The state had been sitting on $37.5 million it collected over several years — but not spent — from its cruise ship passenger tax, and the Legislature decided this was the year to put the money to good use. Lawmakers drained the account and sent the funds to 16 communities, based on their cruise visitor counts.

Wrangell will receive $375,000, with no immediate plans to spend the money.

“It didn’t serve a public purpose building up an account balance,” Juneau Sen. Jesse Kiehl said of the money sitting unused in the state’s commercial vessel passenger tax account.

Gov. Mike Dunleavy had not proposed spending from the account, leaving it to accumulate. 

Kiehl is a member of the Senate Finance Committee, which added the spending to the state budget in May. The governor signed the spending bill last month for the fiscal year that started July 1.

“The $37.5 million basically empties the account,” said Alexei Painter, director of the Legislative Finance Division.

The account was at zero in 2022, with no withdrawals since then, he said.

The state collects a tax of $34.50 per passenger from cruise ships of more than 250 passengers. Half the money is shared with cruise-destination communities which receive $5 per passenger, which includes Wrangell, and the state keeps the other half.

The tax originated with a citizens initiative approved by Alaska voters 20 years ago after lawmakers failed to approve similar legislation, prompting the ballot measure so that the public could decide.

Under state law, the money can only be used “for projects to repair, maintain and upgrade port facilities and harbor infrastructure, enhance passenger safety and provide services to vessels and passengers.”

Those same restrictions apply to the funds shared with municipalities — both the annual allocation of $5 per passenger and this year’s $37.5 million one-time cash-out of the account.

In addition to $375,000 coming to Wrangell, the legislative appropriation directs $9 million to Skagway, $6.875 million to Ketchikan, $6 million to Juneau, $4.5 million to Sitka and $3 million to Hoonah, among the larger distributions.

Wrangell’s share of the legislative appropriation will go into its commercial vessel passenger tax reserves account. “We’re going to have a lot of money … saved up, which is great,” Borough Manager Mason Villarma reported to the assembly during its budget work last month.

That account, which receives Wrangell $5 share of the state tax, held an estimated $545,000 on June 30.

The borough estimates its revenue for the fiscal year that ended June 30 will total $127,000, after cruise operators file their returns with the state. That’s an increase from $75,000 the year before.

Cruise traffic to Wrangell is up substantially from last year, with as many as 75,000 passengers expected this summer if all the berths are full, up from about 40,000 last year — though many of those travelers are aboard ships of less than 250 berths and do not pay the tax.

The money in the commercial vessel passenger tax account could be used for improvements to parks, the Nolan Center, waterfront development, Petroglyph Beach which is popular with visitors, even public restrooms downtown, Villarma told the assembly.

The money also could be used as matching funds if the borough is able to secure grants for waterfront or visitor-related projects, Kate Thomas, the borough’s economic development director, said at the same assembly budget workshop.

Any municipal spending needs to be related to services or facilities used by cruise ships and their passengers, Kiehl explained.

In addition to its share of the state cruise ship passenger tax, the borough expects to collect $375,000 this fiscal year from its commercial passenger wharfage fee charged ships per passenger at the dock. The assembly raised the fee to take effect next year at $9 per passenger who use the dock and $7 if they are lightered to a float from ships parked offshore.

The wharfage revenue goes into the Port and Harbors Department budget.

The borough also profits from tourists through a 6% tax on overnight hotel and bed-and-breakfast accommodations. That revenue is estimated at $83,000 for the fiscal year that started July 1.

The so-called bed tax goes toward Wrangell’s tourism marketing efforts.