Legislature(2003 - 2004)

04/02/2004 07:05 AM W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 537-TOURISM SALES AND USE TAXES                                                                                          
                                                                                                                                
TAPE 04-21, SIDE B                                                                                                            
Number 4360                                                                                                                     
                                                                                                                                
CHAIR HAWKER announced  that the next order of  business would be                                                               
HOUSE BILL  NO. 537,  "An Act relating  to the  levy, collection,                                                               
and administration  of sales and  use taxes on  tourism services;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
CHAIR HAWKER  opened public testimony  on HB  537.  He  said that                                                               
since the last meeting the  committee has received the governor's                                                               
transmittal letter of March 16, 2004, and Mr. Shively's letter.                                                                 
                                                                                                                                
Number 4241                                                                                                                     
                                                                                                                                
JOHN   SHIVELY,   Vice   President,  Government   and   Community                                                               
Relations,  Holland America,  said that  most of  his points  are                                                               
made  in  his  letter  to  the committee.    He  noted  that  the                                                               
governor's transmittal  letter and [DOR] have  indicated that $19                                                               
million will  be raised [from  the tourist tax] this  fiscal year                                                               
and $49 million  thereafter, and he said that has  not seen those                                                               
calculations.   He said that  is something the committee  and the                                                               
cruise  industry need  to see  because, "We  don't know  how they                                                               
calculated those  amounts."  He  emphasized that it  is important                                                               
for the committee  to get answers [from DOR] to  the questions he                                                               
raised in the letter.                                                                                                           
                                                                                                                                
MR. SHIVELY  stated that some  of the problems raised  are unique                                                               
to the cruise  industry because it sells about 90  percent of the                                                               
cruises through travel agencies.   "We don't know everything that                                                               
they collect.   In  addition, the  way this  bill is  written, if                                                               
they bundle services  like airline fares from  Chicago to Seattle                                                               
or  Vancouver, and  transfers and  busses, all  of that  would be                                                               
part of the tax.  So  you're really taxing things that are taking                                                               
place out of the state," he said.                                                                                               
                                                                                                                                
MR.  SHIVELY emphasized  that  Alaska is  in  a very  competitive                                                               
position right  now.  The  market share  peaked in 1996  at about                                                               
9.5  percent   and  is  under   8  percent,  currently,   due  to                                                               
competition from  the Caribbean, Eastern Canada,  Mexico, Hawaii,                                                               
and Europe, he said.  He noted  that many people can now drive to                                                               
a cruise  and price is  an issue.  He  opined that this  tax will                                                               
make the  cruise more  expensive, and that  is not  exclusively a                                                               
"cruise bill", as mentioned earlier.                                                                                            
                                                                                                                                
CHAIR  HAWKER  thanked  Mr.  Shively  and  said  he  would  stand                                                               
corrected  if he  did refer  to it  as a  cruise bill,  saying it                                                               
would affect the whole travel industry in Alaska.                                                                               
                                                                                                                                
Number 4040                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG,  referring  to  the  letter  from  Mr.                                                               
Shively, asked about the paragraph  on page 4, after question 11,                                                               
which says,  "These questions are  not meant to  be all-inclusive                                                               
as we  have not had enough  time to thoroughly analyze  the bill.                                                               
He said that  indicates that Mr. Shively may  have further issues                                                               
with  the  bill.   Representative  Gruenberg  requested that  Mr.                                                               
Shively send the remainder of his concerns to the committee.                                                                    
                                                                                                                                
MR. SHIVELY said he would.                                                                                                      
                                                                                                                                
Number 3939                                                                                                                     
                                                                                                                                
KAREN  REGINA,  President  and Chief  Executive  Officer,  Alaska                                                               
Hospital Alliance,  which includes  the Alaska Hotel  and Lodging                                                               
Association, and the Alaska  Restaurant and Beverage Association,                                                               
shared her organization's reasons for  opposing HB 537.  She said                                                               
she opposes  targeted taxes on  [the tourist industry]  which are                                                               
not earmarked exclusively for tourism  marketing.  She noted that                                                               
the  industry  does  contribute   significantly  to  the  state's                                                               
economy,  and should  be  part  of the  solution  to solving  the                                                               
budget  deficit.   "To  achieve that,  we  believe a  broad-based                                                               
solution  is necessary,  rather  than an  approach that  unfairly                                                               
targets  specific industries  and  businesses.   We also  believe                                                               
that a broad-based  solution is achievable, in fact,  to that end                                                               
we support the  governor's POMV [percent of  market value] plan,"                                                               
she related.                                                                                                                    
                                                                                                                                
MS. REGINA  spoke of  the bill's utilization  of a  tax mechanism                                                               
that  local  regions  rely on  for  tourism  marketing,  economic                                                               
development, and local government.   Tourism enhances the quality                                                               
of life  in Alaska  in many ways,  both directly  and indirectly,                                                               
and a  bill such  as this  sends the  wrong message,  she opined.                                                               
She pointed  out that  the tax is  targeting businesses  that are                                                               
already paying local taxes.   The hotel and lodging industry paid                                                               
more than  $46 million  in tax to  local municipalities  in 2002,                                                               
she said.   The cumulative impact of an additional  5 percent tax                                                               
would  bring the  tax  on  hotels in  many  regions  up to  13-17                                                               
percent.   She repeated her  organization's opposition to  HB 537                                                               
and  urged  the  committee  to consider  other  more  broad-based                                                               
solutions.                                                                                                                      
                                                                                                                                
Number 3628                                                                                                                     
                                                                                                                                
JACK  REISS,  Vice  President for  Operations,  Aramark  Parks  &                                                               
Resorts, said his  company operates the concessions  and tours in                                                               
Denali National Park  and Preserve, as well as two  lodges in the                                                               
Denali  corridor.   He  related that  visitations  to Denali  are                                                               
approximately 80 percent  cruise line related, and  over the past                                                               
three  years,  visitation has  been  going  down approximately  5                                                               
percent a year.   He said that fewer tourists  are venturing into                                                               
the interior of  Alaska for a variety of reasons.   He stated his                                                               
belief  that  this tax  targets  the  tourism industry  and  will                                                               
continue to deter travelers from  going into interior Alaska.  He                                                               
called  it,  "Shooting  the  goose that  lays  the  golden  egg."                                                               
Denali only  operates about 120  days a year and  most businesses                                                               
rely  on  cruise line  tourism,  and  this bill  jeopardizes  all                                                               
business management in the Denali corridor, he concluded.                                                                       
                                                                                                                                
Number 3430                                                                                                                     
                                                                                                                                
JOHN BINKLEY,  Owner, Sternwheel Riverboats; Eldorado  Gold Mine,                                                               
said his  businesses employ  about 150  people.   He said  he has                                                               
been  very supportive  of Governor  Murkowski's drive  to develop                                                               
the resources  in Alaska.  Tourism  is also a resource,  he said,                                                               
and he  stated his  opposition to  HB 537  because of  the effect                                                               
that it  has on the  development of  this resource.   He compared                                                               
tourism to  other resources that  bring new dollars  from outside                                                               
of the  state into its  economy.  He  urged the committee  to not                                                               
pass this legislation.                                                                                                          
                                                                                                                                
Number 3124                                                                                                                     
                                                                                                                                
STEVE  FRANK  said that  he  is  the  owner  of a  small  tourism                                                               
business  consisting  of a  hotel,  restaurant,  and RV  park  in                                                               
Fairbanks.   He stated  that he is  almost entirely  dependant on                                                               
visitors to support his business and  the 100 jobs created by his                                                               
business.   He opined that  HB 537  would cost jobs  because less                                                               
people  will  come  to  his   business,  and  it  does  not  seem                                                               
appropriate to tax an industry  that supports general government.                                                               
He stated  his support  for a mechanism  to enhance  the economic                                                               
development  of tourism  through  SB 254,  which  is an  industry                                                               
self-assessment   that  would   put  money   back  into   tourism                                                               
marketing.   A 5 percent  tax, added to  an 8 percent  hotel tax,                                                               
would make  for a  13 percent tax,  which will  discourage people                                                               
from booking tours to Alaska, he said.                                                                                          
                                                                                                                                
Number 2657                                                                                                                     
                                                                                                                                
GARY  MENDIVIL,  Business  Manager, Eaglecrest  Ski  Area,  spoke                                                               
about his  concerns with the definition  section of HB 537.   The                                                               
language  leaves  a  number of  things  open  to  interpretation,                                                               
specifically in the definition of  guided activities, which might                                                               
be  determined to  include  ski and  snowboard  lessons or  field                                                               
trips operated  by local  community groups  or schools,  he said.                                                               
He  described  the ski  industry  in  Alaska as  one  destination                                                               
resort,  Alyeska, six  community ski  areas, and  four ski  areas                                                               
located on military bases.                                                                                                      
                                                                                                                                
Number 2452                                                                                                                     
                                                                                                                                
KEVIN  BATTERS, General  Manager,  Hilton Hotel,  in stating  his                                                               
opposition to  HB 537, said  that his hotel relies  on convention                                                               
and tour  business for  the majority  of its  business throughout                                                               
the year.   This tax will  make it extremely hard  to continue to                                                               
run the  business effectively, he said.   If there is  a decrease                                                               
in any of these areas, it  will prevent Anchorage from becoming a                                                               
year-round destination and it will decrease jobs, he opined.                                                                    
                                                                                                                                
CHAIR HAWKER closed public testimony.                                                                                           
                                                                                                                                
[HB 537 was held over.]                                                                                                       
                                                                                                                                

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