Legislature(2013 - 2014)BARNES 124
02/11/2014 11:15 AM House ECON. DEV., TRADE & TOURISM
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| Overview: Division of Economic Development, Department of Commerce, Community & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE, AND
TOURISM
February 11, 2014
11:16 a.m.
MEMBERS PRESENT
Representative Shelley Hughes, Chair
Representative Pete Higgins
Representative Harriet Drummond
Representative Geran Tarr
MEMBERS ABSENT
Representative Lynn Gattis
Representative Bob Herron
Representative Craig Johnson
Representative Kurt Olson
Representative Lance Pruitt
COMMITTEE CALENDAR
OVERVIEW: DIVISION OF ECONOMIC DEVELOPMENT~ DEPARTMENT OF
COMMERCE~ COMMUNITY & ECONOMIC DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ROBERTA GRAHAM, Assistant Commissioner
Office of the Commissioner
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the Division of
Economic Development, program updates, future plans, and
Alaska's general economic health.
ACTION NARRATIVE
11:16:54 AM
CHAIR SHELLEY HUGHES called the House Special Committee on
Economic Development, Trade, and Tourism meeting to order at
11:16 a.m. Representatives Higgins and Hughes were present at
the call to order. Representatives Drummond and Tarr arrived as
the meeting was in progress.
^Overview: Division of Economic Development, Department of
Commerce, Community & Economic Development
Overview: Division of Economic Development, Department of
Commerce, Community & Economic Development
11:17:14 AM
CHAIR HUGHES announced that the only order of business would be
an overview of the Division of Economic Development, Department
of Commerce, Community & Economic Development (DCCED) to provide
program information regarding updates, future plans, and
Alaska's general economic health.
11:18:56 AM
ROBERTA GRAHAM, Assistant Commissioner, Office of the
Commissioner, Department of Commerce, Community & Economic
Development, informed the committee that she would address the
following topics: what DCCED is doing to create a better
economy in Alaska; DCCED's role in the Arctic and Arctic
development specifically; how DCCED collaborates with others,
other departments, and within the department itself; and how
DCCED is looking toward the future to diversify the economy
beyond oil and gas. Ms. Graham then emphasized that DCCED, and
the Division of Economic Development in particular, are focused
on a strong Alaska. The department's theme is "North to
Opportunity," which focuses on opportunity including growing the
state's economy and jobs, unlocking the state's resource
potential, promoting that the state is open for business, and
building strength and resilience for future generations.
11:20:55 AM
MS. GRAHAM clarified that economic growth needs sustainable
energy and reducing the cost of energy through oil tax reform
through the development of the new gasline project, resolution
of the Point Thomson litigation, and establishment of benchmarks
for the producers. Through DCCED, the Alaska Gasline
Development Corporation (AGDC) is reviewing the smaller pipeline
development as well. Ms. Graham emphasized that sustainable
energy and a reduction in the cost of energy is a big focus for
DCCED, as are strong communities, which are necessary for viable
economic development. Strong communities include good
infrastructure, strong local government, utilities, and a
general way of life that produces economic opportunity.
Consumer protection, through regulation and enforcement, is also
a major focus of DCCED as it ensures a stable business climate.
11:22:27 AM
MS. GRAHAM, regarding what DCCED is doing to create a better
Alaska economy, highlighted the department's marketing efforts,
focus on infrastructure, efforts to reduce the cost of energy,
research, and assistance with businesses. In terms of creating
new markets for the state's goods and services, she highlighted
the department's key marketing programs for tourism, seafood,
and minerals. She then pointed out that [department staff]
attend trade shows to develop future contacts, meet with
businesses to resolve problems, and review new [opportunities]
such as new air carriers coming to Alaska. In fact, DCCED
courted Iceland Air to open up a new air route. The department,
she related, has also accelerated the development of rare and
strategic minerals. She then directed attention to two
brochures that highlight the overall mineral and mining
activities that are occurring in Alaska. At the beginning of
March, the department along with a number of other state
partners, mining companies in Alaska, Native corporations, and
others, will attend the Prospectors & Developers Association of
Canada meeting in Toronto, Canada. This is one of the largest
mining conferences in the world, she noted. During the meeting,
DCCED will host an Alaska opportunity room to specifically
address what Alaska offers, the future investment potential in
Alaska mining, and how to diversify existing resources in the
companies that are currently invested in the state. Although
the aforementioned is a major effort, DCCED is also focused on
increasing development and marketing of forest products, the
film program, upgrading trade show booths and collateral, and
enhancing the promotion of "Made in Alaska" (MIA). One of the
ways in which the department is promoting MIA is through the MIA
home incentive. The MIA home program, which DCCED did with the
Department of Natural Resources (DNR), is evolving and this year
work is occurring to make the MIA house with as many Alaska
resourced products as possible. The ultimate goal, she
emphasized, is to have the [Alaska resourced] products in retail
establishments and conduct seminars in the home as it's
constructed. The hope is for construction of the house, which
is located in Anchorage, to begin in June and to be completed by
August.
11:27:33 AM
MS. GRAHAM then turned to the matter of growing Alaska's
businesses and attracting new industries. She informed the
committee that DCCED is creating more emphasis on cultural
tourism. In fact, DCCED is doing a pilot project in Northwest
Alaska where interest is being sought from businesses, including
Native artists, and local communities. The department, while
on the road and attending trade shows, is also promoting
agricultural industries. There is also more emphasis on
creating a film community in terms of feature films. Ms. Graham
said that one must discuss providing access to capital in
growing Alaska's economy. Within DCCED and the Division of
Economic Development (DED), access to capital is through
financing loan programs, of which there are 11. The Rural
Development Initiative Fund, the Small Business Economic
Development Revolving Loan Fund, and the [Alaska Microloan]
program cater to small business development. The aforementioned
are robust in lending and creating - or retaining - jobs that
might not otherwise be in place. "We're dedicated to finding
ways to help small businesses obtain the capital that they need
to grow and expand ...," she related. Over the course of the
life of the Rural Development Initiative Fund and the Small
Business Economic Development Revolving Loan Fund, they have
created or saved/retained 1,200 small business jobs. She then
highlighted the Skagway ore terminal project, a larger project
through the Alaska Industrial Development and Export Authority
(AIDEA), which has created numerous jobs and will continue to do
so as the project expands.
11:31:00 AM
REPRESENTATIVE DRUMMOND, as a former Anchorage Assembly member,
informed the committee that the Municipality of Anchorage was
granted about $13 million in the 49th State Angel Fund monies.
Those funds are loans, not grants, and thus will ultimately be
repaid. This was the first time such funding had been awarded
to a municipality as it has normally been awarded to states.
She recalled that at the time the Anchorage Assembly had to
approve the appropriation, it was told the state wasn't prepared
to manage these funds and thus the municipality was selected
instead. She inquired as to why the state was unable to provide
management of the 49th State Angel Funds.
MS. GRAHAM recalled that the opportunity to house that fund did
come to DCCED first, but there was a timing issue. In order to
receive the 49th State Angel Funds there was a need to increase
the authority to do so. However, there was only a set amount of
time, perhaps 60-90 days, to initiate the fund. The letter
arrived in the late summer/early fall and with the legislature
not meeting again until the winter, DCCED didn't have the
flexibility to receive the funds. Therefore, the work the
department had put into creating that opportunity went to the
city and DCCED did what it could to make the municipality's
application seamless.
REPRESENTATIVE DRUMMOND asked if the 49th State Angel Funds are
for statewide use or only for businesses and startups within the
Municipality of Anchorage.
MS. GRAHAM offered that the 49th State Angel Fund has addressed
that by investing the preponderance of the initial funding in
other funds. To that end, the 49th State Angel Fund has
dedicated at least half of the funds, through the application
and review processes, to other venture funds that then consider
other investment opportunities.
REPRESENTATIVE DRUMMOND recalled reading that a couple of
million of the 49th State Angel Funds have been given out in
seed money and another couple of million have been given to
another organization.
11:35:27 AM
MS. GRAHAM, [returning to the issue of growing Alaska's
businesses and attracting new industries], told the committee
that DCCED has worked to grow export markets through trade
missions to Iceland, China, and German-speaking Europe. The
trade missions engage industries in countries that have a
relationship with Alaska and the work that is done in Alaska.
Therefore, they could include the seafood, tourism, and energy
industries. Although a lot of ongoing work is occurring in that
arena, [DCCED] is looking toward new markets in seafood and
energy in Asian countries. Ms. Graham then informed the
committee of a recent agreement with the Government of Yukon,
Canada, to develop mutual economic needs. The scope of work is
being developed through the Alaska Energy Authority (AEA). Ms.
Graham explained that DCCED works closely with private industry,
regional and local economic development organizations as it goes
about its work with the universities, local governments, trade
associations, and other state agencies. The aforementioned
partners are important as DCCED implements its business plan.
11:37:40 AM
MS. GRAHAM then addressed the role of DCCED in terms of Arctic
development. Arctic development, she opined, is of critical
importance for the state as well as the nation. The department
is working with other state partners on issues such as the deep
water Arctic port and providing input into the administration's
position on Arctic-related issues. She said that DCCED is
conducting a study regarding the potential of Arctic shipping,
impact on safe and reliable shipping, new sources of energy, the
creation of jobs in the future, and ways to encourage trade
between nations. She explained that the scope of work is being
handled through the University of Alaska Fairbanks (UAF) as it
has the intellectual capital to work on this. In developing the
work, there have been discussions with Arctic shippers and those
that insure them. A transshipment hub, which is different than
a deep water port, is where [goods] going to different locations
are loaded and offloaded. Currently, transshipment hubs are
being explored for Unalaska and Adak. The department is also
reviewing how it courts and works with businesses in Arctic
countries, such as Iceland and Finland, who are already
interested in investing in Alaska. In fact, last week [the
department] heard from Iceland regarding opportunities.
11:39:56 AM
CHAIR HUGHES inquired as to when the study began and will end.
She also inquired as to how the study compares with the U.S.
Army Corps of Engineers' study and dovetails with other efforts
such as the DNR's request for proposals (RFPs) in January
regarding the land needed for port development.
MS. GRAHAM characterized DCCED's work with issues related to the
Arctic as collaborative, and noted that she served as DCCED's
representative on the deep water port study. Although the study
has been very collaborative in terms of input, it's the purview
of the U.S. Corps of Engineers and the Department of
Transportation & Public Facilities (DOT&PF) to bring that study
to fruition. The administration also has an Arctic working
group for those involved with Arctic issues, which might include
the Department of Military & Veterans' Affairs (DMVA), DOT&PF,
the Department of Environmental Conservation (DEC), and others.
The study began in November with a work shop in collaboration
with the Norwegian government regarding the new maritime Arctic,
specifically considering the Northern Sea Route. There was a
day-and-a-half symposium during which a number of sources
provided information on economic development beyond the deep
water port. The Counsel General of the Norwegian Consulate
informed attendees about what Norway is doing in terms of
offshore development, telecommunications, and a number of other
areas. A draft report is anticipated at the end of this fiscal
year, June or July, with a final report anticipated in the fall.
11:42:37 AM
MS. GRAHAM, in response to Representative Drummond, explained
that ships transiting the Northern Sea Route carrying some
energy product would offload at a port such as Adak, and take on
additional cargo to take to its home port, which could be Norway
or Finland. The cargo would then be distributed via the ship to
the destinations to which it was intended. A transshipment hub
is where cargo is offloaded and loaded. In further response to
Representative Drummond, Ms. Graham confirmed that Adak and
Unalaska are under consideration as locations because they are
strategic locations and have other capabilities/elements, such
as a workforce and security. Although there could be other
locations, Adak and Unalaska are the two that have been
identified.
11:44:34 AM
REPRESENTATIVE HIGGINS surmised then that shippers don't want to
navigate the full route but rather want to travel halfway and
turn around where they can offload and load cargo.
MS. GRAHAM stated her agreement with Representative Higgins'
understanding, and added her understanding that predominantly
smaller ships would be used.
11:45:33 AM
MS. GRAHAM then turned to how DCCED collaborates with other
departments. She underscored that DCCED is all about
collaboration, which she opined DCCED does well and often. The
department participates in at least three subcabinets, including
the Rural Subcabinet, the Economic Development Working Group,
and the Natural Resources Subcabinet. With the exception of the
time during the legislative session, the aforementioned
subcabinets meet at least quarterly and sometimes monthly. The
department, she noted, is also part of the Food Policy Working
Group, and works with other departments regarding how to better
market and extend the state's agricultural resources through the
state's existing infrastructure and departments, as well as
outside of Alaska. The department is involved with disaster-
related issues through departments that oversee those particular
issues. The department is also involved with the Arctic Working
Group and is a marketing partner, although many departments have
their own marketing entity within that department. When DCCED
assumed responsibility for tourism marketing, it decided to
identify and convene all marketing groups within the various
departments. The department meets with the marketing groups
regularly to discuss topics in which there is mutual interest.
Every effort is made to include marketing partners in [DCCED's]
collateral. For instance, the state's vacation planner includes
pages devoted to "Alaska Grown", state parks, and other entities
within the state. The aforementioned is an effort to help
market what the state has to offer.
11:48:19 AM
CHAIR HUGHES recalled mention of cultural tourism, and asked if
there is a separate marketing program for that. She also asked
how DCCED came to invest in cultural tourism.
MS. GRAHAM explained that cultural tourism has been part of the
tourism marketing program for a number years, but has ebbed and
flowed as businesses or communities have wanted to be involved.
She highlighted that cultural tourism ranks in the top 10 top
attractions of visitors per the Alaska visitors' statistics
program.
11:50:31 AM
CHAIR HUGHES related the following question submitted by
Representative Reinbold:
Since fiscal year '11, the department's received $16
million-plus a year in tourism marketing funds
directly instead of contracting with the qualified
trade association. What has the department done with
the $64 million during this time and what does the
department plan to do with the $16 million proposed in
the governor's budget this year?
MS. GRAHAM answered that since fiscal year 2012 (FY 12), which
was the year DCCED assumed the tourism marketing program, the
immediate need was to assume the five domestic contracts that
are partners and help implement the tourism marketing program.
They include advertising research, fulfillment contracts, public
relations, and the web contractor. She reported that since
2012, tourism has increased. In fact, a yet-to-be released
report specifies that the amount of summer visitors to Alaska
was 7 percent higher in 2013 than in 2012. There have also been
additional cruise ships coming to Alaska, which she largely
attributed to Governor Parnell's work to decrease taxes and
increase marketing several years ago. The marketing budget did
increase to $16 million and the industry contributes another
$2.7 [million]. She highlighted the entrance of Iceland Air and
Virgin America as [the result] of hard work to increase tourism.
Ms. Graham opined that DCCED's marketing is far and wide,
global, and there is increased tourism from various parts of the
world.
11:53:15 AM
CHAIR HUGHES inquired as to how the $2.7 million is collected.
Chair Hughes acknowledged the increase in tourists, but asked
whether the state is getting more [tourism marketing] per dollar
than if those functions were contracted out.
MS. GRAHAM explained that the tourism expenditure is established
annually in consultation with the tourism industry, and is
spread across the various efforts while fulfilling the travel
planner. Certainly, more funds are being leveraged in terms of
web advertising as more visitors come from web sites.
Furthermore, there have been more requests for the travel
planner. Ms. Graham explained that every year the tourism
marketing program establishes a goal in terms of the number of
inquiries it hopes to receive from advertising and other sources
for the travel planner. Over the past few years, the goal of
around 650,000 inquiries has been routinely surpassed by about
100,000 inquiries. Therefore, she surmised that more visitors
are being reached regarding traveling to Alaska. The conversion
study will be underway soon and will actually document how many
visitors who made inquiries actually converted to visit the
state. The study will also specify from which sources of
advertising or expenditures the visitors converted. In further
response to Chair Hughes, Ms. Graham informed the committee that
the tourism industry is engaged almost daily. In fact,
quarterly meetings are held in order that the tourism industry
advise and consult with DCCED on the tourism marketing programs
that DCCED directs and implements. She opined that the process
is collaborative and is going quite well.
CHAIR HUGHES expressed the desire to hear from the tourism
industry. She then opined that she prefers that the private
sector take care of certain things. Therefore, when the
government takes on a task, she said she hopes a good value is
received for the dollar spent.
11:57:59 AM
CHAIR HUGHES asked how DCCED would define economic development
as part of its mission. She then inquired as to the indicators
DCCED is looking for in terms of measuring success and achieving
economic development.
MS. GRAHAM specified that economic development is typically
defined as strategies and efforts that create jobs and
opportunities for businesses, entrepreneurs, and those striving
for better. This type of economic development is different than
community development, which focuses more on infrastructure and
programs that help communities build a strong base for the
future. Measuring economic development is difficult since it
can be measured in many different ways, including in terms of
the number of loans awarded, jobs [created and filled],
businesses helped through technical programs, and businesses and
private sector entities involved in DCCED's marketing effort.
She related that when DCCED staff attends an event at which they
might meet with key travel journalists, they take any number of
tourism partners who might want to join; that group seems to
grow every year.
12:00:38 PM
MS. GRAHAM, in response to Chair Hughes, confirmed that DCCED
does track the number of calls received, the business assistance
delivered, and the number of jobs resulting from the financing
program. She said she would be happy to provide those numbers
to the committee.
12:01:36 PM
CHAIR HUGHES inquired as to whether the Economic Development
Working Group is the same organization as the Economic
Development Advisory Council.
MS. GRAHAM replied no, adding that they are different bodies.
The Economic Development Advisory Council is predominantly
industry and business members who meet with the commissioner's
office on an irregular basis during which concerns of the
industry are heard. The Economic Development Subcabinet, which
she referred to as a working group earlier, consists of cabinet
members at the commissioner and deputy commissioner level who
come together to discuss economic development issues. In
further response to Chair Hughes, Ms. Graham confirmed that the
Economic Development Subcabinet doesn't [include private
industry] but rather consists of commissioners, deputy
commissioners, AEA, AIDEA, and the University of Alaska.
CHAIR HUGHES inquired as to whether the Economic Development
Advisory Council listens to industry concerns in terms of
barriers specific to increased economic development, or just
general barriers. She further inquired as to whether the
council makes recommendations for long-term planning and
strategies for DCCED.
MS. GRAHAM confirmed that the Economic Development Advisory
Council listens to industry in terms of general barriers and
barriers specific to increased economic development. She added,
however, that any topic of concern is also discussed. For
instance, the last time the council met the topics of discussion
surrounded permitting, roads to resources, the Alaska Workforce
Investment Board, and other issues related to workforce
development. Hearing the issues/concerns of the industry
provides a good barometer of how to address them. The intent,
she explained, is to have input without asking the legislature
to develop a plan.
12:05:17 PM
CHAIR HUGHES, recalling testimony that DCCED has an annual work
plan, asked if DCCED has a long-term plan. She opined that the
Economic Development Advisory Council seems to be a good
organization to develop a long-term plan for DCCED.
MS. GRAHAM related her understanding that the governor's plan
for long-term economic planning has been one in which it's left
to the private sector to engage with [the department].
CHAIR HUGHES interjected that the [Economic Development Advisory
Council] is [the appropriate group] and provides the opportune
time to provide input. The state will have a role as so much
hinges on infrastructure, affordable energy, and communications.
She expressed surprise that the Economic Development Advisory
Council has not been used for that purpose.
MS. GRAHAM clarified that the department engages the Economic
Development Advisory Council on a number of issues and takes its
advice and input to develop any number of concepts and ideas,
but to date the council hasn't been engaged in developing a
long-term plan. The [Division of Economic Development] has an
annual work plan, which is based on statutory responsibilities,
research projects, collateral, innovative thinking around
marketing, business assistance programs, and aspects on an
annual basis.
CHAIR HUGHES acknowledged that the work plan would address the
obligatory and statutory matters. However, she opined that it
seems inappropriate that it's a reactive situation in terms of
present situations, but rather there should be some proactive
planning for the future. Therefore, Chair Hughes encouraged the
department to make use of the Economic Development Advisory
Council and consider obtaining its input on a regular basis,
particularly in terms of the Arctic.
MS. GRAHAM noted her agreement with Chair Hughes that the
Economic Development Advisory Council is an incredibly important
group of advisors to DCCED. The department tries not to tax the
council, although its advice and perspective are always sound.
12:09:54 PM
REPRESENTATIVE DRUMMOND returned to the tourism marketing effort
of DCCED and asked what prospective visitors seek [in terms of
marketing materials].
MS. GRAHAM informed the committee that the visitor's guide is
produced online, is downloadable, and is mobile. She then
reviewed the process for requesting the visitor's guide. First,
a visitor receives a smaller version of the vacation planner and
then follow up occurs and those very interested in visiting
Alaska then receive the full book, or are directed to the web
site. The large, glossy visitor's guide only goes to serious
inquiries that are potential conversions. In further response
to Representative Drummond, Ms. Graham informed the committee
that the visitor's guide without the fulfillment portion is not
that expensive to print, at a cost of $1.14 to produce. With
the fulfillment portion, the cost is slightly more than $1.14.
The guide is bulk mailed in batches and the book and the mailing
totals under $2. There is a contractor based in Portland and
the visitor's guide is designed by the advertising firm of
Bradley Reid + Associates.
12:14:51 PM
REPRESENTATIVE HIGGINS, referring to a brochure on the timber
industry, pointed out that it specifies 200 million board feet
are put out for sale annually. He offered his understanding
that 49.5 million board feet are from state land, 56.13 million
board feet are from federal land, and approximately 110 million
board feet from private land. With the understanding that the
private land is Alaska Native land, he inquired as to how many
board feet are being sold now. He related his further
understanding that the federal government owns 95 percent of the
lands of which 80 percent is the Tongass National Forest and
inquired as to how [DCCED] approaches that land in terms of
selling timber.
MS. GRAHAM agreed that is an issue not easily answered. [The
department] is considering [selling timber] through any number
of sources, including future markets for secondary growth. She
related her understanding that part of the outreach and
availability of timber to market has to do with the supply
rather than the demand. She related her further understanding
that [timber] marketing is occurring through conferences and
trade shows while being mindful of the supply on hand. Beyond
that, Ms. Graham offered to obtain and provide answers to
questions.
12:17:19 PM
CHAIR HUGHES then turned to the legislature's consideration of a
liquefied natural gas (LNG) project and inquired as to what that
would mean in terms of the cost of energy in the state. She
inquired as to whether the department has engaged in any work or
planning as to what the aforementioned would mean in terms of
workforce needs, value-added processing possibilities, and
necessary departmental changes.
MS. GRAHAM responded that DCCED is working closely with the
Alaska Workforce Investment Board, Department of Labor &
Workforce Development, in terms of workforce training and
development.
CHAIR HUGHES commented that [to take advantage of] the
opportunity for value-added processing with affordable energy
will require more than workforce infrastructure and includes
transportation infrastructure and other needs. Therefore, she
opined that there should be [meeting] and planning [for the long
term].
12:20:15 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, Trade, and Tourism
meeting was adjourned at 12:20 p.m.
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