Sam DeGrave

Cruise lines lawsuit continues

A U.S. District Court judge has denied the City and Borough of Juneau’s request to dismiss the complaint Cruise Lines International Association Alaska filed in April, alleging the city has misused marine passenger fees. On Thursday, Judge H. Russel Holland issued a written ruling in which he determined the city’s motion for dismissal had a leg to stand on, so to speak. But in order to dismiss the case, it would’ve needed more. The city’s motion for dismissal hinged on the Tax Injunction Act, a federal law that prohibits U.S. District Courts from enjoining or otherwise stopping the collection of “any tax under state law where a plain, speedy and efficient remedy may be had in the courts of such state,” the law reads. Every cruise ship passenger who comes through Juneau has to pay a $5 marine passenger fee and $3 port development fee. CLIAA argues that the city has misused the revenue these fees generated by building a $10 million man-made island incorporated in the downtown seawalk. Juneau attorney Robert Blasco, who is representing the city in the ongoing suit, argued that CLIAA’s council treated the fees as if they were a tax in their complaint. “We don’t agree that that’s a correct factual statement, but if that’s what they’re saying, this court doesn’t have jurisdiction,” Juneau City Attorney Amy Mead told the Empire Monday, explaining the motion for dismissal. In order to determine whether the entry fees Juneau charges cruise ship passengers are legal taxes, or (as their name implies) fees, Judge Holland had to apply the Bidart Test, a legal test consisting of three criteria. In order to be considered a tax, a charge must meet at least two of the test’s three requirements. It must be administered by a legislative governing body. It must be imposed on a broad class of parties. And/or it must be used for general purposes, not to subsidize specific projects. In this case, “it all boiled down to the third prong of that test,” Mead said. In the motion for dismissal, Blasco argued that the cruise passenger entry fees — as described by CLIAA in its complaint — met all of Bidart Test’s criteria. Judge Holland found that the entry fees only met the first. Now that the motion for dismal has been denied, Mead said the trial will proceed at a quicker pace. Though the city is prepared to defend itself, Mead said it would rather have done so in state court and not federal court, which explains the motion for dismissal. “In the end, the judge said that this case should stay in federal court,” Mead said. “We weren’t sure how that was going to go one way or the other, but we believe this is a matter of local import and that the case should have been heard at a local level — in state court.” Neither Blasco nor Herbert H. Ray Jr., an attorney for CLIAA, responded to Empire queries by press time Monday afternoon. Sam DeGrave can be reached at [email protected]

Canadian becomes 1 millionth cruiser to Juneau this year

JUNEAU — Wendy Yoisten, a resident of St. Albert, Canada, stepped off a cruise ship in Juneau for the eighth time this season on Sept. 22. As familiar as she’s grown with her “favorite port” in Alaska, disembarking was quite different this time. A small welcoming party — including the ship’s captain and John Binkley, president of the Cruise Lines International Association’s Alaska affiliate — greeted her as she walked onto the dock. The cause for celebration: Yoisten is the millionth cruise passenger to visit Juneau this year. “They didn’t say anything on the boat; they just told us to dress warm,” she said. “We knew something was happening. We didn’t know what.” After the initial surprise next to the MS Zaandam, the Holland America ship on which she arrived, Yoisten and her husband, John, joined an ongoing celebration near the visitor center. Members of the Yees Ku Oo dance group sang and pounded drums as the Yoistens made their way off the docks. Lt. Gov. Byron Mallott, Juneau Mayor Ken Koelsch, several city Assembly members and a group of about 30 other people all welcomed the Yoistens to town. Though some might consider the Yoistens lucky, they had a better chance than most at winning the millionth-passenger lotto, so to speak. They have cruised to Juneau eight times this season alone, Wendy and John Yoisten said. “They probably think we’re locals,” Wendy said of the State Library, Archives, and Museum employees. The SLAM is one of the Yoistens’ favorite Juneau attractions, and it was where they planned to spend their afternoon. Binkley presented Wendy Yoisten with a gift basket, a medal and a glass trophy commemorating the occasion. “This really marks a change in the industry and cruising in Alaska,” Binkley said speaking to the Yoistens and the rest of the people gathered around, standing in the rain. This year marks the first since 2009 during which Juneau — and the rest of Alaska — hosted more than 1 million cruise ship passengers. Binkley said the number of cruise ship passengers visiting Alaska dropped by about 15 percent between 2009 and 2010. During that short time frame, the total number of cruise passengers dipped from more than 1 million to about 850,000. Binkley primarily attributes the sharp decrease and subsequent, but slow, increase in cruise passengers during the past seven years to state head tax fluctuation. In 2006, voters approved a ballot measure imposing a statewide head tax of $46 per person on cruise passengers visiting Alaska. Four years later, then-Gov. Sean Parnell signed into law legislation that lowered that head tax $34.50 per person after facing pressure from major cruise lines, such as Carnival Cruises, which argued that the $46 head tax was too high. Thanks in large part to Parnell, Binkley said the Alaska Legislature also relaxed regulations, which encouraged cruise lines to deploy more ships to Alaska again. The decline in Alaska’s cruise passenger numbers also roughly coincides with the great recession, during which luxury spending fell off across the nation. Though Juneau was the only port in Alaska to hit the million-passenger mark this year, other ports may see more than one million passengers again in the near future. The major cruise lines determine where they will deploy their ships two years in advance, so cruise companies are setting their schedules for 2018. Though nothing is set in stone yet, Binkley expects the number of cruise passengers visiting Alaska to continue climbing in the coming years. Holland America, for example, is deploying an additional ship to Alaska next year, he said. Though cruising can at times be a controversial topic in towns such as Juneau, which are heavily impacted by the influx of people during the cruise season, the industry’s impact on the city’s economy is indisputable. “Cruise passengers make up 20 percent of our sales tax; that’s what this means to the city,” Mayor Koelsch said, explaining the importance of increasing cruise traffic in Juneau. “Plus, it breathes vigor into the city.”

Juneau to help with mobile home payments

When Margaret O’Neal, chair of the city’s Affordable Housing Commission, first moved to Juneau in the early ‘70s she found that many people who owned houses had first lived in mobile homes. “It was a very Alaskan kind of experience,” she told the Empire. “That was how people built equity, but you have to have financing first.” Now, more than 40 years later, a program she helped launch has the potential to set Juneau residents on that “very Alaskan” road to equity. This week the city launched its mobile home down payment assistance program, a partnership with True North Federal Credit Union. The program, which originated in the Affordable Housing Commission, will allow Juneau residents with a median household income of less than $96,800 annually to obtain low-interest loans covering up to half of their down payments. “Everything that we’ve seen over the years says that we need to provide as many tools possible to grow our affordable housing stock, and this is another tool,” said Scott Ciambor, the city’s chief housing officer. Mobile homes represent a sizable chunk of Juneau’s affordable housing stock, according to Ciambor. There are more than 1,200 mobile homes in Juneau, accounting for roughly 11 percent of the city’s overall housing stock. Mobile homes offer a less expensive alternative to renting than conventional homes, but that doesn’t mean they are easy for everybody to get into. Typically mobile homes have higher down payment requirements, according to Bill Peters, vice president of Corporate Development for True North. People buying mobile homes are typically asked to put 15 percent down whereas a first-time homebuyer purchasing a conventional house might only have to put 5 percent down. This means that a person looking to buy a $100,000 mobile home would have to make the same down payment as a first time homebuyer purchasing a $300,000 house. “Mobile homes — particularly mobile homes in parks — are a mainstay of affordable housing here,” Peters said. For the past three years, True North has been offering financing for mobile home down payments, Peters said. During that time, the credit union has booked 22 loans for homebuyers with annual household incomes ranging from about $40,000 to nearly $90,000. Now the city is sweetening the deal. It’s offering loans to match up to 50 percent of mobile home down payments through True North. These loans, which will have to be paid back in five years, will carry a 1 percent interest rate, which is quite low Peters said. So if our hypothetical homebuyer looking to purchase a $100,000 mobile home with a down payment of 15 percent were to take advantage of this new program, he or she would have to put $7,500 down, and the city would loan him or her the remaining $7,500. “We essentially process the city’s loans in conjunction with our lending,” Peters said. If everything works according to plan, Peters said this program could help younger or lower-income families begin building equity, a crucial step for those looking to climbing the housing ladder. The city has set aside a little more than one fifth of its nearly $500,000 affordable housing fund to support this program. It will continue to provide down payment loans until the $100,000 it has reserved for the program runs dry. It’s too early to say the extent to which the mobile home down payment program will ease the high cost of housing in Juneau. For Ciambor and O’Neal, though, it’s an important new tool for their toolbox — so long as people know about it, that is. “We have such a stuck market, so some of the work that we have to do is let people know that these resources and tools exist,” O’Neal said. Sam DeGrave can be reached at [email protected]

Juneau's first marijuana testing lab applies for permit, license

JUNEAU — When drafting their regulations for the growth and sale of marijuana, the Alaska Marijuana Control Board and the Juneau Assembly split the budding industry into four sectors: cultivation, product manufacturing, testing and retail. To date, the city’s Planning Commission has heard and approved conditional use permits for cultivation, manufacturing and retail businesses. Now, the last piece of the marijuana supply chain is about to fall into place. Southeast Alaska Laboratories LLC, Juneau’s first marijuana testing business based in Lemon Creek, has applied for its city conditional use permit and its state marijuana establishment license, and another business is following close behind. Glacier Analytics, a testing lab located in the Mendenhall Valley, should have its state license application and city permitting paperwork turned in by early next week, according to the business’ co-founder Mitch Knottingham. Loren Jones, a member of the Juneau Assembly and the Marijuana Control Board, said that these testing facility applications are a “big deal” for other marijuana businesses in town because without local testing, cultivators would be put in “limbo.” Jones, not speaking on behalf of the Marijuana Control Board, said that federal law currently prohibits the transport of marijuana using boats, planes or the U.S. Postal Service. This leaves transport via car the only real legal option for communities without licensed labs to get their products tested. Without access to the road system, however, this puts communities like Juneau in a bind. “If you’re in Mat-Su, you can drive your samples to Anchorage for testing,” Jones explained. “For communities in Southeast Alaska, rural Alaska, the Aluetian chain — all of those — it’s going to be problematic.” Now that Juneau has two prospective testing facilities preparing for business, growers and manufacturers here no longer have to worry about how they are going to transport their products to be tested. Jessica Dreibelbis, the CEO and manager of Southeast Alaska Laboratories, said this fact is not lost on most marijuana business owners in town. “When I put in my application, word got around pretty quick, and cultivators have been very appreciative,” she told the Empire in a phone interview Thursday. “They know without a lab here, it’s going to be very difficult for them to sell their product legally.” James Barrett — who co-founded and co-owns Rainforest Farms LLC with his brother, Giono — said that he was never particularly worried about having to ship his product for testing. He pointed out that in Washington and Oregon, both states in which recreational marijuana is legal, the feds have allowed for intrastate shipping of products. Jones observed this, too, and added that if other Alaska communities have trained their drug dogs like Juneau has (not to detect marijuana), then shipping might not be impossible to get away with — even if it is still federally illegal. “It’s not like we’re going to send a five-pound package of marijuana to the tester,” Jones said. “We’re talking about one-gram, two-gram samples.” But he also noted that shipping adds extra risk to business owners, who are already venturing into uncharted waters, so to speak. For Barrett, though, having a local lab is more exciting from a product development standpoint than anything. “If we have a lab we are close to here, we could have the lab analyze our products closely and help us develop them,” he said. With more direct access to labs, and without having to deal with the hassle of shipping, Barrett said Rainforest Farms would go beyond the regulatory mandatory testing to work on fine-tuning the taste and effects of its edible products. The Barretts and other cultivators are not the only people happy about Juneau’s two testing facilities. Both lab owners said they are excited to get their businesses off the ground. Knottingham is going into business with his wife, Rochele. He said they have wanted to get into the commercial marijuana industry for a while now, and testing seemed like a good fit, given that Rochele has a background in water-quality testing. “With Rochele’s background and the lack of labs in Southeast, it made way more sense for us and for the entire community for us to focus on a laboratory,” Mitch Knottingham said. Dreibelbis’ conditional use permit hearing is scheduled for the July 26 Planning Commission meeting, and Jones said Dreibelbis’ state license will likely be heard at the Marijuana Control Board’s September meeting. Dates won’t be set for Knottingham’s hearing until his permit and license paperwork has been finalized and submitted. • Contact reporter Sam DeGrave at 523-2279 or at [email protected]

Lawsuit looms heavy over Juneau chamber luncheon

JUNEAU — The presentation John Binkley gave during Thursday’s Juneau Chamber of Commerce luncheon was a little longer than he had originally planned when the chamber asked him to speak a couple weeks ago. That’s because Binkley, a former Alaska legislator and president of the Cruise Lines International Association’s Alaska affiliate, couldn’t give the cruise industry update he had prepared without mentioning that his organization is suing the city. Shortly after beginning his presentation in the crowded ballroom of the Hangar on the Wharf, Binkley assured his audience that he would explain the “activities of earlier this week” before he finished. As if referring to Voldemort, he didn’t mention these “activities” by name, but most people already knew what he was talking about. On Tuesday, CLIA Alaska announced that it is suing Juneau and several city officials including the mayor in federal court over the alleged misuse of marine passenger fees. “We want to find a way to move forward,” Binkley said of the lawsuit. “We’ve had this long-standing dispute — difference of opinion — and it’s causing more friction, I believe, between the industry and the community, and the only way we think we can solve that is through our judicial system.” The city currently collects a $5 entry fee from every cruise passenger and another $3 fee for port development. The fees are collectively referred to locally as the cruise ship head taxes, and they add up. In the past four years, Juneau has received more than $35 million from cruise lines, according to CLIA Alaska. Juneau is not the only community in Southeast Alaska that levies head taxes, but it is the only community CLIA is taking to court. This is at least in part because of the Whale Project. Though the almost $3 million whale stature was paid for with private donations, CLIA Alaska alleges that the $10 million in head tax money the city is using to fund the seawalk and park surrounding the life-sized bronze whale crosses the line. “We don’t have a problem with the whale,” Binkley said. “It’s about a mile from the current docks, and that’s really our concern.” According to Binkley and CLIA Alaska, head tax money has to be spent in a manner that “impacts the ship and the passenger arriving on the ship.” Though cruise passengers may very well walk a mile to see the whale, the sculpture doesn’t benefit the cruise ships in any way, which is where Binkley finds fault with it. Bob Janes, the owner of Gastineau Guiding, was in the audience and took issue with this point. Janes’ company operates nine whale-watching boats out of Statter Harbor in Auke Bay, which sees a sizeable increase in traffic during cruise season. In fact, 98 percent of the roughly 32,000 people who Janes’ company moves through the harbor during the summer months come from cruise ships, he said. “There are big impacts that are figuratively close to the docks,” he told the audience before asking Binkley if he thought infrastructure improvements in Statter Harbor would be an appropriate use of head taxes. Binkley said that answer depends on the outcome of the lawsuit. “Our interpretation is that it really has to be tied pretty closely to the ship; it really has to have a nexus to the ship,” he responded. “I don’t know what the answer is, but hopefully we’ll get some guidance from the court.” That guidance is likely to come at a heavy cost to Juneau though, according to City Attorney Amy Mead. It’s too early to tell exactly how the lawsuit will unfold or how much it will cost, but it will likely be a “significant amount.” “This is not a case I can handle out of this office; I just don’t have the resources to take on this and meet the normal legal needs of the city,” she told the Empire in a phone interview Thursday afternoon. “We are going to have to retain outside council, and I suspect that will be costly.” If she were to try to handle this suit in-house, Mead said she would need at least one more full-time attorney and a paralegal. Binkley said that he hopes this lawsuit doesn’t create any animosity between the city and the cruise industry, and he acknowledged that the city has spent some marine passenger fee funds appropriately. He supports the construction of the two new Panamax docks downtown, both of which were funded partially by the local port development fee. “That’s really what these fees are supposed to be used for,” he said. The city maintains that it has used passenger fees in an appropriate manner. “Juneau has a long history of legal and responsible community planning and implementation of passenger fees for the management of our visitor industry,” Mayor Ken Koelsch wrote in a city press release Wednesday. Koelsch was present for Binkley’s talk Thursday and is one of the city officials named in the suit.  

Juneau Assembly supports Juneau Hydropower plan

JUNEAU — The City and Borough of Juneau Assembly has pledged its support to Juneau Hydropower Inc.’s $25 million district heating plant proposal, which company officials said will keep heat prices low and carbon emissions lower. At a Feb. 22 Assembly work session, Juneau Hydropower CEO Keith Comstock and Duff Mitchell, the company’s managing director, pitched their plan to use water from the Gastineau Channel to heat Downtown Juneau. They didn’t ask for much in return. “We’re asking for your love, tenderness and cheerleading support,” Mitchell said, channeling his inner Michael Bolton and eliciting a few chuckles from Assembly members and onlookers alike. Mayor Mary Becker showed the Juneau Hydropower some love when she moved that the Assembly write a letter of support for the plan. The rest of the Assembly turned on the tenderness when it voted, without objection, to pass Becker’s motion, but not before Assembly member Debbie White gave Comstock and Mitchell her cheerleading support by amending Becker’s motion, clarifying that it would be a “strong letter of support.” Boasting their district-heating plant’s 300 percent efficiency rating and its ability to reduce Juneau’s dependence on fossil fuels and outside markets, Comstock and Mitchell won over some of the Assembly’s toughest critics, such as Jerry Nankervis. “In the four years I’ve been hearing about this project, I’ve yet to hear anything about it that I don’t like,” Nankervis said after the pitch. With the Assembly at their backs, Comstock and Mitchell have to finish answering the four major questions that Comstock said need to be resolved in order to get the project going. They’ve already answered the first two: both think the project is both economically feasible and marketable. Now they need to finish getting their equity in order and securing financing, according to Comstock. “This is a large project so there’s a large amount of equity that has to be put down,” he said noting that Juneau Hydropower has friends on Wall Street ready to invest in the project. As for the financing, Mitchell and Comstock said they are looking for a low-interest loan from the federal government, and they are getting “strong signals of support.” “We wouldn’t be here talking to you if we didn’t intend to go into construction, and in order for that to happen we have to have all of these things in place,” Comstock said. Juneau District Heating’s system would take electricity from Juneau Hydropower’s Sweetheart Lake facility about 40 miles south of the city to power heat pumps in Gastineau Channel that “scavenge” the thermal energy in the seawater and transfer the heat to water in network of pipes used to deliver the heat to homes and businesses. It is essentially the same process used in large-scale refrigeration, except the heat is trapped as a valuable resource rather than being collected and dispersed as waste. The City of Seward is also investigating the potential of sourcing its heat from Resurrection Bay. The science behind the renewable energy is nothing new; it’s already being used on a smaller, and cooler, scale to heat the Alaska Sealife Center in Seward and the Ted Stevens Marine Research Institute in Juneau. At more than 180 degrees Fahrenheit, the district heat loop would run hotter than the systems used at the Sealife Center and Marine Research Institute. With two water lines, that hot water can simply be put hooked up to and replace a fuel oil-fired boiler system, which 78 percent of Juneau’s buildings, including Downtown state facilities, use for space heat. Juneau Hydropower estimates the cost to switch from fuel oil heat to the district heat system to be in the hundreds or low thousands of dollars — less than switching to natural gas. Information from a previous Journal article by Elwood Brehmer was added to the original story.

Juneau bars some materials for marijuana concentrates

JUNEAU — Anybody attempting to make marijuana concentrates using butane, propane or any other such chemical had better think twice. Not only could using these gases result in a potentially deadly explosion, they will now result in misdemeanor charges, too. Without objection, the City and Borough of Juneau Assembly passed an ordinance Feb. 8 making it illegal for anybody without a license or permit to make marijuana concentrate — waxes, oils, etc. — using extraction methods that are not alcohol-, food- or water-based. This ordinance applies to all city zones; no permit or license, no gas-based extraction. Until Feb. 8, the ordinance allowed only for food- and water-based extractions, but Assembly member Debbie White motioned to include alcohol-based extractions, which she pointed out are not as dangerous as using explosive gases. “Alcohol is flammable, but it’s definitely not explosive,” she said. With a 5-3 vote, the Assembly approved White’s motion but not before consulting with Capital City Fire/Rescue Chief Rich Etheridge, who confirmed White’s point. “I think the risk is less than those explosive, compressed gases, but there is a risk similar as when cooking with alcohol or using it in your garage,” he told the Assembly. “There is a risk, but it’s not the level of using butane or those other methods.” Assembly members Loren Jones, Maria Gladziszewski and Mayor Mary Becker voted against White’s amendment. Jones said that he wanted the Assembly to clarify what it meant by “food-based” extraction, explaining that people are already making concentrates illegally. The only way the Assembly can make sure people are making concentrates safely is by “better defining ‘food-based.’” Assembly member Jesse Kiehl, a proponent of the ordinance and of White’s motion said that what Jones was asking for was beyond the scope of this particular ordinance. “In terms of dealing with this ordinance, that is dealing with things that go boom, any of these food products are OK with me because none of them go boom,” he said responding to Jones. “It makes sense that we should allow people to do alcohol-based extractions because it’s not going to make the neighbor’s house blow up.” The members of the Assembly weren’t the only ones talking about marijuana in City Hall Monday. The Assembly discussion regarding the concentrate ordinance was preceded by a lengthier public-comment period than usual. Four North Douglas residents, including Planning Commission Chair Nicole Grewe, spoke out against the Assembly’s decision to allow commercial marijuana operations to operate in D1 and Rural Reserve zones outside the urban service boundary. Though the Assembly established the zoning rules for marijuana businesses in early November, Grewe said it’s not too late to ensure neighborhood harmony. “We answered the where, but we didn’t answer the how,” she told the Assembly. Grewe also took issue with the fact that the Assembly had made the “random” distinction between D1 and Rural Reserve neighborhoods inside the urban service boundary and those outside it, which is the case for her neighborhood. Not all neighborhoods outside the urban service boundary are low density, she said. “I could subdivide my lot, put in two grow facilities, and force my neighbors to look at two marijuana farms, 1,000 total square feet,” Grewe said. “That’s not low density, not even close.” The Assembly didn’t discuss the zoning matter further, as it was not an agenda item.
Subscribe to RSS - Sam DeGrave