Paying the price, reaping the rewards

Cruise tax will bring more visitor money, but only if they come

Posted: Friday, August 18, 2006

Tourism officials know travelers understand the value of an Alaska cruise, but a new $50 tax on the trip may make some tourists more reluctant to travel to the Last Frontier, they say.

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Ballot Measure 2, to go before voters in the Tuesday primary election, imposes a $50 tax per cruise ship passenger, plus a 33 percent tax on gambling in state waters and some state corporate income taxes.

Supporters of the initiative say that's money that can be used to soften the impact of cruise travelers using city and state services from Ketchikan to Denali National Park.

"I think there's needs all over coastal Alaska," said Juneau attorney Joe Geldhof, a sponsor of the initiative.

Initiative backers say the cruise ship industry pays a fraction of state taxes levied on other industries in Alaska. For several years, citizen groups and lawmakers have tried to make companies pay more to fund civic projects, while cruise lines and some local business owners say the industry is taxed enough.

Revenue from the head tax would only be available if tourists continue to come to Alaska and spend money at local shops and on shore excursions, as an increase in the price may eliminate both, opponents argue.

The proposed taxes are not the only financial threat to the industry, said John Shively, vice president of government affairs for cruise liner Holland America. The measure also calls for new regulations on wastewater disposal and allows the filing of civil lawsuits concerning environ- mental violations. Costs incurred from those changes could be more than the taxes and also will be passed on to the customer as they come along, Shively said.

"We haven't really digested this piece by piece, because you can't," he said. "You have to look at it as a whole package."

People disagree over how much taxes the cruise industry already pays in Alaska.

The industry says in its campaign ads against the measure that it pays more than $40 million in taxes each year while in Alaska. Shively said the industry is using a number from the McDowell Group, a Juneau research firm.

Supporters of the ballot initiative believe that number is inaccurate.

The Alaska Department of Revenue shows state tax returns from members of the Northwest Cruiseship Association paid a total of $273,106 in 2003 and 2004. The association represents the major cruise lines, such as Carnival Cruise Lines, Celebrity Cruises, Holland America and Princess Cruises.

The industry and other opponents, including some local businesses, have been repeating the message this summer the initiative is bad for the economy.

The alternative to paying for infrastructure and other state services could be worse, said Rep. Carl Gatto, R-Palmer, who supports the measure. For instance, the state could levy a sales or income tax, as a cruise line official suggested last year in legislative committee testimony. That would prevent the possibility of driving away tourists with a passenger tax, the official said.

"They will do anything to avoid paying taxes," Geldhof said.

With the industry shipping nearly 1 million tourists to Alaska each summer, the state stands to collect about $50 million from the head tax, roughly $10 million from gambling and about $15 million from income taxes, according to Geldhof.

Widening sidewalks so people aren't walking in the streets, installing public restrooms, improving docks and providing security personnel are some of the projects cities want to fund with fees from the industry.

The industry also pays taxes at ports of call. Juneau and Ketchikan have local tax systems that amount to about $7 per passenger, with the fees going toward capital projects, services and improvements that support tourists.

Absent is a corporate income tax, which the industry has avoided paying in Alaska but would have to start remitting if the measure passes, Geldhof said.

Juneau has plans to redesign the waterfront property of its downtown harbor so tourists and locals can avoid vehicle traffic, see more scenery, have wider spaces to walk and more opportunities to shop.

The city also is considering lengthening two city cruise ship docks to make room for larger ships.

Funds for these projects are expected to come from local taxes levied on the ships, said city port director John Stone.

"We've always been good at finding ways to fund projects and improvements," Stone said.

With local arrangements in Juneau and Ketchikan, and fees charged by private dock owners in Juneau, Skagway and elsewhere in coastal Alaska, Shively said the supporters of Measure 2 are not clear on where the new revenue will go.

"What happens if they don't need the money?" he said.

The state needs the cruise ship industry to pay its share of taxes, similar to ones paid by the petroleum, mining and seafood industry, to diversify its revenue sources, said Rep. Paul Seaton, R-Homer.

About 90 percent of the state's money comes from the oil industry, according to the Revenue Department.

Juneau and Ketchikan can chose to keep their current tax systems, or participate in receiving some of the revenue the state collects, if the measure passes, Geldhof said.

• Andrew Petty can be reached at

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