Alaska governor signs bill lowering cruise ship head tax to help settle industry lawsuit

By Becky Bohrer, AP
Thursday, June 24, 2010

Alaska gov signs bill cutting cruise ship head tax

JUNEAU, Alaska — With a hulking ship in the background, Alaska Gov. Sean Parnell signed legislation lowering the state’s tax on cruise passengers in a move aimed at bringing more ships back to Alaska and settling an industry lawsuit over the fee.

The Alaska Cruise Association has blamed the $46 head tax and the state regulatory climate, at least partially, for the loss of three ships — and an estimated 140,000 passengers — this season, though critics questioned how large a role it played, given the global economic woes and other factors, like changing travel trends.

The loss of travelers is expected to compound the financial hit taken last year by many small tourist-related businesses, like those along Juneau’s Franklin Street row, amid the slumping national economy.

“It’s a tough and challenging time,” said Tanja Cadigan, a co-owner of Caribou Crossings.

Parnell signed the bill Thursday outside Cadigan’s art and jewelry store as a smattering of tourists, who had unwittingly stumbled upon the photo op, paused on the fringes — in their rain gear amid the gloom and fog — to watch.

During the legislative session, Cadigan made emotional pleas for a rollback, saying she considered a tax cut crucial to her livelihood. Business was down 15 percent last year, she said, and down another 10 percent early in the summer season upon which her livelihood relies.

Questions have been raised about whether $46 tax on a cruise that can cost $1,000 or more would really give tourists pause.

Wayne Cory, who recently disembarked from a cruise ship in Juneau with his wife, said he didn’t know there was a state head tax but that he couldn’t imagine it would change their decision to take a cruise.

“But I’m always in favor of less taxes,” said the Las Vegas-area resident.

Nevertheless, Cadigan hugged Parnell on Thursday, even though immediate help wasn’t anticipated.

Tourism and industry officials called the reduction an important first step, and John Binkley, president of the Alaska Cruise Association, cautioned against expecting too much, too fast.

Cruise lines have already made their plans for next year. And while there are some bright spots — three lines have announced plans to bring in new ships — the lineup for 2012 won’t be finalized for months.

Binkley said the state will not only have to build back what it lost, but it must also compete with destinations that benefited from ships Alaska lost. A multimillion-dollar ad campaign to promote the industry, a cause for which the Legislature gave extra money, is seen as a key part of that endeavor.

With Parnell’s signature, the head tax will drop from $46 to $34.50, with deeper offsets for ships stopping in at least one of two popular ports, Juneau and Ketchikan. Voters had approved the tax in 2006, with supporters seeing it as a way to help cover the cost of infrastructure needed for large ships coming to port.

But the cruise association argued the tax is onerous and unconstitutional, and sued the state. The legislation signed Thursday addresses how infrastructure money is divvied among ports of call, winning over some early critics who didn’t want infrastructure to suffer.

It also calls for the cruise association to drop the suit.

The latter was a term agreed upon by the state and industry contingent upon the rollback becoming law. Another term of the agreement was for the state and each of the association’s nine member lines to work toward boosting deployments.

Parnell said he has made clear to executives that he expects more ships, adding that he sees the new deployment announcements as signs of a “tremendous shift in the investment climate.”

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