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Audit: Cities must ensure cruise ship tax is properly spent

By Austin Baird, KTUU
KTUU story
JUNEAU — State government revenue generated from a per passenger tax levied against cruise ship operators, required to go toward port and harbor infrastructure, is often spent without verification of compliance with federal and state laws, according to an audit released publicly on Thursday.

A report prepared by the Division of Legislative Audit claims that the Ketchikan Gateway Borough and City and Borough of Sitka, in particular, must ensure that money being raised from the Commerce Department’s commercial passenger vessel tax program — commonly referred to as a “head tax” — is spent properly.

The Municipality of Skagway Borough also plainly violated federal and state laws by spending $114,450 to build an elementary school playground with the tax, according to the report.

The program was established with a vote during the 2006 primary election and established a $46 tax for each person aboard one of the many cruise ships that crowd Southeast Alaska ports during the summer tourist season.

Revenue generated from the tax is deposited into a special account within the state’s general fund, government cash that can be appropriated for any reason, while $5 of receipts are distributed to the first five ports of call a passenger visits.

$271 million of revenue has been generated since the program’s inception. Port communities must use the cash to improve harbor facilities and to pay for services to provide for vessel visits.

Immediately after it was created, the tax came under fire from the Alaska Cruise Association, which claimed that the tax violated the commerce and tonnage clauses of the U.S. Constitution.

A settlement agreement was reached, and fees were dropped to $34.50 per passenger during the 2010 lawmaking session.

The report comes on the heels of an announcement that the cruise ship industry plans to sue the City and Borough of Juneau over allegedly improper spending of revenue generated from the head tax.

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