Costs continue to pile up for lawsuit with cruise industry

City officials are preparing for more legal costs in the future of the city’s ongoing litigation with the cruise line industry.

Cruise Lines International Association (CLIA) Alaska filed a lawsuit against the city in April 2016, alleging that the city misused money from a so-called “head tax” that gives Juneau $8 for every cruise passenger. Since then, the City and Borough of Juneau has appropriated $597,000 for the cost of legal defense, according to a memo from CBJ Finance Director Bob Bartholomew.

At Wednesday’s CBJ Finance Committee meeting, Bartholomew and City Manager Rorie Watt recommended that the city appropriate an additional $250,000 to the litigation. The committee members agreed to have staff prepare an ordinance appropriating the funds, so that the full Assembly can vote on it at an upcoming meeting, likely in January.

The main question at hand Wednesday was not whether to appropriate the money, but which funding source to use.

Bartholomew said that to date, about half the funds have come from sales tax revenue and half have come from head tax revenue. Bartholomew’s recommendation was to use only sales tax for this newest appropriation.

City Attorney Amy Mead, who telephoned in for the portion of the meeting addressing the funding, said it’s hard to know whether using head tax revenue for this purpose is acceptable.

“The defensibility of using marine passenger fees to pay for the legal services is uncharted territory, if you will, under the case law,” Mead said. “I think we have a good argument to do so, but it does carry the risk that CLIA has made it very clear that they object to our doing so and would likely make it an issue in the lawsuit.”

Committee chair Jesse Kiehl and committee member Maria Gladziszewski both expressed interest in continuing to use the head tax revenue for half the costs.

“When we look at the mix of how to pay this cost that’s been imposed on us,” Kiehl said, “I don’t think it’s appropriate that local taxpayers carry the entire burden of defending the city but that visitors carry not all but some share of that.”

Gladziszewski proposed that the $250,000 be paid with both sales tax and head tax revenue, but she and Kiehl were the only people to vote yes.

Mayor Ken Koelsch spoke (and voted) in favor of playing it safe and using only sales tax revenue to pay for this appropriation.

“I believe that there will be ample opportunity in the future that if we want to put money in from head tax there will be an additional funding somewhere along the line,” Koelsch said. “I don’t think this is the last appropriation that we’re going to see.”

Mead said there are currently two pending motions in the case, but no negotiations at this point. CLIA Alaska’s argument in the case is that the city used money from the head tax — funds that are required to be spent to benefit a cruise vessel — for projects that do not directly benefit the vessel.

Central to the argument, as reported at the time, was the Whale Project. The project, which built a life-sized sculpture of a whale near the Douglas Bridge, was funded through private donations. What CLIA alleged in its lawsuit in April 2016 was that the head tax money the city used to fund a seawalk and park surrounding the whale was illegal.

“We don’t have a problem with the whale,” CLIA Alaska President John Binkley told the Empire in April 2016. “It’s about a mile from the current docks, and that’s really our concern.”

Clarification: An earlier version of this article stated that CLIA Alaska’s argument was that the head tax money needs to benefit cruise passengers. CLIA Alaska’s argument is that the head tax money needs to benefit the cruise vessel itself, not the passengers.

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