Association banks on tax credits for tourism marketing

Proposed bills would redirect cruise lines' income taxes to ads touting Alaska travel

Posted: Sunday, August 23, 2009

An effort to nearly double the amount of money the state spends to market itself as a tourist destination is gaining momentum as the industry feels the pinch of a troubled summer season.

Two bills introduced last spring would redirect cruise lines' corporate income taxes into a tourism marketing campaign headed up by the Alaska Travel Industry Association. Cruise lines that contribute to the marketing campaign would receive tax credits against the contribution.

The bills, Senate Bill 138 and House Bill 167, are likely to be considered by state lawmakers during the next session.

Alaska spends $11.7 million a year in marketing, but ATIA President Ron Peck said the amount should at least double.

"There are states outspending us by five, six and seven to one," Peck said.

Hawaii spends in excess of $70 million, Peck said, and draws 7 million visitors.

Alaska sees about 2 million visitors a year.

"To be competitive ... it's altogether appropriate for us to have a $20 million budget," Peck said.

Peck promoted the bills at a July 24 tourism summit in Juneau that more than 300 people attended, and his organization sponsored a similar summit in Anchorage on Thursday.

A majority of the Juneau summit's attendees who answered a survey said they supported industry tax credits for marketing.

The Cruise Ship Initiative established the corporate income tax on cruise lines in 2006. It also established the head tax, a $50 tax imposed on every cruise ship passenger.

The head tax was lambasted in Juneau by summit attendees who said it made Alaska less competitive and drove cruise business away.

Chip Thoma, whose organization Responsible Cruising in Alaska sponsored the initiative, said an organization that wants to repeal taxes should not have their hand out to receive them.

He also said giving ATIA a cruise industry tax credit sets a bad precedent.

ATIA is supposed to be marketing to independent travelers, not cruise ship tourists, he said.

"They spend $11 million a year to get those independent travelers here and they've failed," Thoma said. "A lot of that is due to the economy and rather than recognize that and own up to it, they blame the head tax."

Senate bill sponsor Kevin Meyer, R-Anchorage, said the state needs to find a long-term funding solution for the tourism industry. ATIA comes to the legislature "hat in hand" every year, he said.

"That's a waste of their time and our time," Meyer said. "We want to fund them; it's figuring out how and at what level."

Rep. Cathy Muñoz, R-Juneau, said the tax credit has a lot of support in the House, where she and 14 others are co-sponsors.

"We are not putting enough into state marketing efforts," Muñoz said. "Other states in the U.S. that are popular tourist destinations have much stronger marketing efforts or state-sponsored programs."

About 70 percent of Alaska's marketing fund is paid for with legislative appropriations.

Last year, $9 million in car rental taxes was combined with $2.5 million from ATIA's cooperative ad programs to fund the campaign. Cruise lines once contributed money for that on their own, but cut back on that after the Cruise Ship Initiative imposed the new taxes on them.

The state Department of Revenue raised an issue about the constitutionality of the tax credits, but did not issue an opinion before the session ended.

The department needs to hear more from legislators before forming a legal opinion, Deputy Commissioner Marcia Davis said.

The majority of the state marketing budget goes to direct mail programs, based around the state vacation planner and Web site, according to ATIA.

Additional funding would pay for advertising in travel press, some cable television commercials and travel media public relations, Peck said.

• Contact reporter Kim Marquis at 523-2279 or

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