BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:April 28, 2014        |Bill No:SB                         |
        |                                   |1119                               |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                              Senator Ted W. Lieu, Chair
                                           

                          Bill No:        SB 1119Author:Leno
                         As Amended:April 2, 2014 Fiscal: Yes

        
        SUBJECT:  California Travel and Tourism Commission.
        
        SUMMARY:  Establishes a limit on the assessment of the passenger car  
        rental industry to fund the California Travel and Tourism Commission  
        (Commission) of no more than 70 percent of the funding necessary to  
        fund the Commission's approved marketing plan and all administrative  
        costs.  Limits the marketing plan and administrative costs to $70  
        million per fiscal year.

        Existing law:
        
        1) Establishes the Governor's Office of Business and Economic  
           Development (GO-Biz) within the Governor's Office for the purpose  
           of serving as the lead state entity for economic strategy and  
           marketing of California on issues relating to business development,  
           private sector investment and economic growth.  (Government Code §  
           12096 et. seq)

        2) Establishes the California Tourism Marketing Act (Act).  (GC §  
           13995 et seq.)

        3) Makes various findings and declarations regarding the importance of  
           California's tourism industry, need for marketing of the industry  
           and importance in funding the marketing of the industry, including:  
            (GC § 13995.1)

           a)   An industry-approved assessment provides a private-sector  
             financing mechanism that, in partnership with state funding, will  
             provide the amount of marketing necessary to increase tourism  
             marketing expenditures by California.





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           b)   The goal of the assessments is to assess the least amount per  
             business, in the least intrusive manner, spread across the  
             greatest practical number of tourism industry segments.

        1) Defines the following:  (GC § 13995.20)

           a)   "Assessed business" is a person required to pay an assessment  
             pursuant to the Act other than a public entity or a corporation  
             when a majority of the corporation's board of directors is  
             appointed by a public official or public entity, or serves on the  
             corporation's board of directors by virtue of being elected to  
             public office, or both. 

           b)   "Industry category" means the following classifications within  
             the tourism industry: accommodations, restaurants and retail,  
             attractions and recreation, transportation and travel services,  
             other than passenger car rental and passenger car rental.

           c)   "Maximum assessment" is a dollar amount, adopted by the  
             California Travel and Tourism Commission (Commission), over which  
             an assessed business shall not be required to pay. The Commission  
             may adopt differing amounts of maximum assessment for each  
             industry category or industry segment.

        1) Requires the Governor to appoint a Tourism Selection Committee  
           (Committee) based upon recommendations from established industry  
           association comprised of 25 representatives, with no fewer than six  
           from each industry category.  Requires the Committee to issue a  
           report listing industry segments that will be included in the  
           initial referendum, the target assessment level for the initial  
           referendum, the percentage of funds to be levied against each  
           industry category and segment based upon, to the extent possible,  
           quantifiable industry data, assessment methodology and rate of  
           assessment within each industry segment, that may include a  
           percentage of gross revenue or a per transaction charge.  (GC §  
           13995.30)

        2) Requires the Office of Tourism within GO-Biz to establish a  
           non-profit Commission consisting of 37 members, including  
           representatives of the tourism industry and travel agencies or tour  
           operators, whose mission is to increase the number of persons  
           traveling to and within California.  Provides that the Commission  
           be administered by an executive director who shall be a tourism  
           industry marketing professional, recommended by a vote of the  
           commissioners and approved by the Governor.  (GC §§ 13995.40,  





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           13995.41 and 13995.43)

        3) Requires the Commission to annually provide to all assessed  
           businesses a report on the activities and budget of the Commission.  
            Provides that the Commission's annual budget is subject to the  
           review and approval of the Director of GO-Biz, but specifies that  
           any decision of the Director related to the budget may be  
           overridden by a vote of three-fifths or more of the commissioners  
           then in office.  Requires the Commission to maintain a report,  
           updated when assessments are amended and to be made available to  
           any assessed business, on the percentage assessment allocation  
           between industry categories and industry segments including the  
           reasons and methodology used for the allocations. (GC § 13995.44)

        4) Requires the Commission to annually prepare a written marketing  
           plan and specifies that any expenditures by the commission shall be  
           consistent with the marketing plan.  Requires the marketing plan to  
           promote travel to and within California and to include, but not be  
           limited to, an evaluation of the previous year's budget and  
           activities; a review of California tourism trends, conditions, and  
           opportunities; target audiences for tourism marketing expenditures;  
           marketing strategies, objectives, and targets; and a budget for the  
           current year.  
        (GC § 13995.45)

        5) Provides that if an assessed business within the passenger car  
           rental category pays an assessment greater than the maximum  
           assessment, as determined by the Commission for other industry  
           categories, the weighted percentage assigned to that assessed  
           business shall be the same as though its assessment were equal to  
           the highest maximum assessment.  (GC § 13995.64.5)

        6) Provides that an assessed business may pass on some or all of its  
           assessment to customers and may identify or itemize the assessment  
           on any document provided to a customer.  
        (GC § 13995.65 (f))

        7) Specifies that funding for the Commission is a cooperative venture  
           and establishes Legislative intent that the state shall be  
           responsible for appropriating a minimum of $7.3 million each fiscal  
           year for travel and tourism.  Requires the assessment level to  
           ultimately reach at least $25 million and authorizes the industry  
           to terminate the Commission by referendum at any time if the state  
           fails to appropriate $7.3 million in any fiscal year and provides  
           that the state may decide not to appropriate funding in the event  
           that the Commission fails in any fiscal year to target its annual  





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           assessment level at or above the level set for the initial  
           referendum.  (GC § 13995.70) 

        8) Provides that the proposed assessment for the passenger rental car  
           industry shall be set at a level determined by the Commission that  
           will generate funding that will be sufficient, when aggregated  
           together with other funding for the Commission for an amount  
           sufficient to fund the approved marketing plan of  no less  than $50  
           million per fiscal year.

        This bill:  Provides that the proposed assessment for the passenger  
        rental car industry rate shall be set at a level determined by the  
        Commission that will generate no more than 70 percent of the total  
        funding that will be sufficient, when aggregated together with other  
        funding for the Commission, to fund the approved marketing plan and  
        all administrative costs of  no more  than $70 million per fiscal year.
        
        FISCAL EFFECT:  Unknown.  This bill is keyed "fiscal" by Legislative  
        Counsel.
        
        COMMENTS:
        
        1. Purpose.  This bill is sponsored by  Enterprise Rent-A-Car  .   
           According to the Author, the bill is "an effort to create measured  
           growth in the demonstrably successful Visit California program in a  
           manner that does not disproportionately place the burden on the  
           rental car industry."  The Author contends that under current  
           budgeting practice by the Visit California program, once an annual  
           budget amount is established, estimates are made as to the amount  
           anticipated to be collected from all industries except for the  
           rental car industry.  According to the Author, "once that amount is  
           set, the assessment percentage on rental cars is set to then fill  
           the gap in the budget."  The Author notes that while the current  
           budgeting approach has been widely accepted by the participants of  
           this successful program, Visit California and the Visit California  
           Board are currently undertaking an effort to increase the Visit  
           California marketing budget on an ongoing basis, including a  
           proposal to increase the program to $105 million annually.  The  
           Author intends for this bill to "facilitate opportunities for the  
           tourism industry to enhance its support of Visit California and  
           ensure that assessments are shared by all segments of the  
           industry."

        2. Visit California.  The California Tourism Marketing Act (Act) grew  
           out of efforts to reverse a multi-year decline in California's  
           tourism industry.  During the 1970s, Governor Brown closed the  





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           Office of Tourism and withdrew funding from many tourism promotion  
           efforts.  During Governor Deukmejian's tenure, the Office of  
           Tourism was reactivated.  In February, 1993, Governor Wilson  
           created the Governor's Task Force on Tourism Funding (Executive  
           Order W-41-93) for the purpose of "investigating various tourism  
           funding methods and making policy recommendations regarding a new,  
           "non-tax" method of providing stable financing for statewide  
           tourism promotion."  The Task Force, which was composed of  
           representatives from various California businesses, developed the  
           concept that was ultimately enacted by SB 256 (Johnston, Chapter  
           871, Statutes of 1995) as the California Tourism and Marketing Act.  


           The Act authorized the establishment of a non-profit, public  
           benefit corporation, Visit California, to oversee the promotion of  
           California as a premier travel destination. The statute became  
           operative upon industry wide approval in 1997 and the assessment  
           program was initiated in 1998.  In 2001, the program was renewed by  
           industry referendum with an 
           84 percent margin, while in 2007 it was renewed by a 91 percent  
           margin.  The first full year of assessment funding occurred during  
           Fiscal Year 1998-1999 and between 1998 to 2002, the marketing  
           budget was fully funded by the Commission and the state at  
           approximately 
           $14 million annually. 

           Visit California is comprised of 37 Commission members,  
           representing each industry segment (Accommodations, Restaurants and  
           Retail, Attractions and Recreation, Transportation and Travel  
           Services, and Passenger Car Rental). The Commission meets three  
           times a year and directs and approves the marketing plan,  
           expenditures and the overall strategic course for California  
           tourism.  The assessment program is administered by the Office of  
           Tourism, Tourism Assessment Program which is housed in GO-Biz.

           According to Visit California, since its inception more than a  
           decade ago, it has become one of the nation's premier state  
           marketing agencies - promoting the California brand and helping to  
           increase tourism and travel-related spending.  Visit California  
           states that as an industry-led public-private partnership, it is  
           leading successful marketing campaigns that are having a profound  
           effect, citing that over the last three years, California has moved  
           from 28th to 2nd among state tourism marketing budgets.  A 2011  
           White Paper on California Tourism stated that visitor spending  
           directly supported jobs for 873,000 Californians and resulted in  
           $6.1 billion in direct state and tax revues.  The paper also  





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           highlighted the role of a statewide tourism program, noting a  
           number of other states with substantial budgets to market  
           themselves to potential travelers and that without the coordinating  
           efforts of a California tourism program, California's travel  
           destinations and tourism industry would be at a competitive  
           disadvantage.     

           In 2006, AB 2592 (Leno, Chapter 790, Statutes of 2006) established  
           a new tourism assessment program for the passenger car rental  
           industry.  This passenger car rental industry assessment program is  
           limited to companies that have business locations renting passenger  
           vehicles at either airports or accommodation locations, such as  
           hotels and requires an industry-specific assessment rate, adjusted  
           annually.  Numbers provided at a recent Visit California meeting  
           show that for FY 2012-13, the passenger rental car industry  
           accounted for about seven percent (about $1.5 million) of the  
           tourism revenue generated in the state and contributed 76 percent  
           (over $43 million) of the assessments to fund the program.   

           In March 2013, assessed businesses voted to approve the California  
           Tourism Assessment Program and as a result, the program and Visit  
           California efforts will continue to operate for an additional six  
           years, pursuant to referendum results, with $300 million intended  
           for marketing and as a means of allowing Visit California to  
           greatly expand the depth and scope of its marketing programs during  
           that time.  At a recent Visit California meeting, materials were  
           presented outlining some of the upcoming efforts related to the new  
           "Dream Big" slogan and brand, including a chart outlining what  
           increased budgets could mean for program.  Specifically,  
           projections show that the current $50 million budget would have no  
           additional impact, a $150 million budget could result in an  
           additional $6.8 billion impact and a $147 million budget could  
           result in an additional $7.7 billion impact to tourism in the  
           state.  While no budget above $50 million has been approved thus  
           far, it is entirely possible that the program's budget numbers  
           double in the near future, as stakeholder outreach results indicate  
           that this is the right time to be considering an increased budget,  
           which would then result in a need for Visit California to secure  
           funding.  Conversations are still ongoing as to where money beyond  
           the current $50 million would come from, with a particular focus on  
           the need for parity in assessments across the industry.  Given the  
           ability under current law for assessments to be passed onto  
           consumers, it is likely that any increased budget for Visit  
           California will result in increased fees consumers see when renting  
           a car or staying at a hotel in order to fund the industry's  
           assessments.        





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        3. Governor's Office of Business and Economic Development (GO-Biz).   
           In February 2010, the Little Hoover Commission undertook a review  
           of the state's economic and workforce development programs.  In its  
           final report, Making up for Lost Ground:  Creating a Governor's  
           Office of Economic Development, it analyzed the status and  
           effectiveness of current programs since the 2003 demise of the  
           Technology, Trade and Commerce Agency (TTCA) and recommended the  
           creation of a new governmental entity to fill the void left by the  
           dismantled agency.

           The report called for a single entity that would promote greater  
           economic development, foster job creation, serve as a policy  
           advisor and deliver specific services (i.e., permitting, tax,  
           regulatory, and other information) directly to the California  
           business community.  In April 2010, Governor Schwarzenegger issued  
           Executive Order S-05-10 as a means to operationalize the report  
           recommendations including the creation of the Governor's Office of  
           Economic Development (GOED).

           In October 2011, the Governor signed AB 29 (cited and described  
           below), which effectively codified GOED and changed its name to  
           GO-Biz, effective January 1, 2012.  Since its inception, the office  
           has served over 3,000 businesses, 95% of which are small.  The most  
           frequent types of assistance include help with permit streamlining,  
           starting a businesses, relocation and expansion of businesses, and  
           regulatory challenges. 

           In March 2012, the Governor initiated a reorganization process to  
           realign the state's administrative structure.  Key changes include  
           dismantling of the Business, Transportation and Housing Agency  
           (BTH) and the shifting of a number of key programs and services to  
           GO-Biz including the California Travel and Tourism Commission,  
           Small Business Loan Guarantee Program, the California Film  
           Commission, the Film California First Program and the  
           Infrastructure and Economic Development Bank (I-Bank).  

        4. Prior Related Legislation.   SB 820  (Committee on Governmental  
           Organization, Chapter 353, Statutes of 2013) enacted the statutory  
           changes to reflect the assignment and reorganization of the  
           functions of state government as outlined in the Governor's  
           Reorganization Plan No. 2 of 2012 (GRP 2), effective on July 3,  
           2012, and operative on July 1, 2013, which included transferring  
           responsibilities for the Commission to GO-Biz and set the current  
           proposed assessment for the passenger rental car industry to fund  
           an approved marketing plan of no less than $50 million.





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            AB 29  (John A. Pérez, Chapter 475, Statutes of 2011) established  
           GO-Biz within the Governor's Office for the purpose of serving as  
           the lead entity for economic strategy and marketing of California  
           on issues relating to business development, private sector  
           investment and economic growth.
            
           SB 1175 (Price) of 2010 would have required the Secretary of BT&H  
           to direct the California Travel and Tourism Commission to conduct a  
           review of its principal mission and core competencies in order to  
           determine if the commission should include trade promotion in its  
           strategic marketing plan or other future plans of the commission  
           and provide a report to the Legislature.  (  Status:   This measure  
           was held in the Senate Committee on Rules.)  
            
           AB 2592  (Leno, Chapter 790, Statutes of 2006) modified the  
           conditions and terms of appointees and elected members of the  
           Commission, broadened industry segments which may voluntary  
           participate in Commission programs, and clarified certain  
           assessment and referendum procedures.  The bill also made changes  
           to the way the passenger car rental industry is assessed by the  
           Commission to permit rental car companies to separately state  
           specified fees in advertising, quotes and charges for rental cars  
           which become operational only if the rental car industry agrees to  
           increase its assessment to specified levels.

           SB 1390  (Speier) of 2004 would have appropriated $1 million from  
           the General Fund to the Commission.  (  Status:   This bill was held  
           under submission in the Assembly Committee on Appropriations.)

            AB 487  (Firebaugh, Chapter 204, Statutes of 2003) required the  
           Commission to consult with certain entities and recommend  
           strategies and a timeline for revising the annual tourism marketing  
           plan to income promoting the state's artistic, cultural, historical  
           and ethnic resources.
            
            AB 1757  (Committee on Budget, Chapter 229, Statutes of 2003)  
           eliminated TTCA and transferred responsibilities of certain  
           programs to BTH, including the Commission.

            SB 1900  (McPherson, Chapter 474, Statutes of 2002) extended the  
           term between referendums to every six years, provided that only 10  
           percent of assessed businesses are required to call for a  
           referendum to terminate the Commission and allowed the Commission  
           to be terminated at any time by a referendum called by a weighted  
           10 percent of the assessed businesses.





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            SB 1398  (Johnston, Chapter 795, Statutes of 1996) made technical  
           and substantive changes in the Act and made the Deputy Secretary of  
           the then TTCA Office of Tourism the executive director and  
           secretary of the Commission.

            SB 256  (Johnston, Chapter 871, Statutes of 1995) enacted the  
           California Tourism Marketing Act of 1995 to establish the framework  
           for an industry-wide referendum on self-assessment of the tourism  
           industry to competitively promote travel to and within California.

            SB 1983  (Rosenthal, Chapter 830, Statutes of 1994) required the  
           Office of Tourism to perform various functions and activities for  
           the purpose of establishing and enhancing a statewide network of  
           visitor information centers.

        
        SUPPORT AND OPPOSITION:
        
        Support:  

        Enterprise Holdings, Inc (Enterprise Rent-A-Car) (Sponsor)
        Avis Budget Group
        Hertz

         Opposition:  

        None on file as of April 23, 2014.



        Consultant:Sarah Mason