After the City and Borough of Juneau was served with a lawsuit by the cruise industry in April, it seemed both sides would reach an amicable agreement. After all, the industry was merely trying to achieve certainty in how marine passenger fees are spent and only resorted to federal court after its pleas to resolve the issue were largely ignored by the city.
City Manager Rorie Watt promised to “keep the lines of communication open” and appeared to be open to negotiation. Since then, however, Watt has been openly dismissive of industry concerns that unbridled taxes make the city a less competitive cruise destination. The CBJ Law Department has taken a series of actions signaling unwillingness to compromise and discouraging efforts at reaching a settlement. This is a mistake.
For readers who haven’t followed the issue, the cruise lines contend CBJ is spending fees collected from its passengers on projects and services unrelated to any direct benefit to passengers and their ship — a violation of state and federal law and the U.S. Constitution.
Their lawsuit asserts the city has collected and misspent over $41 million in fees since 2001, including $22 million on general governmental operations and another $2 million on city bus service. Further, CBJ has allocated $10 million to build a man-made island, elevated walkways, a city park and infrastructure to support a whale sculpture over a mile from the cruise ship docks.
City officials point to a recently completed state audit as proof that passenger fee proceeds are being spent correctly. However, the audit doesn’t mention or examine the use of fees that are the subject of this lawsuit.
While it is puzzling the city had not secured an independent legal opinion before this, the Assembly took the correct action in initially authorizing the expenditure of up to $50,000 for this purpose.
Then things starting going awry. The CBJ Law Department hired a law firm to represent them and invited former mayor Bruce Botelho to become part of the defense team. This represents a huge conflict as Botelho in his previous position as mayor was arguably the prime promoter of the current policy that led to the lawsuit.
While Botelho’s knowledge of the history may be useful, it’s difficult to see how the city will receive independent legal advice when one of the defense team members will be naturally predisposed to staunchly defend the city’s past policy, rather than negotiate a settlement.
Next, in a highly questionable move, the city decided it could pay for legal defense costs with marine passenger fees — suggesting if the city loses the lawsuit, cruise passengers will be deprived of the use of future parks and walkways “created” for them. Therefore, the cost of defending this lawsuit “benefits” them. This convoluted reasoning sets up a situation where the city’s legal team has no incentive to settle and feel they can litigate this to the Supreme Court, if necessary, since it isn’t their money they are spending.
Next, in a procedural ploy that will only delay resolution of this matter, the city filed a motion to dismiss the lawsuit claiming federal courts lacked jurisdiction and the matter should be adjudicated in state court. This seems pointless since, regardless of the outcome, the decision will surely be appealed and eventually end up back in federal court. However, in order to accomplish this, the city was forced to argue in their motion that marine passenger fees are not actually “fees” but a “tax” collected “for the general benefit of the community.” The argument undercuts the city’s own lawsuit defense and bolsters the industry’s contention the fees are not specifically benefitting cruise passengers and their ship as legally required.
This kind of legal mumbo-jumbo and maneuvering is hard to understand. The city could fight this for years and, at best, in the unlikely event they win every argument, they will have only preserved the status quo. Is that worth the risk of losing the use of all passenger fees?
Legal arguments aside, there’s so much more at stake here. Disputes between business partners that end up in court rarely result in one side or the other really winning. In the real world, it usually means the business and relationship are damaged beyond repair and any legal victories seem hollow in the bloody aftermath. Gearing up for a long, expensive legal battle with one of our largest and most important community economic partners is short-sighted.
Everyone’s interests are best served by an expeditious and mutually agreeable out-of-court solution to this dispute. A similar lawsuit between the state of Alaska and the cruise industry was wisely settled out of court in 2010. It is perplexing why our city leaders cannot see the wisdom in doing likewise.
• Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.
