If Skagway doesn’t renovate its port for larger cruise ships, it could miss out on $15 to $30 million over 20 years. But even without the bigger ships, visitor revenue will increase. That was the message port consultants delivered to Skagway residents last week.
It’s difficult to overstate Skagway’s reliance on tourism. More than two-thirds (68 percent) of the city’s revenue comes from sales tax, cruise passenger head tax, and bed tax.
To what degree that revenue increases depends on the decisions Skagway makes over the next couple months.
“Without dramatizing it, this is the most important decision you’ll make probably for the next 20 years,” said Shaun McFarlane.
McFarlane is with Moffatt & Nichol, a port consulting firm hired by city.
“There are cruise ships wanting to come in in 2019,” McFarlane said. “There’s not a lot of time for more navel-gazing.”
Here’s the situation. Even more massive cruise ships are expected in Alaska in two years. Skagway doesn’t have the dock capacity to accept more than one mega-ship at a time.
In order to build a floating dock that would create more capacity, the city needs access to property currently leased by a private company. White Pass and Yukon Route Railroad has said it will cooperate on those improvements, but only if it gets a guarantee its lease will continue past its current expiration date in 2023.
McFarlane said working with White Pass is the best bet to meet the deadline for bigger ships.
“You already have a context and a player in place with White Pass to allow that project to move forward,” McFarlane said.
Moffatt & Nichol conducted an economic analysis where they projected how much income the city would lose without a floating dock for larger cruise ships.
First there’s the question of whether smaller ships would take advantage of the open dock space if the mega-ships weren’t able to make port calls. McFarlane says that’s not likely. But if it were to happen, contractor Lorraine Cordova says Skagway could lose out on about 2,000 passengers per week in 2019.
“We’re still saying there’s gonna be an increase in cruise ship passengers that’ll come to Skagway even in the constrained case, you’re gonna have more passengers than you have today,” Cordova said. “But it’s gonna be about 2,000 less than what you could’ve had.”
The 2,000 visitors per week equates to about 40,000 throughout the whole 2019 season. That’s a conservative estimate. If no smaller ships are waiting in the wings to take advantage of empty dock space, Skagway could lose 4,000 passengers per week.
Cordova says the total estimated loss in revenue is between $15 and $30 million over a 20-year period.
Again, Cordova says without the bigger ships, Skagway’s visitor income would still increase, but the city just wouldn’t be able to capture all of the money it could.
Moffatt & Nichol’s subcontractor, Julie Dinneen, conducted an appraisal of Skagway’s tidelands and uplands.
A proposed new lease with White Pass would cover just the tidelands beneath the ore and Broadway docks. Dinneen says tidelands typically lease for six to seven percent of the land value. If the city were to follow that rationale, Dinneen says the annual lease payments would be about $60,000 at the low end and $94,000 at the high end.
That’s significantly less than the yearly rent payment of $200,000 proposed by White Pass. It’s also less than what the railroad is paying right now.
White Pass has controlled the majority of Skagway’s waterfront, including cruise operations, for decades. Some residents don’t want to sign a longer lease because they think the city should take over management of the port.
Moffatt & Nichol also researched port governance structures. They gave examples of ports which, like Skagway, have a public-private partnership, and others in which the government oversees operations.
One of Moffatt & Nichol’s main points was that if Skagway were the create a port authority and transition to a more active role, it would be a long process. And, as one consultant put it, time is not on Skagway’s side.
The full Moffatt & Nichol reports are at skagway.org.
Skagway paid about $265,000 for the economic analysis, port governance study and environmental compliance report. The city paid Moffatt & Nichol a separate $200,000 for a short-term port planning process.
The Skagway Assembly is holding a special meeting Wednesday, July 26 to discuss the new White Pass lease proposal.