Protecting Passenger Fees: Reawakening Congress's Tonnage Clause Authorization Powers

• Publication year: 2019

§ 36 Alaska L. Rev. 77. PROTECTING PASSENGER FEES: REAWAKENING CONGRESS'S TONNAGE CLAUSE AUTHORIZATION POWERS

Alaska Law Review
Volume 36, No. 1, June 2019
Cited: 36 Alaska L. Rev. 77

PROTECTING PASSENGER FEES: REAWAKENING CONGRESS'S TONNAGE CLAUSE AUTHORIZATION POWERS

Bradley Russian ^[*]

ABSTRACT

For 20 years, the City of Juneau has collected passenger fees from cruise lines that enter its port. These fees are assessed based on the number of passengers that arrive on each cruise vessel, and amount to $8.00 per passenger. On December 6, 2018, in Cruise Lines International Association Alaska v. The City and Borough of Juneau, the U.S. District Court of Alaska held that Juneau's use of the passenger fees violates the U.S. Constitution's Tonnage Clause. Rather than appeal the decision, the City of Juneau subsequently settled the litigation with the cruise lines. This Note will examine Juneau's passenger fees in light of the Tonnage Clause. It will argue that because Juneau and the State of Alaska depend on these fees and other tourism revenue, Alaska policymakers should lobby Congress to use its Tonnage Clause authorizing powers to grant Alaska port cities the authority to charge set passenger fees to visiting cruise lines. Part One will analyze the Court's historical understanding of the Tonnage Clause. Part Two will examine the litigation, the court's decision in Cruise Lines International, and the recent settlement between the City and the cruise lines. Part Three will consider how this case may disrupt Alaska's tourism industry and economy and will focus on other Alaska laws that may be invalidated on the basis of this decision. Part Four will propose a model law for passage by Congress, to help Alaska work around the holding in Cruise Lines International.

Just off the boat, cruise line tourists visiting Juneau may explore the city's downtown shops, restaurants, and other local amenities. They may meander down Franklin Street and head to the nearby waterfront Seawalk bordering the scenic harbor. ^[1] Seasonal crossing guards usher more than 1,000,000 visitors along this journey during peak tourist season-from May to September. ^[2] At the far end of the Seawalk, visitors are greeted by vast mountains; the harbor water curves through these mountains and extends beyond view. On the journey back into town, the Seawalk culminates at the base of a life-size, bronze statue of a humpback whale. ^[3] A fountain and an array of lights decorate the whale-the brainchild of former Juneau mayors Bill Overstreet and Bruce Botelho. ^[4]

According to Cruise Lines International Association Alaska (CLIAA), the trade association that represents cruise lines operating in Alaska, much of this downtown infrastructure has been funded inappropriately. ^[5] The Seawalk and seasonal crossing guards, along with the recent upgrades to Franklin Street, Front Street, and the downtown area, are all on a long list of items that CLIAA believes have been financed illicitly through a misappropriation of funds collected from cruise passengers. ^[6] The passenger fees that Juneau charges the cruise lines amount to $8.00 per passenger entering the port and total more than $8,000,000 every year. ^[7] CLIAA believes that under the U.S. Constitution, ^[8] these funds must be used on projects more directly related to the cruise lines' well-being. ^[9] In 2016, CLIAA sued to enjoin the City from further collecting and misusing the passenger fees. ^[10] CLIAA pointed to the large bronze whale as a symbol of the City's excess. ^[11]

On December 6, 2018, in Cruise Lines International Association Alaska v. The City and Borough of Juneau, ^[12] the U.S. District Court of Alaska announced its opinion that Juneau's use of the passenger fees violates the U.S. Constitution's Tonnage Clause. ^[13] The Tonnage Clause says that "No State shall, without the Consent of Congress, lay any Duty of Tonnage." ^[14] Traditionally, the Tonnage Clause has been interpreted to apply broadly to any duty on a ship charged "for the privilege of entering, lying in, or trading in a port." ^[15] Because the passenger fees here were levied upon the ships and assessed on a per-passenger basis, they fell within the purview of the clause. ^[16] Moreover, the court rejected Juneau's argument that the passenger fees were exempted from the Tonnage Clause as a "service fee," one of the narrow classes of taxes, charges, and fees that are deemed permissible under this body of jurisprudence. ^[17] The court ruled that Juneau may continue to collect passenger fees from visiting cruise ships, but that it would be strictly limited in how it spends those fees. ^[18] Juneau would only be able to spend passenger fees on projects that directly benefit the cruise vessels themselves. ^[19] Although the City contemplated appealing this decision, Juneau and CLIAA ultimately announced a settlement to this lawsuit. ^[20] The settlement allows Juneau to continue collecting and spending passenger fees, but requires them to consult with CLIAA before raising the fees or spending them on new projects in the future. ^[21]

This Note argues that although Juneau and CLIAA settled their dispute here, the Alaska District Court's holding in Cruise Lines International may still be harmful to the Alaska tourism industry, and unfair to Alaska citizens. The case narrowed the kinds of charges that are permissible as "service fees" in a way that stands to invalidate passenger fees in other Alaska cities. ^[22] Juneau's passenger fees closely mirror a statewide head tax charged to cruise lines by the Alaska state government, as well as other comparable fees assessed by similarly situated Alaska port cities. ^[23] Though the cruise line industry may be hesitant to litigate against these laws in the immediate wake of this decision, they ultimately may use the district court's holding as precedent to mount a new attack against other laws of this kind in Alaska. ^[24] Many Alaska cities may become economically imperiled if these laws are struck down; this would be an inequitable outcome in light of the historical relationship between the parties. ^[25]

This Note seeks to identify a way for Juneau and Alaska policymakers to secure long-term protections for the Alaska tourism industry against this disruptive Tonnage Clause jurisprudence. Specifically, it argues that Juneau and Alaska should appeal to the U.S. Congress for recourse. The Tonnage Clause expressly endows Congress with the ability to grant cities and states with the right to charge duties of Tonnage. ^[26] Congress has not addressed whether Juneau or Alaska may collect passenger fees, ^[27] but its intervention here could ensure that each parties' best interests are protected. On the one hand, it would benefit Alaska by ensuring that its cities do not lose much-needed revenue from tourism fees. ^[28] At the same time, Congress could set the fee with a standard formula that would protect the cruise lines against sudden or unexpected increases in the passenger fees. ^[29] Finally, congressional action here would act as a back-stop to the Juneau-CLIAA settlement agreement, ensuring good faith by the parties, and protection against third-party intervention. The main obstacle in pursuing this path would be to get Congress to act in an area where it has little experience, ^[30] nor an overt motive to legislate. ^[31] However, if Congress could be persuaded to legislate in this domain, it could provide a lasting protection for Alaska tourism. ^[32]

This Note will examine Juneau's passenger fees in light of the Tonnage Clause. It will argue that because Alaska developed a dependence on these fees and other tourism revenue based on representations made by the cruise industry, Congress should grant Alaska port cities the unique authority to charge passenger fees to visiting cruise lines, at a set rate. Part One will analyze the Court's historical understanding of the scope of the Tonnage Clause. Part Two will examine the Cruise Lines International litigation and the court's decision in that case. It will briefly examine the announced settlement agreement between Juneau and CLIAA. Part Three will discuss the Alaska tourism industry and will consider how this case may disrupt that industry and the Alaska economy. It will focus on other Alaska laws that may be invalidated on the basis of this decision. Part Four will propose a model law for passage by Congress that could help Alaska work around the holding in Cruise Lines International. It argues that policymakers in Alaska should be prepared to lobby Congress to pass legislation to protect revenues secured from cruise line tourism. Part Five provides brief concluding remarks.

I. THE TONNAGE CLAUSE

There is a long history of Tonnage Clause jurisprudence in the United States. ^[33] Originally designed as a limit on state economic power, ^[34] the Tonnage Clause has been interpreted to bar a wide variety of taxes and fees levied against vessels entering state ports. ^[35] Equally numerous, however, are the fees that ports charge to maritime vessels which do not implicate the Tonnage Clause. These non-violate charges include property taxes and service fees. ^[36] The CLIAA litigation focused on whether passenger fees fell within one of those separate classes of charges, or whether Juneau was using the fees in a way that violated the spirit of the Founders' Tonnage Clause prohibition. ^[37] This Section will examine the underlying purposes of the Tonnage Clause, as well as the scope of the...