Legislature(2017 - 2018)BARNES 124


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11:31:55 AM Start
11:33:05 AM HB383
01:03:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
-- Public Testimony <Time Limit May Be Set> --
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
         HB 383-TOURISM MARKETING:BOARD;ASSESSMENT;FUND                                                                     
11:33:05 AM                                                                                                                   
CHAIR LINCOLN  announced that the  first order of  business would                                                               
be HOUSE  BILL No.  383, "An Act  establishing the  Travel Alaska                                                               
Board;   relating  to   a  tourism   marketing  assessment;   and                                                               
establishing a tourism marketing fund."                                                                                         
11:33:59 AM                                                                                                                   
BROOK  IVY,  Staff,  Representative  Jason  Grenn,  Alaska  State                                                               
Legislature, speaking on behalf  of Representative Grenn, sponsor                                                               
of HB  383, said  she would  address questions  on the  bill that                                                               
were  raised  during  the  previous hearing  [on  2/27/18].    In                                                               
response to  Representative Neuman's inquiry as  to where vehicle                                                               
rental tax (VRT),  [collected by the Tax  Division, Department of                                                               
Revenue]  funds are  expended,  Ms. Ivy  said  the Department  of                                                               
Transportation &  Public Facilities (DOTPF) reported  - in fiscal                                                               
year  2018  (FY  18)  -  the  department  received  approximately                                                               
$5,497,300 in  VRT receipts, which  were used for  direct highway                                                               
and  airport  runway  maintenance  activities,  including  labor,                                                               
equipment, and materials.  She  directed attention to fiscal note                                                               
[Identifier:  HB383-DNR-PKS-02-27-18],  provided in the committee                                                               
packet,  which  indicated  the  Division  of  Parks  and  Outdoor                                                               
Recreation,  Department  of   Natural  Resources  (DNR)  received                                                               
[$300,021,000] in FY  18 which was used for  personal services or                                                               
personnel.   To the question  of whether  VRT funds were  used to                                                               
bond parking  garages, she related  that the  Legislative Finance                                                               
Division, Legislative  Agencies and  Offices, advised not  to its                                                               
knowledge, and clarified that debt  service for the Linny Pacillo                                                               
Parking Garage in Anchorage came  from unrestricted general funds                                                               
11:36:18 AM                                                                                                                   
MS. IVY, in response to a  question raised by Chair Lincoln as to                                                               
whether Alaska  residents could be exempted  from the assessment,                                                               
stated  that  Legislative  Legal  Services,  Legislative  Affairs                                                               
Agency, advised  exempting Alaska  residents is prevented  by the                                                               
privileges and immunities clause  within the Fourteenth Amendment                                                               
to  the  U.S.  Constitution,  which  prevents  states  and  local                                                               
governments  from   discriminating  against  citizens   of  other                                                               
states.  In  order to overcome the  aforementioned provision, the                                                               
bill must  not burden  a fundamental  privilege protected  by the                                                               
clause,  or  if  so,  there  must be  a  substantial  reason  for                                                               
discriminating  against  non-residents,   and  she  concluded  an                                                               
Alaska-preference  option would  violate the  Constitution.   Ms.                                                               
Ivy continued  by pointing  out VRT  revenue is  collected mostly                                                               
from  visitor  activities,  which  in other  states  is  used  to                                                               
support  statewide  tourism marketing  programs.    In fact,  the                                                               
statute in Alaska related to VRT  directs that receipts are to be                                                               
used  for  tourism  development  and  marketing;  therefore,  the                                                               
legislature has  the purview  to appropriate  VRT revenue  to its                                                               
original purpose.  Reinvestment of  VRT into tourism marketing is                                                               
important  to  ensure  the new  plan  for  statewide  destination                                                               
marketing  is  successful.    She   noted  the  tourism  industry                                                               
contributes over  $100 million in  various taxes and fees  to the                                                               
state's general  fund (GF), thus  an appropriation of  $9 million                                                               
to $10 million in VRT to  tourism marketing funds represents a 10                                                               
percent  reinvestment   to  maintain  Alaska's   healthy  visitor                                                               
industry.   Turning to the  question of why the  tourism industry                                                               
can't achieve the goal of HB 383  "on their own," she said HB 383                                                               
would  only involve  state government  as an  official collecting                                                               
agent of any potential assessment  based on a tourism improvement                                                               
district  (TID)  model.    The   TID  structure  is  a  voluntary                                                               
assessment  that  intends  to level  the  playing  field,  create                                                               
transparency   and  reliability,   and   allow  for   businesses'                                                               
11:40:19 AM                                                                                                                   
MS. IVY  pointed out  that in  a manner  like the  Alaska Seafood                                                               
Marketing Institute  (ASMI) legislation,  HB 383 provides  for an                                                               
assessment,  government  oversight through  a  governor-appointed                                                               
[board of  directors], and regulations  issued by  the Department                                                               
of Revenue  (DOR).  Further,  HB 383 is not  a tax bill,  and the                                                               
industry is  lobbying to  manage the tax  process.   She returned                                                               
attention  to additional  information provided  in the  committee                                                               
packet which indicated the tourism  industry has felt the impacts                                                               
of decreases  in funding for Alaska's  tourism marketing program.                                                               
In fact, although  the cruise [ship] industry  continues to grow,                                                               
growth in that  industry does not benefit most  tour operators in                                                               
the  state;  however,   statewide  destination  funding  benefits                                                               
smaller businesses.   Ms. Ivy  concluded that tourism is  part of                                                               
an [economic]  solution, and she reviewed  tourism's net positive                                                               
return on investment  (ROI) figures.  She  reminded the committee                                                               
that HB  383 was proposed in  response to FY 17  operating budget                                                               
legislative  intent language  that  tasked  the tourism  industry                                                               
with developing a sustainable plan  for funding.  She inquired as                                                               
to where a source of funding  for a marketing plan would be found                                                               
if not  by collecting  from visitors.   Ms. Ivy  acknowledged the                                                               
bill is  complicated legislation with  issues to address  such as                                                               
the structure of  the transition board and other  issues that may                                                               
be addressed by forthcoming amendments.                                                                                         
11:44:45 AM                                                                                                                   
REPRESENTATIVE NEUMAN  pointed out  that the legislature  seeks a                                                               
sustainable plan to fund state  support for the tourism industry.                                                               
Upon speaking with members of  the tourism industry, he expressed                                                               
his belief  HB 383 would not  pass as written because  it diverts                                                               
general funds  currently needed  by the  Division of  State Parks                                                               
and  Outdoor  Recreation,  DNR, and  the  Alaska  Marine  Highway                                                               
System,  DOTPF.    Representative  Neuman  suggested  modeling  a                                                               
funding  mechanism after  the North  American  Model of  Wildlife                                                               
Conservation, which  established a  nationwide 10  percent excise                                                               
tax on sporting goods that  is distributed to states for wildlife                                                               
management.   With a target goal  of $10 million per  year, a tax                                                               
could be  based on  the estimated number  of visitors  each year;                                                               
however, he  cautioned that an excise  tax may be perceived  as a                                                               
duplication  of  taxes  on  cruise  ship  visitors.    The  North                                                               
American  Model  of  Wildlife   Conservation  has  proven  to  be                                                               
successful in  managing wildlife for  79 years and  assesses only                                                               
those who use related management  services.  He restated he would                                                               
not support  legislation that  would take  money away  from other                                                               
agencies for a  program that is not mandated by  the Alaska State                                                               
11:49:30 AM                                                                                                                   
REPRESENTATIVE  JOSEPHSON  asked  Ms.  Ivy to  cite  the  statute                                                               
directing that  [VRT] revenue is  to be appropriated  for tourism                                                               
and marketing.                                                                                                                  
MS. IVY said AS 43.52.080(c) reads:                                                                                             
     (c) The legislature may  appropriate the actual balance                                                                    
     of  the   vehicle  rental   tax  account   for  tourism                                                                    
     development   and  marketing.   This  section   is  not                                                                    
     intended to create a dedicated fund.                                                                                       
REPRESENTATIVE  JOSEPHSON  questioned  whether [VRT]  funds  have                                                               
been rerouted to other agencies for tourism-related functions.                                                                  
MS. IVY  said correct.   She  explained that  the sponsor  of the                                                               
bill reviewed  an overview  of the governor's  FY 19  budget from                                                               
the  Legislative  Finance   Division,  Legislative  Agencies  and                                                               
Offices,  and found  VRT tax  receipts were  identified as  "non-                                                               
designated  use  of  designated   funds";  however,  the  tourism                                                               
marketing  industry   has  not  previously  brought   said  issue                                                               
forward.   Ms. Ivy directed  attention to a document  provided in                                                               
the  committee packet  entitled, "State  Distribution of  Vehicle                                                               
Rental Tax Funds  1200 VehRntlTax (DGF)," which  showed VRT funds                                                               
were  appropriated  at less  than  the  full  amount from  FY  06                                                               
through FY 11, and no VRT  funds were appropriated to the Tourism                                                               
Marketing Program from FY 12 through FY 17.                                                                                     
REPRESENTATIVE JOSEPHSON  observed, relative to  intent language,                                                               
both positions  [expressed by Ms. Ivy  and Representative Neuman]                                                               
are correct because VRT funds  are not unrestricted general funds                                                               
(UGF); on  the other  hand, [appropriating all  VRT funds  to the                                                               
Tourism Marketing  Program] would  create funding  shortfalls for                                                               
other departments.                                                                                                              
MS.  IVY acknowledged  that the  sponsor  recognizes there  would                                                               
have  to be  a  fund source  change  to UGF  for  DNR and  DOTPF.                                                               
Ultimately, even  those from industry who  oppose the legislation                                                               
agree  VRT  receipts are  a  pass-through  cost to  visitors  and                                                               
similar to assessments  in other sectors; therefore,  a key piece                                                               
of the legislation provides that  VRT revenue would go to tourism                                                               
marketing as originally intended.                                                                                               
11:54:00 AM                                                                                                                   
REPRESENTATIVE  NEUMAN surmised  the  bill  sponsor and  industry                                                               
feel VRT [should  be directed to the  tourism marketing program];                                                               
however, he opined the legislature  feels differently because the                                                               
program has  not been [fully]  funded through VRT.   Further, the                                                               
legislature  has   worked  with  industry  for   many  years  and                                                               
legislators  have urged  industry to  raise funds  autonomously -                                                               
independent from  the state.  He  stressed that since FY  07, VRT                                                               
revenue  has  been appropriated  by  the  legislature to  support                                                               
infrastructure that is used by the tourism industry.                                                                            
REPRESENTATIVE  TUCK  returned  attention to  the  aforementioned                                                               
document  and  noted  that  all  funds are  general  funds.    In                                                               
addition,  [AS 43.52.080(c)]  advises  that  the legislature  may                                                               
appropriate VRT  for tourism  marketing.   For several  years the                                                               
legislature  did fund  tourism marketing;  during that  period of                                                               
time  -  from  FY  06  through   FY  11  -  VRT  funds  were  not                                                               
appropriated to [the Division  of Highway/Aviation & Facilities],                                                               
DOTPF, but they resumed again in FY 12.                                                                                         
11:56:07 AM                                                                                                                   
CHAIR LINCOLN opened public testimony on HB 383.                                                                                
11:56:50 AM                                                                                                                   
JILL  MCLEOD,  Attorney,  informed  the  committee  she  provided                                                               
Alyeska Resort  Management Company with  a legal analysis  of the                                                               
impact HB  383 would have  on its  business.  She  stated Alyeska                                                               
Resort  Management  Company  opposes  HB 383  for  a  variety  of                                                               
reasons,  particularly because  the  tax cannot  be dedicated  to                                                               
statewide   tourism  marketing.      Further,   the  bill   lacks                                                               
performance  metrics  -  a  mechanism to  track  the  success  of                                                               
marketing  efforts  -   and  is  unclear  as   to  which  tourism                                                               
businesses would be  assessed.  From the  business perspective of                                                               
Alyeska    Resort    Management    Company,   the    tax    would                                                               
disproportionately affect its Alaska resident  users.  Ms. McLeod                                                               
said the  tax currently is not  needed and returned to  the issue                                                               
of  funds   that  cannot  be   dedicated  to   statewide  tourism                                                               
marketing; VRT, which is dedicated  to tourism and marketing, has                                                               
historically not been fully used  for tourism and marketing.  She                                                               
opined that creating a new assessment  for the same purpose is no                                                               
guarantee of  the use of  funds, and  she urged the  committee to                                                               
review  the   written  comments   submitted  by   Alyeska  Resort                                                               
Management Company.                                                                                                             
12:00:11 PM                                                                                                                   
REPRESENTATIVE  TUCK asked  for clarification  that funds  remain                                                               
MS.  MCLEOD explained  that  only  a very  small  portion of  VRT                                                               
revenue was appropriated  to tourism marketing.   For example, in                                                               
2017,  approximately  $1.5  million,  out  of  an  estimated  $12                                                               
million collected, was appropriated towards tourism.                                                                            
REPRESENTATIVE  JOSEPHSON   questioned  whether   Alyeska  Resort                                                               
Management  Company would  benefit  by moving  the funds  created                                                               
under HB  383, subsection (c),  so that, albeit  with discretion,                                                               
there could  be an  appropriation [to  tourism and  marketing] of                                                               
$12 million from VRT, rather than $1.5 million.                                                                                 
MS. MCLEOD  agreed if the  full amount of revenue  generated from                                                               
VRT was appropriated  to tourism marketing, under  the purview of                                                               
the Alaska Travel Industry Association  board (ATIA), there would                                                               
be  no  need  to  propose   a  further  assessment  on  industry.                                                               
However, performance  metrics would  still be necessary  to gauge                                                               
the efficacy of marketing efforts.                                                                                              
REPRESENTATIVE  JOSEPHSON understood  that  the tourism  industry                                                               
seeks  to self-impose  a tax  in  order to  demonstrate its  good                                                               
faith to the legislature.                                                                                                       
MS. MCLEOD  restated the need  for performance  metrics "attached                                                               
to the  spending in  order to ensure  that the  tourism marketing                                                               
actually is effective."                                                                                                         
12:04:34 PM                                                                                                                   
CHAIR LINCOLN surmised if HB 383  were to pass and industry self-                                                               
imposed  a tax,  but the  legislature failed  to appropriate  the                                                               
funds to marketing, industry could "roll that assessment back."                                                                 
MS.  MCLEOD said  yes,  there  is a  provision  to terminate  any                                                               
assessment through an election process;  further, there are other                                                               
issues related to who holds  the authority to propose the initial                                                               
assessment, the  transition board, and  the nominees to  the ATIA                                                               
board.   In  fact, HB  383  directs the  election to  be held  in                                                               
accordance with AS 44.25.270 and  AS 44.25.275, which are related                                                               
to  tourism  businesses;  however,  tourism  businesses,  tourism                                                               
segments, and  tourism industry  are all  undefined in  the bill.                                                               
She  advised  that  the  legislation   is  "premature"  as  other                                                               
jurisdictions  have spent  years  developing tourism  improvement                                                               
12:08:38 PM                                                                                                                   
STEPHEN  MAHAY,   Spokesperson,  Mahay's  Jet   Boat  Adventures,                                                               
expressed his  support for HB  383.  He said  he has been  in the                                                               
[tourism] industry for 42 years  and recalls that state marketing                                                               
funding for the  industry has varied greatly over the  years.  In                                                               
fact,  in  some  years  marketing  has been  on  a  national  and                                                               
international  level,  which was  good  for  small businesses  in                                                               
Talkeetna.  He  opined the industry is not looking  for a handout                                                               
from the  state, although  state investment  in the  industry has                                                               
generated growth in  the marketplace and in  the state's economy.                                                               
He pointed  out individual small  businesses cannot  access large                                                               
marketplaces.  The proposed legislation  would allow the industry                                                               
to work  with a tax  system involving businesses,  guests, staff,                                                               
and personnel, in order to  generate revenue for an effective and                                                               
consistent  marketing program.   Mr.  Mahay restated  support for                                                               
the bill and self-imposed taxes on the tourism industry.                                                                        
12:12:31 PM                                                                                                                   
CHAIR  LINCOLN   asked  for  more  information   on  Mr.  Mahay's                                                               
MR. MAHAY said his company operates  a fleet of nine jet boats in                                                               
Talkeetna;  his company  hosts  approximately  22,000 guests  per                                                               
summer and employs 25 people.                                                                                                   
REPRESENTATIVE NEUMAN  asked Mr.  Mahay for  additional solutions                                                               
related to funding for the tourism industry.                                                                                    
MR. MAHAY said the language in  the bill "is heading in the right                                                               
direction."   He suggested tourist attractions  could collect the                                                               
tax to  forward to the state  and thereby create a  pool of money                                                               
for use by industry for marketing.                                                                                              
12:14:21 PM                                                                                                                   
BRETT CARLSON  informed the  committee he  is a  lifelong Alaskan                                                               
working in the travel industry.   Mr. Carlson observed the travel                                                               
industry allows  small businesses in rural  Alaska to participate                                                               
in the  travel industry at the  ownership level.  In  addition to                                                               
operating a  small hospitality center  on the Dalton  Highway, he                                                               
said he works  with a family of tour companies  - Northern Alaska                                                               
Tour Company, Wright  Air Service, and Warbelow's Air  - that are                                                               
doing business  throughout Interior and  Arctic Alaska.   Part of                                                               
his  business  is  renting vehicles  to  tourists  traveling  the                                                               
Dalton  Highway, and  thus his  company  pays VRT.   Mr.  Carlson                                                               
disagreed with others  who have testified that in  2003, when VRT                                                               
legislation first  passed, the  tax was  to support  highways and                                                               
airports.   Instead, he  stressed the  intent of  the legislation                                                               
was  to use  the funds  for destination  marketing to  the extent                                                               
allowed  by the  Alaska State  Constitution; in  fact, there  was                                                               
"implicit  commitment from  the  legislature  that, [revenue  for                                                               
VRT]  would be  used to  market Alaska  and grow  Alaska's travel                                                               
resource."   Further, he  also disagreed  with those  who believe                                                               
"that   the  legislature   hasn't   followed   through  on   that                                                               
commitment,"   and  he   provided  additional   history  on   the                                                               
legislation.  Mr. Carlson concluded that  only in the last two to                                                               
three years has funding been  insufficient, and [HB 383] provides                                                               
an  opportunity for  the legislature  to develop  Alaska's travel                                                               
12:19:18 PM                                                                                                                   
KIRK  HOESSLE, President,  Alaska  Wildland Adventures,  informed                                                               
the committee  Alaska Wildland  Adventures operates  three lodges                                                               
on the  Kenai River and  offers multiday adventure  programs from                                                               
the Kenai  River to  Denali and  beyond.   The business  began in                                                               
1977 and employs  12 year-round and over  100 seasonal employees.                                                               
He  expressed  his strong  support  for  a destination  marketing                                                               
program and  HB 383;  in fact, research  throughout the  U.S. has                                                               
shown  that  a  strong   and  well-funded  destination  marketing                                                               
program  is essential  for a  strong  diversified travel  tourism                                                               
economy that reaches  into rural areas.  Mr.  Hoessle pointed out                                                               
his  business  benefitted from  years  of  high levels  of  state                                                               
spending in support  of tourism programs that  culminated in 2015                                                               
and  2016; however,  in 2017,  a  decline in  trip inquiries  and                                                               
revenue  occurred.   He expressed  his belief  the aforementioned                                                               
decline  is the  result of  severely reduced  marketing programs,                                                               
and  he noted  his concern  for small  businesses throughout  the                                                               
state, especially those operating in  rural and remote areas.  He                                                               
restated  his  support  for   the  tourism  improvement  district                                                               
concept within HB  383, which has been proven  effective in other                                                               
REPRESENTATIVE  TUCK  has heard  the  amount  of tourism  dollars                                                               
coming into Alaska is at record  levels and asked whether this is                                                               
not the situation for Mr. Hoessle's business since 2017.                                                                        
MR. HOESSLE  confirmed his business  has had a  decline; although                                                               
Alaska has record  numbers of visitors, they  are not distributed                                                               
equally throughout  the state;  however, marketing  [rural areas]                                                               
is effective after visitors are convinced to come to Alaska.                                                                    
REPRESENTATIVE TUCK  asked how much  Mr. Hoessle  spends annually                                                               
on a marketing plan.                                                                                                            
MR. HOESSLE said his business  spends approximately 10 percent of                                                               
its  sales revenue  - over  $300,000 to  $400,000 -  on marketing                                                               
initiatives through web site publications and promotions.                                                                       
12:23:45 PM                                                                                                                   
DAVID  STORY  stated  he  is   an  employee  of  Alaska  Wildland                                                               
Adventures.   Speaking for himself  and others in  his community,                                                               
he said he  supports a statewide tourism  marketing program which                                                               
is essential to the success of  small businesses - such as Alaska                                                               
Wildland  Adventures -  that make  up the  economic community  of                                                               
Cooper Landing,  the Kenai  Peninsula, and  businesses throughout                                                               
Alaska.  Mr.  Story cautioned small businesses  cannot spend much                                                               
for marketing their  services to broad audiences  and thus depend                                                               
on the state  to promote greater Alaska as  a travel destination,                                                               
in addition  to a  cruise destination.   The  tourism improvement                                                               
district concept  is attractive because it  ensures participation                                                               
by all the tourism industry  while allowing specific funding from                                                               
the   industry.      He  urged   the   legislature   to   address                                                               
prioritization of  general funds, but  not at the expense  of the                                                               
intended  use of  VRT or  investment in  tourism marketing.   Mr.                                                               
Story concluded  [HB 383] would  attract more visitors  and glean                                                               
additional money  for the destination  marketing program,  and he                                                               
urged  for urgency  to support  the economic  backbone of  Cooper                                                               
Landing.   He described some  of the  provisions of the  bill and                                                               
pointed  out that  jobs in  rural Alaska  are difficult  to find;                                                               
programs similar to those in  the bill can maintain a consistency                                                               
of  employment to  avoid  a "boom  and bust"  cycle.   Mr.  Story                                                               
restated his support for HB 383.                                                                                                
CHAIR  LINCOLN  asked  where Alaska  Wildlife  Adventures  spends                                                               
$300,000 to $400,000 in marketing programs.                                                                                     
MR. STORY said the marketing  budget is spent on online marketing                                                               
and direct consumer marketing.                                                                                                  
12:28:36 PM                                                                                                                   
KELLY  BENDER,  Co-owner,  Lazy   Otter  Charters,  informed  the                                                               
committee  she  and  her  husband  own  Lazy  Otter  Charters  in                                                               
Whittier, which  operates four boats  in Prince William  Sound, a                                                               
fleet of rental  kayaks, and a coffee and gift  shop, and employs                                                               
twenty Alaskans  seasonally, and six part-time,  year-round.  She                                                               
noted responsible  owners continually invest in  their businesses                                                               
to  be  successful, and  she  and  her  husband invest  in  their                                                               
business,  the industry,  and  the state.    Lazy Otter  Charters                                                               
operates year-round  and works hard  to participate in  the local                                                               
economy by  promoting their  business, advertising,  and actively                                                               
finding  customers.    Ms.  Bender  opined  tourism  is  Alaska's                                                               
business, providing  thousands of year-round jobs  and supporting                                                               
many  small businesses,  and the  legislature should  support the                                                               
industry.  In fact, Alaska  is out-marketed by nearly every other                                                               
state in  the nation; other  states understand the  importance of                                                               
promotion and the  economic value of the tourism  industry; to be                                                               
competitive, Alaska  must have  a strong  tourism program.   Lazy                                                               
Otter Charters  supports industry's  effort to establish  a long-                                                               
range solution  for sustainable tourism marketing,  an assessment                                                               
to establish  a tourism marketing  fund, the  tourism improvement                                                               
district  model,   and  VRT  revenue  directed   to  the  tourism                                                               
industry.    She  closed,  noting   visitors  to  Alaska  do  not                                                               
"magically  appear" but  come  to the  state due  to  years of  a                                                               
diligent  and aggressive  marketing program;  she urged  that the                                                               
committee support HB 383.                                                                                                       
12:32:26 PM                                                                                                                   
KAREN HARRIS, Owner, Alaska Garden  Gate B&B and Cottages, stated                                                               
her strong support for HB  383 and agreed with previous testimony                                                               
provided by Steve  Mahay, Brett Carlson, and Kirk Hoessle.   As a                                                               
small business  owner since 2002,  she has grown her  business to                                                               
employ three  fulltime year-round positions and  twelve part-time                                                               
seasonal  positions.   Her business  did well  during the  period                                                               
that the  state funded marketing,  but business has  fallen since                                                               
then.  She opined the residual  effects from years of $20 million                                                               
[tourism  marketing]  budgets  have  come  to a  close.    As  an                                                               
appointed  board  member  of ATIA,  she  observed  ATIA  strongly                                                               
supports  the  needs  of  small  businesses.    Ms.  Harris  said                                                               
legislators and  industry, by establishing a  tourism improvement                                                               
district, seek to  keep tourists coming to Alaska  and to smaller                                                               
businesses in rural areas of Alaska.                                                                                            
12:35:14 PM                                                                                                                   
DEBORAH HANSON,  Spokesperson, Pike's Waterfront  Lodge (Pike's),                                                               
stated  her  support  for   establishing  a  tourism  improvement                                                               
district  (TID);  as  described  by other  testifiers,  she  said                                                               
Pike's was growing  until last year and is  struggling with sales                                                               
this year.  One of her  agents explained Alaska is competing with                                                               
Europe for tourism  bookings, and some East  Coast clients prefer                                                               
Europe.   Further,  the lack  of television  advertising and  the                                                               
failure  to send  vacation planners  have  had negative  impacts.                                                               
Ms. Hansen  said Pike's advertising cannot  entice an independent                                                               
land-traveler  to travel  to Fairbanks,  thus [Pike's]  relies on                                                               
the state to make "the State  of Alaska look attractive out there                                                               
in the marketplace."   She restated her support for  the bill and                                                               
said she has been working for  over one and one-half years to get                                                               
a TID implemented.  Ms. Hansen urged the committee's support.                                                                   
12:38:05 PM                                                                                                                   
JOHN LAMBETH,  Industry Consultant,  ATIA, returned  attention to                                                               
the issue of  VRT and explained tourism  improvement districts in                                                               
the U.S. and  internationally commonly use VRT as a  part of that                                                               
mechanism.   He said after  lengthy discussion,  Alaska's tourism                                                               
industry seeks  a partnership with  the state by  its willingness                                                               
to  accept a  self-imposed tax.   He  acknowledged the  state has                                                               
limited  funds;   however,  HB  383  does   not  dedicate  funds,                                                               
therefore, the  legislature retains  its power  of appropriation.                                                               
Continuing  with   comments  on  the  bill,   Mr.  Lambeth  first                                                               
characterized the bill as a  starting place.  Second, in response                                                               
to testimony  related to the  procedure of elections,  he assured                                                               
the  committee  the  procedure  makes  sense  and  is  internally                                                               
consistent;  in  fact,  as  enabling legislation,  HB  383  is  a                                                               
framework  for  industry, and  the  board  created thereby  would                                                               
satisfy  all   outstanding  specific   questions  prior   to  the                                                               
election.   Third,  to the  question  of whether  the ATIA  board                                                               
would  be  involved, he  pointed  out  the  bill would  create  a                                                               
transition  board and  he  outlined its  functions.   Fourth,  in                                                               
recognition   of  Alaska's   constitutional  limitation   against                                                               
dedicated  funds,   HB  383  allows  industry   to  dissolve  the                                                               
assessment  if  the legislature  does  not  appropriate funds  in                                                               
accordance with the  intent of the bill.  Finally,  there are 167                                                               
TIDs in  the U.S., some  of which  were established in  less than                                                               
one  year.    Mr.  Lambeth  stressed HB  383  presents  a  proven                                                               
mechanism and urged the committee's support.                                                                                    
12:43:18 PM                                                                                                                   
MARK WEAKLAND,  General Manager, Hotel Alyeska  and spokesperson,                                                               
Alyeska Resort,  expressed opposition to the  bill, stating Hotel                                                               
Alyeska and Alyeska Resort view HB  383 as a very narrow targeted                                                               
year-round resort and  statewide lodging tax.   He explained that                                                               
the proposed legislation is narrow in  that the tax would be paid                                                               
by  businesses across  the state  on a  year-round basis  for the                                                               
benefit of  primarily summer  visitation proprietors  but exclude                                                               
many principle  payers within "the  summer marketplace,"  such as                                                               
large cruise lines, airlines, and  others.  He surmised there may                                                               
be more  exempted businesses than  participatory businesses.   On                                                               
the  other  hand,  the  bill  creates  a  tax  with  specificity,                                                               
although  other provisions  of the  legislation are  vague.   Mr.                                                               
Weakland stated Hotel  Alyeska and Alyeska Resort  pay $1 million                                                               
at  a 12  percent  rate  to the  Municipality  of Anchorage,  and                                                               
Anchorage "brought  in" $25  million last year.   This  amount of                                                               
revenue indicates -  even after a decline  in commercial commerce                                                               
such  as  state government  and  corporate  travel -  the  travel                                                               
industry  "had  a decent  year  as  far  as Anchorage  ..."  even                                                               
following  smaller  legislative  appropriations [to  the  tourism                                                               
marketing  budget].    Alyeska  Resort  operates  year-round  and                                                               
employs  650  workers,  thus  year-round  sustainability  is  its                                                               
upmost interest;  he pointed out  there is  a high cost  to doing                                                               
business in  Alaska year-round  and cautioned  against increasing                                                               
lodging  taxes to  businesses that  are not  on the  Railbelt and                                                               
that do  not have an airport  [nearby].  Mr. Weakland  noted that                                                               
each   community  has   a  destination   marketing  program;   in                                                               
Anchorage, the  cost is 12  percent, and some  municipalities the                                                               
cost is less.                                                                                                                   
12:46:56 PM                                                                                                                   
DONALD BULLOCK  stated he is  a retired attorney speaking  on his                                                               
own behalf.  He expressed opposition  to the bill because it is a                                                               
new tax  placed on a targeted  industry - the tourism  industry -                                                               
which  would be  enforced  by the  state;  however, unlike  other                                                               
taxes,  the bill  puts the  tourism industry  in the  position of                                                               
deciding whether the  tax would be applied, and if  so, DOR could                                                               
file levies against nonpayers for  the assessment, penalties, and                                                               
interest.   Turning  to  the topic  of  dedicated and  designated                                                               
funds, he recalled  the Alaska Supreme Court ruled  assets in the                                                               
Alaska  Permanent Fund  are  not dedicated,  but  are subject  to                                                               
appropriation; similarly,  the tax collected  by HB 383  would go                                                               
into  the  general fund.    Mr.  Bullock  advised that  the  best                                                               
intention [by the legislature] would  be to appropriate the money                                                               
back  to the  tourism industry;  however, he  cautioned that  the                                                               
money  collected  from the  tax  could  be  used for  any  public                                                               
REPRESENTATIVE  JOSEPHSON   asked  whether  it  is   improper  to                                                               
authorize DOR, which is an agency  of the sovereign, to collect a                                                               
tax "that isn't really the sovereign's."                                                                                        
MR. BULLOCK  said no.  He  explained HB 383 would  collect a tax,                                                               
under a statute, that would go  into the general fund in the same                                                               
manner as mining  taxes and production taxes;  the big difference                                                               
would be the taxpayers would decide whether to apply the tax.                                                                   
12:51:09 PM                                                                                                                   
REPRESENTATIVE JOSEPHSON observed that  other designated funds in                                                               
the budget could  be repurposed, perhaps leading  to protests and                                                               
disgruntlement [by Alaskans].                                                                                                   
MR. BULLOCK recalled Alaskans were  upset because the full amount                                                               
of  [designated] permanent  fund monies  was not  made available,                                                               
and that led  to a lawsuit confirming that the  funds are subject                                                               
to appropriation.   For  example, the  proposed tourism  fund may                                                               
pay for a  [marine] dock or other infrastructure  that is related                                                               
to tourism  but is  not marketing.   He  characterized designated                                                               
funds as  "often disappointed  funds," because  they can  be used                                                               
[by the legislature] for any public purpose.                                                                                    
REPRESENTATIVE  JOSEPHSON  suggested  the  tourism  industry  has                                                               
decided to trust legislators.                                                                                                   
MR.  BULLOCK  agreed there  is  trust,  albeit  a trust  with  no                                                               
guarantee and a high risk.                                                                                                      
REPRESENTATIVE EDGMON  asked if  Mr. Bullock's opposition  to the                                                               
bill is  founded on principle  and whether there  are alternative                                                               
mechanisms he would suggest.                                                                                                    
MR. BULLOCK said  the problem is that [HB 383}  is an approach to                                                               
fund tourism  that is subject  to tax law and  appropriation from                                                               
the general fund.  A different  example of how an industry raises                                                               
funds would be  the collection of dues members pay  to the Alaska                                                               
Bar  Association  or  to  service  clubs  for  benefits  such  as                                                               
advertising; an alternative would  be a private organization that                                                               
assesses its  members, rather than  imposing a state tax  that is                                                               
subject to appropriation for other uses.                                                                                        
12:55:09 PM                                                                                                                   
REPRESENTATIVE EDGMON asked Mr. Bullock  to clarify whether he is                                                               
testifying on  his own behalf  and the basis for  his opposition.                                                               
He then  restated the  earlier question as  to whether  there are                                                               
alternative mechanisms to achieve the purpose of the bill.                                                                      
MR. BULLOCK  clarified his opinion  is his own legal  opinion; he                                                               
is not representing  anyone, nor does he hold  an adverse opinion                                                               
of  the tourism  industry.    He said  his  legal  advice to  the                                                               
committee,  based on  his experience  with tax  law, is  that [HB
383] is a  new tax that does  not result in a  dedicated fund and                                                               
is subject to appropriation.                                                                                                    
REPRESENTATIVE TUCK asked whether  Mr. Bullock has concerns about                                                               
the bill because the tax is self-imposed.                                                                                       
MR. BULLOCK  said no.   He said  the funding mechanism  within HB
383  has  been  compared  to   funding  for  the  Alaska  Seafood                                                               
Marketing Institute  (ASMI); however, ASMI funding  is subject to                                                               
the  Executive Budget  Act, but  "there's no  mention of  that in                                                               
this  bill."  In  further response  to  Representative  Tuck,  he                                                               
explained the  Executive Budget Act  [AS 37.07.010]  statement of                                                               
policy grants  the legislature the  opportunity to  review budget                                                               
expenditures and decide how appropriations are made.                                                                            
12:58:34 PM                                                                                                                   
REPRESENTATIVE   TUCK  restated   his   question  pertaining   to                                                               
[possible problems  caused by]  an organization  self-assessing a                                                               
MR. BULLOCK  explained that the legislation  would authorize [the                                                               
tourist] organization to decide whether  it is going to be taxed,                                                               
which  he characterized  as unique  [legislation].   He  directed                                                               
attention to  fiscal note Identifier:   DOR TAX HB383  version 1.                                                               
It  indicates  that  HB  383  would  require  DOR  to  add  three                                                               
positions,  and implementation  of  the program  would require  a                                                               
capital  expenditure  of  $900,000;  he  questioned  whether  the                                                               
legislature  would choose  to spend  limited funds  [to implement                                                               
and  administer HB  383].   Returning to  ASMI funding,  he noted                                                               
ASMI marketing  money is directly  tied into [AS  43.75 Fisheries                                                               
Business License and Taxes and  AS 43.77 Fishery Resource Landing                                                               
Tax],  thus to  the  extent that  ASMI  marketing is  successful,                                                               
there  is a  greater incentive  for  more fish  processing and  a                                                               
direct link to  more taxes to the state; however,  the link in HB
383 is  indirect.  He restated  his opposition to the  tax aspect                                                               
of the bill.                                                                                                                    
REPRESENTATIVE JOSEPHSON asked:                                                                                                 
     ...  because we're  dissolving the  existing board  ...                                                                    
     even  though it's  not state  revenue in  a traditional                                                                    
     sense, ... it's still a tax,  and there's no way for us                                                                    
     to  monitor the  nature of  the expenditures  for their                                                                    
     efficacy ...?                                                                                                              
MR.  BULLOCK  advised  the  Executive  Budget  Act  provides  the                                                               
legislature a  mechanism for monitoring state  appropriations, as                                                               
does the Legislative Budget and Audit Committee.                                                                                
REPRESENTATIVE JOSEPHSON opined the "trust  element" is less of a                                                               
concern -  when related to HB  383 - because the  taxpayers could                                                               
choose to end self-imposition of the tax, if desired.                                                                           
MR.  BULLOCK said  that's correct,  "this is  an industry  that's                                                               
going  to decide  when it'll  be taxed  and when  it ...  will no                                                               
longer be taxed, [the bill is] unique."                                                                                         
1:02:24 PM                                                                                                                    
CHAIR LINCOLN closed public testimony on HB 383.                                                                                
1:03:19 PM                                                                                                                    
HB 383 was held over.