an opportunity for growth. He is confident that the industry will come up with its matching contribution. The industry eats at this table, not the government and if there isn't enough money spent then the industry will suffer the consequences. MR. DINDINGER concluded that the reason for having a new organization is so there isn't a battle every year on whether the ATMC gets the money or the Division of Tourism gets the money. The last couple of years the issue has been who's going to take the hit when the budget gets cut back. Also, AVA wouldn't be a part of that battle either. There is a handful of truly large companies in Alaska and they would only get one vote, which means they get the same number of votes as the small businesses. The small businesses are just as empowered to elect representatives that will protect their interests as much as anyone else. Number 0386 REPRESENTATIVE HALCRO asked Mr. Dindinger how many people he employees in Juneau. MR. DINDINGER replied that they employee about 20 in the winter and 200, statewide, in the summer. REPRESENTATIVE HALCRO referred to Mr. Dindinger's comment about the fact that the needs of small businesses are not being met. He asked Mr. Dindinger how he gets people to his doorstep. MR. DINDINGER responded that many of ATA's customers come to them because of their alliance with other businesses. They also have to hustle their business by going to meetings with travel agents and tour wholesalers, as well as, advertising. REPRESENTATIVE HALCRO wondered if Mr. Dindinger has read SB 122 and what his feedback is on it. Number 0256 MR. DINDINGER stated that there are several problems with SB 122. One of which is that there are not broad based dedicated taxes in Alaska and he sees it as problematic. He knows that everyone in the legislature is a person of integrity, but as the oil money diminishes the demands on tax revenues will be stretched and that is troublesome. He believes that a lot people will be contributing to this program knowing that if they don't raise their share of the $6 million dollars that the alternative is a tax. Another problem with that legislation is that it allows money to be spent on things other than marketing. MS. KASZA responded to Ms. Lindgren's comments about the opportunity for a broad range of people to participate in the survey. She was one of the people that filled out the survey, late in the game, and none of the concerns that she expressed in there seem to be reflected. AWRTA's president, Kirk Hoessle, made it very clear that if AWRTA's concerns were not incorporated into "The New Millennium Plan" that AWRTA would not support it. DEROTHA FERRARO, Homer Chamber of Commerce, stated that out of the 412 members of the Homer Chamber of Commerce 402 of them have fewer than 5 employees; therefore, she truly feels that she represents small businesses in the state of Alaska. TAPE 99-5, SIDE A Number 0024 MS. FERRARO continued, stating that the Chamber of Commerce Board of Directors supports the concept of HB 136, but she is not clear on the differences between SB 350 from last year and HB 136. She does believe it comes down to the control issue. All of the businesses in Homer have had the opportunity to learn about this issue, voice their opinions and get involved. The question, that surfaced earlier, as to whether the AVA circulated the proposed legislation, she received it, but believes that it is up to the individual to obtain that information for themselves. The Homer Chamber of Commerce feels that the concept of cooperative marketing is the direction to go. They are not interested in the concept of a tax, but they definitely support the concept of a match with the Alaska State Legislature providing funding and the private sector matching that. Number 0250 ANN CAMPBELL, Vice-President, Alaska Village Initiatives, stated that she doesn't pretend to represent all small businesses in the state, but she does work with a lot of them. It is not fair to say that all small businesses are not supportive of the existing program and/or the idea of trying to do consolidated marketing. The job of the state of Alaska is to bring visitors to Alaska. The businesses know that they will have to fight over those people after the state finds them, but for many small villages, the state, getting the word out, is their only hope. As the chair of the transition team she believes that she represents a broad constituency. The idea was to reach out and get as much feedback from people as possible, so the opportunity is there and a real effort was made. CHAIR PHILLIPS announced that HB 136 would be held in subcommittee and the members would be Representatives Halcro, Barnes and Kerttula, and Representative Halcro will chair the subcommittee. ADJOURNMENT Number 0506 CHAIR PHILLIPS adjourned the House Special Committee on Economic Development and Tourism at 6:55 p.m.
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