JUNEAU – The cruise ship Zaandam pulled into port this morning, just an hour ahead of a big wet southeasterly that drenched Alaska’s capital city with the first good soaking of autumn.
By 9 a.m. the ship’s captain was escorting the one millionth cruise ship passenger and her husband (the one millionth and one) off the vessel. Everyone was all smiles, in spite of the blustery weather.
A small band of raincoat-clad Juneauites were on hand to celebrate the return of the strength of the cruise industry to Southeast ports.
It had been seven years since Juneau had reached one million passengers, and today was a recognition of the importance of good tax policy and reasonable regulations.
As raindrops started to spit sideways, John Binkley, head of Cruise Lines International Alaska, welcomed Wendy and John Yoisten of St. Albert, Alberta, Canada. Binkley acknowledged past leaders of Alaska who had fixed a tax-and-regulate scheme that had driven away business.
As Binkley spoke about the important changes that had restored tourism in Alaska, Lt. Gov. Byron Mallott stood by to greet the couple, perhaps not recalling that he once proposed his version of a cruise ship tax, one that would have taken a bite out of any ship that even sailed by his home town of Yakutat.
WHY ONE MILLION IS A BIG DEAL
It was in 2006, when the citizens’ initiative, Measure 2, set the cruise passenger head tax at a steep $46 a passenger, and imposed draconian environmental standards on cruise ships — water purification standards so high that even Alaska’s municipalities didn’t have to achieve them. In fact, the water discharge standards were so high that there was no technology on earth that could meet them.
By then, the cruise companies were already booked for 2007, but by the next year decisions were already being made to pull out of the Alaska market. Small business owners across Alaska felt the pinch. They laid off workers and stopped expanding as cruise companies moved ships out of Alaska to places like Europe, where they were being treated fairly.
Some said it was the economy, but the fact remains that the cruise industry grew that year and the years following — just not in Alaska.
“The cruise lines didn’t tie the ships up,” said Mike Tibbles, government affairs director of Cruise Line International Association of Alaska. “The cruise industry kept growing all that time, but Alaska didn’t grow. We lost 5,000 jobs after the initiative went into effect. Alaska took a hit, but the ships kept sailing.”
Businesses up and down the Inside Passage weren’t the only ones feeling the pain of lost business. City coffers also gave up revenue, as cruise passengers provide 20 percent of the sales tax receipts in places like Juneau.
Local civic leaders got involved because watching a growing industry die on the vine was alarming. By 2009, there was a lawsuit filed by the industry against Alaska for what the was viewed as punitive and unfair treatment.
The Parnell Administration went about setting things right. Gov. Sean Parnell traveled to SeaTrade — the cruise trade show — in Miami in 2010 to communicate the message that Alaska wanted their passengers and vessels back.
He asked cruise industry leaders “What can Alaska do to bring back major investment?”
From there, a three-part plan developed as Parnell began to work on legislation that scaled back what had become one of the highest head taxes in the world, and made sure Alaska’s cruise ship water regulations could be actually accomplished with the existing clean water technology.
Parnell also proposed and the Legislature passed funding to significantly beef up marketing for tourism at a time when it was most needed. It took time, but by the next year, the itineraries started to reflect a better relationship between Alaska and the cruise industry.
THIS YEAR: ONE MILLION AND 14 THOUSAND CRUISING ALASKA
Alaska will set a new record for cruise visitors this year, with one million, 14 thousand visitors. It has been a long seven years and untold lost revenues to local businesses and governments. If Measure 2 had not passed, and the ships had not left, the municipalities would not have given up what is now in the tens of millions of dollars.
Next year Holland America is adding another ship to the Inside Passage, bringing north another 35,000 visitors. That ship, the Oosterdam, was added recently, and gives the sales teams just six months to get those 35,000 tickets sold. That normally would be a challenge, but sources Must Read Alaska spoke with said they have confidence they can sell the staterooms.
For 2017 the news is great: Alaska can now expect a new record of 1,050,000 cruise passengers, according to Must Read sources.
“The future for Alaska really looks good,” said Tibbles. “It’s now considered to be a stable environment for industry with more reasonable taxes and regulations.”
That could change. Gov. Bill Walker proposed a new head tax premium in the most recent legislative session and, although it was batted down by the Legislature, it was and still may be part of his fiscal restructuring plan. Will he try again?
Walker would do so at his own peril. Cruise ships are not like hotels with fixed footprints; They can be moved, and as the past seven years showed Alaska, they will be moved if taxes and regulations are not competitive.