HOUSE BILL NO. 167 "An Act relating to a corporation income tax credit for contributions by a person owning or operating a commercial passenger vessel to a qualified trade association that was awarded a contract by the Department of Commerce, Community, and Economic Development, and used for planning and executing a destination tourism marketing campaign." 5:15:31 PM AT EASE 5:16:40 PM RECONVENED Representative Fairclough introduced the bill and solicited public testimony. GENEVIEVE WOJTUSIK, STAFF, REPRESENTATIVE MILLET, stated that the tourism industry had encouraged the development of HB 167. Alaska's tourism industry had informed lawmakers that Alaska had failed to maintain, and grow, a market share in national and international markets. Competing destinations were outspending the state with increasing marketing budgets. All sectors of Alaska's travel industry were reporting an unprecedented drop in summer season bookings. The bill attempts to secure funding for the marketing of Alaska by taking money from the industry and giving a tax credit back, which would create a sustainable source of income. The bill would ensure that a person making a contribution would not receive a direct benefit from the contribution while also receiving the income tax credit. The bill deals only with commercial passenger vessel income, and a credible passenger vehicle tax. REPRESENTATIVE CHARISSE MILLETT (via teleconference), she stressed state investment in marketing the Alaska product. She reiterated that the state was competing on the global market with international destinations. Alaska has unique wildlife attractions, but other areas often have the same attributes. She stated that the tourism industry created jobs and sustained the economy, and that infrastructure for tourism had been built that should not go to waste. The bill provided a mechanism for a steady stream of revenue for marketing, which would alleviate the need for future legislative allocations in the area of marketing. 5:22:08 PM Representative Doogan asked how much revenue would be generated by the tax to spend on tourism marketing. Ms. Wojtusik replied that Title 44.33.125 defined how the marketing would be done with both private and state dollars. JOHANNA BALES, DEPUTY DIRECTOR, DEPARTMENT OF REVENUE, explained that the bill would allow credit against the corporate income tax paid by operators of commercial passenger vessels, which would be the difference between the tax already paid without the excise tax, and the tax paid including the excise tax. The department had encountered 2 problems when trying to figure the actual numbers. First, there were only 3 tax payers, so confidentiality was an issue. Second, it the nature of the corporate income tax made it difficult to make an approximation. Representative Doogan requested the amount that the cruise industry would pay the state under the legislation. Ms. Bales responded the ships were often subsidiaries of larger corporations which made estimating the funds the state would receive difficult. 5:26:40 PM Representative Kelly noted that the version of the bill before the committee referred to the 3 major recipients of the credit. The governor's version was much broader in the amount of businesses that could take part. He queried the department's position on including larger groups. Ms. Bales responded that the governor's bill was crafted to include any corporation engaged in tourism activity in the state. House Bill 167 was crafted to include only 3 companies, and one small segment of the corporate base, that could take advantage of the credit. The department had suggested putting a cap on the credit, but opening the credit to all corporations that were engaged in tourism in the state. 5:29:13 PM SANDRA LOOMIS, BUSINESS MANAGER, TALKEETNA AIR TAXI, spoke in favor of the legislation. She stated that the tourism industry was vital to the community of Talkeetna. She shared her experience with ATIA and the marketing help provided by the association. She contested that there was no end to the benefits for the state from the marketing work done by ATIA. ROARK BROWN, OWNER, HOMER OCEAN CHARTERS, HOMER, supported the bill. He stated that ATIAs board of directors, on behalf of the 1,100 member businesses in Homer, unanimously endorsed the governor's plan to restore the health of Alaska's travel industry. If the bill were amended to add the governor's language the state's tourism marketing program would be adequately funded. He noted that the program had extensive state oversight, including veto power. Representative Kelly pointed out to the committee that the element differences between HB 167 and HB 422, was the discussion of the 3 taxpayers versus the broader based plan, he wondered which method the testifier supported. Mr. Brown supported the broad based plan. 5:36:34 PM BRETT CARLSON, COOK, COLDFOOT AND DEADHORSE, testified in support of the bill. He shared that in his region there were many small businesses that were not primarily cruise related businesses. The businesses focus on non-cruise visitors and were dependent on a tourism marketing program that reached out to non-cruise travelers. Declining marketing funding over the past 20 years had made it increasingly difficult for the non-cruise businesses. He stated that the tourism numbers in the northern areas of the state were dismal. He noted that the low tourism numbers were expounded by the weak economy. He felt that Alaska was comparable to other destinations like Hawaii, New Zealand, and Australia. He concluded that the bill offered a long term sustainable funding plan for marketing the state. 5:42:19 PM ALAN LEMASTER, ATIA, GLENALLEN, urged supported of the governor's HB 422, but not HB 167. He argued that HB 167 was fragmented and contained no fiscal impact information. He divulged that in his business experience, a reduction of marketing equaled a reduction in visitation, which equated to a reduction in jobs. He believed marketing was the first step in reenergizing the tourism industry in Alaska. COLLEEN STEPHENS, VALDEZ, voiced support for the legislation. She stated that the reduction of visitors to the state had negatively affected 10 full-time seasonal jobs, and 1 full-time year-round position in the community. She believed that seasonal employment help young people develop a work ethic which would continue with them through life. Scarce entry level jobs for young people across the state would affect the work force in to the future, as well as the economy and the viability of the state. SCOTT REISLAND, DENALI GRIZZLY BEAR, DENALI NATIONAL PARK, testified in support of the bill. He said that ATIA marketing was critical for marketing his business. The funding received by the passage of the legislation would help with increasing the independent travel market. MARY RICHARDS, ALL SEASON'S INN, FAIRBANKS urged support of the bill. She explained that the only way the inn could be effectively marketed was in cooperation with the ATIA marketing plan. She used her money to reach out to the association, who in turn reached out to the rest of the world on her behalf. MATT ATKINSON, FAIRBANKS spoke in support of the governor's bill. He offered accolades to ATIA for the association's ability to maximize available funds. He believed the tax credit would allow the state to direct more focus on marketing the state and less on requesting one-time appropriations. 5:53:20 PM LOIS WIRTZ, SELF, spoke in support of the legislation. She stated that statewide marketing was crucial for tourism development in Nome, Kotzebue, and Gamble. Reducing the head tax was only one aspect of what was necessary to foster tourism in the state. She believed that an ongoing marketing effort was necessary to bring back non-cruise and independent visitors. JILLIAN SIMPSON, ALASKA TRAVEL INDUSTRY ASSOCIATION (via teleconference), testified in support of the broad based bill for tourism marketing tax credits. She felt that Alaska needed sustainable marketing funding for to the domestic and international market in order for the state to continue to grow. TOM HALL, KLONDIKE GOLD DREDGE BREWERY (via teleconference), offered support for the bill. He testified that ATIA offered unique opportunities for collaboration in marketing the Alaska product to visitors from far away. He felt that there would be significant return on the marketing investment. 5:58:28 PM TAMMY GRIFFIN, DIRECTOR OF OPERATIONS, ALASKA HOTEL AND LODGING ASSOCIATION (via teleconference), supported the legislation. She stated that the association supported an amended HB 167 that included the participation of a broader selection of industry players in the tax credit. She concluded that an increase in tourism marketing funding was imperative for the future of the industry in Alaska. FRANK FLAVIN, PHOTOGRAPHER supported the bill. He cited the marketing spending increases made by other destinations in the past 6 years. He revealed that Alaska had spent $10 million in 2005, with an additional $5 million match from the industry, but had only increased to 11.7 million in 2010. 6:02:46 PM SHANNON HAMRICK, EXECUTIVE DIRECTOR, KENAI PENINSULA TOURISM MARKETING COUNCIL (via teleconference), testified in support of the legislation. She opined the downturn in the tourism economy of 2009, and the equally abysmal forecast for 2010. She explained that her family business relied on the building of lodges and bed and breakfast establishments, which were is less demand because of the industry slump. She said that the loss of visitors had a ripple effect of loss throughout the community. Co-Chair Stoltze closed public testimony. Co-Chair Stoltze discussed housekeeping. HB 167 was HEARD and HELD in Committee for further consideration.