Ketchikan uses $2M Norwegian Cruise Line donation to keep port fund afloat through May

Ketchikan’s City Council will put a $2 million donation to the city from Norwegian Cruise Line towards shoring up its ailing port fund.

 

It’s not too often that a cruise line writes a big, unrestricted check to the city of Ketchikan.

“It’s the only unencumbered money you’re ever going to see from the cruise lines. Let’s be realistic: barring a paradigm shift, this is it,” said Ketchikan City Council member Mark Flora at Thursday’s meeting.

He referred to the fact that nearly all the money cruise lines and passengers pay to the city to dock at Ketchikan’s port is restricted by federal law: cruise lines can sue if they believe a particular project funded by port fees doesn’t benefit port users.

So, in theory, the $2 million check from Norwegian Cruise Line presented a rare opportunity to finance city projects outside the port.

“I would very much love to to put it towards sewer lines or any a huge list of other needs that we have in the community,” said Riley Gass, also on the City Council. “But I think right now we’re in get through this crisis mode.”

In a memo to the council, Ketchikan’s finance director explained that port revenues fell by more than 99% when cruise ships stopped calling in 2020 — from more than $10 million in 2019 to roughly $82,000 in 2020. And it wasn’t much better this year: revenue is expected to come in at about $1.35 million.

The finance director told the council that it was essentially out of viable options. Without an immediate cash infusion, the port fund would be unable to pay its debts by the end of the year.

“I thought we had partners,” City Council Member Judy Zenge said. She called back to discussions from last year, when the council rejected two private proposals to take over operations of the port. In exchange, the city would have received cash to upgrade port facilities and city infrastructure.

The City Council at the time voted 4-3 to keep the port under city management.

“When the RFP was happening, we were told, ‘No, we should manage your own port. We’ve got partners, they want to help us, they’re gonna come to the table,’” Zenge said. “I based my vote on that. Where are the partners?”

Interim City Manager Lacey Simpson explained that she’d held one meeting with cruise line representatives in which the city presented a list of minor projects to be funded from the port fund. Simpson says the idea was to get a list of projects that the cruise lines wouldn’t sue over.

“They were fairly receptive to what we laid out,” she said. “But as you’ll recall, while we introduced the limitations of the port, at no time did we say we would like our cruise line partners to … provide some sort of solution that would cover debt service and other operational obligations of the port.”

Cruise lines have yet to respond to the list of projects, Mayor Dave Kiffer said. Simpson said the cruise lines view port calls as their primary mechanism for supporting the port.

Flora said the insolvency of the port fund illustrated larger problems with the city’s approach to port management.

“This model that we’ve been doing in this community has never been sustainable,” he said. “The pandemic accelerated to get us to where we are now. But the debt’s gone up, the infrastructure’s decayed — this has never been a model that works.”

He said the problems would continue until the city changed its approach.

“It’s such a fantastic business model, nobody does it. But it’s imposed upon the citizens of this town as the best solution. And maybe I’m hearing it wrong, but I still hear basically the status quo with ‘maybe we’ll let you spend money on a bathroom or crossing guards.’ That is not going to solve this problem,” Flora said.

Flora, citing the lack of other options, voted with a unanimous council to green-light the transfer. The $2 million from Norwegian, plus another roughly $2.7 million in American Rescue Plan funding, will keep the port fund afloat until next May.