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  








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             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  








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             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  








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             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  








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            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  








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            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  








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            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  








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            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  








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               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  








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               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