New Orleans mayor's plan for cruise tax raises concern of Port CEO

New Orleans CityBusiness, Mar 7, 2005 by Chris Price

Looking for ways to bolster a tight budget without adding new taxes, New Orleans Mayor C. Ray Nagin wants to tap one of the city's fastest-growing industries.

But he risks a feud with Port of New Orleans President Gary LaGrange.

The mayor has proposed increasing the cruise ship boarding tax 88 percent. Nagin wants the tax passenger's pay to board cruise ships in New Orleans raised from $8 to $15.

Since the city's budget is so tight - it's fiscally sound but it's tight - we are looking at enhanced revenue measures that don't impact the citizens. And the cruise ship industry is one, Nagin said.

Keep in mind, there's almost 1 million new passengers that have come to the city, he said. The city is responsible for fire, safety and cleanup associated with those people. So we think it's only right we share in the revenue from that industry.

LaGrange says such an increase would hamper the Port's ability to sustain the industry let alone attract new ships to the Crescent City.

The Port of New Orleans did not and will not go blindly into restructuring the boarding tax, LaGrange said. That $8 number was not pulled out of the sky. Hours of study and thought went into coming up with that figure that we think makes this Port competitive from a standpoint of bringing more cruise ships in.

If there was any way an additional assessment could be put on the cruise ship passengers without jeopardizing the business and chasing cruise ships away we would have already done it, he said.

Nagin said New Orleans should raise its boarding tax to equal the Port of Miami's fee.

The mayor alluded to Miami's $15 boarding fee but Miami is not our competition, LaGrange said. Our competition is on the Gulf Coast.

State Rep. Cheryl Gray of District 98 said Nagin has briefed New Orleans-area legislators about raising the tax.

I was under the impression that the increase he was asking for would actually keep us in line or put us in line with our competitors, she said.

But LaGrange said Nagin did not confer with Port officials before discussing the proposed increase. LaGrange warned raising the boarding tax to $15 would impede growth of the cruise industry and send ships to rival ports along the Gulf Coast.

I was a bit surprised by Mr. LaGrange's concern that it would put us out of competition with other cities, Gray said. I'm waiting for more information and clarification. Clearly we don't want to do anything that limits us in our ability to compete and hinders the booming industry we have.

The Port of Houston charges an $8 boarding tax, the Port of Galveston charges $6.80 for Royal Caribbean cruises and $5.75 for Carnival cruises. The Mobile, Ala., Cruise Terminal would not release its boarding fee.

The International Council of Cruise Lines named New Orleans the world's fastest-growing cruise port in 2004 capping a 12-year boom with more than 773 percent growth in passengers served.

Cruise passengers sailing out of New Orleans multiplied from 80,000 in 1993 to 698,193 in 2004. New Orleans is the home port to four cruise ships, a number LaGrange plans to double within the next five years.

The Port's two new cruise ship terminals at the Erato and Poland street wharves should be completed in 2006. LaGrange also proposed adding a terminal on the West Bank opposite the Julia Street Cruise Terminal, which could be operational by 2010.

Within the past five years several Gulf Coast ports - including Houston; Galveston, Texas; and Mobile, Ala. - have added cruise services cash in on the growing popularity of western Caribbean cruises. Ports officials in Gulfport, Miss., and Pensacola, Fla., are looking into the possibility of adding cruise services in the near future, LaGrange said.

In order for the next cruise ship to come to New Orleans instead of somewhere else, we need to make darn sure our rates are equal to or better than theirs, LaGrange said. We don't need to assess that tax and have those ships turn around and go to another port. That does nobody any good.

Tim Gallagher, a spokesman for Carnival Cruise Lines, said the increase would hurt New Orleans in remaining competitive.

There's no question that cruise lines look at those costs when they look at homeports for their ships, Gallagher said. This proposed increase would make New Orleans significantly higher than its competitors and Miami is not one of New Orleans' competitors.

LaGrange said the increase is not needed to cover city-provided services because New Orleans already benefits from cruise-related sales taxes.

According to a Port-commissioned study conducted by Pennsylvania- based Business Research and Economic Advisors, the cruise industry was responsible for $150 million in direct sales among New Orleans businesses in 2004, including $18.1 million in retail and clothing stores, $17.5 million on lodging and $13.9 million on dining.

LaGrange said he plans to meet with the mayor to discuss the issue but a date has not been set. It's a shame he didn't discuss it with us in the first place, but when we meet I'll bring my olive branch, he said.