Written by Matthew Widmer and William Earnhart

 On December 6, 2018, the United States District Court for the State of Alaska issued an order that could have a profound impact on the way municipal governments can spend certain fees. The case concerned two types of passenger fees imposed by the City of Juneau on cruise ship operators. One fee was a $5-per-passenger fee; the other was a $3 fee. An association of cruise ship operators filed suit in federal court claiming that the fees violated the River and Harbors Appropriation Act of 1899 (RHRA), as well as the Tonnnage Clause, Commerce Clause, and Supremacy Clause of the United States Constitution.

A cruise ship passenger fee or “head tax” is imposed by most of Alaska coastal communities visited by cruise ships. The fees are intended to off-set the additional costs and services required by the large influx of visitors.  Many cruise ships contain a larger population than the communities themselves.  Although summer tourism is an important part of local economies it also places tremendous stress on port infrastructure and community services.

The Court ruled that the Tonnage Clause and the RHRA required that any fee imposed on a vessel must be compensation for services provided “to the vessel” itself or services that would be made available to the vessel if it requested. It would be illegal to use those fees for services that only benefitted passengers or the general public. It was perfectly legal if the services provided to the vessel were also used by vessel passengers or public. As long as the fees were used for services that assisted the marine operations of the vessel, the expenditures were legal. The Court also ruled that the Supremacy Clause did not prevent the City from collecting the fees.

In an effort to provide examples in its decision, the court noted that a gangplank would be a permissible expenditure because boarding and disembarking from a vessel is a service provided to that vessel. The fact that passengers or the general public would also use the gangplank was entirely permissible. Sidewalk repairs or access to a public library’s internet would not be permissible because these were not services provided to the vessel itself.

Municipalities that collect passenger fees from cruise ship operators should take a few things away from this decision:

  • Collecting passenger fees continues to be legal. The court specifically ruled that the Supremacy Clause did not prevent a municipality from collecting passenger fees.
  • Reviewing how those passenger fees are spent is important. As long as the fees are being used to provide services to a vessel, the expenditures are most likely permissible. But fees spent for any other purpose, such as general city infrastructure, could lead to future legal challenges.
  • Fees can only be imposed to make services available to the vessel for which the fees are being collected. If fees are being spent on services that a vessel cannot use, then those expenditures might be illegal.