Legislature(2009 - 2010)HOUSE FINANCE 519

04/15/2010 08:30 AM House FINANCE

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CS FOR SENATE BILL NO. 312(FIN)                                                                                               
     "An Act relating to the  deposit of the proceeds of the                                                                    
     tax  on gambling  operations aboard  certain commercial                                                                    
     passenger vessels into the  general fund; providing for                                                                    
     a  reduction  in  the  excise   tax  to  $34.50  for  a                                                                    
     passenger  for each  voyage on  a commercial  passenger                                                                    
     vessel; describing  the passengers that are  subject to                                                                    
     the excise tax  and liable for the payment  of the tax;                                                                    
     providing  for  a reduction  in  the  state excise  tax                                                                    
     imposed  on  a  passenger  traveling  on  a  commercial                                                                    
     passenger vessel  by the amount  of tax on  a passenger                                                                    
     traveling on  a commercial passenger vessel  imposed by                                                                    
     a municipality under a law  enacted before December 17,                                                                    
     2007;  authorizing appropriations  from the  commercial                                                                    
     vessel passenger  tax account to the  first seven ports                                                                    
     of  call in  the state  and for  costs associated  with                                                                    
     commercial  passenger  vessels  and the  passengers  on                                                                    
     board; limiting the use of  funds appropriated from the                                                                    
     commercial    passenger   vessel    tax   account    to                                                                    
     expenditures   related  to   port  facilities,   harbor                                                                    
     infrastructure,   other   services  provided   to   the                                                                    
     commercial  passenger  vessels  and the  passengers  on                                                                    
     board  those   vessels  and  certain   other  purposes;                                                                    
     repealing  the   regional  cruise  ship   impact  fund;                                                                    
     relating  to the  administration of  the excise  tax by                                                                    
     the Department  of Revenue and regulations  required to                                                                    
     be adopted;  requiring a report from  the Department of                                                                    
     Commerce, Community, and  Economic Development relating                                                                    
     to safely and  efficiently hosting passengers; defining                                                                    
     'voyage' for  purposes of the  excise tax;  relating to                                                                    
     municipal  levies  on  a   passenger  on  a  commercial                                                                    
     passenger  vessel;  and   providing  for  an  effective                                                                    
4:53:36 PM     RECONVENED                                                                                                     
MILES BAKER,  STAFF, SENATE  FINANCE COMMITTEE,  proposes to                                                                    
reduce the  commercial passenger vessel excise  tax from $46                                                                    
to $34.50 per passenger per  voyage. Currently excise tax is                                                                    
split with  25 percent in  regional cruise ship  impact fund                                                                    
and  75  percent  in the  commercial  passenger  vessel  tax                                                                    
account. The bill  proposes to reduce the current  tax by 25                                                                    
percent  and repeal  the regional  cruise ship  impact fund.                                                                    
With  SB  312,  the  $34.50 would  go  into  the  commercial                                                                    
passenger vessel tax account.                                                                                                   
Mr.  Baker  elaborated  that   the  bill  clarifies  statute                                                                    
regarding  uses  and  purposes   that  the  legislature  may                                                                    
appropriate the  tax proceeds for.  The first purpose  is to                                                                    
make payments  to the ports  of call; current  statute makes                                                                    
payments to  first five  ports of call.  The CS  changes the                                                                    
number to seven to reflect larger voyages.                                                                                      
Mr. Baker  second purpose  for legislative  appropriation is                                                                    
found in  Section 4(d).  In addition to  making the  port of                                                                    
call payments,  the legislature  may appropriate  money from                                                                    
from the  account to projects  that improve port  and harbor                                                                    
infrastructure,  provide  services to  commercial  passenger                                                                    
vessels,  and improve  safety and  efficiency of  interstate                                                                    
and  foreign  commerce activity  in  which  the vessels  are                                                                    
4:58:58 PM                                                                                                                    
Mr. Baker  cited Page 3,  Line 18, Section B  addressing the                                                                    
port  of  call  payments.   The  language  tightens  up  the                                                                    
purposes for which  local port of call  payment proceeds can                                                                    
be used.                                                                                                                        
Mr. Baker stated the intent  of Senate Finance Committee was                                                                    
to  eliminate confusion  in  existing  statute. The  current                                                                    
statute left  open the question  of appropriation  for state                                                                    
owned port and harbor facilities.  He stated omission of the                                                                    
language "other  services to properly provide  for vessel or                                                                    
watercraft  visits  and  enhance safety  and  efficiency  of                                                                    
interstate  and  foreign  commerce  and  such  other  lawful                                                                    
purposes as  determined by the  legislature" which  has been                                                                    
replaced with the before mentioned language.                                                                                    
Mr.  Baker mentioned  another  substantial  change, where  a                                                                    
local government in  a port of call with a  local tax levied                                                                    
against passengers was given a  choice either to rescind the                                                                    
tax  and  accept or  forfeit  the  state's $5  payment.  The                                                                    
communities that  fell into the  category were the  City and                                                                    
Borough of  Juneau and  the City  of Ketchikan.  Both Juneau                                                                    
and Ketchikan  had local levies  that were greater  than $5.                                                                    
The  bill proposes  a  credit against  the  $34.50 that  the                                                                    
state is  paying. Those municipalities  with a tax  in place                                                                    
would  not  require  a  greater  payment  of  tax  from  the                                                                    
passenger. The effect  of the change is that  the state will                                                                    
collect less money. The $5  payment will work in the current                                                                    
fashion. If the port is a  unified city, then the $5 goes to                                                                    
the unified city.                                                                                                               
5:04:19 PM                                                                                                                    
Mr. Baker informed  that Section 1 addressed  the 33 percent                                                                    
tax  on  gambling  proceeds deposited  into  the  commercial                                                                    
passenger tax  account. The funds  were deposited  into this                                                                    
restricted account  creating an  accounting issue.  The 2007                                                                    
cruise  season yielded  $6.7 million  in gambling  tax which                                                                    
was  not  appropriated,  thereby lapsing  into  the  general                                                                    
fund. The 2008  season yielded $6.28 million  that lapsed. A                                                                    
reverse sweep  placed it back  into the  restricted account.                                                                    
The projection from DOR is another $5.7 million.                                                                                
Mr.  Baker   communicated  that   Section  10   retains  the                                                                    
governor's recommended periodic report.  He pointed out that                                                                    
Section 13  states an  effective date  of October  31st; the                                                                    
reduced head tax will take effect next year.                                                                                    
Representative  Doogan  reviewed  his understanding  of  the                                                                    
legislation. He  understood that  the bill lowered  the head                                                                    
tax  per passenger  to  $34.50.  He proposed  hypothetically                                                                    
that  a  passenger  would stop  in  Ketchikan,  Juneau,  and                                                                    
Skagway.  When the  money is  allocated, he  understood that                                                                    
each port would  receive $5 and the  ports already receiving                                                                    
taxes would  also get theirs.  He understood  that Ketchikan                                                                    
and Juneau would receive $12.                                                                                                   
Mr.  Baker explained  that the  passenger would  pay $34.50,                                                                    
but when they arrive in  Ketchikan, the vessel would pay the                                                                    
$7 and  the $26.50  balance would  go to  the state.  If the                                                                    
legislature appropriates the $5  port of call payments, they                                                                    
would go to all three ports.                                                                                                    
5:10:33 PM                                                                                                                    
Representative Doogan understood  the mechanism. He wondered                                                                    
where  the remaining  money goes.  Mr. Baker  responded that                                                                    
excess  money  not  paid  out  would  stay  in  the  account                                                                    
available to the legislature for appropriation.                                                                                 
Representative  Doogan  asked  what   would  happen  when  a                                                                    
passenger stops at four ports.  Mr. Baker directed attention                                                                    
to  handout,   "Commercial  Passenger  Vessel   Excise  Tax;                                                                    
Effects  of  CS  SB  321(FIN)  Per P  on  State  Cash  Flow,                                                                    
4/15/2010 10:00 am,"  (copy on file). The  handout lists the                                                                    
five itineraries that are currently sold.                                                                                       
Mr. Baker surmised  that if $5 is the port  of call payment,                                                                    
and the DOR forecast is  correct at 850 thousand passengers,                                                                    
$2.3 million  will be available for  appropriation after the                                                                    
port of call payments are made.                                                                                                 
5:15:13 PM                                                                                                                    
Representative  Austerman  asked   about  the  $2.3  million                                                                    
available for  appropriation. He wondered if  the amount was                                                                    
available  as  a  result of  Ketchikan  and  Juneau  "double                                                                    
dipping" the  municipal tax plus  the $5. Mr.  Baker replied                                                                    
that  the analysis  was correct.  He pointed  out that  each                                                                    
provided scenario  presents an excise tax  of $19.50 because                                                                    
the $15 has been backed out for Ketchikan and Juneau.                                                                           
Representative  Austerman   summarized  that   the  negative                                                                    
figures seen are the result of increased ports of call.                                                                         
Mr. Baker  pointed to  second spread  sheet "CS  SB 312(FIN)                                                                    
Port of  Call Payment  Scenarios, April  13, 2010"  (copy on                                                                    
file).  He analyzed  the handout  which details  the revenue                                                                    
projections using both  $4 and $5 as  examples. The addition                                                                    
of  Ketchikan and  Juneau  in  the $5  port  call bumps  the                                                                    
payment  by  the state  up  by  $6.1  million based  on  the                                                                    
projected traffic for the season.                                                                                               
Mr.  Baker noted  that  the principal  loss  to the  account                                                                    
would  not be  caused by  the increased  ports of  call, but                                                                    
because  the tax  is decreased  to $34.50.  He reminded  the                                                                    
committee that  the regional portion would  be discontinued.                                                                    
The regional  cruise ship  fund used to  go to  the treasury                                                                    
and equaled 15 percent.                                                                                                         
5:20:28 PM                                                                                                                    
Mr. Baker  explained that the last  few appropriation cycles                                                                    
led  to  port  of  call  payments of  $9.9  million  and  an                                                                    
additional $17  million was appropriated.  In FY10,  port of                                                                    
call payments  of $10 million  were made with  an additional                                                                    
$54 million  appropriated in  capital projects.  The capital                                                                    
budget  before  the  House Finance  Committee  includes  the                                                                    
language necessary  to make  the port  of call  payments for                                                                    
2010, which are  estimated at $10 million. If  SB 312 passes                                                                    
the estimation will increase to $15 million.                                                                                    
Mr.  Baker  stated that  in  the  current fiscal  year,  the                                                                    
May/June travelers will lose $3.1  million with the proposed                                                                    
reduction. The next fiscal  year, encompassing July, August,                                                                    
September, October, May and June  will equal $22 million per                                                                    
year in loss of revenue.                                                                                                        
Representative  Fairclough asked  if Juneau's  port fee  was                                                                    
$12.  Mr.   Baker  responded  that  Juneau   has  $5  marine                                                                    
passenger fee and  a $3 port development fee for  a total of                                                                    
$8. Ketchikan has a passenger wharfage fee of $7.                                                                               
Representative  Fairclough   asked  how   communities  would                                                                    
respond  to the  proposed model  of tax  implementation. She                                                                    
wondered if  other municipalities  might try to  emulate the                                                                    
Ketchikan and Juneau model. Mr.  Baker responded that SB 312                                                                    
proposed  capping  the  tax  at   $34.50  per  passenger.  A                                                                    
community that has  raised taxes prior to the  passage of SB
312  is  grandfathered  in.  Ketchikan's  wharfage  fee  was                                                                    
initially $6 and was raised to  $7 in January of 2007 with a                                                                    
sunset date of January 2010 for review.                                                                                         
5:26:30 PM                                                                                                                    
Mr. Baker  commented that Juneau's  $5 fee currently  has no                                                                    
sunset  date, but  the $3  fee  has a  January, 2011  sunset                                                                    
date. He guessed  that if Juneau received  an additional $5,                                                                    
the $3 port development fee might not be necessary.                                                                             
Representative  Fairclough  clarified that  the  legislation                                                                    
seeks to place  a cap on maximum collections  for the state.                                                                    
The first seven  ports of call will be covered  by the state                                                                    
at $5  per port. If cities  already have a fee  intact, they                                                                    
receive the fee  in addition to the $5.  Mr. Baker responded                                                                    
Representative Fairclough continued  that the industry would                                                                    
be  subject to  an  increase by  those  particular ports  of                                                                    
which they could not visit if  the added fees were not paid.                                                                    
Mr.  Baker agreed,  if a  port wished  to raise  a fee,  the                                                                    
industry's reaction would be considered.                                                                                        
Mr.  Baker  directed  attention   to  a  third  spreadsheet,                                                                    
"Distribution  of head  tax  revenue  relative to  passenger                                                                    
visits  FY07-FY10,  April  15,  2010"  (copy  on  file).  He                                                                    
explained that  Juneau passed their $5  marine passenger fee                                                                    
in  1999 and  the port  development fee  in 2002.  Ketchikan                                                                    
originally  passed  their  fee  in  2005.  Both  communities                                                                    
worked with the industry  communicating their needs for port                                                                    
infrastructure  and  they  proposed  their  fee.  A  voter's                                                                    
initiative also  passed, adding  a state  tax of  $46, which                                                                    
increased  the cost  of traveling  to Juneau  and Ketchikan.                                                                    
The spreadsheet  illustrates the  reflection of  the traffic                                                                    
patterns  and   the  funding.  The  principal   reason  that                                                                    
Ketchikan  is only  at 18  percent  of the  funding with  27                                                                    
percent of  the passengers and  Juneau at 14 percent  of the                                                                    
funding with  29 percent  of the  passengers is  because the                                                                    
numbers are skewed. The additional  money received by Juneau                                                                    
and Ketchikan is used to pay debt service.                                                                                      
5:32:25 PM                                                                                                                    
Representative Fairclough asked if  the state is prohibiting                                                                    
communities in local  areas to provide taxes  for the others                                                                    
that  are unaffected.  Mr. Baker  stressed that  is not  the                                                                    
intent of the bill.                                                                                                             
Representative  Doogan understood  that a  current passenger                                                                    
visiting  Juneau  and Ketchikan  would  pay  $61. Mr.  Baker                                                                    
Representative Doogan  continued that  in the new  model the                                                                    
passenger pays  $34.50 and the  state deducts the $7  and $8                                                                    
for Juneau and Ketchikan. Mr. Baker agreed.                                                                                     
5:34:15 PM                                                                                                                    
Representative  Austerman  asked   about  other  communities                                                                    
implementing their own  tax. He asked if  the bill prohibits                                                                    
the implementation  of a community tax.  Mr. Baker responded                                                                    
Representative  Austerman asked  about the  $7 collected  in                                                                    
Ketchikan. He  wondered if the  implementation was  prior to                                                                    
the state's $46  tax. Mr. Baker responded  yes, the wharfage                                                                    
fee was  passed in  2005 and  the citizen's  initiative went                                                                    
into effect in 2007.                                                                                                            
Representative  Austerman asked  if  Ketchikan  used the  $7                                                                    
bonds  for  improvements,  what will  the  additional  money                                                                    
Mr.  Baker elaborated  that the  additional  $2.50 would  be                                                                    
used  for   additional  improvements  in  services   to  the                                                                    
passenger and the vessel.                                                                                                       
Representative   Austerman  asked   if  Juneau's   plan  was                                                                    
similar.  He expressed  concern  for the  other ports  since                                                                    
Juneau and Ketchikan would be double dipping.                                                                                   
5:36:58 PM                                                                                                                    
Co-Chair Hawker opened public testimony.                                                                                        
5:37:35 PM                                                                                                                    
ROBERT DINDINGER, ALASKA ALLIANCE  FOR CRUISE TRAVEL, ALASKA                                                                    
ACT explained  that while the  bulk of his  membership comes                                                                    
from Southeast  Alaska, the community  with the  second most                                                                    
members  is   Fairbanks.  According   to  a  study   by  the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED)  the   state  can  anticipate  5000   fewer  tourism                                                                    
industry employees in the beginning  of the season. He noted                                                                    
that  2500  were  lost  last  year.  He  believed  that  the                                                                    
national  economy  had  a  significant  impact  on  revenues                                                                    
because cruise  passengers spent  less money.  The situation                                                                    
in 2010  is unique  as the carrying  capacity of  the cruise                                                                    
industry will  be down  by 140,000  berths. The  decrease in                                                                    
cruise  travel  to Sitka  is  projected  at 40  percent.  He                                                                    
commented that  with a loss  of 40 percent, the  bottom line                                                                    
becomes hard to  maintain. He opined that  the bill provided                                                                    
the only  hope for improvement  of cruise travel  to Alaska.                                                                    
If   the  bill   passes,   then  a   message  to   financial                                                                    
institutions is provided signaling  that Alaska is doing its                                                                    
part  to  improve the  potential  economic  climate for  its                                                                    
citizens.   He   urged   the  committee   to   support   the                                                                    
5:42:29 PM                                                                                                                    
Vice-Chair Thomas asked if Mr.  Dindinger was married to the                                                                    
bill.  Mr. Dindinger  replied that  he spoke  in support  of                                                                    
this bill.                                                                                                                      
Vice-Chair Thomas  asked if he  would support any  bill. Mr.                                                                    
Dindinger replied  that he might  support another  bill that                                                                    
would accomplish the same task.                                                                                                 
Vice-Chair  Thomas commented  on  the  loss of  construction                                                                    
funds.  He asked  if Skagway  should be  treated differently                                                                    
than  Ketchikan.  Mr.  Dindinger communicated  that  he  has                                                                    
businesses in  Skagway, Juneau, Sitka, and  Ketchikan but he                                                                    
was not prepared  to provide an opinion about  the amount of                                                                    
money  provided  to  each  community.  He  wished  only  for                                                                    
continued cruise ship business in Alaska.                                                                                       
5:44:14 PM                                                                                                                    
Vice-Chair   Thomas  stressed   that   each  legislator   is                                                                    
concerned about  the survival of the  communities. He sought                                                                    
equal treatment for all communities.  He commented that half                                                                    
of  the year's  cruise ship  tax  is waived  because of  the                                                                    
established effective date.                                                                                                     
Representative Doogan asked about  the 140,000 berth number.                                                                    
Mr.  Dindinger responded  that four  less cruise  ships will                                                                    
visit leading to the 140,000 number.                                                                                            
Representative Doogan asked why  Sitka would experience a 40                                                                    
percent loss.  Mr. Dindinger replied that  the prediction is                                                                    
based  on  the deployment  of  the  ship  taken out  of  the                                                                    
market. Some ships redeployed with a different itinerary.                                                                       
5:47:05 PM                                                                                                                    
Representative Salmon  asked how  long Mr. Dindinger  was in                                                                    
business.  Mr. Dindinger  replied  that he  started his  own                                                                    
business in 1980.                                                                                                               
Representative Salmon asked how  many cruise ships companies                                                                    
visit Alaska. Mr. Dindinger replied six or seven.                                                                               
Representative Salmon asked how  many cruise ships filed the                                                                    
lawsuit. Mr. Dindinger admitted that he did not know.                                                                           
5:48:37 PM                                                                                                                    
JOHN BINKLEY, ALASKA CRUISE  ASSOCIATION responded that nine                                                                    
member lines  represented by  the Alaska  Cruise Association                                                                    
initiated the lawsuit.                                                                                                          
Representative   Gara  opined   that  the   legislature  was                                                                    
unfairly  put  in  bad  place by  the  industry.  He  stated                                                                    
concern that the  state is asked to  provide substantial tax                                                                    
relief without promise that ships  will return to the state.                                                                    
Mr. Binkley  replied that the legislation  was introduced by                                                                    
the  governor   and  the   Senate  Finance   Committee.  The                                                                    
legislation  was  not created  by  the  cruise industry.  He                                                                    
noted that  signing the settlement  agreement is not  in the                                                                    
best interest of  the Alaska Cruise Association,  but if the                                                                    
legislation is passed, the litigation will be dropped.                                                                          
Representative  Gara asked  for commitment  from the  cruise                                                                    
ship industry to bring ships  back to the state. Mr. Binkley                                                                    
stated that  the change in the  head tax is specific  to the                                                                    
Representative Gara asked if ships  will return to Alaska if                                                                    
the  legislation  is passed.  Mr.  Binkley  simply based  on                                                                    
change of  head tax does not  provide quid pro quo  to bring                                                                    
back the  ships. Marketing is  an issue; Alaska  lost market                                                                    
share.  The reduction  in  the state's  marketing  led to  a                                                                    
reduction in  demand. He mentioned  the regulatory  issue as                                                                    
some ships  cannot operate in  Alaska. The time  required to                                                                    
set itineraries is also a consideration.                                                                                        
Representative  Gara elucidated  that the  industry wants  a                                                                    
tax reduction, regulatory changes,  and additional money for                                                                    
marketing.  Mr. Binkley  agreed  that  those elements  often                                                                    
deter ships to other destinations.                                                                                              
Representative  Gara suggested  that if  marketing important                                                                    
that   is   another   frustration.  Cruise   lines   stopped                                                                    
contributing to marketing of Alaska by the state.                                                                               
Mr. Binkley  explained that cruise  lines are able to  get a                                                                    
better return  on their money elsewhere.  Driving demand and                                                                    
reducing costs can change the situation.                                                                                        
5:54:45 PM                                                                                                                    
Representative  Salmon commented  that  his flight  business                                                                    
calculates  costs of  operation with  the majority  going to                                                                    
the  customer.  He wondered  how  the  cruise ship  industry                                                                    
operates. He expressed confusion and opposed the bill.                                                                          
Mr.  Binkley  admitted  that  he   did  not  understand  the                                                                    
question.  He   believed  that  the  cruise   ship  industry                                                                    
operates  in  a manner  similar  to  that of  Representative                                                                    
Salmon's  flight business  by reducing  some flights  if the                                                                    
customer interest wanes.                                                                                                        
Representative  Austerman  referenced  reducing the  tax  to                                                                    
$34.50. He  understood that the  original tax is a  $46 head                                                                    
tax, and  if a passenger  chooses Ketchikan and  Juneau they                                                                    
pay  $61, but  this bill  drops  the amount  to $19.50.  Mr.                                                                    
Binkley clarified that the amount  does not drop from $61 to                                                                    
Representative  Austerman  opined  that   the  bill  is  not                                                                    
written  that   way.  Mr.  Binkley   stated  that   any  tax                                                                    
adjustment will be  good for the industry.  The industry was                                                                    
willing to drop the litigation in response to a change.                                                                         
Representative  Austerman proposed  $34.50 with  the add-ons                                                                    
for Juneau and Ketchikan. He  asked if that would constitute                                                                    
a deal breaker. Mr. Binkley replied yes.                                                                                        
6:00:04 PM                                                                                                                    
Vice-Chair  Thomas  asked  how  much  dock  fees  cost.  Mr.                                                                    
Binkley  responded  approximately  $30 million  a  year  for                                                                    
private dock fees.                                                                                                              
Vice-Chair Thomas  asked what  the total  cost would  be for                                                                    
the passenger. Mr. Binkley replied $91 million.                                                                                 
Vice-Chair Thomas asked if the  bill was no longer perceived                                                                    
as   the  governor's   bill.  Mr.   Binkley  clarified   his                                                                    
statement.  He  stated  that  the bill  is  similar  in  net                                                                    
outcome for the passenger.                                                                                                      
Vice-Chair   Thomas   commented  that   Ketchikan   averaged                                                                    
$900,000 a  year. He recalled  that the committee  asked the                                                                    
fiscal policy group  about the problem with  the cruise ship                                                                    
industry. The response  was saturation, correction, economy,                                                                    
and cessation of turmoil in  the Mediterranean. The head tax                                                                    
was never mentioned as a potential problem.                                                                                     
6:02:53 PM                                                                                                                    
Representative Doogan how many  passengers are expected this                                                                    
year.  Mr. Binkley  replied approximately  850,000 from  the                                                                    
large cruise ships that are charged the head tax.                                                                               
Representative  Doogan asked  if  some  percentage of  those                                                                    
would  be paying  $61,  while others  pay  $46. The  current                                                                    
proposal charges a flat $34.50.  He asked for an estimate of                                                                    
the total savings  to the passengers if the  proposal was in                                                                    
place.  Mr.  Binkley  approximated  $22  million  in  annual                                                                    
savings to the passengers.                                                                                                      
6:04:15 PM                                                                                                                    
Representative  Gara asked  about the  average cruise  cost.                                                                    
Mr. Binkley  responded that  the cost  was lower  last year.                                                                    
The goal  for the  cruise ship companies  is always  to fill                                                                    
the ship.  A cruise  might cost  $499 to  $2500 for  a seven                                                                    
night tour. The time of year also dictates the cost.                                                                            
Representative   Gara   requested  statistics   of   average                                                                    
passenger   spending  in   Alaska.  Mr.   Binkley  responded                                                                    
approximately $900 per visitor.                                                                                                 
Representative Gara asked if most  passengers cruise one way                                                                    
then  fly back  home.  Mr. Binkley  answered  yes, but  some                                                                    
cruises are round trip.                                                                                                         
Representative   Gara  realized   that  Alaska   wants  more                                                                    
travelers.  He  discussed  the  various  costs  incurred  by                                                                    
cruise ship travelers.                                                                                                          
Mr. Binkley agreed. He stated  that 142,000 less people will                                                                    
visit Alaska  as a result  of the  head tax. The  ships must                                                                    
reduce the  price to in order  to fill the ship,  leading to                                                                    
less revenue. If the costs  are fixed, they make less money.                                                                    
If the ships return, the volumes will too.                                                                                      
6:09:13 PM                                                                                                                    
Representative Austerman  thought that the  passengers would                                                                    
come back  whether the tax  is reduced or not  following the                                                                    
global recession.  He asked if cruise  association discusses                                                                    
saturation point.                                                                                                               
Mr. Binkley stated  that the cruise industry  was growing by                                                                    
6.5  percent.  Other  destination  points  are  experiencing                                                                    
growth, while Alaska  is not. He mentioned  the baby boomers                                                                    
and their penetration  into the cruise market  over next 10-                                                                    
20 years. The  anticipation is for continued  growth for the                                                                    
cruise industry.                                                                                                                
Representative Austerman chose not to debate the issue.                                                                         
6:11:57 PM                                                                                                                    
Representative  Kelly  believed  that  a  series  of  events                                                                    
including  taxes and  regulations have  impacted the  cruise                                                                    
ship situation. He  asked to know other  concerns the cruise                                                                    
industry might have.                                                                                                            
Mr. Binkley noted  that the cruise industry  is not bothered                                                                    
or concerned, the economics are  simply the bottom line. The                                                                    
industry  works their  asset for  the best  return on  their                                                                    
investment as  publicly held corporations. Alaska  is a high                                                                    
cost  environment as  the only  state that  has a  corporate                                                                    
income tax,  gaming tax, ocean  ranger tax,  regional impact                                                                    
fund tax, in addition to the head tax.                                                                                          
Representative  Kelly asked  about the  issue of  separating                                                                    
the marketing assistance from state.  He understood that the                                                                    
association  sought funding  in the  $20 million  range. Mr.                                                                    
Binkley agreed  that the additional  funding will help  as a                                                                    
50 percent increase in the state's marketing budget.                                                                            
6:15:11 PM                                                                                                                    
Representative Foster  wished the tax  could be tied  to the                                                                    
number of  visitors coming back  to Alaska. The  cruise ship                                                                    
industry  affects the  entire state.  He  wondered how  many                                                                    
passengers  travel beyond  Southeast  Alaska and  Anchorage.                                                                    
Mr. Binkley  responded that DCCED has  statistics. He stated                                                                    
that   the  impacts   of  the   cruise  ship   industry  are                                                                    
ubiquitous. Cruising is often an  initial way to see Alaska,                                                                    
and cruisers  sometimes return as independent  travelers. He                                                                    
spoke of his  family business in the  visitor industry. Many                                                                    
businesses are struggling. The cruise  ship industry will be                                                                    
fine  because they  can take  their assets  and go  to where                                                                    
they can make the most money,  but when they go Alaskans are                                                                    
Representative    Austerman   referenced    the   settlement                                                                    
conditions  as presented  to  the  committee. The  agreement                                                                    
discusses  the $34.50  tax and  further reducing  the excise                                                                    
tax on  any passenger by  the total amount of  taxes imposed                                                                    
on the  passenger by  municipalities that  did not  elect to                                                                    
receive  funds. He  wondered if  he perceived  the agreement                                                                    
correctly  regarding  Juneau   and  Ketchikan.  Mr.  Binkley                                                                    
answered  that  he  believed  that  the  agreement  included                                                                    
Juneau and Ketchikan.                                                                                                           
6:20:27 PM                                                                                                                    
Vice-Chair Thomas  recalled that  the bill was  initiated as                                                                    
an  initiative  to  repeal  the cruise  ship  head  tax.  He                                                                    
wondered  why Juneau  and Ketchikan  were  coupled with  the                                                                    
initiative.  Mr.  Binkley  responded  that  the  association                                                                    
never proposed that  the head tax be  repealed. The governor                                                                    
proposed the  reduction of the  head tax. He added  that the                                                                    
Alaska  Cruise  Association  does not  have  contracts  with                                                                    
Juneau or Ketchikan.                                                                                                            
Vice-Chair Thomas  contended that agreements  with Ketchikan                                                                    
and  Juneau exist  regarding  head tax  and  port fees.  Mr.                                                                    
Binkley argued  that the  head tax is  elected by  people of                                                                    
Juneau and Ketchikan.                                                                                                           
6:22:42 PM                                                                                                                    
Representative  Fairclough  understood  that a  lawsuit  was                                                                    
filed against the state. A  settlement has been reached with                                                                    
the Attorney  General to  resolve the  lawsuit if  this bill                                                                    
passes.  She expressed  interest  in the  resolution of  the                                                                    
litigation  issue.  She  opined that  the  bill  encompassed                                                                    
greater issues than the reduction of the head tax.                                                                              
6:24:23 PM                                                                                                                    
Representative  Salmon  commented  that  the  bill  has  the                                                                    
public's support.                                                                                                               
Representative Gara  added that  if the  case is  settled in                                                                    
exchange for  reduction of  the cruise  ship tax,  the state                                                                    
might still be  sued. He opined that passing  the bill might                                                                    
lead to a one way settlement.                                                                                                   
Mr. Binkley agreed  with Representative Gara. The  risk of a                                                                    
class action  suit exists despite  the passage of  the bill.                                                                    
He  speculated that  if the  legal ground  is plowed  by the                                                                    
cruise lines through the litigation,  there could be a class                                                                    
of people  who may want  to sue. The legislation  may reduce                                                                    
that risk.                                                                                                                      
6:27:20 PM                                                                                                                    
JENNIFER   GIBBINS,  EXECUTIVE   DIRECTOR,  PRINCE   WILLIAM                                                                    
SOUNDKEEPER  CORDOVA (via  teleconference)  opposed SB  312.                                                                    
She  observed that  the legislators'  points were  good. She                                                                    
understood  the   importance  of  the  cruise   industry  to                                                                    
Alaska's  economy.  She  opined  that the  bill  served  the                                                                    
cruise industry. The cruise  ship's decisions regarding ship                                                                    
deployment happen  years in advance. Alaskan  citizens voted                                                                    
to  approve the  voter initiative  initiating the  head tax.                                                                    
The voter initiative was passed  to protect and preserve the                                                                    
environment of  Alaska in partnership  with the  cruise ship                                                                    
STEVE    HITES,    SKAGWAY,     STREETCAR    COMPANY    (via                                                                    
teleconference),  discussed  his  company and  the  loss  of                                                                    
revenue because of  the head tax. He stressed  that the loss                                                                    
of revenue  and jobs was not  the intent of the  cruise ship                                                                    
initiative.  He commended  Governor Parnell  for carrying  a                                                                    
message to the cruise ship  industry that Alaska is open for                                                                    
business. He  urged the committee  to follow  the governor's                                                                    
lead and pass the legislation out of committee.                                                                                 
KARL  AMYLON, SELF,  KETCHIKAN (via  teleconference) offered                                                                    
to respond to questions.                                                                                                        
6:36:46 PM                                                                                                                    
TANJA CADIGAN,  OWNER, CARIBOU  CROSSINGS, spoke  in support                                                                    
of  the  legislation.  She  spoke  of  the  many  employment                                                                    
opportunities available as a result  of the cruise industry.                                                                    
She  expressed  frustration  about the  pressure  placed  on                                                                    
small businesses as a result of the head tax.                                                                                   
6:41:45 PM                                                                                                                    
GREG PILCHER,  OWNER, WHALE TALES,  testified in  support of                                                                    
the legislation.  He stressed the  impact that  industry has                                                                    
on his business.                                                                                                                
6:43:40 PM                                                                                                                    
CHRIS   WILSON,  JUNEAU   (via  teleconference),   suggested                                                                    
dividing  the  head tax  into  a  port  fee similar  to  the                                                                    
management of the airport tax.  He wondered about the impact                                                                    
that the  cruise ships have  on Alaska's waters.  The impact                                                                    
is tied  to the fishermen.  He suggested  a new avenue  of 1                                                                    
percent tax  appropriated to the  state for  the improvement                                                                    
of water and sanitation issues.                                                                                                 
Representative Fairclough  asked Mr. Wilson if  he supported                                                                    
or opposed the bill.                                                                                                            
Mr. Wilson stated that he did not support the bill.                                                                             
6:48:03 PM                                                                                                                    
STAN  STEVENS,  WILDLIFE  TOURS BUSINESS,  chair  of  Alaska                                                                    
Travel Industry Association (ATIA)  informed that 70 percent                                                                    
of ATIA's members are small  businesses. He commented on the                                                                    
downturn  for these  small businesses  credited  to lack  of                                                                    
marketing,  poor economy,  and  the head  tax.  The loss  of                                                                    
140,000 people by the industry  will affect small businesses                                                                    
in the  interior, Anchorage, and Southeast.  He stressed the                                                                    
value of the cruise industry to the whole economic system.                                                                      
Representative  Gara relayed  a  message to  the members  of                                                                    
ATIA.  He  pointed  out  that Alaska  levies  no  income  or                                                                    
business tax on the members.                                                                                                    
Mr. Stevens mentioned that ATIA  brought forth a proposal to                                                                    
tax the industry  in 2004. The members  have suggested taxes                                                                    
as a  method of generating additional  marketing dollars. He                                                                    
shared stories about his experience as a business owner.                                                                        
6:54:56 PM                                                                                                                    
Co-Chair Stoltze closed public testimony.                                                                                       
Representative   Austerman  requested   opinion  about   the                                                                    
settlement agreement from Department of Law (DOL).                                                                              
CHRISS  POAG, DEPARTMENT  OF LAW,  explained  that when  the                                                                    
initiative  went  into  effect,  those  communities  had  to                                                                    
choose whether to keep their tax  in effect and elect not to                                                                    
receive port  of call revenue  sharing or their  tax expired                                                                    
as  a matter  of  law. The  presented  offset provision  for                                                                    
Juneau and  Ketchikan shows that  the communities  chose not                                                                    
to receive port of call funds.                                                                                                  
Representative Austerman  asked if the  communities received                                                                    
the $5 prior to the law going into effect.                                                                                      
Mr.  Poag replied  that  the communities  can  apply to  the                                                                    
legislature  for  appropriations  but they  do  not  receive                                                                    
revenue sharing.                                                                                                                
Representative  Austerman  asked  if the  communities  would                                                                    
receive revenue sharing under the  new law. Mr. Poag replied                                                                    
Representative Fairclough  wanted to assure that  her office                                                                    
was not flooded with cruise ship lobbyists.                                                                                     
6:57:56 PM                                                                                                                    
Representative  Doogan commented  that  his office  received                                                                    
many emails regarding the bill.                                                                                                 
Vice-Chair  Thomas  commented   that  Juneau  and  Ketchikan                                                                    
received $80  million in regional  funds in addition  to the                                                                    
collection of port fees.                                                                                                        
Representative  Austerman  announced   that  he  planned  to                                                                    
submit an amendment during the next hearing of the bill.                                                                        
Representative Gara  spoke to the  passion generated  by the                                                                    
SB  312  was  HEARD  and   HELD  in  Committee  for  further                                                                    
7:01:03 PM          AT EASE                                                                                                   
7:11:55 PM          RECONVENED                                                                                                
Co-Chair Stoltze                                                                                                                

Document Name Date/Time Subjects
K version CE Workdraft.pdf HFIN 4/15/2010 8:30:00 AM
CS WORKDRAFT Kversion SB 305
SB 305
Summary of Changes to SC workdraft K SB 305.pdf HFIN 4/15/2010 8:30:00 AM
SB 305
sb13_2009 summary 3-9-09[1].pdf HFIN 4/15/2010 8:30:00 AM
SB 13
SB 13 - Sponsor Statement 2-10-09 (H)FIN.pdf HFIN 4/15/2010 8:30:00 AM
SB 13
SB 13 Sectional Summary 26-LS0076A (H)FIN.pdf HFIN 4/15/2010 8:30:00 AM
SB 13
CS SB 83 (L&C) section analysis.pdf HFIN 4/15/2010 8:30:00 AM
SB 83
SB 83 Gov Transmittal Letter.pdf HFIN 4/15/2010 8:30:00 AM
SB 83
Explanation of Changes between SB 83 and CSSB 83.pdf HFIN 4/15/2010 8:30:00 AM
SB 83
SB139 Sponsor Statement Revised.PDF HFIN 4/15/2010 8:30:00 AM
SB 139
SB 139 Data Health Care Professions Loan Repayment Program Concept Proposal.PDF HFIN 4/15/2010 8:30:00 AM
SB 139
SB 159 Sponsor Statement H FIN.pdf HFIN 4/15/2010 8:30:00 AM
SB 159
SB172 Sectional.PDF HFIN 4/15/2010 8:30:00 AM
SB 172
SB172 Sponsor Statement.PDF HFIN 4/15/2010 8:30:00 AM
SB 172
Sectional Analysis.pdf HFIN 4/15/2010 8:30:00 AM
SB 174
Changes to SB 220 in SB 220 FIN[1].pdf HFIN 4/15/2010 8:30:00 AM
SB 220
Sectional on SB 220, version Y.doc HFIN 4/15/2010 8:30:00 AM
SB 220
Sponsor Statement for SB 220.docx HFIN 4/15/2010 8:30:00 AM
SB 220
HCS CSSB 234 Sponsor Statement.docx HFIN 4/15/2010 8:30:00 AM
SB 234
Summary of Changes to HCS CSSB 234.docx HFIN 4/15/2010 8:30:00 AM
SB 234
Sponsor Statement[1] SB 258.pdf HFIN 4/15/2010 8:30:00 AM
SB 258
Support Documents[1] SB258.pdf HFIN 4/15/2010 8:30:00 AM
SB 258
Sponsor Statement - SB 266.doc HFIN 4/15/2010 8:30:00 AM
SB 266
HCS for CS for SB 279_LC_ Sectional Analysis.pdf HFIN 4/15/2010 8:30:00 AM
SB 279
SB 279 Sponsor Statement.pdf HFIN 4/15/2010 8:30:00 AM
SB 279
SB 279 Back-Up.pdf HFIN 4/15/2010 8:30:00 AM
SB 279
2010 04 12 SB312 Port of Call Payments.pdf HFIN 4/15/2010 8:30:00 AM
SFIN 4/14/2010 9:00:00 AM
SB 312
SB 312 Sectional Analysis.docx HFIN 4/15/2010 8:30:00 AM
SFIN 4/5/2010 10:00:00 AM
SB 312
SB 312 Sponsor Statement.docx HFIN 4/15/2010 8:30:00 AM
SFIN 4/5/2010 10:00:00 AM
SB 312
SB 305 SECTIONAL for CS.pdf HFIN 4/15/2010 8:30:00 AM
SB 305
SB305 sponsor statement.docx HFIN 4/15/2010 8:30:00 AM
SB 305
HCS CSSB305(RES)(title am)-REV-TAX-04-13-10 decoupling.pdf HFIN 4/15/2010 8:30:00 AM
SB 305
2010 04 15 Historical Rev Distribution 3Yrs.pdf HFIN 4/15/2010 8:30:00 AM
SB 312
2010 03 02 D Wood Calculations FY2008_09.pdf HFIN 4/15/2010 8:30:00 AM
SB 13 Support Letter.pdf HFIN 4/15/2010 8:30:00 AM
SB 13
SB 220 Amendments #2 3 4.pdf HFIN 4/15/2010 8:30:00 AM
SB 220
SB 305 Amendment Hawker.pdf HFIN 4/15/2010 8:30:00 AM
SB 305
SB 172 Amendment #1 Hawker.pdf HFIN 4/15/2010 8:30:00 AM
SB 172
Sponsor Statement 243.docx HFIN 4/15/2010 8:30:00 AM
Corrected Sectional Analysis Sb 243 version P.docx HFIN 4/15/2010 8:30:00 AM
SB 243
H FIN Comments on SB 305 4-15-10 FINAL.pdf HFIN 4/15/2010 8:30:00 AM
SB 305
Qualifying For the AGIA Tax Inducement - H FIN 4-15-10.pdf HFIN 4/15/2010 8:30:00 AM