Alaska Cruise Ship Initiative Slated for August Primary Ballot
By Dick Kauffman
July 12, 2006
If approved by the voters, this citizen's initiative would tax the cruise ship industry and enforce stricter environmental standards. The initiative would institute a $50 head tax, a 33 percent tax on onboard gambling revenue, and would subject the industry to Alaska's corporate income tax. The initiative also increases fines for illegally dumping waste from $500 to $5,000 and would requires cruise ships to hire marine engineers to monitor wastewater treatment and pollution control equipment.
Ballot Measure 2, more commonly referred to as the "cruise ship tax", is sponsored by Juneau-based Responsible Cruising in Alaska (RCA); the Campaign to Safeguard America's Waters (C-SAW ) an Alaska-based project on the Earth Island Institute; Karen Jettmar of Equinox Wilderness Expedition; and Bluewater Network a national environmental organization based in San Francisco.
The sponsors of the "cruise ship tax" say, "The goal of the initiative is to level the economic and environmental playing fields between the cruise ships and other industrial discharges of polluted wastes into Alaska waters." Sponsors of the initiative say the cruise lines should follow Alaska's taxation and pollution rules like everyone else and the initiative protects Alaska's fisheries and helps pay for cruise ship impacts on Alaskan communities.
In a statement of support filed with the Alaska Division of Elections, Gershon Cohen and Joe Geldhof with Responsible Cruising in Alaska wrote, "The cruise lines are "selling" Alaska - while impacting our docks, roads, public facilities, wildlife, and the quality of our lives. This initiative will do nothing to turn visitors away; it will help keep our tourism industry sustainable while protecting the needs of all Alaskans."
Those opposing Ballot Measure 2 say Alaska's economy is under attack.
Mounting the fight to defeat Ballot 2 is a group called Alaskans Protecting Our Economy based in Anchorage. This coalition is made up of numerous Alaska businesses including the Alaska State Chamber of Commerce.
Members and visitors to the Greater Ketchikan Chamber of Commerce luncheon on June 21st had an opportunity to hear from those opposing Ballot Measure 2 and how it would impact Ketchikan's economy from guest speakers Dick Coose, businessman Robert Scherer, and Ketchikan City Mayor Bob Weinstein. All spoke about the cruise ship tax and why they oppose the "cruise ship tax" initiative.
Dick Coose speaking as a community representative on behalf of Alaskans Protecting our Economy spoke first. He said, "A citizen's initiative can do a lot of things. Sometimes they're very good, sometimes they can do a lot of harm." Coose said Ballot Measure 2 could do the citizens of Alaska a lot of harm.
Among many things that will impact Alaskans, Coose said the proposed cruise ship tax will force local businesses to disclose confidential information about their businesses, it would create new motives for lawyers to file predatory lawsuits, and the cruise ship tax will raise costs and discourage tourism to Alaska. He added there are nine pages of complex, confusing language and Ballot Measure 2, if passed, will also increase the amount of bureaucratic red tape.
Of Alaskans Protecting Our Economy, Coose said there are 1,200 individuals and businesses across the state that have signed on to defeat this "cruise ship tax". Of those signed up, Coose listed the State Chamber of Commerce and the Resource Development Council.
Alaskans Protecting Our Economy has conducted some research and reports that if this ballot measure passes "ten percent of our current tourism folks will stop coming" said Coose. He said to the chamber audience, "Relate that back to your business. It's going to be a huge impact on folks." From restaurants to gift shops to local sales tax, all would feel the impact said Coose.
Coose said, "The tourist industry in Alaska is the fourth largest industry. It provides over 26,000 statewide jobs." He said, "Here in Southeast Alaska we've lost a lot of people, a lot of jobs in the last decade. To lose what we rely upon now to keep us afloat would not be the thing we want to do."
According to Coose, Alaskans Protecting Our Economy also conducted a survey which reported that many people surveyed said they would not come to Alaska if they had to pay a $50 head tax. He noted that Ketchikan voters just passed a bond to build new docks so Ketchikan can accommodate tourism in a better way. "How does that affect how we pay for that dock?" asked Coose.
Coose said beyond the economic impacts, there are other good reasons for voting against the "cruise ship tax". He said the initiative, if approved, would appeal a number of environmental statutes which really don't give any environmental gain. Coose said the cruise ships are complying with the current laws and Alaska has the best laws in the nation. The state already requires a permit that the cruise ships have to comply with. "So why would we want to increase the bureaucracy?" Coose said one of the requirements would be the addition of an ocean ranger program. "An ocean ranger program puts a person that's state employed onboard every vessel to monitor what goes on," said Coose. He said this is a needless addition to the bureaucracy and creates more red tape.
Another provision of the initiative is the citizen's lawsuit provision. Coose said this sets up a system that allows for 50 percent of any fines collected as a result of litigation to be paid to the person with the 39-cent stamp who can bring on the lawsuit. Coose said if you don't like the way the industry is operating, you could shut the cruise industry down with a 39-cent stamp.
Coose stressed that no state agency is proposing the initiative. "It was proposed very simply by an outside bunch of people, mostly environmental groups." He said they got their signatures in Anchorage mostly. "It's not our measure."
Asking for help in defeating this initiative on August 22nd, Coose asked for a "No" vote. He noted the State Chamber has already taken a position against the initiative.
Robert Scherer, owner of the Great Alaska Lumberjack Show, spoke next. He told how the citizen's initiative to tax the cruise ship industry would affect his business. Scherer said he first became aware of the ballot measure last winter when it first came across his desk. "Like many of us, we're still so very busy that getting engaged early on is sometimes difficult. We wait and we start to hear the propaganda coming in from both sides, then we start to develop a stand, then we start to learn more," said Scherer.
After reading and rereading the ballot measure several times, Scherer said he started thinking about how this would impact his businesses. Scherer said he has been in Alaska eight years coming from an area very similar to Ketchikan in transition from a very robust logging community in northern Wisconsin which really didn't have a direction for the future. It then rolled into tourism and now is slowly getting logging and tourism and a few other related businesses he said.
Scherer said the one thing that separates Alaska from northern Wisconsin is that people here have a lot of interests and those interests become special interests. "As I read this ballot measure, it increasingly became more obvious to me that this measure has special interest behind it."
He said he believes that the special interest behind the "cruise ship tax" would just as soon over the course of time see tourism in Southeast Alaska, and probably on the road system, minimized to where there could possibly be no tourism.
Scherer said, "We're challenged by geographics..." He said, "Let's face it, Southeast Alaska really depends upon tourism and not necessarily huge growth in tourism but at least sustained growth - meaning there'd be growth of five or ten percent per year." This growth is important to Southeast he said. "I think we've seen that [importance] from the transition of the pulp mill to now where we have tourism replacing a lot of the general taxation funds through sales tax," said Scherer.
"What are they after in their initiative ballot measure and what is not already available in this area?" asked Scherer. "I realized that the State of Alaska isn't asking for there to be more regulation of the cruise ships. In fact the last seven years I've monitored what has gone on between the state and the cruise ships and realized that all the new ships are probably more well suited for reducing opacity on air omissions and also gray water than what I believe is a fact that ninety percent of coastal community in North America are able to produce." Scherer said the cruise ship industry accomplished this on their own with the State of Alaska.
"What is left in that area to need more bureaucracy and large government to oversee?" asked Scherer. "I don't see anything in the balance that the State of Alaska isn't dealing with."
Scherer said, "In addition, I look at what are the needs for the coastal communities to get more money from the cruise ships." He said, "In our own town and the city they've been so effective at working with the cruise ships that we were able to pass this bond initiative with guaranteed bonds to produce brand new renovations and lots of improvements to facilitate this industry. So where's the need there?"
Scherer said, "It starts to dawn on you after awhile that the people pushing this [cruise ship tax] are really after control of an industry that is self-regulating itself and doing a good job."
Another of Scherer's concerns questioned how this initiative helps the average Alaskan in south central or the interior not vested in tourism. He said, "The first fifty percent of this money goes back to the first five ports of call. In addition, twenty-five percent, which is $12.50, is proposed to go to Prince William Sound. That leaves the other twenty-five percent to go to the administration and bureaucracy. We have to create all this big government agency to do this. Is that enough money to cover it and will there be any money left over for the general fund?" Scherer said, "Constitutionally, there can't be any of this money put into the general fund. It can't go there so how is it going to help the average Alaskan?"
Scherer asked, "How is it being presented that this should pass? Is it a smoke and mirror campaign to get the average person to say yeah, fifty dollars from the cruise ship industry is a good idea for us as an Alaskan?" Scherer added, "The reality is, can it be transferred to them legally and is there any money left over currently in the equation? The answer is no."
"The average Alaskan isn't going to benefit. So who does it hurt?" asked Scherer. Answering his question Scherer said, "I think it hurts a huge component of the Alaska economic landscape - and that's tourism." He said, "We have a one billion dollar industry that is very sound, it's growing, it's creating jobs, it's creating trickle-down economy."
Scherer said ninety percent of his budgets from the Alaska Lumberjack Show and Experience Alaska Tours, which is George Inlet Lodge, are spent in Ketchikan. "That money that we are interacting with the cruise ships is spent right here in this economy."
"So what's at risk? That's what's at risk," said Scherer. "Our one million dollar industry that has the opportunity to operate in the Inside Passage and on the road system of Alaska is what's in jeopardy if ballot measures like this are able to pass with the general voters."
Scherer said, "We have to look at who's pushing it, who's going to benefit, will the average Alaskan benefit and who's it going to hurt." A town like Ketchikan would hurt greatly said Scherer because there's a threshold by the people coming to Alaska as far as their economics goes. "A million people a year choose to come to Alaska. Who are they? They're mostly common American people who have dreamt most of their life of coming to Alaska," said Scherer. "Every time there's a fifty dollar tax it goes right to the top. The cruise ships have to monitor a percentage gross profit. They have to be in business."
If this $50 tax pushes the cost of a visit to Alaska above the visitor's economic threshold, some cut back. If the visitors are forced to cut back, we don't have full ships said Scherer.
"Once we go past that threshold profits go down, you have inflation pushing against these common people, we will have a reduction. So our goal in our economic sector is to bargain with the cruise ships and keep this affordable for all these people," said Scherer.
"There are other parts of this [initiative] that are so egregious to me as businessmen and Americans that it's unpatriotic," said Scherer. After businesses have achieved partnerships with the cruise industry so both benefit, "along comes this measure that says they want to tell everyone that gets on a cruise ship the price that I charge the cruise ship and the price that they mark it up. That will create chaos within the industry," said Scherer. "It won't work, it's not free market."
"The independents who don't work with the cruise ships benefit from my relationship with the cruise ships," said Scherer. The reason, Scherer explained, is that the independents who haven't established a partnership can simply match his prices without going through all the risk management concerns or product control concerns and make thirty percent more profit.
Scherer said, "Forty percent of all passengers that disembark have not booked something onboard. That means that these ships with all the marketing they've done nationwide, [forty] percent of them are delivered to independents for them to capture without having to do all that marketing and able to have a capture increase far beyond what mine is with a thirty to forty percent higher return on their delivery." That's a huge benefit said Scherer.
"The talk about the independents needing for us to disclose our relationships [with the cruise industry] isn't justified," said Scherer.
"It's a bad deal. It's a bad deal for the economics of Southeast Alaska. Over time it's going to be bad for Alaskan tourism," said Scherer. "I think the motivation for this [initiative] are some components of Alaska don't want tourism and I think that's the big supporting factor of why they are behind this."
Ketchikan City Mayor Bob Weinstein spoke next on the initiative. "I'd like to tell you why that from a public policy point of view, from a community point of view, a government point of view and a business point of view, this is a bad thing for all of us," said Weinstein.
"Philosophically I'm opposed and I suspect all of you are opposed to unnecessary and exorbitant taxes," said Weinstein. "Imagine if you will, if the City Council proposed a $50 increase in property tax just because we felt like it what do you think you're reaction would be?"
Eliciting laughter, one chamber audience member said, "We'd impeach you!"
After a few amusing comments were exchanged, Weinstein returned to the topic of the initiative. He said taxing cruise ships and tighten regulations is an example of an initiative whose sole purpose is to punish one industry.
In addition, said Weinstein, some of the funds from the tax might go into communities for improvements, however that would be subject to legislative appropriations. "In essence, there is no guarantee that the funds would be spent on projects related to port usage, especially cruise ship passengers, or more importantly communities that are impacted by the cruise ship passengers such as Ketchikan," said Weinstein.
It is important to recognize that the state does not own or operate any ports in the state of Alaska said Weinstein. "It seems to me that if there is going to be some kind of marine passenger fee or head tax, then we should be the ones who control how it's being spent," he said. "That's exactly what has been happening here." Ketchikan has had a $6 per passenger fee, which was just recently increased to $7 by the City Council.
"We have a very cooperative relationship with the industry and because of that relationship, we're able to impose the proper level of taxation or fees to pay for projects directly related to passengers," said Weinstein. This is not just a head tax said Weinstein. There are nine pages to the initiative.
Weinstein said, "There is no upside at all in this for Ketchikan. There's a potential downside from a business point of view. Were the City to accept money from this, it would actually cost us because the maximum fare is $5 to each of the first five communities to which a ship visits. We're not always the first, though probably we're usually one of the first five." With current plans, Ketchikan will be collecting $7. Weinstein said, "The city port fund would lose $2 million a year if we would take advantage of this great proposal."
Regarding the cruise ship tax, "There's absolutely no benefit to the city taxpayers, to the residents, to the business people," said Weinstein. That's an important point that needs to be made he said. "We'll not get one dime from this." Money that the sponsors of the initiative claim might have come to Ketchikan will go to the state treasury said Weinstein.
The Greater Ketchikan Chamber of Commerce Board of Directors passed a resolution on May 4, 2006 opposing this ballot initiative. According to information provided by Blaine Ashcraft Business Manger for the Ketchikan Chamber of Commerce, the Chamber "joined in the growing list of other businesses and organizations that see this measure as impracticable and punitive to the industry."
If approved by the voters in August, the measure would go into effect within 90 days.
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