CS FOR SENATE BILL NO. 101(FIN) "An Act relating to merchandise sold and certain fees charged or collected by the Department of Natural Resources." 8:40:06 AM ED FOGELS, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, relayed that the bill was extremely important to the department and the state. Alaska's state park system was the largest in the nation; it had evolved into a lean and efficient machine. The Department of Natural Resources (DNR) was trying hard to reduce the amount of General Funds required to run state parks and believed they had developed a strategy to completely get the state park system off of general funds in the near future. He detailed that the bill represented a key piece of the department's strategy. BEN ELLIS, DIRECTOR, DIVISION OF PARKS AND OUTDOOR RECREATION, DEPARTMENT OF NATURAL RESOURCES, discussed that the bill would enable the Division of Parks and Outdoor Recreation to sell state park themed merchandise in a manner that ensured a reasonable monetary return to the state to help support state park operations, which would thereby potentially reduce the division's reliance on General Funds. He communicated that the bill contained two parts. First, the current statute specified that the department could collect fees in a "park unit." He detailed that at present, DNR collected fees online for public use cabin reservations, annual parking and boat launch passes at public information centers; there were also other areas where funds were received that were not in a park unit. The bill would remove the park unit language. He specified that the Department of Law (DOL) had looked at the issue. He elaborated that the department was not in danger of losing the funds collected outside of a park unit, but the idea was to clarify the language. He characterized the change as a housekeeping measure. The second and more important part of the bill gave DNR another tool in its effort to reduce dependency on Undesignated General Funds (UGF) that supported the division. Mr. Ellis explained that in FY 15 the division had been allocated $3.5 million in UGF and the division had brought in $3.3 million in program receipts. The division's operational budget was a little over $7 million. The department had taken the steps through the legislation to try to close the gap. He explained that the division had increased its program receipts; previously about 31 percent of its operating expenses came from permits. The number had increased to 40 percent with a target in the 50 percent range by the beginning of next year. The division had looked at park units where the state had not charged fees and had taken steps to change that. For example, the division had installed collection stations with restrooms on Kodiak; it had anticipated bringing in $20,000 as a result, but it had already reached that amount before the summer season had begun. He elaborated that Kodiak had been very supportive of the fee increase to support the parks, which comported with the overall statewide sentiment. The division had also reduced its spending by 18 percent in order to operate without UGF. The bill would enable the division to maintain park services, reduce dependency on UGF, and provide a way to support the largest state park system in the nation. 8:45:32 AM Mr. Ellis relayed that the idea had come about 4.5 years earlier when there had been a photo contest as part of the 40th anniversary of Alaska's state parks. He detailed that the idea had come to create blank notecards with some of the photos and park information to sell for a profit. The division had been told it could only sell the item at cost. He showed the committee a park hat that was given to advisory board members, but could not be sold. Currently, the only source for park merchandise was an online retailer based in Seattle. For example, if a person wanted an Eagle Beach Alaska State Park sweatshirt they could buy it online for $40; the state and the division received zero percent of the profits. The bill would enable people purchasing the merchandise to support their state parks and to know that the profit was going back into their state parks. He relayed that at least six other states had mature park merchandise programs that generated $1 million or more in profits for their park systems. 8:47:38 AM Co-Chair Neuman asked if the division had the ability to work with commissions. He stated that the Mat-Su visitor's center and others worked on commission sales where items could be sold. Mr. Ellis answered in the affirmative. He detailed that the bill was broad and specified that it was the division's responsibility to seek a desirable and appropriate return on investment, which could occur through a number of venues. The program would have a strong wholesale component where a product would be sold to retail stores. The concept had been put forward by Princess, specifically related to its lodge at the Denali National Park near the new Kesugi campground. The division would love to have products to sell at the lodge, which would make a small profit for the state and the retailers. Co-Chair Neuman looked forward to the bill becoming law so he could purchase a hat. Representative Gattis asked if there was a preference given to Alaska businesses when retail items were purchased. She realized the state was going to try to make a profit and that the money went back in [to DNR's budget]. She referred to Mr. Ellis's testimony that currently the products could only be purchased out of state. She believed there could be a win-win situation [for the state and its businesses]. Mr. Ellis answered that the bill did address the issue; it included language that to the extent practicable several things would occur. First, the products would be made in the United States. He noted that currently products were primarily made outside of the U.S. Second, there was an Alaska bidder preference and the ability to look into the state's correctional facilities to determine if they had an opportunity to create a product. 8:50:33 AM Mr. Ellis continued to provide an explanation of the bill. He explained that there were states making between $1 million and $4 million in annual profit on the sales of merchandise (the programs had been in operation between 8 and 10 years in those states). However, he clarified that if implemented, the program would not bring in that kind of revenue immediately; it would be necessary to take very small steps to slowly grow the program. He explained that the bill had a zero fiscal note and the division would have to find the ability within its current means to make the program work. He communicated that states with the most successful programs had product at all of their state park areas. The program in Alaska would probably focus initially on some of the state's most heavily used areas that were closest to the largest population centers. The department intended to grow the program over a 5 to 8-year period. He relayed that the New Hampshire program had earned in the $1 million per year range. He cited the program's deputy director as saying "We are fairly passionate about our retail operations here in New Hampshire state parks. When you change the dialogue from cost control to revenue growth opportunities all of a sudden new doors open, employees attitudes shift, and we build a broader customer base of support, loyalty, and advocacy for our state parks system." Representative Munoz asked if the division would work with a wholesale distributor or if the state would act as the wholesaler. Mr. Ellis answered that the division had not yet looked at those details, but it would in the future. The department would also look at turning artwork generated by artisan residents in the Rie Munoz-Dorothy Gruening Artist-in- Residence Program into prints for resale. Representative Munoz encouraged the division to work with a wholesaler with a network of businesses instead of taking the work on itself. She believed the work would be quite cumbersome for the state to take on itself. Mr. Ellis agreed. Representative Munoz suggested working with a graphic designer on creating a product line. She believed that investing a little on the front end would create greater success. Mr. Ellis emphatically agreed. He acknowledged that the division did not contain graphic artist or merchandise sales experts; it would be looking to the private sector for the expertise in order to develop a product that would sell and that the state could be proud of. 8:53:55 AM Co-Chair Neuman stated that a significant number of people enjoyed state parks for photography. He noted that many professional photographers had copyrights of their photos. He wanted to ensure that there was nothing in the bill that would infringe upon the right of individuals to take professional photos. Mr. Ellis replied that the bill would not impact photographers. He relayed that in the photography contest held by the division six years earlier, the photographers had agreed to provide the division with copyright for their particular submission. However, the bill would not impinge upon the ability of professional photographers to take pictures. TED WELLMAN, PRESIDENT, KENAI RIVER SPECIAL MANAGEMENT AREA ADVISORY BOARD, STERLING (via teleconference), testified in support of the legislation. The advisory board was concerned about ensuring adequate monies and funding for parks in order to have appropriate enforcement and maintenance of facilities. He shared that the Kenai River was under "virtual assault" by increased use throughout the system. The board was in favor of any legislation that raised funds to allow state parks to more adequately perform their job. The board believed the bill and merchandizing was a nice and neat idea that would allow people visiting the park to identify with the park. He believed the products would be very popular. He relayed that the advisory board had submitted a letter of support in the past. Co-Chair Thompson CLOSED public testimony. Co-Chair Neuman addressed the zero fiscal note from DNR for FY 17 through FY 22. He noted that the department had the authority to collect fees at locations outside the park unit and the bill would enable the division to collect program receipts to allow for a profit to be made outside the sale of merchandise. Co-Chair Neuman MOVED to REPORT CSSB 101(FIN) out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 101(FIN) was REPORTED out of committee with a "do pass" recommendation and with and one previously published zero fiscal note: FN3 (DNR). 8:57:38 AM AT EASE 8:59:45 AM RECONVENED