Battle over cruise tax goes to voters

Posted: Tuesday, August 01, 2006

Alaskans will decide at the polls Aug. 22 whether to impose new taxes on the cruise ship industry, with proceeds going to enhance services and infrastructure to accommodate the growing industry.

Ballot Measure 2 would impose a head tax on passengers on large cruise ships, with those monies to be appropriated for state-owned port and harbor facilities and other services to enhance the safety and efficiency of such travel.

The measure also would tax gaming activities aboard the vessels, require discharge permits and documentation for the release of all wastewater from large commercial passenger vessels and require licensed marine engineers as observers on board.

To Gershon Cohen of Haines, one of the architects of the cruise ship initiative, there are several issues at stake. They include the environmental safety of Alaska’s waters, the state’s right to tax on gaming profits, and the need for disclosure when businesses promoted aboard a cruise ship have paid for that promotion.

“They would have to pay corporate income taxes on marine revenue and taxes on their gambling proceeds. All other corporations pay tax on all their profits,” he said.

Many in the business community argue that the cruise industry already contributes millions of dollars to Alaska’s economy, and new taxes would have dire consequences.

To John Shively, president of the Resource Development Council, Ballot Measure 2 is an anathema, one causing widespread concern among businesses that feed on the tourism industry, as well as other businesses. Shively, who is vice president of government and community affairs for the cruise line Holland America Line, sees the initiative as a punishment intended for the cruise industry, a punishment that will be felt by hundreds of Alaska businesses.

“In many ways, the cruise industry is the feedstock for much of what goes on in tourism in Alaska,” Shively wrote in the July issue of RDC’s Resource Review newsletter. “Cruise ships bring about half of the visitors to Alaska each year. In doing so, the industry helps feed hundreds of Alaska businesses, large and small.”

Cohen, a leader in state and national efforts to address pollution from cruise ships, said he simply wants to see that cruise ship companies abide by the same rules as other industries. Cohen holds graduate-level degrees in molecular biology and environmental policy. He is also a fellow of the Conservation Science Institute, a think tank and research organization whose goal is resolving ecological and environmental dilemmas.

“This is the first time citizens of an area have come together and said, ‘You have to play by the rules we have established for everyone,’” Cohen said of the initiative.

Cohen argues that cruise ships are the only major polluters of Alaska waters not required to have a discharge permit or meet all of Alaska’s water quality standards. He also argues that every gaming operator in Alaska, except the cruise industry, pays 33 percent of its profits to charity and taxes. Cruise lines were exempted by the Alaska Legislature in 1998 from paying corporate income taxes on marine revenue, he said. Under this initiative, they will again pay at the same rate as all other corporations, he said.

The RDC, a nonprofit, membership-funded organization made up of businesses and individuals from all resource sectors, sees the ballot measure strictly as a penalty on the cruise business.

“Nine pages of onerous provisions that penalize small Alaska businesses,” was the way Carl Portman, RDC deputy director, summed up the ballot measure.

Portman said the so-called environmental portion of the initiative offers no net environmental gain in terms of laws and regulations that apply to the industry. “Instead it creates a new layer of bureaucracy. The so-called Ocean Rangers will ride on cruise ships during the summer season and report exactly the same information the cruise lines are already required to report to the state, the Coast Guard and to federal agencies,” he said.

According to Portman, the Coast Guard and the state have commended the industry for its strong environmental record, “self-adhering to higher standards than what is currently required by law. In fact, the industry’s Alaska environmental model is now being used in Washington, California and other places,” he said.

Carol Frazier of Aspen Hotels, a member of the RDC executive committee, wrote in the organization’s July newsletter that the initiative would not only directly hurt tourism businesses, but also hurt the service and infrastructure businesses that support the industry. “With more than 26,000 local jobs provided by tourism, contributing tens of millions of dollars to Alaska’s economy, there is a lot at stake,” she said.

“The Denali Borough was formed around the property tax base from the hotels and other tourist facilities that serve visitors to Denali National Park,” Shively noted in the newsletter. Visitors also contribute millions of dollars in sales tax revenues, he said.

“Another way the cruise industry helps feed the Alaska economy is through our aggressive marketing program,” he said. “As an industry, it spends about $70 million a year to encourage people to visit Alaska.”

Cohen doesn’t argue what the cruise industry contributes financially to the economy, but he does argue that the head tax would not be a deal breaker for cruise ship passengers. “The $50 head tax is 1 to 1.5 percent of what a person is spending on a typical week’s cruise trip to Alaska,” he said.

Figuring in about $3,000 for the cruise, including alcoholic beverages, gambling, shopping and tours, “and you were really looking forward to this, would you not do it because it was going to cost $50 more?” he asked.

The bottom line for Cohen, however, is the recent history of enforcement actions taken against cruise ships for polluting oceans. The most recent case in Alaska, in 2004, involved Holland America Line pleading guilty to discharging 25,000 gallons of sewage into Juneau Harbor. The company was ordered to pay a $200,000 fine, plus $500,000 in restitution, and spend $1.3 million to improve the ship’s handling of wastes.

Other cruise lines operating in Alaska, including Royal Caribbean and Norwegian Cruise Lines, have also paid millions of dollars in fines for waste disposal practices during the past decade.

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