SENATE BILL NO. 350 "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." JEFFREY BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT explained that CS SB 350 (FIN) would provide an exemption from the procurement code for the tourism marketing contracts. He noted that a prior version of the legislation was HB 478. In the Senate Finance Committee, a comfortable compromise with the Alaska Visitors Association (AVA) and the Administration was worked out. Mr. Bush explained that the legislation would eliminate the Alaska Tourism Marketing Council and would provide marketing for Alaska tourism through private industry. This industry would be called a "qualified trade association" and would be responsible for broadly representing the tourism industry and which would include specific sectors listed within the bill. Mr. Bush noted that the legislation would provide marketing dollars, appropriated on an annual basis to the Division of Tourism. The Division must then define what the tourism- marketing program is. All funding would be placed on a contractual line in order to decide what should be matched. The bill requires a 30% match in the first year, that would escalate to a 60% private section match by the third year. Assuming that private industry contributes sixty cents on the dollar, would give them the right to represent any available program. Co-Chair Therriault asked if the language was always the "first right of refusal". Mr. Bush explained that language had been added in the Senate Finance Committee on Page 3, Lines 21-25. Co-Chair Therriault MOVED that the work draft 0-LS1695\P, Cook, 5/6/98, be the version before the Committee. Representative Martin OBJECTED. He stated that he did not "like" the title and questioned if the Alaska Tourism Marketing Council was being eliminated. Co-Chair Therriault commented that was the intent. Representative Martin noted that he disagreed with private industry receiving money from the State and then using it to benefit the small businessperson. A roll call vote was taken on the motion. IN FAVOR: Moses, J. Davies, G. Davis, Grussendorf, Kelly, Therriault OPPOSED: Kohring, Martin Representatives Foster, Mulder and Hanley were not present for the vote. The MOTION PASSED (6-2). In response to Co-Chair Therriault's concern, Mr. Bush explained, originally, the bill was structured so that it would take State money and put give it to the private sector for a match. There was concern within the Administration that some important elements would be removed from the program, in particular, that small business representation would be lost in the marketplace. Consequently, the bill was structured so that the State would define what elements must go into a tourism program. At this time, it has been established that entire amount is not provided up front, but that instead, the State retains enough control to define the elements necessary in a tourism program. Mr. Bush elaborated on the Alaska Visitors Association's perspective of the bill. The legislation would create an incentive for the trade association to make sure that all elements are represented in the industry. The only way to make money is to represent the entire piece of the industry. The income of the association would be dependent upon membership fees, dues and voluntary contributions. Representative Martin asked how the legislation would protect the small "mom and pop" type business enterprise. TINA LINDGREN, EXECUTIVE DIRECTOR, ALASKA VISITORS ASSOCIATION, ANCHORAGE, acknowledged that Representative Martin's concerns were shared throughout the industry. She cited that the proposed work draft was sent to 3,000 businesses around the State before it came before the Legislature. Many of those businesses shared the same concern, although, in the end, 85% requested that it be brought before the Legislature. Ms. Lindgren continued, pointing out that State funds for promotion and advertising are declining. The point of the legislation is addressed toward small business, because without increased marketing, they can not survive on their own. She added, the plan calls for Alaska Visitors Association to be dismantled. At that time, each business will be allowed one vote, so that everyone in the program will have equal power. Co-Chair Therriault asked who would control access to the information. Mr. Bush responded that at this time, it is written that the State and the trade association will jointly own the information. Co-Chair Therriault advised that there is a prohibition on using those funds for lobbying municipality or State agencies. Mr. Bush noted that there is a restriction included in the legislation which would limit access to the mailing lists. Ms. Lindgren pointed out that Section #8 repealed ATMC and purposes related to ATMC. Mr. Bush explained the difference between Sections #9 & #10; Section #9 adopts the substantive bill with a 30% match requirement effective July 1, 1999; Section #10 adopts an increase private industry match requirement from 30% to 60% effective July 1, 2001. Co-Chair Therriault asked if the FY99 budget would continue to operate at status quo. Mr. Bush replied that the fiscal note assumes the status quo budget, although,in fiscal year 2000, it would include adjustments to the match requirements. The note would eliminate personnel services from ATMC and the contractual difference would be the elimination of the program receipts. Representative J. Davies spoke to Amendment #1. [Copy on File]. He explained that the amendment would clarify the intent, implied in Section #(c). Mr. Bush stated that the only problem the State would have with the amendment would be inclusion of the 30% match requirement. He believed that there could be contracts with the qualified trade associations in which a match would not be feasible. Representative J. Davies offered a technical change to Amendment #1, placing a period after "contract" and deleting the material: "Provided that each contract be matched by 30% by the successful applicant". Mr. Bush believed such action would solve the problem. Representative J. Davies commented that the reason the language had been included was to stipulate the right of first refusal. Mr. Bush explained that there was a right of first refusal provided that there was a match for all contracts. If there is no match, then the contract is free to go to anyone else. Essentially, whenever a contract is entered into with the trade association, they will be required to match. Ms. Lindgren spoke to Amendment #1. The amendment would not preclude another contract. She noted for the record that AVA would not want to see this dilute the idea of putting the majority of destination marketing to a single contract with the State. Representative Mulder believed that the amendment would put the Director of Tourism in a strong position for marketing and dealing with the agency. Co-Chair Therriault advised that the proposed amendment would amend section (b), clarifying that the contract would be with a single trade association. He commented that the information specifies that there could be multiple contracts and that each agency has the first right of refusal. Mr. Bush interjected that there is no way that the Director of Tourism would have the power to "chop it up" and deny it to a trade association. Representative J. Davies MOVED to adopt the amended Amendment #1. There being NO OBJECTION, it was adopted. In response to concerns by Representative Martin, Mr. Bush remarked that the State has considered the possibility of the association not meeting the match. That concern will be addressed in the contract process to assure that the match money is there. Ms. Lendgren advised that AVA has had a contractual arrangement with the Department since 1989, and that meeting a match has never been an issue. She emphasized that the Department has a lot of leeway in writing the contract document and did not foresee that being a problem. DAVID LEE, (TESTIFIED VIA TELECONFERENCE), VALDEZ, testified in support of the legislation. He noted that there was tremendous interest for the bill in rural Alaska. He added that the most important aspect of the legislation for the rural area, would be the independent traveler and the international marketing. Mr. Lee wanted assurence that those efforts would continue to be supported. ALAN LEMASTER, (TESTIFIED VIA TELECONFERENCE), GAKONA, commented that he is a small business person who supports the bill 100%. Representative Mulder MOVED to report HCS CS SB 305 (FIN) out of Committee with individual recommendations and with the accompany fiscal note. There being NO OBJECTION, it was so ordered. HCS CS SB 350 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Commerce and Economic Development dated 5/2/98. (Tape Change HFC 98- 159, Side 2).