Legislature(2009 - 2010)CAPITOL 106
03/09/2010 05:15 PM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation: the Alaska Alliance for Cruise Travel (alaskaact). | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
March 9, 2010
5:15 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative Mike Chenault
Representative Mark Neuman
MEMBERS ABSENT
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Reggie Joule
Representative Harry Crawford
Representative Lindsey Holmes
Representative Chris Tuck
OTHER LEGISLATORS PRESENT
Representative Alan Austerman
COMMITTEE CALENDAR
PRESENTATION: THE ALASKA ALLIANCE FOR CRUISE TRAVEL
(ALASKAACT).
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
FRED REEDER, Member
Alaska Alliance for Cruise Travel (AlaskaACT); Port Manager
Cruise Line Agencies of Alaska
Sitka, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
CHRIS MEIER, Member
Alaska Alliance for Cruise Travel (AlaskaACT); Vice President
Alaska Travel Adventures
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the Alaska Alliance
for Cruise Travel (AlaskaACT) and Alaska Travel Adventures.
BOB JANES, President
Gastineau Guiding Company
Juneau, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
CHIP THOMA, President
Responsible Cruising in Alaska (RCA)
Juneau, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
ALAN LEMASTER, Outfitter
Copper River Salmon Charters
Gakona, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
JOE GELDHOF, Legal Counsel
Responsible Cruising in Alaska (RCA)
Juneau, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT) as the primary
author of the 2006 Cruise Ship Initiative 2.
CAROL FRASER, Regional Director for Sales and Marketing
ARAMARK Parks and Destinations
Anchorage, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
TYLER HICKMAN, Vice President-Operations
Icy Strait Point
Hoonah, Alaska
POSITION STATEMENT: Testified during the presentation by the
Alaska Alliance for Cruise Travel (AlaskaACT).
ACTION NARRATIVE
5:15:28 PM
CHAIR JAY RAMRAS called the House Special Committee on Economic
Development, International Trade and Tourism meeting to order at
5:15 p.m. Representative Ramras was present at the call to
order. Representatives Neuman and Chenault arrived as the
meeting was in progress. Representative Austerman was also in
attendance.
^PRESENTATION: THE ALASKA ALLIANCE FOR CRUISE TRAVEL
(ALASKAACT).
PRESENTATION: THE ALASKA ALLIANCE FOR CRUISE TRAVEL
(ALASKAACT).
5:16:27 PM
CHAIR RAMRAS announced that the only order of business would be
a presentation by the Alaska Alliance for Cruise Travel
(AlaskaACT). Chair Ramras disclosed that he works in the
hospitality industry, and indicated that committee members are
cognizant of that fact, and that [once more members arrive he
would be handing over the gavel].
5:19:03 PM
FRED REEDER, Member, Alaska Alliance for Cruise Travel
(AlaskaACT); Port Manager, Cruise Line Agencies of Alaska,
informed the committee that AlaskaACT is an organization
concerned with the decline in the cruise ship volume coming to
the state of Alaska, and the economic impact thereof. He opined
that in 2008, Alaska hit the "high watermark" for cruising and
the volume would have stayed in the 1,100,000 range for the
future, except for the intended and unintended consequences of
the 2006 ballot initiative. As a result of that legislation,
cruise executives were convinced to serve their stockholders
with a higher yield and return by going to other destinations.
Mr. Reeder emphasized that cruise line schedules are set two
years in advance, thus the effects of the ballot initiative that
became law 1/2007, were not felt until the fall of 2007. Like
other industries, cruise lines attempt to maximize revenue
wherever possible, and he pointed out that whereas other Alaska
businesses are tied to the land and are unable to move their
assets, cruise ships are moveable assets that can be moved to
"where they can make the most money." Mr. Reeder opined
providing an environment for businesses in the state to make a
profit is "not a dirty word." Through profit is the way
everyone can obtain a job. The decline in cruise passengers for
2010 and 2011 will result in a loss of 1,800 jobs in the visitor
industry beginning this summer. He referred to a study by the
McDowell Group that indicates there will be $165 million less
spent in the state, and a reduction to payrolls of $72 million.
Mr. Reeder compared the losses against an estimated gain of $70
million from the initiative, and noted that of the revenue to
the state, much of it cannot be spent on schools, roads, or
other community needs. He provided a chart that showed the City
of Sitka received $1,448,765 in sales tax revenue from cruise
passengers in 2008, and sales tax revenue from cruise passengers
in 2011 is estimated to be $525,000.
5:24:48 PM
MR. REEDER continued to explain that the effects of this
reduction are grave for the City and Borough of Sitka. For
example, revenue from the initiative may be $1 million; however,
this revenue is tied to benefit only cruise passengers, and
cannot be used for schools, gymnasiums, or recreation programs.
He expressed his belief that the city is better off receiving
the same amount of money in sales taxes. Furthermore, if Sitka
needs cruise ship infrastructure, the cruise industry would pay
for the improvements that are needed. Mr. Reeder said the
recession is not the reason cruise ships have been redeployed to
other destinations, but that the revenue generated is less in
Alaska, and the ships are going to areas such as Europe, the
Baltic, and the Mediterranean. He acknowledged that cruise
companies should not be exempt from paying their share, but they
should not be held to a higher standard than other business in
the state. For example, communities in the state could not
afford to meet the same waste water regulations that are
required of the cruise industry. He said, "If it's good enough
for our communities, it ought to be good enough for the cruise
ship."
CHAIR RAMRAS noted that he was "very comfortable to take
testimony, but not to pose questions from the chair."
5:29:59 PM
MR. REEDER said he was glad his testimony would be heard on
Gavel to Gavel. He indicated his concern that he is unable to
provide jobs to the youth in his community this coming summer.
He concluded that Alaskans need to work together for jobs in
their communities.
CHAIR RAMRAS offered brief comments about various industries and
items of interest in Sitka.
5:34:46 PM
CHRIS MEIER, Member, Alaska Alliance for Cruise Travel
(AlaskaACT), and Vice President, Alaska Travel Adventures,
relayed that he has been involved in the visitor industry in
Alaska for 17 years, and tourism has given his family the
opportunity to live and work in the safe and pristine
environment of Alaska. He said he has serious concerns about
the future of the visitor industry, and the impact that the
ballot initiative is having on his business and others like it.
Alaska Travel Adventures operates tours and attractions
throughout the state, and his experience is that the cruise
industry is important to communities in Alaska for the jobs it
provides. He opined 2006 Ballot Measure 2 threatens the
stability of the industry and the families it supports. In
truth, the head tax is a $50 million cost increase imposed on
the cruise ship industry that is already in a high operational
cost location. Alaska is now at a competitive disadvantage with
other global cruise destinations, and cruise lines are
redeploying ships to less costly destinations. Mr. Meier
expressed his belief that the initiative is driving business out
of Alaska; in fact, targeted taxes are not the way to improve
Alaska's economic situation. Furthermore, the tax is not just
on outsiders, but is affecting small businesses across the state
during an already challenging economic environment. He re-
stated the revenue statistics, and said that economic and job
loss will be far greater than any benefit derived from the tax
itself. Also, current estimates are that there will be between
1,800 and 2,100 fewer industry jobs this year, with the
resulting negative impact to each community. Alaska Travel
Adventures in Juneau has reduced its full-time staff from six to
four employees. In addition, his office will hire approximately
15 percent fewer seasonal staff, for a total loss of sixty
seasonal jobs statewide. His personal experience in the
industry began as a seasonal employee, and he wondered if the
same opportunity will be available if the decline in the
industry continues. Mr. Meier pointed out that many local
communities have become dependent on the industry for sales tax
revenue, and warned that without the repeal or modification of
the initiative, businesses and local governments will suffer
from fewer jobs, reduced economic activity, and reduced revenue.
Because of the lapse of time in cruise line scheduling, he
expressed his hope that action will be taken this legislative
session to repeal or significantly modify Ballot Measure 2.
CHAIR RAMRAS turned the gavel over to Representative Neuman.
CHAIR RAMRAS asked for the projected decline or increase in
employment for Alaska Travel Adventures.
MR. MEIER said the staffing plan presently calls for an
approximate 15 percent reduction of staff statewide.
5:42:35 PM
BOB JANES, President, Gastineau Guiding Company, explained that
Gastineau Guiding Company is a local eco-tour operation that has
been in business in Juneau for about 15 years. His business was
based on the tourism opportunity presented by the visitors
brought to Juneau by the cruise ships; this opportunity is also
appreciated by many other towns in Southeast, and throughout
Alaska. He assured the committee his employees work hard to
provide an incredible experience for people, but his company
needs the cruise ships that provide "business coming to our
doors." Mr. Janes said his main concern is to look at the
intent of the voters when Ballot Measure 2 passed. He opined
the intent of the Alaska voters was not to cut back on the
number of visitors, or to see businesses like his reduce their
donations to non-profits because the market is shrinking.
Another result the voters did not intend is to see the
infrastructure shrinking rather than growing, and he listed some
of the improvements in Juneau that were based on the involvement
of the cruise industry. He said he also does not believe that
the intent of the voters was to see the job market and
opportunities for young people, diminished. Mr. Janes urged
voters to contact their legislators and make clear the intent
behind passing Ballot Measure 2.
REPRESENTATIVE NEUMAN asked Mr. Janes what the intent of the
voters was.
MR. JANES responded that he feels the voters want the industry
to pay for itself. Unfortunately, he added, the $50 head tax is
excessive; in fact, it is difficult to spend that much money on
infrastructure directly related to the cruise ship industry.
Although eliminating the tax would be a mistake, leveling the
tax, and making it fair, would continue to encourage cruise line
visitation, provide for a more affordable experience for
visitors, and continue to bring resources into the state.
REPRESENTATIVE NEUMAN asked whether the voters understood the
ballot initiative.
MR. JANES said he did not think so, adding that he probably did
not either. Acknowledging that "it is easy to vote for a tax,"
he re-stated that most people did not realize "who would be
paying for it, or what the loss might be."
5:50:41 PM
CHIP THOMA, President, Responsible Cruising in Alaska (RCA),
stated that the recession is over; in fact, Carnival Cruise
Lines announced on 2/24/10, that it is raising ticket prices
worldwide by 5 percent, and in Alaska ticket prices were raised
by 21 percent. This difference was revealed when the state
purchased tickets for the Division of Water, Department of
Environmental Conservation (DEC), Ocean Ranger program. He
opined this increase is good because that means that the economy
is improving dramatically, nationally and worldwide. Mr. Thoma
concluded that prices will increase, along with the increased
interest in travel to Alaska. Also, he related that through a
Freedom of Information Act request to DEC, Ocean Ranger ticket
purchases further reveal that there are three categories of
prices: basic price; taxes and fees; gratuity. The average
taxes and fees paid by a customer coming to Alaska is $140,
although the state and local taxes are $66. This discrepancy is
explained because the additional taxes and fees are going to
private vendors and private dock owners. He offered the
following examples: in Skagway, taxes and fees are paid to the
White Pass & Yukon Route Railway; in Whittier, they are paid to
the dock; in Seward, they are paid to the Alaska Railroad
Corporation; in Hoonah, they are paid to the dock. Mr. Thoma
continued to explain that the average gratuity charged to each
ticket to come to Alaska for one week is $80, and he expressed
doubt about the disbursement of gratuities to staff. He opined
$80 million per year was being collected in gratuities, and he
encouraged further investigation into this matter.
5:54:35 PM
CHAIR RAMRAS asked Mr. Thoma to address the testimony from small
business people across the state about their businesses,
families, and livelihoods.
MR. THOMA said he believes the economy is turning around, and
that the economy will improve. In further response to Chair
Ramras, he said the loss of employees and "personal situations,
family situations, employment situations, all of those are on
the mend, they will improve in the next year or two."
CHAIR RAMRAS clarified that he was not asking about situations,
but about people and families.
MR. THOMA expressed his empathy for those who testified, and his
confidence that personal things will improve in the years to
come.
5:57:00 PM
REPRESENTATIVE NEUMAN referred to the statistics offered
regarding Sitka's loss of revenue. He offered his understanding
that the recovery will be slower than the decline. He asked
whether the economy will return to the level of 2008 within four
years.
MR. THOMA stated his belief that the economy will return to the
level of 2008 within three years. He added that the last 25
years of the cruise ship industry in Alaska has shown a 15
percent increase almost every year. The last few years have
shown a 5 percent increase; in fact, 2008 was the highest year,
and in 2009, volume was flat for the first year ever. He
concluded that this is an industry that will bounce back.
REPRESENTATIVE NEUMAN observed that ticket prices could be
raised due to the increase in operating expenses, such as fuel,
and a decline in ridership. He opined that the increase in
prices was imposed to cover base costs after ridership was down
64 percent.
MR. THOMA stated that ridership is not down; in fact, all of the
ships to Alaska are full.
There followed brief comments on the interpretation of numbers.
6:01:46 PM
ALAN LEMASTER, Operator, Copper River Salmon Charters, recalled
that three years ago he employed three and one-half guides full-
time and four or five others, and those numbers have declined
each year. There has also been a marked decline in his business
as a vendor for the Copper River Princess Wilderness Lodge of
about two-thirds. He said his overall business has declined in
the last three years to about one-third. Mr. LeMaster stated he
will try to stay in business this summer with no employees and
one commissioned guide. Furthermore, Princess Tours has cut 30
days from its schedule at the hotel, and reduced its fleet by
one ship per week. This reduction is equal to 130,000-150,000
guests who will not come to Alaska.
MR. LEMASTER continued to explain that this critical problem is
based on two things: (1) there is insufficient money to market
the state appropriately; (2) the burden must be taken off of the
cruise ship industry so that they can bring the ships back to
Alaska. He agreed that this is the first decline in visitors to
Alaska since 1953. Now, however, there is a 20-25 percent
decline, and he asked legislators to bolster the industry by
providing funds to market Alaska tourism to the world, and by
easing the pressure on the cruise ships. Mr. LeMaster warned
that without these measures, the visitor industry will shrink to
a size smaller than it was 25 years ago.
REPRESENTATIVE NEUMAN offered his belief that the Copper Center
area is one of the most highly advertised and popular areas of
the state for tourism. He assumed Mr. LeMaster was in a good
position and well established.
MR. LEMASTER emphasized that his business is "on the ropes,
too." The Copper Center area is not in a borough thus does not
have the advantages of a borough, but does have high costs, such
as energy for transportation on the river and roads. Without
high volume, his business will not be able to continue
operating. In addition, the Copper Center area is faced with a
very poor future because the Department of Transportation &
Public Facilities (DOT&PF) does not have major plans for work in
the area, nor does the Alyeska Pipeline Service Company. He
disagreed about the visibility of the Copper Center area, and
said that his area is fourth or fifth in marketing behind other
areas of the state that have "thousands, if not millions, of
dollars to market their area."
6:08:20 PM
JOE GELDHOF, Legal Counsel, Responsible Cruising in Alaska
(RCA), informed the committee he was the primary author of the
2006 Cruise Ship Initiative. Furthermore, he has worked on
cruise ship and associated tourism issues for at least 10 years.
Mr. Geldhof opined that the industry markets its business
extremely well, especially beginning in the 80's. Beginning in
the late 90's, issues such as taxation, consumer disclosure, and
pollution to marine waters coalesced. He disagreed with
statements concerning unintended consequences, and pointed out
that the initiative was based on polling and widespread citizen
discussion. In addition, the initiative was in response to the
legislature's failure to act on the $50 tax passed by the Senate
in 2000. He opined the Senate arrived at the $50 price point
after deliberation and considered analysis. Mr. Geldhof also
disagreed with the suggestion that voters did not understand the
initiative; in fact, there was a very vigorous debate and dialog
surrounding the initiative.
MR. GELDHOF recalled that the initiative has been amended four
times by the legislature, with the cooperation of RCA and others
who are represented today. Mr. Geldhof remarked:
... people stepped up and worked with you and your
colleagues to get adjustments changed. My point is,
this wasn't some unintended thing that lurched out of
the back of the Red Dog Saloon and was popped on the
industry and has been this grossly unfair piece of
legislation. It basically is working; it's providing
the Alaska Legislature with the resources financial to
build the large Panamax docks that we need.
MR. GELDHOF continued to explain that two large Panamax docks
are needed in Juneau, and Ketchikan and the other ports need
them also. Furthermore, during negotiations on the four
amendments, in 2009 there was discussion about reducing the
amount of the tax; however, he said he was told by
representatives that the industry preferred to pursue political
avenues and litigation strategies. He pointed out that there
has been a attempt to determine what the capital needs are in
terms of wharves and infrastructure. He compared the situation
of the local tourism industry with that of the oil and gas
industry.
6:15:08 PM
MR. GELDHOF expressed his sympathy toward those whose businesses
have a need for marketing; in fact, he has advocated for funding
for marketing aimed at independent tourists. In response to a
question from Chair Ramras, he agreed that taxes can change
behavior. Mr. Geldhof emphasized that there have been
adjustments, and a sense of empathy, sympathy, and cooperation
from Alaskans who may approach this issue from different
viewpoints. However, someone must determine a fair and
equitable user fee that allows the state to capitalize the
necessary cruise ship infrastructure for ports. He concluded
that this is a question of policy and common sense.
6:17:50 PM
CAROL FRASER, Regional Director for Sales and Marketing, ARAMARK
Parks and Destinations, informed the committee ARAMARK is the
concessionaire for Denali and Glacier Bay National Parks. Ms.
Fraser noted that she previously owned a hotel chain with over
100 employees and is very familiar with the tourism industry.
She agreed that the following statements are true: ships coming
to Alaska are full; the 2006 Ballot Measure did not affect the
2007 or 2008 tourism season; the cruise industry is very
successful at marketing. However, to fill the ships coming to
Alaska, the industry is marketing seven-day cruises to Alaska
for $399. She opined the passengers "that were very conscious
of the value of the dollar" are unlikely to take helicopter
flights. Ms. Fraser said the cruise line industry is very
healthy worldwide; in fact, 24 new ships are being built, but
none of those are slated to come to Alaska. She observed that
in cities that are competing for cruise ship visits, such as St.
Kitts and Bermuda, taxes are being lowered or eliminated, and
free services are offered. She noted that the cruise lines are
making smart business decisions that would be supported by any
business person.
MS. FRASER continued to explain that the decision process for
cruise lines is a 3-5 year process, thus the itinerary for 2010
will be the first affected by the change, and she estimated that
142,000 passengers will not be coming to Alaska. Furthermore,
because 27 percent of cruise line passengers return to the state
within three years, the result will be "an even worse economy."
Again referring to marketing, she stated that the industry
spends $75 million per year marketing Alaska. The Alaska Travel
Industry Association (ATIA), the state marketing entity, has a
very small budget, and out-of-state TV advertising is not
sponsored by the state, but by the cruise ship industry.
Therefore, her business relies on that advertising, as do other
tourism businesses. She offered her understanding that along
with the removal of ships and advertising, the cruise industry
can influence travel agencies to discontinue marketing Alaska as
a destination.
MS. FRASER advised that 1,800 Alaska tourism employees will lose
jobs because of the loss of cruise ship passengers. She
concluded that it is necessary to have a reduction in the head
tax; in truth, without a change in regulations, Alaska will not
recover, even if the economy goes through the roof.
6:23:54 PM
REPRESENTATIVE NEUMAN assumed that those who are going on
cruises now do not have the same level of expendable income as
before.
MS. FRASER concurred, adding that in Denali National Park the
income from food, beverages, and retail shops was down.
6:25:12 PM
TYLER HICKMAN, Vice President-Operations, Icy Strait Point,
explained that Icy Strait Point is owned by Huna Totem
Corporation and is a completely private investment. Huna Totem
Corporation made a substantial investment to get a private
cruise ship port "off the ground and running." It began
operation in 2004, however, since 2007 there has been a sharp
decline in business. Employment in 2007 was over 130 people,
but this year and last year employment is about 100 people. The
reduction in cruise ship guests is about 50,000 per year, and
the impact is huge because taxes from the ballot initiative
bypass Icy Strait Point, and are paid to the city of Hoonah.
Mr. Hickman questioned the comments made about the gratuities
collected by the cruise lines, and equated the comments with
"demonizing the cruise lines." Mr. Hickman said it is the
responsibility of Alaska to incentivize the cruise lines so they
will bring people to Alaska. In response to Chair Ramras, he
said his company employs 100 seasonal workers that are 80
percent Native hire, and 90 percent local hire. Also, he noted
that his business provides 25 percent of the payroll in Hoonah;
in fact, there are very few jobs in Hoonah. Mr. Hickman said
that the imposition of additional taxes stops business.
6:29:44 PM
MR. GELDHOF, in response to a question, provided information
about the membership in Responsible Cruising in Alaska.
MR. THOMA, in response to a question, provided further
information about Responsible Cruising in Alaska.
REPRESENTATIVE NEUMAN closed public testimony.
6:33:20 PM
CHAIR RAMRAS thanked those in attendance.
REPRESENTATIVE NEUMAN mentioned that he heard comments from
those in his district regarding the economy and the effect of
the ballot initiative; in fact, there is a possibility that the
impact will be felt even in Whitehorse, British Columbia,
Canada.
6:35:25 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 6:35 p.m.
| Document Name | Date/Time | Subjects |
|---|