Frequently Asked Questions (FAQs): Alaska Tourism Improvement District (TID)

  • What do you mean by a Tourism Improvment District ?

  • A tourism improvement district or TID is like a business improvement district, including businesses that vote to assesses themselves for the improvement of an outlined jurisdiction. Benefits of a TID go to the payors or those businesses that are being assessed. A TID is created by governing law, in this case a state statute, giving the industry the tool to assess itself to support statewide tourism marketing. Legislation creating an Alaska TID would also include a mechanism for industry to vote out the assessment.

  • Isn't the assessment just a tax on business?

  • An assessment through a tourism improvement district is not a tax. Where a tax collected by government supports public services in general, any assessment through a tourism improvement district must benefit those being assessed.

  • What would the assessment fund?

  • An Alaska Tourism Improvement District and assessment would fund statewide destination marketing. This includes advertising, public relations activities, travel trade and international marketing strategies, website efforts, and research. It would not be used for capital or infrastructure projects.

  • Why do we need an assessment?

  • Because of the State of Alaska’s (SOA) fiscal challenge, receiving operating support from the SOA’s general fund is no longer realistic. Governor Walker vetoed and reduced several programs’ funding at the end of the legislative session in June, 2016. This included a reduction to tourism marketing funding, leaving $1.5 million to be allocated this fiscal year 2017. This is a drastic decrease in general fund support for tourism marketing, down from $16 million two years ago.

    The TID and industry assessment is one way to fund statewide destination marketing in Alaska that adds more certainty and sustainability to future funds.

  • What business sectors would be assessed?

  • The Alaska Travel Industry Association (ATIA), along with Alaska Tourism Marketing Board (ATMB) members, are exploring a mix of current and new revenue as part of an Alaska TID assessment. Industry leaders have focused on revenue that could be collected from visitors, with the least impact on Alaska residents. Additionally, initial industry feedback emphasized any new assessment should be broad-based and not target one industry sector.

    Currently, the State of Alaska collects revenue from a statewide vehicle rental car tax or the VRT (10% cars and 3% RVs). With the current level of the VRT combined with a 1% assessment on the tour activities, attractions and accommodations sectors of the tourism industry, we could be well on our way to funding an annual $20 million tourism marketing program.

  • Doesn't the Vehicle Rental Car tax (VRT) legislation have language that refers to tourism promotion?

  • Yes. The existing vehicle rental car tax legislation includes language that says revenue may be allocated to tourism promotion. However, the State of Alaska’s Constitution prohibits dedicating funds to any program. Until this year, Alaska’s tourism marketing program has received support allocations in the range of or above what has been generated by the VRT. ATIA is advocating for support of the TID concept which includes VRT revenue and combines it with new revenue in the form of the assessment, thus honoring the intent of the original VRT legislation.

  • Why aren't other industry sectors included? Like the cruise industry, or retail?

  • The ATIA Board of Directors initially researched revenue that could be generated from the cruise, air, transportation, retail, food and beverage sectors. Complicated legal issues would make it very challenging and costly to assess businesses operating interstate transportation and are subject to federal commerce laws. However, the Alaska TID concept recognizes visitors traveling to Alaska aboard a cruise ship and/or a major airline. These travelers would pay an assessment through any tour activities, attractions and accommodations they visit, as those sectors are being considered as part of the Alaska TID.

    The ATIA Board of Directors also researched other various forms of revenue, including broadening any assessment to include retail and gift shops and restaurants and bars. In reviewing examples from other communities, industry leaders chose to focus initially on three primary industry sectors: vehicle rentals, tour activities and attractions, and accommodations. In developing legislation, the ATIA Board of Directors is considering language that would allow industry to invite additional industry sectors to participate in the TID in future years.

  • How would an assessment impact my business?

  • If your business operates in one of the tourism industry sectors (activities and attractions, accommodations) your business would receive a notice from the State of Alaska for payment of up to a 1% assessment on gross revenue derived from visitors/tourism. Businesses can pass on the assessment cost to visitors on a payment document (invoice). The assessment is collected by the State of Alaska and can be allocated to ATIA to use for tourism promotion.

  • What are the potential costs to the State of Alaska for enabling an Alaska TID and assessment?

  • The State of Alaska includes the Department of Revenue and other divisions that are already collecting and processing various fees and taxes. ATIA would partner with the State to utilize existing staff and resources to minimize any administrative expenses.

  • Why do we need a statewide destination marketing program?

  • Alaska will not remain competitive among other domestic or international destinations at the level of $1.5 million for tourism promotion. Research and case studies show when other destinations have reduced and/or cut their tourism marketing, they see reductions in visitation and visitor spending, along with market share.

    In 1993 Colorado repealed their tourism funding legislation and within two years lost 30 percent of its U.S. visitor market share. Conversely, during a recession, Michigan doubled their state tourism marketing funding, launched the Pure Michigan campaign, and generated $6.6 billion in visitor spending.

    More recently, San Diego held off allocating tourism promotion funding and in a short time lost $560 million in visitor spending and $24 million in reduced tax revenues.

    In 2010, Connecticut eliminated their entire tourism marketing budget and travel-related tax revenue growth slowed to half the pace of the rate during slow economic times (2009-2010).

    In 2011, Washington shut down their tourism office and saw competing states increase their tourism promotion budgets and capture increased visitor spending.

    Without a strong tourism marketing program and level of funding, Alaska’s tourism businesses will not be able to maintain or increase market share and attract visitors. These visitors, in turn, are contributing, through various taxes and fees, to local economies and the state economy. This economic activity has allowed business owners to be able to provide jobs to Alaskans and helped communities pay for local services.

  • What does a statewide destination marketing program do for my business?

  • A strong destination marketing program generates brand awareness and keeps Alaska as a top visitor destination. It can complement your own business marketing strategies and leverage those marketing opportunities that individual businesses can’t do on their own. In the past, Alaska’s tourism marketing program has included national television advertising, magazine and direct mail campaigns and has supported a representative to sell Alaska to domestic and international markets. This year, Alaska is not able to afford these marketing activities. And, for the first time in 40 years, Alaska is not producing a main printed piece: The Official State Vacation Planner. These marketing strategies have been successful in past years in maintaining our share of certain markets and in keeping Alaska top of mind of potential travelers.

  • What would be the timing of any Alaska TID and assessments?

  • Today, ATIA is meeting with communities, destination marketing and management organizations and industry groups to continue to explore and gather feedback for the idea of an Alaska TID for statewide tourism promotion. The Alaska TID idea concept begins with the current state vehicle rental car revenue and packages it with new revenue from a potential 1% assessment on accommodations, tour activities and attractions.

    ATIA is asking for industry and legislative support for legislation, which would allow the establishment of an Alaska TID by state statute during this legislative season. Any legislation introduced  is reviewed throughout the legislative session: January through April. At the same time, ATIA would develop a voting process for a referendum for a potential industry self-assessment.

    An industry vote could take place in late summer or fall of 2017. If legislation is passed, industry may be able to generate assessment revenue starting July 1, 2018.

  • What are the main points of a Tourism Improvement District or TID?

  • A statewide Alaska TID would be created by state statute and would include levels of assessment for different sectors of the tourism industry. As part of the legislation, industry can vote in, increase, decrease, and/or eliminate the assessment. Industry pays the assessment for statewide tourism promotion. Government collects the funds. The TID is governed by participating industry payors and the program is implemented by an existing industry association. Industry can disestablish the assessment through a voting process, offering a level of control over the funds.