HB 177-KING SALMON TAGS AND DESIGNS  2:02:09 PM CO-CHAIR TALERICO announced that the final order of business is HOUSE BILL NO. 177, "An Act relating to king salmon tags and king salmon tag designs." 2:02:21 PM JIM POUND, Staff, Representative Wes Keller, Alaska State Legislature, described HB 177 as a small step in looking at Alaska's economy, in particular fishing. The legislature is looking for increased funding and this bill would provide an opportunity to help fish enhancement, an area some people may eventually start looking at to make cuts to. The bill deals with the Alaska King Salmon stamps, which are already in existence, and it would convert today's stamp into an artist's rendition as a way for artists and collectors to start maintaining and keeping them in their collections. In addition to the stamps, he advised, posters and prints are envisioned for sale and the selling of these items could be handled through the Alaska Department of Fish & Game (ADF&G), local art stores, and charter boat captains, the same way as they sell the stamps. He said that the artist's intellectual property rights would be two years for the original art, the original art would then go back to the artist and he/she could sell that art in addition to whatever the artist was paid by the state. There would be potential for increasing some funds for fish enhancement in the state, he noted. 2:04:20 PM REPRESENTATIVE SEATON requested further information with regard to the artist being paid by the state. MR. POUND replied that it would be a contractual agreement, similar to the Alaska Railroad, almost like going out to bid. He deferred to Stephanie Wheeler who she handles the Alaska Railroad, but added that there would be a payment from the state for the rights to the art. 2:05:02 PM STEPHANIE WHEELER, Communications Officer, Alaska Railroad, explained that the Alaska Railroad has an annual art program whereby it solicits artists, Alaskan artists in particular, to submit sketches for a piece of artwork featuring the railroad. Based upon those sketches the Alaska Railroad personnel selects an artist and that artist is paid $3,000 to provide the artwork. The Alaska Railroad does retain ownership of the artwork which is used to create merchandise in addition to posters and prints and a matching lapel pin. The costs include paying the artist and printing costs of approximately $10,000. After advertising, production costs, and artist payment, about $15,000-$20,000 goes into it each year. The railroad does recoup most of that cost in the sale of prints, posters, and merchandise through its gift shop, she said. REPRESENTATIVE SEATON referred the statement that the railroad recoups "most" of the cost and asked whether it is a net loss. MS. WHEELER answered it is not a money maker as it is more of a public relations benefit and the railroad basically breaks even. 2:07:17 PM REPRESENTATIVE TARR asked whether the Alaska Railroad has ever considered doing this as a contest rather than a financial relationship. MS. WHEELER replied that artists are typically not wealthy individuals and therefore paying them some type of stipend for their artwork seemed to be the right thing to do. The railroad also gives the artist a few prints and posters for the artist's use, but the Alaska Railroad owns the artwork so the only value the artist receives is the $3,000, including the prestige in creating the Alaska Railroad's annual artwork. She described it as a show piece that people collect and noted that the Alaska Railroad's artwork is seen in offices around the state and in the Lower 48. There is the value of being recognized as an annual art winner, there is a contest element to it, and the Alaska Railroad has been at $3,000 for over a decade so it's a pretty low payment, she related. REPRESENTATIVE TARR referred to the fiscal note and anticipated the prints would be sold at $100 each. She asked if amount is comparable to the price the railroad charges per print. MS. WHEELER reported that the Alaska Railroad makes 750 prints, which are signed and numbered, and has sold the prints for $50- $55 for the last ten years. Posters are typically printed on smaller less expensive paper and are sold for $25-$30, which captures a different market such as children. The matching pins are $5, and merchandise such as mugs and ornaments are sold by the gift shop for $10-$20. 2:10:20 PM REPRESENTATIVE SEATON asked whether it would make any difference in the way the Alaska Railroad conducts its business if it didn't retain ownership of the artwork and the licensing agreement did not exceed two years. MS. WHEELER answered that the Alaska Railroad retains ownership of the artwork so that it can create merchandise well into the future. She reiterated that the artist receives $3,000 in compensation and the Alaska Railroad keeps the artwork. The railroad does not license the artwork for two years like what is being proposed under HB 177. REPRESENTATIVE SEATON questioned that if the Alaska Railroad were to agree to a license not to exceed two years, whether that would make a difference in its potential revenue stream. MS. WHEELER replied that the Alaska Railroad has found value in the manner in which it has been doing things because it does have gift shops. The railroad is free to use that artwork in other ways from year to year, as opposed to going back to the artist and paying more if it wants to use the artwork. She said she is unsure whether it would make a difference but suspects that the railroad came to do it in this manner because this way has the most benefit to the Alaska Railroad. REPRESENTATIVE SEATON noted he is trying to balance the version [proposed by HB 177]. 2:13:05 PM REPRESENTATIVE HERRON asked why the state wouldn't want to keep the art design such that in the future the fish and game fund could have anniversary prints and collections. MR. POUND replied he went with two years because he estimated that was the shelf life for prints and posters and, after speaking with local artists they are used to that type of timeframe. He opined that it was a way that the actual bid could be much lower than $3,000, initially. REPRESENTATIVE HERRON asked why the state would want to let go of property that could be valuable in a few years for collections. He asked whether the state wants to create an archive that could be valuable years in the future. MR. POUND answered he is not married to the two-year clause. 2:15:09 PM REPRESENTATIVE CHENAULT asked whether the discussion is about an actual salmon stamp or a postage stamp. MR. POUND responded that it is a stamp attached to the fishing license. REPRESENTATIVE CHENAULT noted it does say U.S. postage stamp. MR. POUND explained that it was an example of what the stamp might look like without the U.S. postal reference to it as it may read the State of Alaska King Fishing Stamp. REPRESENTATIVE CHENAULT noted he likes the first example, but cannot see where the other two examples have anything to do with salmon. He then addressed the fiscal note and asked whether there is an estimate as to what the income might be. MR. POUND replied he does not have an estimate but posited it would be higher than that of the Alaska Railroad primarily because there are tourists from the tour ships getting on the charter boats, as well as tourists fishing on the Kenai River with charter boats with an opportunity to sell the posters. Unlike the Alaska Railroad, the state would not be confined to a gift shop. 2:17:03 PM REPRESENTATIVE TARR observed from the fiscal note that it is a breakeven proposition and surmised that the state would have to sell at least 500 prints to get to the cost. She offered concern as to whether that number would be sold and surmised the railroad has other smaller items in addition to the prints. She asked whether that would be an option and whether the legislature needs to specifically give that option. In the event there is a good design but it is not necessarily selling many prints, she said she would want the ability to make it into something such as a greeting card or magnet or other gifts to be certain it is not a money loser. MR. POUND agreed and said it is something that is negotiated between the artist and the department. Once the department owns the art, he explained, it can do with it as it pleases for the next two years, as the bill is currently written. REPRESENTATIVE CHENAULT observed the costs for services in the fiscal note would include a contract with an artist receiving between [$2,500 and $5,000] per year, and surmised that that is a guess by not having the program in place and not knowing the actual costs. He pointed out that that is more than the $3,000 the Alaska Railroad usually pays its artists. 2:19:22 PM REPRESENTATIVE JOHNSON asked whether the discussion is the actual stamp that goes on the back of a license. MR. POUND answered correct. REPRESENTATIVE JOHNSON surmised it is similar to a duck stamp. MR. POUND agreed. REPRESENTATIVE JOHNSON opined that "the federal wildlife" makes more by selling duck stamps as posters and where the actual stamp is below the poster itself. "They make more money off of that," he said, "than they do off the actual people hunting." MR. POUND agreed that that potential is there and people who will never come to Alaska will actually purchase the posters in an online scenario. REPRESENTATIVE JOHNSON expressed his concern for the two year limit because if the department does not own the art work it will miss out because down the road the artwork will become more valuable and can be reprinted in the form of a poster. In the event the department buys the artwork it should own the rights to it, although, the artist can retain certain rights but he would hate to see the department pay for it and have someone go out and create these posters, buy the stamps, and the big money is on the backend. He said he would like the department to own the artwork, have a contest like with the duck stamp, the winner receives $3,000, and the department owns it in perpetuity. MR. POUND said he has no objection to that amendment coming forth. 2:21:41 PM REPRESENTATIVE TARR referred to HB 177, page 1, lines 6-8, which read: "The department shall make stamps available for the creation of king salmon limited edition prints and provide for the sale of stamps and prints to the public." She suggested that the language limits the opportunity to only a print and inquired as to whether it might be appropriate to read "or other products" or something similar that would provide flexibility. For example, she pointed out that Director Ben Ellis, Division of Parks and Outdoor Recreation, advised there is a strong interest in T-shirts, hats, and sweatshirts with the state park emblem, which is a popular design. MR. POUND replied that his goal on this legislation is to come up with funds for fish enhancement and he appreciates that this is a commercial type enterprise making money. 2:23:12 PM REPRESENTATIVE SEATON referred to HB 177, page 1, lines 14-15, "A contract under this subsection is governed by AS 36.30 (State Procurement Code)," and asked whether there is anything in the State Procurement Code on art that will make it a difficult process. MR. POUND replied he doesn't believe there is, but that he hadn't considered that aspect of the State Procurement Code. 2:24:18 PM KEVIN BROOKS, Deputy Commissioner, Office of the Commissioner, Alaska Department of Fish & Game (ADF&G), referred to the fiscal note and clarified that the number for a contract is $2,500- $5,000, a range that would encompass $3,000. REPRESENTATIVE CHENAULT responded that if he said a larger amount, he certainly didn't mean it. 2:25:02 PM MR. BROOKS advised that the department based the fiscal note on the assumption of selling 500 prints and 1,000 posters. The department expects there would be some standup costs given it employs biologists and does not have a marketing department. The fiscal note reflects it would be a general fund cost with the program subsequently generating revenue that would pay for itself. He noted that the department ran a duck stamp program from the mid-1980s to 2009, when it was discontinued for lack of a market. This program used to be a real big deal, but over time that market dried up and there are only a handful of printing firms that will take on this type of thing. The expectation would be that a new program would probably see a surge of sales in the event it could be marketed. He recalled for the duck stamp program in 1985 there was a big build up with a lot of advertising. All 50 states were doing it, with a lot of sales early on, but in the last years of it there was $5,000- $10,000 in sales on the various items. The department appreciates the intent and effort because it has been cutting its budget with programs going away, and anything that could generate revenue the department is certainly open to. However, he said, the department is not as optimistic about the level of revenue that might be generated from the program on a sustained basis going into the future. 2:27:08 PM REPRESENTATIVE SEATON reminded the committee that he had asked about the State Procurement Code. He referred to page 2, lines 1-2, "All costs incurred under this section may be paid from the fish and game fund." He said he wants to be sure that is an allowable use of the fund. MR. BROOKS responded that the state procurement is typically when the department is buying something and it provides for competition wherein the department would put a bid out and accept those bids. He said he doesn't see anything that would restrict the department's ability to do that by reference of the State Procurement Code in Title 36.30. REPRESENTATIVE SEATON noted his understanding of the bidding procedure wherein people bid for the amount of money they want to sell something to the state. In this case, essentially, the department will say the winner would receive $3,000 or $5,000, and then the department would choose from among the applicants based on an artist's selection or the commissioner's selection. He asked whether that is the way it would work. MR. BROOKS answered he envisions it to be something along those lines. REPRESENTATIVE SEATON, regarding that the costs incurred under this section may be paid from the fish and game fund, asked whether that is an allowable use of the fund. MR. BROOKS replied that typically the department uses the fish and game fund to benefit sport anglers. The department matches Dingell-Johnson Sport Fish Restoration funding, which has its own requirements and has to benefit the resources and provide opportunity. There is a relationship there, but if the legislature appropriated it for that purpose he thinks it could legally be done. But, he continued, the department does not currently have an art program using fish and game funds. 2:29:23 PM REPRESENTATIVE TARR referred to page 1, lines 11-12, which read: "The department may only consider designs submitted by state residents," and asked whether there are issues with limiting who the department accepts designs from. MR. BROOKS answered that the department can set its requirements in a bid document to limit it to Alaska residents. REPRESENTATIVE TARR referred to page 1, lines 6-8, [text provided previously] and reiterated that adding the language, "or other products" might be important given the demise of the duck stamp program. The state wouldn't have to become a retail distributor, but, in a more real time analysis, it could determine whether money is being recouped and coffee mugs could be easily made. She asked whether the department would be interested in that type of flexibility or whether it is beyond the scope of what it wants to take on. MR. BROOKS pointed out that the department's personnel are not marketers, they are biologists by trade and the department manages fisheries and game populations, although, currently many of those programs are being cut through different efforts in trying to live within its means. The department would assign marketing duties to staff, and not add staff, but it could add months to a seasonal employee. In the event the sum total of mugs, cards, stamps, and prints could generate money to help the resources of the state and help the department manage the fisheries it would be open to doing it, not wanting to limit itself. CO-CHAIR TALERICO opened public testimony, but closed it after ascertaining no one wished to testify. 2:32:10 PM CO-CHAIR TALERICO stated he would hold the bill given there was a question about the terms and the two year wording. 2:32:29 PM REPRESENTATIVE JOHNSON related that prior to being a legislator he was a marketing person and advised that the opportunity here is not with creating the state's own division to do this marketing, but creating an ability to generate the artwork and license it to someone and generate the money off the license as opposed to actually doing the products. He suggested that several places come to mind such as the people that make the gold coins; there could be a salmon coin and the state would receive a certain percentage off of everything sold. He said he does not want ADF&G getting into the marketing business and agreed ADF&G doesn't have the people. The licensing aspect could be done through the Department of Commerce, Community & Economic Development, he suggested. He added that he is unsure about the way it is currently outlined and offered to work with the sponsor's office. 2:34:08 PM REPRESENTATIVE TARR reiterated Mr. Ellis's comments regarding requests for Alaska State Park designs in different formats, and noted her support for opportunities to raise money in addition to this bill. [HB 177 was held over.]