A federal lawsuit brought by the cruise ship industry against the City and Borough of Juneau says its passenger head tax is unconstitutional.
If the industry prevails it could impact the statewide passenger fee.
After 18 months of litigation and at least $498,000 spent by the city in legal costs, the two sides are no closer to a resolution. John Binkley is president of Cruise Lines International Association Alaska, the industry group suing the city over how it spends the $8-per-passenger fee it collects.
“We don’t dispute the collection of the fees. We don’t dispute those at all, it’s just the expenditures,” Binkley said.
Binkley says the passenger and port development fees are required by federal law to support cruise ship operations, not fund local vanity projects.
“And the city disagrees,” Binkley said. “They say it can be spent on things like the artificial island it built, the Whale Park, the airport or pretty much anything else it wants.”
The city argues that the industry reads the law too narrowly.
One example is seasonal crossing guards near the cruise docks; the city uses passenger fees to pay for them.
“We have a million people getting off the ships in the summer,” City Attorney Amy Mead said. “We think that crossing guards provide a service to the passengers because it enhances their safety and CLIA would disagree with that.”
But Binkley said his industry’s position is these fees are for port infrastructure – like a dock.
“Any of that money collected must be spent on a service to the ship because it’s a fee on the ship,” Binkley said.
(Actually, it’s a fee on the passenger that’s paid by the passenger. But that’s the gist of the dispute.)
In a filing last month, the cruise industry upped the ante. It asserts Juneau’s passenger fees are unconstitutional. It points to the Commerce Clause and Tonnage Clause, both of which give Congress the sole authority to regulate interstate commerce.
Mead said that shows the industry is seeking a ruling with a wider precedent.
“If it were just a Juneau case, their motion would be tied to very specific expenditures and this case would all be about very specific expenditures,” Mead said. “That is not how CLIA has fashioned this lawsuit. They challenge the constitutionality of the fees.”
The cruise industry opposed past citizen-led referendums in Juneau and statewide that created the head taxes.
An industry lawsuit against the state’s head tax was settled in 2010 after the Legislature slashed the passenger fee by 25 percent.
That seemed to settle the issue, but state lawyers are still watching the Juneau case with interest.
Juneau’s local law closely mirrors the state’s law – so precedent matters.
“By challenging the underlying constitutionality of a tax on cruise ship passengers, a victory by CLIA would establish a precedent,” Assistant Attorney General Chris Peloso said. “That could be useful in a future challenge against similar taxes levied by other municipalities, like Ketchikan, or a challenge against the state Commercial Passenger Vessel Excise Tax.”
In other words, it could open the flood gates to fresh challenges.
The cruise industry insists that’s not its aim. If the judge overturns Juneau’s passenger fees, Binkley said the industry would continue to pay the full amount to the state. And he says more funding might be available for other Southeast ports-of-call.
“The resources, we feel, are being not properly spent in Juneau, when they should be spent on port infrastructure in other, smaller communities,” Binkley said.
The Attorney General’s office hasn’t gotten involved.
But if the cruise industry’s lawsuit challenges the state’s passenger fee, Peloso said the state would intervene.
Alaska Airlines pilots are getting a significant boost in pay. Since acquiring Virgin America last year, Alaska has established itself as the fifth largest air carrier in the country. But pilots from both companies felt they were underpaid in comparison to their peers from other airlines. An arbitration panel ruled Tuesday to increase the pilots’ wages.
The average pay increase for Alaska Airlines captains was 16% and the average for Virgin America captains was 29%. First officers from both airlines saw increases of 28% and 45% respectively.
David Campbell is a pilot and spokesman for the Air Line Pilots Association, the union that represents the pilots. He says the large increases are a sign of how low the previous wages were.
“The increase in wages is a good example of how far we were from our peers at other airlines,” Campbell said. “And this negotiation was really about bringing into parity with our peers across the industry and this arbitration ruling failed to do that, so we’re disappointed.”
In a press release from the union, Capt. Chris Notaro expressed disappointment that while these pay increases are significant under most circumstances, pilots with Alaska Airlines are still paid less than their contemporaries at other airlines.
The arbitration panel ruled that while Alaska Airlines operates the fifth largest air carrier in the country, the volume of business they conduct is dwarfed by the larger carriers, such as Delta, United and American. Their larger revenues and operations allow for their pilots to have higher salaries.
Campbell said the arbitration process that began in late August was a last resort for the pilots: used to get what they considered to be fairer wages.
“We were in direct negotiations, and didn’t make any progress there,” Campbell said. “We didn’t make any progress in mediated discussions. And they really forced us into this arbitration, and it’s very disappointing that it had to go that far.”
Alaska Airlines declined to do a recorded interview on the topic. They released a statement stating, “We respect the decision of the arbitrators and the process they went through.” They emphasized, “Our commitment is to keep our company strong with low costs, low fares, and great experience for our guests while paying competitively.”
Both Alaska Airlines and former Virgin America pilots are under the same contract now, effective November 1st of this year. The contract also contains minor increases to some retirement benefits.