HB 24-BOROUGH REVENUES FOR TOURISM MARKETING  REPRESENTATIVE JIM WHITAKER, prime sponsor, testified that this is a simple bill that allows a local option with regard to use of borough revenues for an ongoing tourism marketing effort. He noted that Tam Cook was present to answer questions. SENATOR PHILLIPS said he's not opposed to the concept but he wants to know how it becomes a local option. It says that the money is collected, put into a general pot and then it's distributed on an area wide basis. He doesn't believe the wording is specific enough to ensure that it is local option and asked for interpretation from Tam Cook. TAMARA COOK, Director of Legislative Legal Services, said that existing statute is a simple statement that if a borough collects revenue on an area wide basis then it must use that money for an area wide function. If it collects money on a non-area wide basis, which is the territory within the borough that is outside of cities within the borough, then it must use it for a non-area wide function. The bill adds a subsection that says the principle above doesn't apply in a very narrow case. This means that if the revenue source at issue is a sales tax upon room rentals that is for a tourism marketing campaign, then whether the money was raised on an area wide basis or non-area wide bases is not an issue. Furthermore, whether the tourism marketing campaign is performed on an area wide or non-area wide basis is not an issue because time because tourism marketing campaigns don't need to track the origin of the revenue. It is assumed that tourism marketing is so general to the region that identifying it as area wide or non-area wide function doesn't make sense. It benefits the people of the area that tourists are attracted to whether they visit the city or are out in the country. CHAIRMAN TORGERSON said his understanding of the vote is that it was area wide and the city of Fairbanks was exempted. REPRESENTATIVE WHITAKER said he's aware of no vote specifically related to the legislation. CHAIRMAN TORGERSON said it wasn't this one in particular; it occured when they put the bed tax on originally. It was an area wide vote. REPRESENTATIVE WHITAKER said he thinks that's probably correct. CHAIRMAN TORGERSON wondered why there is need for a bill if there was already an area wide vote. REPRESENTATIVE WHITAKER said he asked the same question and the answer from Tam Cook was Title 29 requires a bill. MS. COOK added, "Assuming that they wish to use it for a non-area wide function." CHAIRMAN TORGERSON said they're not making that determination by calling tourism marketing a non-area wide function. MS. COOK said, "In the case of Fairbanks, it may be because I think economic development is a non-area wide function for that borough. If you take a look at what the powers are of second-class boroughs you'll see that second-class boroughs can perform economic development. It's a general power without having to acquire the power from a city or have a vote on it. It's a granted general power, but only to exercise on a non-area wide basis." CHAIRMAN TORGERSON said unless you have an area wide vote. MS. COOK said, "No, because they would have to have the power transferred to them to become an area wide power for the borough to acquire it. They'd have to acquire that power from the cities, all the cities in the borough." CHAIRMAN TORGERSON said he understood. SENATOR PHILLIPS said that basically, the discussion was about second-class boroughs, not home rule. MS. COOK said it could possibly apply to a home rule. SENATOR PHILLIPS said to use Anchorage as an example. MS. COOK said no, Anchorage is unified; it has no cities. It can't apply to a unified municipality because there are no cities. There's no distinction between area wide and non-area wide in a borough with no cities. There are home rule boroughs that have cities in them that aren't unified. If those boroughs happen to have a non-area wide source of revenue but are trying to exercise an area wide tourism marketing campaign, they would be faced with the same situation. When you're talking about home rule, what a borough does area wide versus non-area wide becomes a matter of their individual charter and wouldn't be reflected in statute. Therefore, it is theoretically possible to have a home rule borough that has an area wide tourism marketing power but was collecting revenue on a non-area wide basis. In that case, this bill would affect such a borough and allow them to spend that money. SENATOR PHILLIPS said that with the exception of the unified boroughs, this bill affects the organized areas of the state. MS. COOK said, hypothetically it could. "Whether or not a borough exercises its power on an area wide versus a non-area wide basis is very specific to that borough. It has to do, if it's general law, with whether the general law has granted them an area wide power or whether they have chosen to acquire it or whether they have gotten it when they filed their original petition for incorporation, they must list the powers they are going to exercise. So each of these boroughs, regardless of classification, might have variations in the relationship between the boroughs and the cities." SENATOR PHILLIPS asked whether it would still require a vote in Representative Whitaker's area if the bill is passed and local option is allowed or whether it just happens automatically. MS. COOK said it would happen automatically, but a vote is required in order to get a sales tax imposed originally. SENATOR PHILLIPS said they've already done that. MS. COOK said they've done that and apparently they have an area wide sales tax in that particular borough. This bill will say if you have an area wide sales tax and it is on room rentals, or that portion on room rentals, that revenue could be used on a non-area wide basis for tourism marketing. REPRESENTATIVE WHITAKER said the key word is could, it's still at the discretion of the local governing body. SENATOR PHILLIPS said that's why he's referring to an area wide vote or through the assembly or city council. Somebody must make the determination. MS. COOK said it would be up to the governing body; there is a prohibition in subsection (a) and this removes the prohibition and leaves the option open as to whether they chose to act or not. SENATOR PHILLIPS said that, upon passage, this would be another decision made at the local level. CHAIRMAN TORGERSON commented that they would have to adopt the power by ordinance. SENATOR PHILLIPS agreed. CHAIRMAN TORGERSON asked for assurance that this wouldn't give differential rates between a general law sales tax and a bed tax. "If they happen to put on a borough wide sales tax of four percent then they must raise or lower the bed tax to that same figure." MS. COOK said it doesn't get into any issues of whether a sales tax rate has to be equal. [Tape indiscernible] DEBBIE TILSWORTH, President of the Alaska Travel Industry Association in Fairbanks, testified that the statewide and local visitor industry supports HB 24. Currently the mayor and the borough are formulating the budget for FY02. It is important that destination-marketing funds be built into the budget and passage of this legislation will allow that. Number 558 FRANK ROSE, Chair of the Alaska Travel Industry Association Legislative Affairs Committee, testified that, from their perspective, the funds for destination marketing should be available at the option of the local community. One of the issues in Fairbanks is that there has been considerable migration from city hotels to borough hotels. This has lowered the bed tax revenue in the city and increased the revenue available in the borough. Under current Title 29 provisions, they can't use that money for destination marketing. There are other communities that could be similarly affected and this is why they urge passage of the bill. SENATOR PHILLIPS asked Mr. Rose whether there is any known opposition to the bill in the community. MR. ROSE said none that he's aware of but there may be some assembly members who will wonder what to do. However, since there is local option, "they're in the drivers seat." WANETTA AYERS, Director of Community and Economic Development for the Kenai Peninsula Borough, testified in favor of HB 24. They currently fund tourism marketing through PILT funds via a contract with the Kenai Peninsula Tourism Marketing Council, which is a regional destination marketing organization. The Kenai Peninsula Borough is in favor of forming options to increase funding for destination marketing. HB 24 will provide borough governments with greater options to fund economic development through destination marketing. CHAIRMAN TORGERSON commented that it doesn't affect his borough much since there is no borough wide bed tax. MS. AYERS said that it might in the future. SENATOR PHILLIPS moved HB 24 with zero fiscal note from committee with individual recommendations.