HOUSE BILL NO. 478 "An Act relating to tourism; relating to grants for tourism marketing; eliminating the division of tourism and the Alaska Tourism Marketing Council; and providing for an effective date." MATT ATKINSON, CHAIR, VISITOR'S BUREAU, FAIRBANKS spoke in support of HB 478. He observed that the goal of the legislation is to shift tourism marketing to the private sector. He maintained that a new method of tourism marketing is needed. State support for tourism marketing has been reduced from $15 million dollars in FY 90 to $6.7 million dollars in FY 98. The Alaska Visitor's Association has worked to create a new plan. He maintained that the plan would combine the marketing activities of the Alaska Tourism Marketing Council (ATMC), Alaska Visitors Association (AVA) and the Division of Tourism. It would decrease confusion, duplication of effort and increase private sector contributions. PAUL SMITH, BUSINESS OWNER, TOK spoke in support of the legislation. He stressed the need to protect small highway businesses. ALAN LEMASTER, BUSINESS OWNER, GAKONA spoke in support of the legislation. He observed that the state of Alaska spends $4 million dollars to market tourism while the state of Queensland in New Zealand spends $40 million dollars in tax money. He stressed that there has been a decline in tourism. He maintained that small and large business must carry the ball. HB 478 was HELD in Committee for further consideration during the meeting. HOUSE BILL NO. 478 "An Act relating to tourism; relating to grants for tourism marketing; eliminating the division of tourism and the Alaska Tourism Marketing Council; and providing for an effective date." TINA LINDREN, ALASKA VISITORS ASSOCIATION, ANCHORAGE stressed that the legislation is a response to indications by the Legislature that industry should increase its contribution to marketing. She maintained that reductions in state support has put Alaska at a competitive disadvantage. The legislation would consolidate statewide marketing into one nonprofit organization. The state of Alaska would grant to the nonprofit organization. There would be a reduction in state general funds and an increase in private sector funds. Communities would be able to leverage their own marketing plans in conjunction with the overall program. She observed that bylaws would be needed for the new organization. The state of Alaska would be able to impose conditions on the funds through the grant contract. (Tape Change, HFC 98 - 119, Side 2) Ms. Lindren observed that the legislation would eliminate the Division of Tourism. She emphasized that there is a continued role for the state in tourism. The state would continue planning and coordination functions. She reviewed the legislation. She noted that the purpose of the ATMC and the Division of Tourism are identical. The legislation deletes reference to both entities and leaves their responsibilities in the Department of Commerce and Economic Development. Section 4 creates a new grant program. Section (b) provides that materials produced and marketing information and tourism related data generated under a grant are the sole property of the qualified trade association. Revenues raised would be retained as part of the funding mechanism. Materials would be provided Department of Commerce and Economic Development on request. Materials would not be part of the public record. This retains current law. She observed that names from mailing lists would have no value if they were under public records. A qualified trade association may not use money granted to lobby a municipality or an agency of a municipality or to lobby the state or state agency. Section (e) defines a qualified trade association: "qualified trade association" means a private, nonprofit organization whose primary purposes are the promotion of tourism within the state encouraging tourists to visit the state and that has a statewide membership consisting of representatives of all major sectors of the visitor industry, including hotels, airlines cruise lines, wholesale and retail travel agencies, visitor attractions, and convention and visitors bureaus. Ms. Lindren observed that statutes that currently deal with the Division of Tourism and the ATMC are repealed. Section 6 contains an effective date. She spoke in support of a one-year transition to setup a new organization. In response to a question by Representative Davies, Ms. Lindren provided members with a copy of the proposed budget for the "New Millenium Plan" by the Alaska Visitors Association (copy on file). She compared budget numbers provided by the Department of Commerce and Economic Development (copy on file) with those contained in the Plan. She discussed funding levels of Pay to Play programs. She noted that the AVA budget is currently $805 thousand dollars. HEATHER DODSON, PRESIDENT, ALASKA VISITORS ASSOCIATION ANCHORAGE CHAPTER, WINDSONG LODGE, ANCHORAGE spoke in support of the legislation. She maintained that it is time for a change. Ms. Lindren observed that the Plan would reduce the general fund contribution over a three year period from $5.3 to $4.0 million dollars. Industry contribution would be increased from $1.4 to $6 million dollars. The total combined budgets of the ATMC and Division of Tourism is $6.7 million dollars. Part of this is not for marketing activities. Approximately $650 thousand dollars is spent by the AVA to produce the vacation planner. The AVA contributes approximately $1.4 million dollars to the state of Alaska. Representative Davies expressed support for the legislation. He questioned how confident is the private sector that the money would be collected. He asked how smaller business would be affected. Ms. Lindren noted that there are no guarantees. She emphasized that it is in the industry's interest to promote the entire state of Alaska. Small communities and businesses need the Plan more than large ones since they have no means of their own to generate tourist to Alaska. Smaller businesses would be charged less under the Plan then they are currently paying. More money would come from larger companies. Larger communities would participate more than they currently do. She observed that state marketing has been reduced to printing and distributing the vacation planner. Ms. Lindren discussed funding sources. There is a cruise formula based on the number of passenger days in Alaska. There is an amount for businesses based on employee numbers. Larger businesses would pay more than smaller businesses. A number of Pay to Play programs, such as the vacation planner would raise revenues. Businesses can pick and chose among Pay to Play programs to pick ones that will benefit their businesses. There is no hammer to make sure that everyone participates. The budget estimate is conservative. Representative Davies expressed concerns regarding the Pay to Play portion of the Plan. Ms. Lindren envisioned that participation would be charged for in a number of things such as trade shows. A new marketing plan would have to be created. JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS clarified that the Department does not oppose the privatization of tourism marketing in Alaska or the elimination of the ATMC. He expressed concerns with portions of the Plan. He observed that the nonprofit organization would be greatly dependent on contributions from the cruise industry. He expressed concern that there would be bias in favor of industry sectors that give large contributions. He observed that the Division of Tourism has focused on a highway tourism program in the last year. Significant funds have been received from the Alaska Marine Highway System. He expressed concern that this kind of promotion would not exist under the plan. The Alaska Marine Highway System competes with the cruise industry and the cruise system would have control over the program. He proposed multiple contracts for tourism marketing. He acknowledged that a large portion of the funding might go to a single contract. Some money should be retained for programs that might not be a priority of the private organization that receives the grant. Winter tourism is very important to the Fairbanks area. He observed that an aurora borealis program has been successfully marketed to Japanese tourist to come to Fairbanks. He stressed that this kind of a grant should be allowed. Representative Mulder asked if Mr. Bush's concerns could be addressed under the proposed program. Mr. Bush noted that the legislation would fund a single grant, which would run a marketing program. He questioned how much control the State could place on the operation of the grant. He noted that the program would not be competitive. The state of Alaska would have to choose between awarding the AVA the grant or not having a tourism program. The State's ability to negotiate terms of the agreement would be limited. He added that there is no guarantee for a private match. He maintained that there should be a required match and a competitive award. He stated that unless formal proposals are required in a competitive situation there is a loss of accountability. Mr. Bush did not see that there would be much more money going to tourism under the Plan than under the current system. He observed that state funding would be reduced by approximately 25 percent over three years. Local communities would pick up a significant percentage of this decrease. He maintained that state funding would be transferred to local municipal funding. Municipalities have contacted the Divisions with concerns regarding contribution levels. Representative Davis noted that tourism marketing in the State has merged into one large group. Mr. Bush explained that the Department is not advocating that state funds be split into small pieces. He clarified that the Department is concerned about the small amount that the Division of Tourism uses to do things like run the Tok visitor center or specialized programs for highway traffic and winter tourism. There needs to be attention to the little pieces. Representative Davis noted that section 3 establishes tourism promotion in the Department of Commerce and Economic Development. Mr. Bush stressed that the Department would not be provided any funding for promotion. The Department would retain one or two positions for general tourism land use planning activities to assist the Department of Natural Resources. All marketing and promotional activities would be given to the nonprofit. Representative Davis stressed that the legislation states that the Department of Commerce and Economic Development would "promote" tourism. Mr. Bush stressed that it is a funding issue. If the Legislature gives the Department money, the Department would find a way to promote tourism under the legislation. HB 478 was HELD in Committee for further consideration.