BILL ANALYSIS Ó SB 1119 Page 1 Date of Hearing: June 24, 2014 ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND INTERNET MEDIA Ian C. Calderon, Chair SB 1119 (Leno) - As Amended: April 2, 2014 SENATE VOTE : 36-0 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% of the funding necessary to fund the Commission's approved marketing plan and all administrative costs. Raises and limits the marketing plan and administrative costs to $70 million per fiscal year. Specifically, this bill : 1)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% 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. 2)Raises and caps the contribution of the passenger rental car industry to no more than $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 Section 12096 et. seq) 2) Establishes the California Tourism Marketing Act (Act). (Government Code Section 13995 et seq.) 3) Makes various findings and declarations regarding the importance of California's tourism industry, need for SB 1119 Page 2 marketing of the industry and importance in funding the marketing of the industry, including: (Government Code Section 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. 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: (Government Code Section 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 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 SB 1119 Page 3 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. (Government Code Section 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. (Government Code Sections 13995.40, 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. (Government Code Section 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. (Government Code Section 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 SB 1119 Page 4 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. (Government Code Section 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. [Government Code Section 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 assessment level at or above the level set for the initial referendum. (Government Code Section 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. (Government Code Section 13995.92) FISCAL EFFECT : Unknown COMMENTS : 1)Author and Sponsor's Stated Need for Legislation: Fairness in Visit California Contributing Industries : According to the sponsors, "The California Tourism Marketing Act (Government Code Sections 13995 et. seq.) has successfully increased California's share of the travel and tourism market. The legislation authorized the self-imposition of an assessment by businesses that benefit from travel and tourism. Over the last three years, California has moved from 28th to 2nd among state tourism marketing budgets. In recent years, this program has raised $60 million annually, allowing California SB 1119 Page 5 to greatly expand its tourism marketing programs. "Funding for the program is split across a variety of industry segments (Accommodations, Restaurants and Retail, Attractions and Recreation, Transportation and Travel Services, and Passenger Car Rental), with funds raised from the passenger rental car industry accounting for about 74% ($43 million) of Visit California's annual budget. "Visit California and the Visit California Board are currently undertaking an effort to increase the Visit California marketing budget on an ongoing basis. Those discussions include Visit California, the Governor's Office of Business and Economic Development and representatives of the various industry segments that contribute to the program's budget. SB 1119 is meant 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. " The author states, 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, claiming, "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)Background: The California Tourism Marketing Act and Visit California Structure : The Act grew out of efforts to reverse a multi-year decline in California's tourism industry. During the 1970s, Governor Brown closed the Office of Tourism and withdrew funding from many tourism promotion efforts. During SB 1119 Page 6 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% margin, while in 2007 it was renewed by a 91% margin. The first full year of assessment funding occurred during the 1998-99 fiscal year and between 1998 and 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. 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 the 2012-13 fiscal year, the passenger rental car industry accounted for about seven percent (about $1.5 million) of the SB 1119 Page 7 tourism revenue generated in the state and contributed 76% (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 the 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. 3)Oversight Hearing, CTTC: Spinning Gold: Marketing Travel and Tourism in California : In 2011, this Committee held an Oversight Hearing into the (then titled) California Travel and Tourism Commission. At that hearing, the Committee learned about the unique public/private partnership funding for the Commission, and of its success in making California the number one travel destination in the U.S. According to an industry White Paper, in 2009, approximately 200 million visitors generated $87.7 billion in spending on goods and services in the state. Visitor spending directly supported jobs for eight hundred and 880,000 Californians and resulted in $5.3 billion in direct state and local tax revenues. (Current figures show SB 1119 Page 8 California Tourism continues to grow and now generates $6 billion in state and local taxes, and directly supports almost 1 million jobs in our communities.) The 2011 White Paper on California Tourism 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. 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. 4)Prior Related Legislation : a) 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, 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. b) 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. c) SB 1175 (Price) of 2010, would have required the Secretary of Business, Transportation and Housing to direct the California Travel and Tourism Commission to conduct a SB 1119 Page 9 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. SB 1175 was held in the Senate Committee on Rules. d) 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. AB 2592 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. e) SB 1390 (Speier), of 2004, would have appropriated $1 million from the General Fund to the Commission. SB 1390 was held under submission in the Assembly Committee on Appropriations. f) 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. g) AB 1757 (Committee on Budget), Chapter 229, Statutes of 2003, eliminated TTCA and transferred responsibilities of certain programs to BTH, including the Commission. h) 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. i) SB 1398 (Johnston), Chapter 795, Statutes of 1996, made technical and substantive changes in the Act and made the SB 1119 Page 10 Deputy Secretary of the then Division of Tourism, within the Trade and Commerce Agency, the executive director and secretary of the Commission. j) 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. aa) 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. REGISTERED SUPPORT / OPPOSITION : Support Avis Enterprise Rent-A-Car Hertz Opposition None on file Analysis Prepared by : Dana Mitchell / A.,E.,S.,T. & I.M. / (916) 319-3450