Friday, April 15, 2016

Cruise Organization Sues Alaskan City

By Mark Edward Nero

The Cruise Lines International Association and its Alaska branch are suing the City of Juneau over the legality of taxes imposed on cruise passengers as a condition of their visit to Juneau and how the borough spends that money.

The legal challenge, which was filed April 12, is intended to resolve a longstanding disagreement between the cruise industry and the city regarding the interpretation of the US Constitution and federal restrictions on the use of passenger entry fee taxes.

At the crux of the case is millions of dollars in fees the city charged cruise passengers to help pay for the construction of a three acre, $10 million artificial island with a life-sized statue of a humpback whale.

Juneau collects $8 in fees from each cruise ship passenger, plus receives funds from a state charge of $5 per passenger. It adds up to millions of dollars for the city per year.

Cruise line passengers pay about 19 percent of all sales taxes generated in Juneau, according to the cruise association.

“The industry certainly does not have an issue with paying taxes or contributing to local services,” said John Binkley, president of CLIA Alaska. “However, the US Constitution is clear that per passenger entry fees are prohibited unless they meet a very narrow list of exceptions, none of which apply to this situation.”

CLIA Alaska says it has objected on numerous occasions to the artificial island project as well as other projects that “do not provide a direct benefit to the passengers paying for those projects and the vessel that transports them.”

If a community feels strongly about a particular project, sales taxes or other revenue sources are appropriate, CLIA said, but projects of general community benefit cannot be funded by one mode of transportation such as the per passenger entry fees.

Juneau has received more than $55 million in entry fee taxes in just the past four years. In addition to the artificial island project, the complaint lists a number of other expenditures over the years that do not meet the criteria mandated by law, including $22 million to fund Juneau general government operating expenses; $594,000 for the Juneau airport; and $447,000 for upgrades to a private dock that CLIA cruise vessels and passengers can’t use.

“Filing suit was a difficult decision for us,” Binkley said. “Juneau is a great port and a community of people who take excellent care of our guests. In turn, it’s important that we ensure that the fees our guests pay to visit Juneau are used in a responsible and legal way.”

A full version of the lawsuit can be seen at