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The Honolulu Advertiser
Posted on: Sunday, May 6, 2007

Alaska cruise ships trigger new taxes

By Anne Sutton
Associated Press

Cruise ship passengers help boost the Alaska economy, but the accompanying congestion tests the patience of residents.

AP LIBRARY PHOTO | May 20, 2003

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JUNEAU, Alaska Juneau's downtown dock is deserted on a recent sunny spring day but for the noisy ravens perched along the railing and a couple teenage boys on skateboards launching off empty park benches.

This is the calm before the storm.

Starting today, thousands of cruise ship passengers, the first of a million expected in the state this season, will be milling about this wooden decking.

Alaska is a major destination for cruise ship passengers, drawing about 8 percent of the market worldwide.

Their presence is an economic boon to the state, with shoreside spending estimated at about $650 million. But many residents also consider them a bane as disembarking hordes test the patience and infrastructure of small port communities.

Last August, Alaskans' ambivalence toward the great white ships came to a head as voters snubbed the industry's expensive ad campaign and narrowly approved an initiative to impose new taxes and environmental controls on cruise ships.

The new law takes a share of the ships' gambling proceeds, levies a state income tax on the cruise lines and a head tax on passengers, requires disclosure of on-board commissions or deals struck with local companies to offer services to the passengers and funds a program to put state environmental officers on board the ships to monitor their pollution controls while in Alaska waters.

"Clearly it was a wake-up call to the people who run the industry that we need to have better community relations," said John Shively, vice president of government and community relations for Holland America Line Inc.

Some question the cruise lines' sincerity, however, as lawmakers at the state Capitol are now mulling over industry-backed bills to water down several initiative provisions.

While lawmakers cannot repeal a citizens' initiative for two years, they can amend it as long as they remain true to the voters' intent.

The changes would correct flaws in the new law, proponents argued. Others said they would gut it instead.

"I definitely think there has been a full court press (against the initiative)," said one of three authors of the initiative, Gershon Cohen of Haines. "The cruise ship companies say they are trying to do things differently, doing outreach with communities. But look what they're doing. They're trying to push bills to kill the initiative."

The most high-profile measure would change the new environmental monitoring program.

The initiative placed a $50 head tax on each cruise ship passenger of which $4 was earmarked to raise about $4 million a year to have marine engineers called ocean rangers ride the ships to make sure their pollution controls are working properly.

But state Rep. Kyle Johansen, R-Ketchikan, proposed a change that would have rangers come on board only when the ships are in port, at a cost of $800,000 a year.

He questioned whether voters really understood the program.

"I think the initiative was written vaguely and very poorly. Somebody has to decide what the program is going to be for practical implementation," Johansen said.

Cruise ship companies which pour thousands of dollars into local legislative campaigns said the ocean ranger program is unnecessary. They point out they have spent millions of dollars on state-of-the-art technology to clean up their discharges, which are already monitored by federal and state agencies.

But others are loath to forget the numerous cruise ship pollution violations and some high-profile felony convictions, the biggest being in 1999, when Royal Caribbean Cruises Ltd. pleaded guilty to 21 felony counts of dumping oil and hazardous chemicals in U.S. waters and paid $18 million in fines.

The backlash in Alaska prompted the Legislature to pass stricter pollution laws and the companies to install the new equipment.

State Rep. Carl Gatto, R-Palmer, a long-time proponent of a cruise ship head tax, said the ocean-ranger money should be spent as voters intended.

"They (cruise ship companies) say they have cleaned up their act, and I am so grateful that they have, but in the words of a great orator, 'Trust but verify,' " Gatto said.

The most recent version of the bill would allow monitors to ride the ships at the discretion of the commissioner of the Alaska Department of Environmental Conservation, a change that still rankles the initiative sponsors.

Other bills also under consideration would soften a requirement that ships disclose the commissions they make for on-board promotions, adopt less stringent pollution standards for certain smaller cruise ships and include existing head taxes in Juneau and Ketchikan under the umbrella of the $50 state head tax.

Rep. Jay Ramras, R-Fairbanks, said the changes remain true to the spirit of the voters' intent.

They keep the head tax, insure cleaner water and give passengers information on the ships' commissions, he said. "I'm very satisfied with our collaborative process."

But Gatto described the measures as the industry's effort to "work the system" and minimize the effects of the initiative.

"In other words, manage your damages as best you can," said Gatto who predicts the cruise lines' legislative efforts are only a prelude to a lawsuit over how the head tax money is spent.

Industry officials won't say whether they plan to file such a lawsuit but they do say federal law places strict restrictions on how the money can be spent.

They prefer to talk instead about having formed a new nonprofit group, the Alaska Cruise Association, that is aimed at improving relations with Alaskans.

The cruise lines have hired John Binkley of Fairbanks, a former state senator and gubernatorial candidate, to head the fledgling organization and work as a conduit between the companies and local communities.

The state meanwhile is moving forward with developing regulations to implement the tax provisions of the initiative.

Indeed, the first passengers to alight in Juneau will already be $50 lighter, having paid the new head tax when they bought their cruise.