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Department of Law Reaches Agreement with Cruise Industry

Lawsuit Resolved Contingent upon Legislative Action

Anchorage, Alaska – The Department of Law reached agreement with the Alaska Cruise Association (ACA) to resolve a lawsuit against the state if Alaska’s passenger excise tax is reduced.

Attorney General Dan Sullivan and ACA President John Binkley signed the settlement, stipulating that a specific reduction in the tax paid by cruise ship passengers in Alaska would result in the dismissal of the association’s lawsuit. The agreement also states that the nine member cruise lines of the ACA share “the mutual goal of increasing future ship deployments to Alaska,” and each line, as well as the state, “will work to achieve that mutual goal.”

Legislation submitted by Governor Sean Parnell, House Bill 422 and Senate Bill 311, would reduce the tax and provide a sustainable funding mechanism for tourism marketing.  If the legislation is passed, and within two weeks of the governor signing it into law, the agreement calls for the state and the ACA to take action to dismiss the lawsuit with prejudice, so that it could not be brought again. Each side would pay its own costs.

“This completes one important element of the negotiations I began with cruise industry officials in Miami,” Governor Parnell said. “The administration and the ACA are united in the goal of making Alaska a more attractive destination for the cruise lines, increasing ship deployments and giving passengers more incentive to spend money on shore-side purchases and excursions. I encourage legislators to move swiftly to pass the bill.”

The governor noted that Alaska visitation numbers, which had steadily increased for many years, dropped in 2009 and are projected to decline further this summer. Including both cruise and independent traffic, there will be an estimated 260,000 fewer visitors than in 2008, a loss of $400 million in visitor-generated spending and as many as 5,000 lost jobs.

The lawsuit, Alaska Cruise Association v. Patrick Galvin, was filed in September in the U.S. District Court for Alaska, challenging the legality of the tax enacted by citizen initiative in 2006. When it was filed, Attorney General Sullivan promised a vigorous defense of the law. If the excise tax is not changed as set out in the settlement agreement, the litigation would continue.

“We have negotiated a settlement that has protections for the interests of both parties,” Sullivan said. “At the same time, we’re ready to continue our vigorous defense of the current law, if need be.”

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