Port Cities Fret Over Taxpayer-Funded Terminals for Cruise Ships

Feb. 22, 2013 -- Controversy roils the waters of the Charleston, S.C., harbor and others in the US. At issue: Is the ever-expanding cruise ship industry a cost or benefit to port cities? And how much should taxpayers chip in for port facilities versus what they can expect in return?

Since 2010 the 2,000-passenger Carnival Cruise ship Fantasy has been based in Charleston at a terminal, which, according to the Post & Courier, is now considered old and outdated. Under debate is whether a new, $35 million cruise ship terminal should be built.

Opposing the new terminal is Cruise Control, a preservationist group, as well as individual citizens who object to cruise ships' noise and pollution. One Charleston resident whose home sits near the existing terminal complains to the New York Times, "I can hear the [ship's] announcements from my house. And that black smoke. It just tumbles out of that smokestack. You should see the dust in my car."

Supporters of a new terminal argue it will make the city more attractive to more ships, and that the resulting increase in cruise ship tourism will put money in local merchants' tills. Officials for the South Carolina Ports Authority estimate cruise traffic already contributes $37 million a year to the region's economy.

Sociologist Ross Klein, a professor at Memorial University in St. John's, Newfoundland, has made cruise ships and their economic impact on ports his area of study. He tells ABC News that determining whether any given port makes (or loses) money on cruise ship tourism is "a bit of a hard one."

It depends, he says, on such variables as whether one includes the cost of the terminal and its related infrastructure, or the cost of ships' impact on the local environment and quality of life (noise, traffic congestion, more pedestrians, and more need for security, for example).

It depends, too, on the affluence of the passengers patronizing any given cruise line. "Is it the K-Mart crowd, or is it the higher end?" Klein asks. Yet even though no two lines (or ships) may be demographically equal, Klein says it's still possible to make generalizations about passenger spending.

True, local merchants do benefit from dollars spent by a ship's passengers on food, liquor, souvenirs and other indulgences. But merchants seldom get to keep the full amount. "Merchants often have to pay a cruise line to be included in shore excursions," says Klein, "or to be mentioned to passengers or to be included on a map." The result, he says, is that a cruise line typically claws back 50 to 60 percent of what passengers spend on shore.

An analysis Klein did this month for the city of Key West, Fla., compared spending by cruise ship passengers with that done by regular terrestrial toursts. Terrestrial tourists, he estimates, have a total economic impact on Key West of $659.3 million, which includes spending on lodging, bars and restaurants. Cruise ship passengers spend $23.7 million, which includes clothing, jewelry, and miscellaneous souvenirs. Of 12,194 total tourism jobs in Key West, Klein estimates that 873 can be attributed to cruise tourism.

Klein says Key West right now is "the primary fire-point, after Charleston," where locals are locked in acrimonious debate over the costs and benefits of cruise ships. "Other ports have not yet reached the point where they're saying, enough is enough"--but Key West has. Locals complain that cruise tourists float into town, flood local streets and bars, buy a few souvenirs and float back out the same day leaving their trash behind.

There is vocal opposition in Key West to a coming ballot initiative that would authorize spending $3 million to widen the channel that cruise ships use. Some 350 cruise ships stops a year are made in Key West already. A wider channel would allow newer, wider, bigger ships to dock.

Klein says the effect of cruise ship tourism on the economies of U.S. port cities has been mixed.

The case of Mobile, Ala., is cautionary: Mobile wooed Carnival for years, borrowing $20 million to build a terminal Carnival would find acceptable. Carnival eventually agreed to base a ship there, and, in 2007 named Mobile its port of the year. The city spent $2.6 million more, according the Times, on a new gangway. Then, two years later, Carnival left, saying fuel costs had made Mobile a more expensive base than higher-trafficked, more popular New Orleans.

Another cautionary tale, says Klein, is Houston. According to the Houston Business Journal, the city spent $108.4 million in 2008 to build a cruise ship terminal. Klein says that the terminal sat vacant until last year, when the city inked agreements with two cruise lines--but only after having to pony up what Klein says are $8.7 million in incentives over five years.

There's a big difference between the benefits enjoyed by a home port (a city where a ship is permanently based) and a port-of-call (a city where transient ships merely visit).

A 2011 analysis of by economist Brian Scarfe of the economic impact of cruise tourism on Victoria, B.C., and other port cities in the province found that the economic benefit to a home port (Vancouver) was 8.5 times greater than the benefit enjoyed by a port-of-call (Victoria). The home port's extra economic benefits derive from such activities as ship re-provisioning and maintenance as well as hotel stays by tourists before and after their cruises.

Scarfe's study, done for the James Bay Neighborhood Association, argues that cruise ship tourism has had "a zero or negative net socio-economic impact" on Victoria. He writes in part: "The significant costs that burden residents and taxpayers exceed the benefits enjoyed by local cruise ship servicing companies, a small portion of the local business community, and the Harbor Authority."

Though economic benefits indeed were generated by passengers and crew while a ship was in port, the "social and environmental costs resulting from marine effluents, traffic congestion, traffic noise, road repairs, atmospheric emissions and public subsidies" cost, by Scarfe's estimate, $28 million--compared with ship-related revenue of $24 million.