After a year of negotiations, the cruise industry and a local public-private task force are getting close to submitting to legislators a formal long-term operating agreement for future port calls in the territory.
The talks were spurred after Sen. Roosevelt David floated a proposal to increase the fee levied on cruise ship passengers arriving in St. Thomas. The proposed $2.50 hike, which would come on top of a $7.50 passenger fee currently being collected by the West Indian Co. Ltd., would be directed to the general fund under David’s proposal. Currently, $3.50 of the fee goes to WICO and the remaining $4 to the V.I. Port Authority.
The proposal sent many Charlotte Amalie merchants who are dependent on cruise passengers into the streets to protest. The St. Thomas-St. John Chamber of Commerce has also come out against the increase. Much of the opposition stems from the not-so unfounded fear that cruise lines, which denounced the hike, would cut back on their visits to the territory or drop the stop altogether if the increase was implemented.
John deJongh Jr., president of the St. Thomas chamber and a member of the V.I. task force, said he understands the head tax’s revenue-enhancing goal, but said the proposed long-term operating agreement secures what a tax can’t: an increasing percentage of port calls for five years – guaranteed. The deal also contains provisions for increasing ship calls to St. Croix, deJongh said.
Those visits would generate a predictable revenue stream for the government and the business community without having the threat of cruise line pullouts looming over the territory.
Last November, Carnival Cruise Lines dropped Grenada from its itinerary after a year of debate over a proposed $1.50 passenger fee. Although Carnival said the fee was not a major issue in its decision, it would have had to pay $3,900 more per visit. The fee was to be used to fund a waste disposal program. Carnival also dropped Santo Domingo, Dominican Republic, when it changed its itinerary.
"I think we are, in fact, putting ourselves at risk" with a head tax, deJongh said. "We should never be so arrogant to think there are no alternatives for the cruise lines. Rather than managing a small amount of revenue. Let’s manage the industry and economy better."
While deJongh wouldn’t reveal how many more port calls would occur under the proposed agreement, he did say it is based on incremental increases for both the winter and summer seasons. And if the cruise lines don’t live up to the projected number of passengers, they would have to pay a penalty.
"We’d select a base year and then grow each year by a percentage beyond that. It gives a consistent flow of passengers and it also allows you to manage if you want more," deJongh said. "If they didn’t live up to the volume they agreed to, then they’d have to pay a penalty that would also be negotiable."
In its spring 2000 issue, Cruise Industry News cited a draft of the proposed long-term agreement. It said the cruise lines were offering St. Thomas in-season as well as summer-season traffic increases of 10 percent annually, with a 25 percent annual increase for St. Croix.
But in its proposal, the Florida Caribbean Cruise Association warned that the Virgin Islands could expect a reduction of about 400,000 passengers a year if the head tax legislation was approved, according to Cruise Industry News.
The reduction could take effect as early as the year 2006, the FCCA said. Without the head tax, the islands are guaranteed 1.09 million passengers in the same year if the territory signs off on the contract.
Michelle Paige, executive director of the FCCA, declined to reveal details of the proposed agreement but said all the stakeholders "seem to be on the same page."
While the focus of the agreement is on St. Thomas, Paige noted that St. Croix, which pales in comparison to its sister island when it comes to port calls, is "very important."
DeJongh said that under the agreement, the cruise lines would send marketing and advertising representatives to St. Croix to evaluate the destination. Those in the cruise industry have noted that the Big Island doesn’t offer enough shore excursion tours or businesses that advertise onboard ships to make it profitable for port calls.
But deJongh asked the longstanding question on St. Croix: What comes first, the ships or the businesses?
"What does St. Croix need?" deJongh asked. "If we can do a long-term agreement, the private sector would be willing to make the investment."
Paige, meanwhile, said the proposed agreement isn’t a new concept within the industry. And although the negotiations with the territory have been under way for a year, she said she is optimistic about the outcome.
"With partners that are very important to each other, it’s very important to plan accurately," she said. "I don’t think there are any problems. We’re working it out. There is no bad news. It’s all extremely positive."
