There's a new suit in Alaska today, and it's not a parka. The nine cruise lines forming the Alaska Cruise Association filed suit in US District Court in Alaska seeking relief from the $46 head tax that the state imposed as part of the Citizens' Initiative in 2006.
While there's much more to the issue that's causing the ships to leave Alaska, this suit deals only with the one. In the last couple of days that led up to the actual filing, the Alaskan media has run several stories, and the quotes they choose to use tell a lot about how things have gotten this far.
The ACA suit has several points on which it says the $46 head tax is not legal. (Even though it is commonly referred to as a $50 head tax, by the way, the ACA is not disputing $4 of it which pays for the Ocean Ranger program to monitor cruise ship discharges.) First the suit says that the fee is essentially a fee for entering Alaska, something that is not allowed under federal law because it discriminates against interstate trade. The suit says the fee also raises much more money than it costs the state to provide services to cruise ships, and in setting it, it doesn't take into consideration any specific services to cruise ships. Another point of illegality, according to the suit, is that it is distributed to cities that aren't even on the ship's itinerary. And finally, it is being used to fund projects that have no direct benefit to the passengers who paid the fee.
The bottom line, in the cruise lines' view, is that it is illegal according to federal law to charge admission to the state, and any taxes charged are to go directly to costs incurred by the state to handle the cruise ships or to fund specific projects directly related to the cruise passengers, and they should not be excessive of those costs.
They also cite several precedents, and to the amateur, it would seem that the cruise lines have a good case. The state's lawyers, no doubt, have arguments to counter the cruise lines', but of course, they have yet to be heard from.
The proponents of the Citizens' Initiative and legislative leaders interviewed by the local media in Alaska have used phrases like "We welcome the suit" and "We've been waiting for this," and questioning why the cruise lines don't work with the legislature to resolve their issues.
That last point was answered by Carnival chairman Micky Arison several months ago, when during an earnings call, he said they have been unable to find any legislator who wants to sit down with them to seriously discuss the issues. It seems that Alaska's elected leaders and most of the citizens are simply dug in and don't want to work with the cruise lines.
As CND has reported before, the head tax is only a small part of the full issue. With the enactment of the Citizens' Initiative in 2006, along with the $50 in taxes paid by the cruise passengers came a bunch of taxes imposed on the cruise lines themselves and some very stringent regulations which are very expensive for the cruise lines to comply with. The issue in total is that the State of Alaska has made it become vastly more expensive for the cruise lines to operate in Alaska at the same time as the economy has made consumers unwilling to pay higher prices for cruises (to offset the lines' increased costs).
The cruise lines are now in the process of setting the 2011 deployments for their fleets. As more profitable markets are identified and developed, more ships will be redeployed elsewhere. Every year, Alaska does nothing to decrease the cruise lines' costs, it's likely more ships will be withdrawn from Alaska.
The sad part is that Alaska's tourism industry, which is such a major part of the state's economy, is about to crumble. The state's leaders and most citizens don't understand they have a product to sell, and the cruise lines are their customers. If they don't do something to make their product more competitively priced with their competition (other destinations), they won't have any customers left.
