HOUSE BILL NO. 420 An Act relating to tourism marketing contracts; and providing for an effective date. Co-Chair Therriault stated that HB 420 had been introduced at his request and would address the shift in the contract date between the Department and ATIA. ANNE CAMPBELL, (TESTIFIED VIA TELECONFERENCE), CHAIR, ALASKA TRAVEL INDUSTRY ASSOCIATION (ATIA), ANCHORAGE, voiced her concern regarding the timing scheduled to sign the upcoming contract. She requested that it be changed because of production expense and fund raising activities which need to take place six to eight months before an advertising campaign can be initiated. She commented that visitors planning a trip to Alaska require information approximately one year prior to their intended travel date. Starting distribution of the 2001 Vacation Planner in October 2000 is critical to visitor industry businesses. Research has shown that the peak planning period for an Alaska vacation is 6 to 9 months prior to the intended date of travel. Ms. Campbell stated that ATIA is concerned that there needs to be more clarity regarding the industry intent. The industry understands that at this time, the fund will not be available until July. By making that an earlier date would provide ATIA a target date to address other activities regarding production, marketing and raising commitments from the private sector. Co-Chair Therriault interjected that if the contract date were changed, the Legislature would still be in session and would be able to address concerns resulting from the transition year. He thought that the Legislature should be able to balance the marketing activity. He wanted to see that written in contract and signed during session. He asked if there would be problems completing the negotiations by April 1st. Ms. Campbell replied that ATIA hopes to be able to meet that date. She pointed out that currently there is communication between the Department and ATIA. She noted that there are philosophical differences with the Department, however, both parties are attempting to have a contract resolution as expeditiously as possible. Representative Phillips voiced concern that HB 420 had not yet come to the Tourism Committee. She emphasized that the proposed legislation changes more than the date. Representative Phillips requested that the Department testify on the changes which the legislation would make. JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT testified that the Department does have concerns with the proposed legislation and listed the general concerns. He noted that the April 1st date was to early, however, August 1st would be better for everyone involved. It is very difficult to negotiate a contract when the amount of the contract is indefinite. Mr. Bush pointed out that in the manner in which the legislation was structured last year, the Department is responsible to decide which components must exist in a tourism contract. He stressed that it would be difficult to accomplish that without knowing in advance what the funding level is going to be. Mr. Bush pointed out that an additional concern is that the proposed April date falls at the end of the Legislature. That is a very busy time for the Department and private industry as well. He pointed out that the fund raising takes place through the selling of the Vacation Planner ads through May. He projected that it would be difficult for industry to guarantee fund raising by the April 1st date. Under statute, the industry would need to guarantee a match requirement. He reiterated that it would be difficult to raise the funds by the April 1st date. Mr. Bush advised that the Department's concerns are more magnified this year in as much as it is the transition year. The legislation requires that the Department approve a marketing plan. That marketing plan is supposed to be put together by a marketing team. He indicated that the team was just recently formed a couple of weeks ago. There has not been a plan yet proposed by the industry. He stated that the Department is confident that a plan will not be available by April 1st. Mr. Bush quoted AS 44.33.125(B), which lists the essential components that should be included in a marketing contract. Mr. Bush reiterated that creating such a plan is unrealistic given the short period of time remaining before April 1st. He mentioned the fund raising issue. He added that if a contract is not entered into, then theoretically, the Department is supposed to do the marketing without even considering entering into a contract. Mr. Bush noted that the State is responsible to determine that the entity that they are contracting with has a set membership. That membership is set, based upon who actually joins the organization. The permanent members are not yet known and the Department can not enter into a contract with them until that information is available. Representative Phillips inquired if the Department thought that the concerns expressed could be handled by July 1st. Mr. Bush replied that they could be addressed by then and that it would be good timing as that is the beginning of the new fiscal year. Co-Chair Therriault interjected that the Department negotiates contracts all the time that are contingent on funding from the Legislature. He asked why that would be a problem for this contract. Mr. Bush explained that it would be uncomfortable with concerns such as the Internet coverage. In conclusion, he stated it would be the components "at the edge" that would be an issue for budget concerns. Co-Chair Therriault advised that the industry has indicated that they would take the current plan and move it forward. Mr. Bush explained that a proposal being rolled forward has been expected since the beginning of the process. However, the language of the statue reads that the marketing plan must be put together by their marketing organization and that it must meet the requirements of the statute. He argued that there might be a dispute over some of the details of that plan. Until the plan is presented to the Department, there is no assurance that the existing program will roll forward. Vice Chair Bunde supported the idea of an April date giving the Legislature long-term oversight, however, he understood that this was a transition year and that the July might work better. Mr. Bush acknowledged that moving the date to July 1st would alleviate many of the Department's concerns. He admitted that there remain concerns regarding appropriations following the contract issue. Ms. Campbell clarified that the ATIA marketing committee has been meeting for the past two weeks in order to able to meet the deadlines. She requested more discussion regarding what needs to be included in the marketing plan. Ms. Campbell noted that April 1st is the goal. Co-Chair Therriault inquired if the funding amount "slipped" a little, would that language is expected in the contract. Ms. Campbell explained that industry understands the position of the Department, however, the reality is that there are targets which will continue to work well for ATIA. Co-Chair Therriault pointed out that there is a condensed time period during the summer months when the tourism activities are at their peak. He believed that last year, the Legislature made the wrong decision when choosing the August date. If the July 1st date were used, that would be in conflict with the peak tourism period. Ms. Campbell agreed the wrong date had been chosen. Ms. Campbell pointed out that ATIA does not collect all the funds at one time. ATIA is prepared to bring the match in as the funds are brought in. Co-Chair Therriault inquired the latest date that would work for ATIA that would not be interuptive with seasonal business. Ms. Campbell replied that industry could go with the May 1st date this year. Representative J. Davies suggested an option would be to forward fund the contract for one year, which would then provide time for ATIA to raise the match. He agreed that this year, presents a unique circumstance. Co-Chair Therriault responded that he did not anticipate funding this component for two years. Representative Phillips pointed out that at present time, the Department does not have an "entity" to negotiate with. She agreed that there would be great merit in establishing an earlier time for the industry in years out, but not this year, the transition year. Representative Phillips recommended that for this year only, the date be established for July 1st and from then forward, the date could be set for either April or May 1st. CAROL KASZA, (TESTIFIED VIA TELECONFERENCE), ARCTIC TREKS, FAIRBANKS, agreed with Department's recommendations regarding the date change. She commented that she is a member of ATIA. She believed that there would be a "shake down" in the original negotiations. Ms. Kasza commented that in the future, the April date would make more sense and that the idea of forward funding would be the best idea. Ms. Kasza voiced full support of fully funding the budget for the Division of Tourism. Co-Chair Therriault MOVED to adopt Amendment 1, which would change the date to May 1, on Page 1, Line 6. Representative Phillips OBJECTED. She reiterated that one more month would not work this year and that ATIA needs the time to get the program in place so that it will be effective and the transition has time to work. Representative Grussendorf commented that the proposed change would place the Division into a "state of flux" that it would spread the Department to "thin". He supported a date change to July 1st. Co-Chair Therriault reiterated that it is important that the Legislature be in session in order to comment on the final product. Vice Chair Bunde questioned the urgency for this year. He noted that May 1st would be too late for the Legislature to have much input. Co-Chair Therriault explained that it is important to get through the transition year. He believed that this would be the most important year. Representative G. Davis pointed out that this "plan" has been thought out and discussed for a long time. He believed that the plan could already be put in place. Co-Chair Therriault reiterated his intent that the Committee was here to look at the contract. Representative Phillips emphasized that it is important to realize that until the membership is set, the Department does not have anyone to contract with. She pointed out the concern has not yet been addressed. A roll call vote was taken on the motion. IN FAVOR: Williams, Bunde, G. Davis, Foster, Mulder, Therriault OPPOSED: Phillips, J. Davies, Grussendorf, Moses Representative Austerman was not present for the vote. The MOTION PASSED (6-4). Co-Chair Mulder MOVED to report CS HB 420 (FIN) out of Committee with individual recommendations. There being NO OBJECTION, it was so ordered. CS HB 420 (FIN) was reported out of Committee with "no recommendation". (TAPE CHANGE, HFC 00-43, Side 2)