Legislature(1995 - 1996)

04/20/1995 01:40 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE BILL 286                                                               
       "An  Act  providing  an  exemption  from  gambling  and                 
       certain alcoholic beverage  laws for gambling conducted                 
       by cruise ships  for their  ticketed passengers in  the                 
       offshore water of the state;  relating to promotions on                 
       board cruise  ships; defining 'cruise  ship'; providing                 
       for  exemption  procedures  for  certain  cruise  ships                 
       before they can conduct gambling  in the offshore water                 
       of   the  state;  providing   an  exemption   from  the                 
       coin-operated device tax for cruise ships exempted from                 
       the  gambling  laws;  and  providing  for  an effective                 
  REPRESENTATIVE WILLIAM WILLIAMS  testified in support of  HB                 
  286.    He  stated   that  HB  286  would  give   the  State                 
  authorization  to offer an  exemption from gambling statutes                 
  to cruise ships.  The exemption  would allow cruise ships to                 
  operate their casinos in Alaskan waters.                                     
  He added  that casino  gambling aboard  cruise  ships is  an                 
  amenity  needed to  keep  Alaska on  par  with other  cruise                 
  destinations.  While gambling is not  the main attraction of                 
  cruises,  it  is  an  accepted  and  expected  part  of  the                 
  Representative Williams added that the communities of Alaska                 
  would not be negatively affected by the legislation.  Casino                 
  operations  would  be  prohibited within  three  miles  of a                 
  vessel's  port  of call.   While  in  port the  casino would                 
  remain  closed, therefore removing  the opportunity for non-                 
  ticketed people to participate in the activities.                            
  Representative Williams concluded that the legislation would                 
  support the tourism industry and would raise State revenues.                 
  He urged Committee members' support the legislation.                         
  TOM  DOW,  VICE  PRESIDENT,  PRINCESS  TOURS,  testified  in                 
  support of HB  286.   The legislation  would allow  gambling                 
  aboard  cruise ships  within  Alaskan  waters  for  ticketed                 
  cruise passengers.  Cruise ships would  be required to pay a                 
  fee to  the  State  for an  exemption  prior  to  conducting                 
  gambling under the legislation.                                              
  Mr. Dow added  that his company  believes that there are  no                 
  public policy  reasons to prohibit  the activity.   There is                 
  public  support  to  allow  it  to  continue  and  with  the                 
  provision  of  an exemption  fee,  there would  be  a simple                 
  method for  the State to  thus secure  revenues from  cruise                 
  lines who wish to continue to offer the entertainment option                 
  to   their   passengers.     He   added,  there   is  little                 
  administrative expense or burden placed on the State for the                 
  collection of the revenues.                                                  
  Representative Brown asked  if the fees recommended  in this                 
  year's legislation  were the same  as those in  the original                 
  legislation  last  year.   Mr.  Dow  replied  that the  fees                 
  reflect what  was passed last  year from Committee  and that                 
  those fees should  generate $600 thousand dollars  this year                 
  and more in the following year.                                              
  Representative Brown referenced Section #6 and asked why the                 
  exception was necessary: This prohibition  does not apply to                 
  on-shore excursions  that are sold  on board a  cruise ship.                 
  Mr. Dow commented, last year an amendment was offered to the                 
  legislation.  The legislation was directed at prohibiting or                 
  restricting  promotions to gift shops.   The language in the                 
  bill  specifically excluded  the  sale  of  shore  excursion                 
  products on  board.   Therefore, more  narrowly defined  the                 
  disclosure requirement to the area  of gift shop promotional                 
  He pointed out, that practice has been applied frequently in                 
  the  Caribbean  areas  although  not  a common  practice  in                 
  Alaska.  Operators have attempted to do this over the years,                 
  although  the Princess  Line  has never  supported  it.   He                 
  understood the  practice was  not legal as  informed by  the                 
  Attorney  General's   office.    Because   the  last  year's                 
  legislation  that was  vetoed  contained  the exemption  for                 
  shore  excursion activities, that area was then readdressed.                 
  He added that it is common practice for cruise ship lines to                 
  offer  shore   excursion  activities  to  passengers.    The                 
  practice  is a  convenience for  the passengers  and to  the                 
  vendors providing the service.   Mr. Dow suggested  that the                 
  information  could  be  disclosed  on  the  shore  excursion                 
  Representative Brown referenced correspondence  from a local                 
  vendor  who  felt  that the  inclusion  of  the  sentence in                 
  Section #6 would be detrimental  to small and local vendors.                 
  Mr. Dow responded  that the cruise  lines has a  responsible                 
  role to guarantee that activities that involve equipment and                 
  transportation are  safe.   He emphasized  that the  current                 
  system  works  for  the  greater  benefit  of  most  of  the                 
  customers, passengers and vendors who are operating.                         
  Representative Martin voiced concern with "opening the door"                 
  to gambling in the State of Alaska.  Mr. Dow responded  that                 
  gambling would  be available only  to the passengers  on the                 
  cruise ships.    Representative Martin  emphasized that  the                 
  State  of  Alaska  prohibits  gambling.    He  asked if  the                 
  legislation could proliferate gambling in the State.                         
  Mr. Dow explained that this  precedence has been established                 
  in other  states  who share  a  gambling prohibition.    The                 
  unique quality of Alaska as opposed to other coastal states,                 
  is that in  Alaska, the  cruise pattern tends  to "hug"  the                 
  inside passage.  By some  definitions, the cruise ship would                 
  be  within  the  state  territorial  waters  at  all  times.                 
  Representative  Martin reemphasized  that  the cruise  lines                 
  would  be opening gambling for profit purposes as opposed to                 
  charitable  donations.    He  asked  the  type  of  gambling                 
  available aboard the ships.                                                  
  Mr. Dow explained the various forms available to the  cruise                 
  line passengers.  Representative Martin voiced resistance to                 
  video gambling and credit card gambling.   He felt that once                 
  the legislation moves through the Legislature, it would open                 
  up gambling possibilities throughout the State.                              
  Representative  Brown referenced a  memo from the Department                 
  of Revenue addressing  the legalization of slot  machines in                 
  the  proposed  legislation.  Mr.  Dow  stated  that  current                 
  information from the Department indicates  that there may be                 
  another  section  of  State law  that  prohibits  other coin                 
  operated  devices.   He  stated  that  it could  require  an                 
  Mr.  Dow  added  that  it  would  be possible  to  pass  the                 
  exemptive legislation  and narrowly define  what is involved                 
  without  opening  the   State  of   Alaska  to  gambling.                    
  Representative  Martin asked if  Mr. Dow would  object to an                 
  amendment indicating that  proceeds from the gambling  would                 
  not be  allowed for political  campaigning.  Mr.  Dow stated                 
  that there was no intention  that the cruise operators would                 
  be using the proceeds to fund any outside activities.                        
  TOURS, JUNEAU, spoke to the need for  a technical amendment.                 
  The Department of Law indicated that a problem existed  from                 
  the drafting,  which inadvertently  excluded slot  machines.                 
  Ms.  Burke  believed  that  the bill  as  passed  last  year                 
  adequately  covers  that  concern.   Although,  having  gone                 
  through the past two years legislative work, she recommended                 
  including the amendment.                                                     
  Ms.  Burke  noted that  Amendment  #1 [Attachment  #1] would                 
  provide  clear  intent  that  slot  machines  would  not  be                 
  included in the exemption for cruise ships.                                  
  Mr. Burke  responded to Representative Martin's concern that                 
  under the  equal protection  doctrine, by  passing the  bill                 
  providing an exemption from casino gambling for cruise ships                 
  would not allow anyone in  the State the authority to go  to                 
  court and  appeal for the same rights.   She stated this was                 
  not  a concern.   Under  the equal  protection analysis,  to                 
  treat  one  class of  person  different from  another, would                 
  require good reason  for doing  so.  Ms.  Burke added,  when                 
  speaking  about   commercial  regulations  to   conduct  the                 
  gambling activity,  there would  be no  chance that  a court                 
  would  come  to  the  conclusion  that an  equal  protection                 
  problem existed.                                                             
  (Tape Change, HFC 95-88, Side 2).                                            
  Ms. Burke  noted that  Amendment #1  would clarify  existing                 
  law,  adding new  language AS 05.15.250.   The  effect would                 
  establish the  fact of cruise  ship exemption, and  that any                 
  prohibitions  resulting from  lack  of authorization  listed                 
  would not apply to the cruise ships.                                         
  Representative  Martin voiced  concern that  the legislation                 
  would bring gambling to the State  in order to generate more                 
  revenues.  Ms. Burke noted that  there would be a difference                 
  between having a gambling operation located on land in which                 
  everyone had access to gambling on board a cruise ship.  The                 
  activity of gambling on the cruise ship would be an activity                 
  which in actuality would not  take place in Alaska, although                 
  it would in a technical sense.                                               
  Representative  Therriault  MOVED  to  adopt  Amendment  #1.                 
  Representative Martin OBJECTED for purposes of discussion.                   
  DEPARTMENT  OF  REVENUE,  noted  that   the  position  paper                 
  distributed to  Committee members resulted from a discussion                 
  with  the  Department of  Law.   However,  he felt  that the                 
  amendment was not needed because of Section 2(d) which would                 
  address the concern.                                                         
  The area of a potential problem results from the regulations                 
  which were  adopted in accordance with Title  43, the taxing                 
  provisions  for coin  operated devices.   The basis  for the                 
  particular regulation which  makes Class 2 and  Class 3 coin                 
  operated  devices  illegal,  was  the   criminal  and  civil                 
  statutes  which  prohibit  slot machines  and  coin operated                 
  devices.     Mr.  Poshard   added,  from   discussions  with                 
  Legislative  Legal  Counsel,  the  Department  of  Revenue's                 
  concern with the proposed legislation has been alleviated.                   
  Mr. Poshard  commented that the main intent  of the position                 
  paper was  to address  the relationship  between the  cruise                 
  ship gambling  bill and  the negotiations  which are  taking                 
  place  with  Klawock Native  group  involving a  contract to                 
  conduct Class 3 gaming activities.                                           
  Representative   Martin   asked   for  further   information                 
  regarding the Native  American court cases and  the gambling                 
  concern.   Mr. Poshard  stated that there  are several cases                 
  existing although he could not speculate on the relationship                 
  between those cases  and the proposed legislation.   Federal                 
  law requires entering  into negotiations in good  faith with                 
  any recognized  Indian tribes  as lands  that could  conduct                 
  Representative Martin asked  if the  State could prohibit  a                 
  group of people  from gambling.  Mr.  Poshard explained that                 
  the only  basis for  allowing the  gaming to  take place  on                 
  Indian lands  is through  the Indian  Gaming Regulatory  Act                 
  which is federal law.   No other states which  have gambling                 
  prohibitions, have  also permitted  other types  of gambling                 
  following the agreement with an  Indian tribe on reservation                 
  A roll call was taken on the MOTION to adopt Amendment #1.                   
       IN FAVOR:      Grussendorf, Kelly, Kohring, Therriault,                 
                      Brown, Foster, Hanley                                    
       OPPOSED:       Martin                                                   
  Representatives Mulder, Navarre and Parnell were not present                 
  for the vote.                                                                
  The MOTION PASSED (7-1).                                                     
  Representative  Grussendorf why  the  number 300  passengers                 
  qualified  a  boat  as  a   "cruise"  ship  thus  permitting                 
  gambling.   Ms. Burke stated that  it was the intent  of the                 
  legislation  to  limit the  gambling  to the  larger vessels                 
  which  offer   a  big   range  of   entertainment  services.                 
  Establishing  that  number  would  eliminate  a  small  boat                 
  claiming status  in order to  offer gambling.   She remarked                 
  that the language would close any possible loop holes.                       
  SERVICES, stated that the operator  of the cruise ship would                 
  have to apply for the exemption as specified in Section 2 of                 
  the legislation.  The definition would exclude anyone who is                 
  not eligible to obtain  an exemption.  Each ship  would have                 
  to apply  for an  exemption separately  and each ship  could                 
  loose their exemption separately.                                            
  Representative Therriault MOVED  to report  CS HB 286  (FIN)                 
  out of Committee  with individual  recommendations and  with                 
  the accompanying fiscal note.   There being NO OBJECTION, it                 
  was so ordered.                                                              
  CS  HB  286 (FIN)  was reported  out  of Committee  with "no                 
  recommendations" and with a fiscal note by the Department of                 
  Revenue dated 4/06/95.                                                       

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