Assessment of the Effects of the Cruise Industry on Local
Government Revenue and Expenditures
Executive Summary with Supplemental Juneau
213 3rd Street, Suite 124
Juneau, Alaska 99801
Prepared by: McDowell Group
Alaska in association with Klugherz & Associates
The purpose of this summary document is to highlight
Juneau results of the study of cruise industry impacts
on local government revenues and expenditures in Southeast
Alaska. This summary document includes the original Summary
of Results along with specific Juneau-related findings.
The full study measured the revenue and expenditure effects
of the cruise industry on these local governments in Southeast:
- City of Ketchikan
- Ketchikan Gateway Borough
- City of Wrangell
- City of Petersburg
- City and Borough of Sitka
- City and Borough of Juneau
- City of Haines
- Haines Borough
- City of Skagway.
This study focused on local government revenues and expenditures
during the 1997 cruise season. Only sales tax and user
fee revenues earned by local governments were measured.
More specifically, this included:
- Sales Tax Revenues: These include the sales
taxes generated by local governments as a result of
local spending by cruise ship passengers, crew and from
cruise lines directly. Transient room taxes paid by
cruise passengers are included.
- User Fees and other revenues: These revenues
include fees paid by cruise lines and cruise passengers.
This includes docking fees, littering fees and other
port charges, garbage disposal fees and charges for
water sales. Examples of cruise passenger fees include
museum admissions, and payments for medical services,
Cruise industry related revenues not measured in this
study include property tax payments made by businesses
selling goods and services to cruise visitors or sales
taxes paid by business people as they make local purchases
in support of their operations. It also does not include
any secondary or indirect tax revenues (such as sales
and property tax payments made by employees (and their
dependents) of the cruise industry. Estimating these kinds
of indirect revenues would require very detailed and time
consuming analysis of each local economy and is therefore
outside the scope of this study.
Local government expenditures measured are of two general
- Marginal Costs: These are direct additional
or new costs incurred by local government over and above
what would be incurred in the absence of the cruise
industry. For example, if the police department does
not need to hire additional patrol or traffic officers
as a result of cruise traffic, there are no marginal
costs in that department, even though officers spend
some of their time serving cruise visitors.
- Direct Overhead (Average Cost or Full Allocation):
These are costs allocated according to services
rendered rather than dollars spent. Returning to our
police department analogy, if a patrol officer is spending
25% of his time dealing with cruise visitors, the approach
dictates that 25% of his salary and overhead should
be allocated to the cruise visitor industry. The theory
underlying this approach is that while there may be
no new cost associated with serving visitors, there
is an "opportunity cost" in terms of reduced
service for residents.
Local government expenditures related to the cruise industry
not measured in this study include indirect overhead costs.
These are all local government costs associated with providing
services to the population in Southeast Alaska employed
by the cruise industry. These costs are not measured in
this study because of the detailed surveying required
to identify income, household size, housing status and
other demographic characteristics of Southeast Alaska
households earning income directly or indirectly from
cruise visitor spending.
Measuring local government revenues and costs associated
with the cruise industry in Southeast is very difficult.
In fact, local government impacts of the cruise industry
specifically have never been measured (the effects of
i.e. tourism industry overall on the City and Borough
of Juneau were addressed in a 1995 study, Juneaus
Visitor Industry: An Economic Impact Study ). The
challenge facing researchers in this field is that virtually
no cost data exists (i.e. local governments do not track
expenditures made in support of visitors) and even the
most detailed examination of local government budgets
does little to shed light on the issue. After all, services
provided to visitors are the same services provided to
residents. Because most departments of local government
do not track cruise-related impacts, cost estimates are
based largely on the perceptions of department managers
and experiences of departments in other communities. To
identify cruise-related costs, interviews were conducted
with approximately 75 local government officials from
around Southeast Alaska. Though not cited individually
in this report, these officials are the primary source
of cost data.
Spending and tax revenue estimates made in this study
are based in part on secondary data, notably the 1993
Alaska Visitor Statistic Program. (AVSP), interviews
with retailers and tour operators serving cruise passengers
throughout Southeast, community-level business sales data,
and other information.
Interested readers are urged to review the full report
for more detailed discussion of methodology.
Regional Cruise Related Spending and Tax Revenues
- Cruise ship passengers spending in Southeast Alaska
totaled approximately $160 million during the 1997,
including approximately $120 million in taxable spending.
- Cruise ship crew generated $10 million in taxable
spending in 1997 region-wide.
- Taxable spending in support of cruise line operations
totaled just under $10 million in 1997. Cruise lines
spent another $18 million on Maritime services, medical
services for crew, state/federal government fees and
other non-taxable services.
- Sales tax revenues generated as a result of all cruise-related
spending, including passenger spending, crew spending
and spending by cruise lines, totaled $7 million in
Southeast in 1997.
- Port fees generated another $3.2 million in local
government revenues in 1997.
Local Government Spending in Support of the Cruise Industry
Alaskas local governments incur relatively
few additional costs as a result of providing services
to cruise lines, passengers and crew. In general,
are able to provide basic services within their existing
staffing and service infrastructure.
- Cruise passengers affect a broad range of local government
services, with police departments the most significantly
affected, but also emergency medical services, public
utilities, and libraries, among others.
- The cost of providing these services is small compared
to the local government revenues generated by the cruise
- Region-wide, "marginal" or
new costs to local governments totaled about $2.2
are costs governments would not occur if not for the
- Region-wide "direct overhead" costs
(local government overhead costs that can be allocated
cruise industry, totaled $1.2 million). These are not
new costs. Local governments would incur these costs
even in the absence of the cruise industry.
Costs City and Borough of Juneau, 1997
Estimated Taxable Passenger Spending
Estimated Crew Spending
Estimated Cruise Line Operations Spending
Total Taxable Cruise-Related Spending
Total Cruise Related Sales Tax Revenues
Total Port Fees
Total CBJ Revenues
Direct Overhead Costs
Total CBJ Costs
Net Gain (Loss)
Net Effect of the Cruise Industry on Local Government
- Region-wide, local government revenues generated by
the cruise industry totaled $10.2 million in 1997 while
local government costs in support of the industry totaled
- All cruise-affected local governments experience a
net financial gain from the cruise industry, with the
exception of Wrangell. The following table summarizes
cruise-related revenues and costs by community.
Cruise-Related Revenues and
Costs by Local Government, 1997
City of Ketchikan
Ketchikan Gateway Borough
City of Haines
between marginal costs, direct overhead, and indirect
overhead is somewhat arbitrary in a arbitrary
as significantly effected by the cruise industry as Skagway.
As a result, cruise-related costs as measured in this
study may understate actual costs for Skagway. Though
it is very likely that revenues exceed costs, a detailed
local-level study would be required to accurately measure
all of Skagways costs and revenues associated
with the cruise industry.
Juneau Revenues and Expenditures
- In 1997, 515,000 cruise passengers spent approximately
$60 million in Juneau, including approximately $48 million
in taxable spending.
- Cruise passengers spent at an average rate of $117
per person per visit during the 1997 season.
- Cruise ship crew visits totaled 226,000 in 1997, generating
approximately $4.1 million in local taxable spending.
- Cruise lines purchased an estimated $4.2 million in
goods and services from Juneau businesses in 1997.
- All cruise-related, taxable spending in Juneau totaled
approximately $56 million in 1997. This spending generated
$2.8 million in sales tax revenues for the City and
Borough of Juneau.
- Revenues from various port fees paid by the cruise
industry in Juneau totaled just under $1.5 million in
- Cruise-related revenue, including sales tax revenue
and port fees paid to the CBJ, totaled just under $4.3
million in Juneau in 1997.
- Costs incurred by the City and Borough of Juneau in
support of the cruise industry totaled $1.3 million
in 1997. Debt service on waterfront redevelopment bonds
account for about two-thirds of this total (this debt
service is paid by cruise lines through port fees).
- Local government activities most affected by the cruise
industry include the police department (approximately
$220,000 in total marginal and direct overhead costs)
and emergency medical services ($57,000 in total costs).
- In summary, cruise-related revenues in Juneau outweigh
costs by a ratio of over three-to-one. Revenues totaled
$4.3 million while costs totaled $1.3 million, resulting
in a net gain of approximately $3 million in 1997.