Attorney General Dan Sullivan is promising to “vigorously defend” Alaska’s cruise ship passenger head tax being challenged by the cruise ship industry.
In a lawsuit filed in federal district court in Anchorage, the Alaska Cruise Association, a group made up of nine cruise ship companies operating in Alaska, said the state’s voter-approved $50 head tax “blatantly violates” federal constitutional and statutory rules barring states from charging a vessel or its passengers fees that go beyond specific services provided.
Juneau attorney Joe Geldhof, one of the original backers of the initiative, called the lawsuit a political effort to convince the Legislature to overturn the head tax.
“It’s designed to create fear and hysteria, designed to motivate them to do what somebody in Miami wants them to do that’s not in the best interest of Alaskans,” he said.
Both Carnival Corp. and Royal Caribbean Cruises Ltd., the state’s largest cruise operators, are headquartered in Miami.
The lawsuit challenges only $46 of the tax, the portion used to fund infrastructure improvements. The remaining $4 supports the Ocean Ranger program that monitors pollution in Alaska waters. The industry has made the same arguments about local taxes in Juneau and Ketchikan, but has not included the municipal taxes in the court challenge.
The head tax only applies to large cruise ships, which is defined as those with 250 or more berths.
The head tax collections “bear no reasonable relationship to the actual costs incurred by municipalities and other Alaska governmental entities to service Large Cruise Ships,” according to lead attorney David Oesting of Anchorage, representing the cruise association.
Attorney General Sullivan disputed that claim, and said the challenge to the head tax was not a surprise.
“The cruise ship industry has been threatening to sue the state ever since Alaska citizens voted to require passengers to pay their fair share of the costs of services and facilities provided to host them,” he said.
The tax was part of an initiative measure passed by 52 percent of voters in 2006. The lawsuit noted that voters “narrowly passed” the measure.
The lawsuit also claims that the head tax unfairly – and illegally – targets out-of-state companies.
The lawsuit quoted an unnamed founder of the group that sponsored the initiative as saying after it passed “even for a cynical political hack like me it’s a good day when the citizens get to win one against a multi-billion dollar business in British Columbia and Outside.”
That unnamed founder was Geldhof, who went on to say “for the average person sitting in a bar, it takes five minutes to figure out this is a tax on the guy from Ohio.”
Geldhof questioned why it was the cruise association, which he called “basically a front group for the Miami cruise lines,” who sued, when the tax was passed on and paid for by the passengers, whether they are from Anchorage or Ohio.
Juneau mayor Bruce Botelho, a former Alaska attorney general, declined to speculate on the outcome of the lawsuit, but said “it does raise some serious and substantial questions.”
He said Juneau’s own $5 cruise ship passenger tax is unlikely to face the same concerns.
“As a city we have been very clear about the fact that the funds that are collected must be spent on projects that are waterfront related and specifically related to the cruise ship traffic into Juneau,” he said.
Geldhof acknowledged that the statewide tax has not always been spent on projects with adequate ties to the cruise business.
The lawsuit cites $800,000 in improvements to the Alaska Zoo in Anchorage, and $430,000 for construction of a railroad station as among inappropriate projects.
Some of the responsibility for that, he said, also is the fault of the cruise industry.
While citizen advocates such as Chip Thoma of Responsible Cruising for Alaska were cautioning the Legislature to only spend head tax money on cruise-ship linked projects, the industry’s lobbyists were “sitting on their hands” while legislators grabbed head tax money for local pet projects.
“If they had any guts, they would have sued the Legislature,” Geldhof said.
The lawsuit names Department of Revenue Commissioner Pat Galvin, and seeks to stop him from collecting the head tax.
The lawsuit does not seek either a temporary restraining order or an emergency injunction to stop collection of the tax.
Geldhof said despite the possibly misspent money, it’s unlikely a judge would invalidate the entire tax on that basis.