HL&C - 02/27/95 HB 116 - EXEMPT ASMI FROM PROCUREMENT CODE Number 021 REPRESENTATIVE ALAN AUSTERMAN, Prime Sponsor of HB 116, stated that this bill was introduced to exempt the Alaska Seafood Marketing Institute (ASMI) from the procurement codes. It seeks to eliminate the restrictive requirements of the state procurement code in marketing Alaskan products in the United States. He pointed out there was also an amendment to add to the original bill. REPRESENTATIVES ROKEBERG, KUBINA & SANDERS arrived at 3:05 p.m. REPRESENTATIVE NORMAN ROKEBERG asked if they had any communications with other entities that were exempt under this statute. REPRESENTATIVE AUSTERMAN pointed out that if they were exempt, they wouldn't have any problems. CHAIRMAN KOTT noted that ASMI had been operating since 1981. He asked how, up until this time, they had been able to operate under the confines of this statute as it currently exists. Number 100 REPRESENTATIVE KIM ELTON stated that changing this procurement code had been a priority of the ASMI board for the past several years. The problem was that the ASMI board had received a significant amount of money from the state, especially in the domestic market place, but within the last two years there has been a transition away from this funding. He stated that ASMI domestic marketing is now completely funded by the industry. The board recognized that there might have been a problem asking to get rid of state procurement, when state general fund dollars were going into it at that time. REPRESENTATIVE ROKEBERG asked if the funding for ASMI was entirely self-generated and whether there is anything on the horizon for which they expect to ask for additional funding. REPRESENTATIVE AUSTERMAN replied that he wasn't aware of anything of that nature. He explained that the amendment to HB 116 directs the ASMI board to create within themselves a procurement policy of their own. Number 149 JERRY McCUNE, PRESIDENT, UNITED FISHERMEN OF ALASKA (UFA), stated they support HB 116. Most of the members pay their taxes to the domestic market and feel it very cumbersome to have this code restricting the way they do business. He stated the procurement code restricts actions ASMI can do under contracts. Number 173 DAVE WILDER, CHAIRMAN OF THE BOARD, ASMI, explained that the situation at ASMI had changed over the past two years. It went from an 18-member board to a 25-member board, made up of 12 fishermen, 12 processors and 1 member of the public. Their committee structure, which was put in place by the legislature, includes a salmon marketing committee designated by the legislature to oversee the moneys collected from the salmon fisheries and make recommendations to the board on their behalf. He stated the salmon industry in Alaska was in a crisis. The encroachment on sales both domestically and internationally, by farmed salmon, foreign seafood production, and by other protein markets, has caused them to lose market share and reduces the price they receive. He stated the board directed ASMI to change their status to seek relief from the state procurement code. MR. WILDER added they had developed a comprehensive domestic marketing plan that has brought more staff into the Lower 48 operation and has brought a much greater need to have the flexibility they were seeking. He explained several of the issues that were involved as the basis for seeking this relief: Fishermen and processors finance ASMI domestic operations; they have offices in Juneau and Seattle, and the majority of activities are carried out in Seattle. Many of these activities require immediate response and flexibility. Going through the procurement code process eliminates the possibility of taking advantage of situations that would benefit the industry and allow them to sell more product at higher prices. He stated that the board was committed to a cost efficient structure to promote quality in marketing Alaskan seafood products. Roughly 33,000 people depend on the industry for full-time jobs. He concluded that it would be in the best interest of the state and the industry to get relief from the procurement code. Number 250 CHAIRMAN KOTT asked for a recent example of how the procurement code had adversely affected ASMI. MR. WILDER said that recently, they had hired two people under contract to represent ASMI in their domestic retail program. They were not able to go out and hire them when they needed them because it was over the $25,000 limit, and it took a substantial amount of time. He also said this has been the same issue in procurement of office supplies, and slows up their process in dealing with out-of-state issues. Number 274 ART SCHHEUNEMANN, EXECUTIVE DIRECTOR, ASMI, related that ASMI had taken a new course with a new marketing plan. The marketing plan is regional in nature, targeting the Lower 48 as the newest opportunity for Alaska's seafood expansion. He explained that it was an area that had not been evangelized in the past to the degree that the seafood industry, fishermen and processors want it to be in the future. Part of the plan, based on extensive research, strongly suggested that they focus on the central core of the United States, where 25 percent of the U.S. population resides above average in disposable income. The marketing strategy also provided that as they become successful in those regional areas, they would roll out in other regions placing five individuals for a total of five regions to represent Alaska's seafood interests. MR. SCHHEUNEMANN followed up on Mr. Wilder's example of the two field marketing representatives that were put in place in September. He stated that it took three and one-half months to place them in the field. Because the contract for the individual was over $25,000, they couldn't advertise in the Lower 48 or do normal recruitment. These people weren't treated like potential employees applying for a job. They had to accommodate the procurement process by becoming licensed contractors in the state. Instead of having those people in the field setting up contacts, building relationships, and developing what needs to be done in the retail marketplace, food service and consumer advertising areas, they were behind the curve. The season had been upon them for some time. He stated this would be a very cumbersome and costly process when they hire the other regional representatives. He pointed out that as the organization becomes more aggressive in terms of marketing strategy, his retail director might want to work with multiple contractors to provide different services at any one time. He indicated that they did not want to have to go through this lengthy process. MR. SCHHEUNEMANN pointed out that this system was designed for state bureaucratic agencies to protect themselves and to make sure all vendors from "outside" had equal access to state services that were being contracted out. Number 402 CHAIRMAN KOTT asked if ASMI advertises within the state. MR. SCHHEUNEMANN replied that virtually all advertising is done outside the state, although there is an instate awareness communications program. Number 428 REPRESENTATIVE ELTON added that many of the instate efforts of ASMI have been in quality working with fishermen and processors. He expounded that you could sell a fish once, but if it's bad quality, you have a tough time selling it a second time. Number 440 CHAIRMAN KOTT stated there was an amendment before the committee. REPRESENTATIVE ROKEBERG made a motion to adopt amendment 1 to HB 116 as presented. CHAIRMAN KOTT asked if there was objection. Hearing none, the amendment was adopted. REPRESENTATIVE ROKEBERG offered amendment 2, page 1, line 12, to delete subsection 3, the Alaska Housing Finance Corporation (AHFC), and to adjust the following numbers of the underlying subsections. REPRESENTATIVES ELTON & KUBINA objected. REPRESENTATIVE AUSTERMAN stated that he could not support this amendment. REPRESENTATIVE ROKEBERG offered that this bill was an exemption to the procurement code to the state of Alaska. He suggested that perhaps they should be looking at changing the procurement code and not the exemptions. REPRESENTATIVE AUSTERMAN agreed with that position. He stated he would be happy to sign on if someone was willing to redraft the procurement codes of the state of Alaska. REPRESENTATIVE ELTON stated he would be intrigued and possibly a Co-sponsor if there was another bill that discussed the different things that AHFC was doing. He related that the major difference between AHFC and ASMI was that ASMI was using industry dollars and needs the latitude that industry has in their private marketing. Number 504 REPRESENTATIVE ROKEBERG asked Representative Elton if industry dollars refer to a fish tax. REPRESENTATIVE ELTON answered that there were three primary income streams into ASMI. The first was the .03 percent tax on seafood processed in state, the second was created by the last legislature when they passed a 1 percent assessment on the value of salmon product in the state, and the last income stream is federal, which last year was over $5,000,000. The later is used exclusively in overseas marketing and is secured with a 15 percent cash match by the state general fund. REPRESENTATIVE ROKEBERG withdrew his amendment. Number 542 REPRESENTATIVE ELTON made a motion to move CSHB 116(L&C) out of committee with individual recommendations. CHAIRMAN KOTT asked if there was any objection. Hearing none, the motion passed.