Cruise ship tax bill could cut $10 million from state revenue

Critics of legislation say it violates the spirit of the measure

Posted: Thursday, April 26, 2007

A bill crafted to credit cruise ship passengers for local head taxes could subtract at least $10 million in rebates from an anticipated $46 million collected from Measure 2, which Alaska voters passed in August 2006.

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The legislation introduced last month by Rep. Jay Ramras, R-Fairbanks, proposes a state credit for taxes levied by towns such as Juneau, Ketchikan and other communities that might choose to implement their own passenger fees to help pay for dock and harbor improvements.

Juneau and Ketchikan levy $8 and $7 in taxes, respectively. If the bill, House Bill 222, becomes law, passengers aboard ships that stop in both these ports would not pay $15 in addition to the $50 voter-approved head tax.

Critics of the bill worry it violates the spirit of the initiative and gives money back to the cruise ship industry. Proponents say implementation of the passenger fee approved by voter initiative is not only impractical, but unconstitutional.

How the $50 head tax is to be spent

under current rules

• $46 placed in a state fund to be disseminated by the Legislature.

• The remaining $4 pays for the ocean ranger program.

• The first five ports of call could receive either a $5 passenger tax or choose to collect their own passenger fees.

• Twenty-five percent of the money would be set aside in a "regional cruise ship impact fund" to be appropriated to communities without ports, but are affected by passenger traffic.

• The remainder could be used for improvements to state harbors and facilities and "other services to properly provide for vessel or water craft visits."

Juneau Mayor Bruce Botelho said the money collected in a regional cruise ship impact fund would be difficult for the Legislature to appropriate because federal law stipulates that taxes collected on vessels be used directly for services for those vessels.

"I suggest that few expenditures could meet the federal test," the former Alaska attorney general said.

Some communities, including landlocked Fairbanks, could claim eligibility, said John Shively of Holland America Line.

"I think there is confusion about what the money can be used for," he said.

Kodiak Republican Rep. Gabrielle LeDoux said there is no reason to believe voters did not understand the initiative.

"This (bill) doesn't go along with the will of the people as reflected in the initiative. It didn't say that the cruise ships were going to get credit for local taxes," she said.

LeDoux is a member of the House Community and Regional Affairs Committee, which is slated to consider the legislation. No date for discussion has yet been set.

"If this bill were to be put into effect, (cruise ship companies') taxes would be reduced," she said. It's up to the courts to determine whether the measure is constitutional, she said.

"You could change things so that the money goes only to the port cities, but it wouldn't be a credit," she said.

Botelho acknowledged the bill will reduce the total amount of passenger tax proceeds received by the state. He calculated an annual reduction at about $10 million.

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Chip Thoma, a cruise ship industry watchdog, said the amount would be closer to $15 million, based on an estimated 1 million visitors in 2007.

"This reduction, however, should not raise major policy objections because of the severe legal restrictions on the ways that these tax proceeds may be spent," Botelho said.

He also said the bill will make it easier for Juneau to raise its tax in the future. Under the measure, up to $10 in local head taxes would be eligible for a state credit.

"It makes it less contentious," Botelho said. In the past there have been significant battles to get cruise lines to pay taxes for local infrastructure improvements, he said.

"It is much less likely that increases in our passenger fees would raise a controversy because the impact on them is a neutral impact," he said.

Lawmakers are not allowed to repeal voter initiatives for two years, but they may amend them.

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