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Web posted Friday, April 9, 2010

Lawmakers debate whether to slash cruise ship head tax

By Steve Quinn
For the Journal


A small aircraft taxis to port as two cruise ships sit at the docks in Juneau in this 2009 file photo. Lawmakers are debating whether to cut the cruise ship head tax, as tourism industry leaders say the higher rate is hurting business. File Photo/Melissa Campbell/AJOC

JUNEAU — It's always about money in the final weeks of the Legislative session, but it's not always about oil money.

In this case, the theme playing out in the waning days is the reprised debate over the cruise ship passenger head tax.

Depending on who is talking, the $50 tax that each passenger pays as part of voter approved ballot initiative should either be reduced, eliminated or left alone.

Further, some are willing to provide additional tax credits for marketing and local docking fees. Others aren't so sure.

Of the $50, tax opponents are looking to lower the $46 used for capital projects, primarily but not exclusively in port communities.

The other $4 is for environmental oversight and is not part of the debate.

There seems to be no consensus building in the finance committee rooms sitting on opposite ends of the fifth floor — known as the money floor.

The disparity of opinions grows with some calling for a change in when a tax cut would take effect or eliminating proposed tax credits that have no link to the 2006 initiative.

And the disagreement doesn't fall along party lines, either.

Rep. Bill Thomas, R-Haines, made his interpretation of these bills abundantly clear to the administration during a finance committee hearing on a proposal by Gov. Sean Parnell.

"As I understand it, the bill by the governor is to overturn the efforts by the people," Thomas said, talking to Curtis Thayer, the states deputy commissioner for the Alaska Department of Commerce.

"What this does. . .." Thayer said.

"Yes, or no?" Thomas said. "Yes, or no?

"I know what you're trying to do," he continued. "It's reducing the head tax amount voted on by the people. I know it's been amended, but this is the meat of the whole initiative."

Meanwhile, fellow Republican Kyle Johansen, the House Majority Leader from Southeast port community of Ketchikan, said he would like the entire tax repealed.

"I can't tell you whether the tax makes a difference in whether people come or not," Johansen said. "But regardless of those arguments, there is no debate that it's money out of the pockets of people who spend money on tours and in stores helping our economy. It's better in the hands of the people rather than the government."

This has been an on-going debate since the initiative passed in 2006 and the tax was assessed in 2007.

But the issue started to pick up some traction in the Capitol last month when Parnell proposed reducing the tax to $34.50 after a meeting in Miami with industry executives.

It gained momentum last week when business leaders in the tourism industry descended on the Capitol looking to push their tax agenda.

Meanwhile a two-man team who drafted the approved initiative roamed the halls making their case as well.

The debate played out in separate finance committee hearings in the House and Senate.

The issue became so divisive that lawmakers seemed to forget about the oil and gas tax for several days.

The head tax also landed the state in court.

The Alaska Cruise Association has a lawsuit pending in the U.S. District Court in Anchorage, claiming the head tax is unconstitutional.

The group, led by former Sen. John Binkley, asserts the Legislature's appropriation of the head-tax money is improper because its been used for communities no where near a port of call.

Projects include $800,000 for the Alaska Zoo in Anchorage or $430,000 for a railroad station in Wasilla.

Meanwhile, port projects in Ketchikan ($1 million for port berth replacement); Juneau ($1.2 million for emergency relief center); and Sitka ($2 million for passenger vessel lighting facility) received vetoes by former Gov. Sarah Palin.

Losing money for the Juneau project in 2008 had one lawmaker recall a cruise ship grounding in 2007 that forced nearly 300 passengers to evacuate.

"What do we do if we have a catastrophe," said Sen. Bert Stedman, a Sitka Republican who serves as the Senate Finance co-chairman. "How do you justify that veto? We need to have a facility to handle that."

The association, which represents nine cruise lines, agreed to drop its suit if the state lowered the head tax by $11.50.

Bringing the tax down to the new figure helps delete the portion that cannot be spent in Alaska's port towns and goes to other state infrastructure projects.

The group and the state are drafting an agreement to drop the suit should legislation to lower the tax pass, Binkley said.

"There is competition out there," Binkley said before the hearings. "There are dozens of other countries trying to get cruise ships to their destinations. When we are losing three ships, they are going to a competing port; they aren't sitting at a dock. "

Backers of change are pointing to a newly minted study by the McDowell Group study, citing a decline of about 142,000 passengers this year and the prospects of losing 5,000 jobs statewide.

Supporters from around the state, mostly small businesses in port cities, weighed in primarily to speak on behalf of the tax cut.

"My business has been directly impacted by this head tax; we were off by 20 percent last year," said Mike Stedman, vice president of flight operations for Juneau-based tour company Wings Airways. "We are laying up 20 percent of our aircraft fleet this year. As a result we will have less jobs. In my mind this is a jobs bill."

Chip Thoma, a proponent of the 2006 ballot initiative, said the money sent to port communities for various projects illustrates the tax is working as planned.

But Thoma told lawmakers he was willing to offer a compromise, something that reflects a projected passenger decrease.

"We are projected to go down 15 percent," Thoma said. "That would be a valid decrease. It would bring it down to $39. We could live with that."