The Alaska Senate voted to roll back much of the voter-adopted $46 cruise ship head tax Wednesday, handing the state’s important tourism industry a big victory and millions of dollars in tax reductions.
The Senate voted 17-3 to lower the tax, with Juneau Democrat Dennis Egan voting for the reduction.
Sen. Bert Stedman, R-Sitka, backed Gov. Sean Parnell’s deal with the cruise ship industry, saying the tax cut was needed to stop the loss of cruise ships from Alaska, which will hit his community particularly hard.
Sitka’s 215,000 annual visitor number will be cut in half this summer.
“It really gets your attention,” he said.
Stedman’s bill was written to implement an agreement reached by Parnell with representatives of Carnival Cruise Lines, Royal Caribbean Lines and others in which they would drop their lawsuit against the state in exchange for reducing the tax from $46 to about $19.50.
Chip Thoma, president of Responsible Cruising for Alaska, which sponsored the cruise ship initiative in 2006, said Wednesday the agreement the Legislature accepted “marks the selling out of Alaska cruise port communities by Governor Sean Parnell.”
The tax reductions would decimate the fund used to pay for port infrastructure, Thoma said.
“Parnell’s actions don’t help tourism, they cripple tourism in the long run,” he said.
Stedman’s proposal followed the governor’s in reducing the base tax rate to $34.50, and also reimbursed the lines for municipal head taxes paid when their ships stop in Ketchikan and Juneau, as most do.
Attorney General Dan Sullivan said the state had a strong case to defend the head tax, but Parnell said eliminating the risk of litigation would be good for the state.
The Senate Finance committee, co-chaired by Stedman, amended the bill Wednesday morning concerning how the remaining head tax money would be used.
Alaska Cruise Association President John Binkley said the changes in the head tax included in the bill met the terms the industry demanded in exchange for dropping the lawsuit agreed to by Parnell. The association brought the suit.
What the agreement doesn’t do is guarantee that more cruise ships will come to Alaska. Instead, the agreement requires only that they consider it.
Sen. Johnny Ellis, D-Anchorage, said the state should have demanded more.
“When you give something you should get something that is real, not just hope and speculation,” he said.
Sen. Bill Wielechowksi, D-Anchorage, agreed.
“This is not the kind of rock-solid agreement that our attorney general should have negotiated on behalf of Alaskans,” he said.
Wielechowski also said the industry presented no evidence the head tax was hurting its business here. In fact, he said, cruise ship visits to Alaska rose to record levels after the tax was passed in 2006, before declining this year.
“We all know what happened in 2009, we had the worst economic meltdown since the Great Depression,” he said.
Wielechowski called it “no surprise we saw tourism dip here in Alaska as well.”
For Juneau’s Egan, the vote was tough, he said.
Egan thinks at least some of the Alaska tourism industry’s difficulty is due to the head tax, though he doesn’t know how much. A reduction might help, he said.
“Being in business for a long, long time, I understand when businesses hurt,” he said.
Egan said he had the same concerns as Ellis and Wielechowski about the industry’s willingness to send more ships to Alaska.
“It’s a real concern to me,” he said. “I’ll be the first one if the numbers don’t change to demand we reinstitute the head tax to its full amount.”
Both Stedman and Parnell expected the cruise ship industry to make express commitments to bring vessels back to Alaska before the tax reduction passed.
Wednesday Stedman on Wednesday said the Legislature would still be hoping to see more ships.
“Clearly we’ll be watching the amount of sailings north into Alaskan waters,” he said.
The tax reduction still has to pass the House of Representatives.