BILL ANALYSIS �
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THIRD READING
Bill No: SB 1119
Author: Leno (D)
Amended: 4/2/14
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 4/28/14
AYES: Lieu, Wyland, Berryhill, Block, Corbett, Galgiani,
Hernandez, Hill, Padilla
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : California Travel and Tourism Commission
SOURCE : Enterprise Holdings, Inc. (Enterprise Rent-A-Car)
DIGEST : This bill 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 Commissions approved marketing
plan and all administrative costs. Limits the marketing plan
and administrative costs to $70 million per fiscal year.
ANALYSIS :
Existing law:
1. Establishes the California Tourism Marketing Act (Tourism
Act).
2. Makes various findings and declarations regarding the
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importance of California's tourism industry, need for
marketing of the industry, and importance in funding the
marketing of the industry, including:
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; and
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.
3. Defines the following terms:
A. "Assessed business" is a person required to pay an
assessment pursuant to the Tourism 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.
4. Requires the Governor to appoint a Tourism Selection
Committee (Committee) based upon recommendations from
established industry associations, 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
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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.
5. Requires the Office of Tourism, within the Governor's Office
of Business and Economic Development (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. Specifies that
the Commission is required annually to:
A. Provide to all assessed businesses a report on the
activities and budget of the Commission.
B. Prepare a written marketing plan and specifies that any
expenditures by the Commission shall be consistent with
the marketing plan.
6. 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.
7. 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.
8. 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
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referendum.
9. 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 requires 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 of no more
than $70 million per fiscal year.
Background
Visit California . The Tourism 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 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 Marketing Act.
The Tourism 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 industrywide 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 Fiscal Year 1998-1999
and between 1998 to 2002, the marketing budget was fully funded
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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 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) 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 approximately 7% (about $1.5
million) of the tourism revenue generated in the state and
contributed 76% (over $43 million) of the assessments to fund
the program.
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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 existing 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.
Comments
According to the author, this 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
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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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/13/14)
Enterprise Holdings, Inc. (Enterprise Rent-A-Car) (source)
Alamo
Avis Budget Group
Hertz Corporation
ARGUMENTS IN SUPPORT : Proponents write, "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."
MW:d 5/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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