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Tuesday, October 23, 2018
HomeColumnsJuneau now up to $850,000 in cruise line lawsuit costs

Juneau now up to $850,000 in cruise line lawsuit costs

By WIN GRUENING
SENIOR CONTRIBUTOR

This month the City and Borough of Juneau staff asked the Assembly to appropriate an additional $250,000 to fund legal costs associated with defending a pending lawsuit initiated by the cruise line industry (CLIA).

This latest amount brings the total legal costs appropriated to almost $850,000 – approximately $300,000 from cruise line fees and the rest from sales taxes.

Hawkins

Ominously, the city’s Finance Director, Bob Bartholomew, recommended an additional $750,000 in sales tax revenue be set aside for future legal defense costs – bringing total expected legal costs to $1.6 million.

The city has passed on several opportunities to settle this litigation out of court. The issues involved have been a source of contention for years, but city officials haven’t been responsive to written requests by the industry to discuss an amicable solution.

Win Gruening

As a last resort, CLIA filed its lawsuit in April 2016 to bring resolution to the matter. Since then, attempts to negotiate an out-of-court agreement have been rejected by the city.

In a series of motions, the city’s legal team has attempted to change jurisdiction, delay court proceedings, and get the judge to rule prematurely on points of law. None of those motions were granted.

Now, the city may be facing a possible unfavorable court ruling far more damaging than any agreement that might have been reached. This could leave a huge hole in the city budget amounting to millions of dollars.

Aside from the financial implications of such a ruling, the adversarial position taken by the city may come back to haunt Juneau in any future dealings with the industry.

Framing the debate as David battling Goliath, some have claimed the industry’s intention is to invalidate the $5 marine passenger fee and $3 port development fee the city is now collecting, and that this must be defended. This presumably would jeopardize funding for existing port infrastructure (such as docks) used by the cruise lines.

Unfortunately, cruise line critics have mischaracterized the nature of the lawsuit and the basis for it. This, in turn, has fueled a misguided backlash against the industry – especially on social media platforms.

The fees being charged (commonly known as “head taxes”) are not at issue and the funding of port infrastructure has never been questioned. Clearly, it’s legal to charge such a fee. Other communities in various parts of the country including Alaska have done exactly that.

The CLIA lawsuit is challenging is how the fees are spent. Under Federal and State law, the fees are restricted to limited purposes. Their lawsuit states Juneau has over-reached by going far beyond the constitutional definition of permissible uses. It further recites the U. S. Constitution’s “Tonnage Clause” that limits port fees charged by governmental entities to only those that are “reasonable compensation for services rendered to, enjoyed by, and available to the vessels entering their ports …”

Examples of questionable items are a $10 million seawalk and 2.6-acre artificial island, general governmental operations of Juneau, transit bus services, wireless internet, civic beautification and park improvements, city street maintenance, airport and hospital expenses, among others.

The city manager points to a state audit as proof that passenger fee proceeds are being spent correctly, but that audit didn’t examine whether the ultimate use of the fees was constitutional.

Others have questioned why the industry can contest a fee that is paid by the passenger. It is generally not understood the fee is charged to each vessel but is determined by the number of passengers on board. If not paid by the vessel’s owner, according to city ordinance, the ship could be barred from the port.

After all this, it’s difficult to understand what the city staff legal team’s end game could possibly be.

The way city legal fees have been funded – partly by marine passenger fee proceeds and the rest through sales tax revenues – may be a clue. According to City Attorney Amy Mead, it’s hard to know whether using marine passenger fee revenue for this purpose is legal.

Is it possible that city officials do believe that some of the uses currently being funded through cruise line passenger fees may be unconstitutional, but are hoping enough will be ruled constitutional to justify the continuation of the lawsuit?

Official discussion of the litigation has largely been conducted in executive session. Therefore, the city’s legal strategy is publicly unknown. But, it would be troubling if the city’s legal defense team believed although the city may be violating the constitution it’s ok because it just isn’t as much as the industry is claiming.

If we eventually discover that theory is the best defense our city can muster, the public will rightfully wonder why we spent millions of dollars on lawyers instead of negotiating a settlement.

Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.

 

 

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • SOME Lawyers/politicians sure know how to create job security!

  • Juneau is squandering the cruise ship head tax income. The muni has purchased private harbors, taking them off the tax assessment rolls, and then pumped millions of dollars into them – then raised the fees for Juneau people to use the palatial, overbuilt harbors. Harbor parking has become what one would expect to see on Long Island, NY, and just about as expensive. All this because the head tax income is free money to the muni, and this is what government does with free money; they add bureaucrats and bureaucracies. Juneau used to have a Harbor Master, but since the head tax was instituted they now have both a Port Director and a Harbor Master, and those fellows have deputies and special assistants. It sounds like state government, but after all this is the state capital (for now). I hate to see money wasted, even if it costs me little or nothing, and waste (haven’t even mentioned the $12 million brass whale, which is what has caused the cruise ship companies to say enough) is what has come to Juneau from the head tax.

  • “…it’s difficult to understand what the city staff legal team’s end game could possibly be.”

    One needs only to understand that, in modern Alaska, the purpose of city and state governments is simply to Get More Money. The “legal team”, who arguably want to keep their jobs, help accomplish that mission by doing what their city employers tell them to do.

    “…the public will rightfully wonder why we spent millions of dollars on lawyers instead of negotiating a settlement.”

    An insignificant portion of the public who fail to accept the infallibility of city government –may– “wonder”.

    Wondering is all they will do.

    Doing more means disrupting comfortable lifestyles, annoying employers, and jeopardizing careers by threatening to disrupt the orderly transfer of money from taxpayers to government to those at both ends of the social spectrum who have the most to gain from doing business with a thriving, growing government which, as Alaska’s very own economists reported, is one of Alaska’s only three growth industries.

    So rest easy, Win, Juneau’s “legal team” is not about to bite the hand that feeds it, the cruise industry is not about to go away, and surely, whatever is spent on lawyers can be recovered through a modest payroll tax.

    What’s not to like?

    • Negotiated settlements are never equitable case the lawyers always win. $$$

  • Thanks to the cruise ship industry, too many southeast towns have become soulless facades of seasonal tourist traps pandering to gullible visitors, while neglecting the communities that host them.

    The unabashed greed of the industry and lack of regard for its negative impacts on communities – as CLIA pursues this senseless and expensive suit against Juneau – comes as no surprise to this life-long resident.

    Southeast Alaska is the goose that laid the golden egg, and the cruise ship industry knows it – or they wouldn’t be here with their ugly mega-barges full of t-shirt and tanzanite shoppers.

    This is not to say Juneau doesn’t benefit from the influx of sales tax revenue or the abundant low paying summer jobs for students. But to turn a blind eye to the impacts on real estate prices, housing, emergency responders, hospital infrastructure, community resources, congestion and pollution is naive and self-serving of the industry.

    CLIA has it good here. You’d think they’d shut up and keep their head down, lest its host communities grow weary of the parasitism that has infected them.

    • Remember, tourism and government are two of Alaska’s only three growth industries, so we don’t want to make either one of them get mad and go away.

      But, one does wonder what Juneau would look like, and be like, if it were not infested with government and tourists.

      Maybe it’s time to find out?

    • Well said, Clay!

  • It shows how stupid some of our city officials really are. Just unbelievable.

  • Maybe nothing, maybe more swamp to drain, make of it what you will:

    “The firm representing the City (Hoffman & Blasco) is a former employer of the City Attorney.”

    ” Upon relocating to Juneau in 1998, Amy worked for a local law firm, where she spent the majority of her time practicing civil litigation and municipal law, serving as the City and Borough Attorney for Wrangell from 2008 until she joined the CBJ Law Department in 2010. In July 2013 the Assembly appointed Amy as the Municipal Attorney.” (https://beta.juneau.org/law-department/department-biographies)

    “Amy Mead is a Member of Hoffman Silver Gilman & Blasco, A Professional Corporation, a law firm in Juneau, AK”. (https://www.lawyercentral.com/amy-gurton-mead-interactive-profile–20-706543.html)

    The Southeast Conference Membership Directory FY2017 includes: City & Borough of Juneau, Hoffman & Blasco, Holland America Line, Inc., Juneau Chamber of Commerce, and Juneau Economic Development Council (http://www.seconference.org/membership)