Cruise ships will now be exempt from Juneau’s sales tax while in port. An overwhelming majority of Assembly members said the exemption sends a business-friendly message to the industry. This comes as the City & Borough of Juneau is proposing to use sales tax revenue to defend itself in a lawsuit brought by the cruise ship industry.
Assembly members lauded the cruise ship industry as an invaluable partner for the local economy and said the sales tax exemption was an important incentive.
“This isn’t a tax we’re forgoing this is a tax that we are not collecting because we haven’t done it in the past and I support trying to encourage businesses to do business in Juneau,” Deputy Mayor Jerry Nankervis said.
Only one cruise ship company had been paying sales tax — now all will be officially exempt in time for the first docking in May. The city’s finance department wrote in a staff report that levying sales tax on cruise ships would raise up to $100,000 a year.
The ordinance passed easily on a 7-1 vote. Only Assembly member Jesse Kiehl was opposed.
At the hearing, leaders in the tourism industry spoke in favor of the exemption.
“I do understand — or I’m led to believe that we are in negotiations right now with the cruise lines on the lawsuit issue,” said Bob Janes, owner of a whale watching and guiding company.
The “lawsuit issue” he referred to is a court challenge brought by the Cruise Lines Industry Association over how the city spends fees collected on cruise ships docking in port. So far there’s been no indication from public statements that the sales tax exemption and this ongoing litigation are linked.
But Janes said the exemption could help the city resolve the lawsuit.
“I think we need to step forward with our best foot here and show that we do cooperate, we can cooperate and we will cooperate with the cruise lines,” he said.
There were also a few critics at the public hearing. Guy Archibald said turning away sales tax money wasn’t responsible.
“A hundred thousand dollars or 10 cents per person is not going to change anybody’s vacation plans. But $100,000 is $100,000 less of a tax burden that the city is going to have to find somewhere else,” Archibald said.
As a matter of fact the city is looking for another $100,000. A separate ordinance proposed Monday evening would earmark $100,000 in sales tax revenue to keep paying lawyers retained specially for the cruise industry lawsuit.
City staff and Assembly members have declined to comment citing the pending litigation. Briefings are done by the city attorney in closed executive sessions.
But that doesn’t mean a lot isn’t happening behind the scenes. Court filings show the city and cruise industry are headed for a jury trial at the end of the year. And to date, the city has spent more than $280,000 on legal counsel. The city so far has relied on passenger and port development fees to pay these lawyers. In other words, it’s been using fees levied on the cruise industry to defend itself from the cruise industry.
Whether that’s a stroke of legal genius or a reckless maneuver really depends on who prevails in court.
The city manager’s office wrote in a brief report that the city strongly supports and welcomes cruise ship tourism, but at the same time needs the $100,000 in sales tax revenue to defend its marine passenger and port development fees now being challenged in federal court.
Why the city is no longer willing or able to finance its legal fight using marine passenger fees isn’t clear. City Manager Rorie Watt declined to elaborate aside from what he’d written in the staff report. The ordinance is now scheduled for a public hearing and vote at the Assembly’s April 3 meeting.
