BILL ANALYSIS �
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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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Page 2
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. P�rez, 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