PASSENGER ACT HURTS SEATTLE

PASSENGER ACT HURTS SEATTLE

Nearly $1 million a week in direct spending is fleeing the Puget Sound region for Canada because a century-old law keeps most Alaskan cruise ships north of the border, a draft study due to be released next month says.

Consultants from Arthur Young & Co. are expected to tell the Greater Seattle Chamber of Commerce that Alaskan cruises are pumping more than $50 million a year into the Pacific Northwest, but that less than 20 percent of the money is being captured on Puget Sound.Most of money goes to Vancouver, British Columbia.

What's more, the Seattle-based consultants conclude that the 1886 Passenger Act - designed to protect U.S.-flag passenger liners - is chiefly responsible for keeping nearly all of the two dozen Alaskan cruise liners from starting regular operations based in Seattle.

Gary Severson, a First Interstate Bank vice president who chairs the Cruise Ship Technical Advisory Committee that commissioned the study, disclosed its preliminary findings. He said the percentage and dollar figures are general ranges, with the specific numbers due to be released in March.

The study found that the Passenger Act is the single biggest inhibitor of the further development of the cruise industry in Seattle, Mr. Severson said. But it also compared the market appeal of the ports of Seattle and Vancouver and produced a lot of empirical evidence that Vancouver has a substantially higher drawing power among Alaska cruise passengers.

Executives at the port of Vancouver contend the port's $25 million cruise terminal, its geographic position 70 miles closer to Alaska and special efforts to provide services for cruise ships would hold most of the Alaskan cruise fleet in Vancouver even if one-way cruises from U.S. ports on Puget Sound to U.S. ports in Alaska aboard foreign-flag ships were not prohibited under the U.S. Passenger Act.

With the exception of some small, exploration-oriented ships, the entire Alaskan cruise fleet operates under foreign registry, although some cruise lines are based in the United States.

Mr. Severson also said that the direct spending figure documented by the consultants proved to be far lower than the $300 million figure sometimes mentioned in Canadian reports.

They (the consultants) tried to substantiate that ($300 million) and the trail always led to a dead end, he said, noting that the Arthur Young & Co. figures are based on 1986 and 1987 summer cruise seasons. Somebody has got to acknowledge that there's an awful lot of blue sky and wishful thinking in that $300 million.

The economic impact figures clearly show that Puget Sound captures a small percentage of the cruise industry's dollar, he said, even though 70 percent of Alaskan cruise passengers arrive at Seattle-Tacoma International Airport, which has better air connections than Vancouver's airport.

Jacquie Trainor, trade development manager for the Seattle chamber, said the study did not recommend action, but provides the background to go out and raise the money to do what needs to be done in (Washington) D.C.

Rep. Don Young, D-Alaska, in December introduced a bill to grant foreign-flag cruise ships in Alaska a Passenger Act exemption similar to the one that allows cruise ships to operate freely in Puerto Rico.

The bill is currently being fine-tuned to protect the state of Alaska's state ferry system from foreign competition. The measure is expected, however, to face broad philosophical opposition from the U.S.-flag maritime industry.

U.S. maritime executives fear that such exemptions to the Passenger Act would set precedents that could be used to challenge the Jones Act, a law that reserves transportation of cargo between U.S. ports to U.S.-flag carriers.

Lee Forsgren, legislative assistant to Rep. Young, said the bill, House Resolution 3681, has been referred to the House Merchant Marine and Fisheries Committee and probably won't be considered until April, after a proposal to open the Arctic Natural Wildlife Refuge has been heard.

Alongside ANWR, this passenger ship issue is like an amoeba on the back of a whale, he said.

That view of the importance of cruise business does not prevail on Puget Sound, however.

Henry Aronson, president of the Seattle Port Commission, said he believes the Passenger Act is responsible for a seemingly glaring and conspicuous failure by Seattle to land vital business.

Foreign ships would be no less barred (from making one-way cruises) from Seattle if we moved the Taj Mahal to Seattle's (cruise ship) pier, he said in a speech to North Atlantic maritime executives.

Mr. Aronson estimated that each cruise ship operating from Seattle produces $5 million to $10 million in primary spending, 100 to 150 new jobs and $400,000 to $600,000 in new state sales taxes.

Half of those jobs are providing maritime services, such as longshoremen to load and unload the cruise liners, he said.

If Seattle were to snare the lion's share of the cruise ship business currently based in Vancouver, this accomplishment alone would provide short- term to medium-term benefits to Seattle, Washington state and our region as great as any opportunity known to us, he said.

Mr. Aronson said he might personally think the Passenger Act needs to be amended, but said the Seattle port is not in a position to oppose U.S.-flag shipping lines that provide a large share of the 1 million cargo containers that passed through Seattle in 1987.

Still, the Seattle port is not alone in recognizing the economic potential of cruise business.

The port of New Orleans, for example, was instrumental in obtaining a new U.S. Customs interpretation that made it possible for a foreign-flag cruise line to base its operations there, resulting in an estimated $15 million in direct spending.

Capt. H.G. Joffray, assistant executive port director in New Orleans, said the end of a U.S. Customs interpretation limiting the stay of foreign- flag cruise ships to one day prompted the Bermuda Star Line of Teaneck, N.J., to base a ship in New Orleans.

The ship makes week-long, round-trip voyages to ports in Mexico.

Combined with a state law allowing gambling aboard ship during the eight-hour cruise to the Gulf of Mexico, the change produced $15 million a year in increased purchases of maritime services and ship supplies, he said.

The commonwealth of Puerto Rico, which obtained a congressional exemption to the Passenger Act, had less detailed information available on the economic gains resulting fromforeign-flag cruise ships, but reported that some of those ships use the island as a base under the exemption.

Managers at Puerto Rico's office in Washington, D.C., said the exemption was won over the objections of the U.S.-flag maritime industry, in part

because of a series of horror stories about medical patients unable to fly

finding it nearly impossible to reach Puerto Rico without repeated transfers

from one island to another.

Both the Puerto Rico exemption and the proposed Alaska exemption allow foreign-flag cruise ships to operate only if no U.S.-flag line is willing to provide similar service.