The City of Ketchikan commissioned a study by McKinley Research Group to look at how much tourism is costing the city.
“So your total costs to the City of Ketchikan related to cruise passenger volume in the city for 2023 was about $8 million,” Raniyah Bakr, a McKinley economist, told the Ketchikan City Council at their October 17 meeting.
That $8 million breaks down to about $5.43 per tourist.
According to a memo from City Manager Delilah Walsh, the study aims to hone in on the specific areas where cruise passengers cost the city the most. That way, they can better focus on where to spend the tourism revenue and negotiate with cruise lines in the future.
The research broke down the costs by city departments. The Ports & Harbors department and emergency services bore the financial brunt of the nearly 1.5 million cruise passengers that passed through the city in 2023. McKinley estimated the total cost to Ports & Harbors to be roughly $3.8 million followed by fire/EMS and police, at $1.3 million and $1 million, respectively.
According to the report, a big part of that cost to Ports & Harbors is Berth IV, one of Ketchikan’s four cruise ship docks. All the docks are city-owned except Berth IV, which the city leases from Ketchikan Dock Company. The city pays the private company a flat, year-round lease of $1.8 million a year for use of the berth, even though, as the report points out, the cruise docks go largely unused in the off-season. Ketchikan Dock Company charges additional fees when passenger volume exceeds 820,000. According to the report, the city paid $2.3 million in 2023 for using Berth IV.
McKinley first submitted the report to the city back in September.
McKinley arrived at these numbers by factoring in two specific types of costs. One is what they call “marginal costs,” which are the costs that wouldn’t exist if there were no cruise passengers– things like hiring seasonal crossing guards or janitorial contracts. The other is “overhead costs,” or the toll that cruise passengers put on city services not specifically geared towards them, things like medical supplies and overtime pay for the city’s emergency medical personnel dealing with more calls. As Bakr put it, this calculation largely focuses on “services rendered rather than actual spending.”
Walsh said the city doesn’t hire extra employees for the summer months. Fire and police department employees just work overtime.
“We just spend a lot on overtime in the season. Let’s say we schedule three ambulance shifts normally. We’ll schedule five during the season because of the call volume. So we’re not hiring more individuals, but we do have a lot of overtime because of it,” Walsh said, adding that those departments are already understaffed. “What national standards are, we’re probably short three EMTs in spite of the cruise season, just based on our number of calls.”
For the $8 million in costs, McKinley said the city doubled that in revenue, bringing in more than $16 million from cruisers. Nearly 90% of that was port fees.
Councilmember Jai Mahtani, who also runs a retail business near the cruise docks, disparaged McKinley’s report. He said he believed the cost to the city was far more than $8 million.
“I’m frustrated because this data is inaccurate – just doesn’t apply, just doesn’t. I think we need to be very careful how we go about using this data,” said Mahtani.
He didn’t elaborate on specific figures in the data he thought were inaccurate.
Councilmember Mark Flora also expressed concern but with a different aspect of the report. Specifically, Flora pointed to the largest cruise-related expense: the port. Flora said the funding for the port was coming out of the city’s general fund, which he says means that “the residents of Ketchikan are subsidizing port operations.”
“We have general fund money funding that port — and by the way, gang, that’s not allowed,” said the councilman. According to Flora, sales tax isn’t factored into port revenue and Ketchikan’s port can’t sustain itself.
“I hope we’re not looking for ways to sustain what’s going on here, because we’re actually asking residents to support expenses directly attributable to visitors,” Flora said, banging his fist on the dais.
City Manager Walsh said she sees where Flora is coming from but said it’s not what the data in this study is pointing to. She said the costs shown in the study are not related to port infrastructure but rather what happens when passengers step off the port.
“The functioning of the port, the infrastructure of the port, that’s a whole separate cost versus what it costs for a person to get off the ship and impact us, because it’s going to be a cost, no matter what, for a ship to dock,” said Walsh.
Raniyah Bakr, the McKinley economist, also mentioned how Ward Cove fits into the equation. Bakr said the cruise port at Ward Cove is responsible for 25% of total passenger numbers. According to the report, Ward Cove recieved about 368,000 passengers in 2023 and about half of them traveled to downtown Ketchikan. Ward Cove, however, is owned by a private company called the Ward Cove Group and partially funded by Norwegian Cruise Lines. The report factored in the costs to the city presented by these additional passengers but Bakr said she didn’t know the tax structure between the City and the Ward Cove Group or if Ketchikan received revenue from Ward Cove.
Walsh noted that Ward Cove passengers do impact Ketchikan’s infrastructure and overall costs.
Ketchikan’s newly elected mayor Bob Sivertsen referenced the head tax, a fee that is paid per passenger and factored out to about $5 per person in the report, and said that Ward Cove port receives the full $5 per passenger while the Ketchikan city and borough had to split the $5 fee in half. “We should be getting credit for that, because the impact is in the community,” Sivertsen said of the Ward Cove Group’s profit. However, Sivertsen also said that the island’s cruise docks were largely a “conduit to get the revenue, get the people into the town, so we can get the sales tax and the economy from the passengers as they come into the community.”
The city will continue to look at the cost of tourism. McKinley Research Group said they planned a survey of Ketchikan residents to look into the intangible costs, like how it affects locals’ quality of life.
McKinley also acknowledged in the report other intangible costs to the city that they were unable to calculate, like the fact that city and state engineers “often struggle to upgrade municipal infrastructure because construction season largely overlaps with the cruise season” or that municipal employees are often “unable to take vacations during the season.” The report also cited cruise passengers using restrooms at local museums without paying admission, which staff must maintain, and commercial charter and tourism boats “blocking the loading zone at the harbor, resulting in lost moorage revenues from other potential users.”
Ketchikan City Council voted unanimously to accept the report and directed staff to come back with a recommendation on how best to use the data.