Saturday, February 5, 2011

Despite Carnival paying only 1.1% Tax, the Quibbling Continues about Who Pays For the Cost of Shore Power at the Brooklyn Cruise Terminal

There was a New York Times article this week, "The Paradox of Corporate Taxes", by David Leonhardt, that detailed how little many corporations pay in taxes in this country due to the exploitation of loopholes in the tax code - this being despite the US having an official corporate tax rate higher than many other countries.

The example that Mr. Leonhardt cites as an example of this practice of tax minimization - an "extreme case", as he puts it - is Carnival Corporation, the operators of Carnival Cruises, the company that operates the cruise ships that use the Brooklyn Cruise Terminal in Red Hook, Brooklyn.

The NY Times article states -

"Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits (That's profits folks - not earnings - Ed). Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes."

It's also noted that Carnival operates with the benefits of many tax payer funded services - Customs officers and services; infrastructure, including roads, bridges and terminals; US Coast Guard services, etc. - and that Carnival "wouldn't have much of a business" without these publicly funded services. Anyone who has ever wondered who was paying for the NY City Police who park their cars to stop traffic going through to Summit Street from Hamilton Ave at Van Brunt Street and control traffic at the Bowne Street intersection while the ships are in - well, if Carnival aren't paying their fair share of taxes, I guess we have our answer.

We are.

Now, many corporations are benefiting from these corporate tax loopholes, but the reason that the revelations about Carnival's tax avoidance seem so egregious, is that they come at at time that there is a squabble about who should be paying for the ongoing costs of supplying "shore power" to the visiting ships at the Brooklyn Cruise Terminal. This is in relation to the already funded plan to build infrastructure and implement the practice of "cold ironing" at the terminal, allowing the visiting ships to stop idling their dirty-diesel burning engines while in port, as they currently do.

In my previous post, I wrote of the rally that was held in January, convened by many local politicians and attended by representatives from the community, demanding that the drawn out process that was taking place to resolve the differences between the various parties involved - The City of New York, The NYC Economic Development Corporation, Con Edison, The New York State Public Service Commission, Carnival Cruise Lines and others - finally come to a close by getting an agreement to finally get this deal done.

The message from that rally was that this process was taking too long. Despite all parties being in agreement about the merits of the "shore power" plan, and various entities, including the Port Authority, the NYCEDC, Carnival Cruise Lines the EPA and others, committing real funds to build the infrastructure and support the plan, many were still quibbling about who was going to pay for the ongoing operating costs, or whether the Public Service Commission should set a new rate of electricity supply from Con Edison to make this plan more economically viable, or whether Carnival should just pay the additional cost of electricity vs. diesel - yadda, yadda, yadda.

The quibbling continues.

The City of New York will be holding a hearing on Monday, Feb. 17th, during which there will be a resolution presented, as the text in Res. No. 463 states, "urging the New York State Public Service Commission to immediately set a competitive electrical rate at the Brooklyn Cruise Terminal in order to facilitate the use of shore-based electrical power by cruise ships that wish to cease idling in ports and reduce the amount of emissions released into the surrounding neighborhoods."

Full Google Docs text of the resolution here. (It outlines many of the facts and figures I have been trying to disseminate in this blog).

The Public Service Commission moves very slowly and this may be a long process - this case has already been at the PSC for over a year - but, if this resolution has any influence, maybe there's hope that something will get resolved concerning the long term operation of the terminal.

But, we also need to make sure something gets done in the short term - like right now.

We've already waited 5 years .... it's 5 years since the "state of the art" terminal was built .... it's already hundreds of avoidable tons of carcinogenic SOx and smog causing NOx later ... it's already tens of tons of avoidable asthma inducing Particulate Matter later .... it's already $27 Million in avoidable health costs later .....

We need someone to step up to take these burdens off our communities. But, at least in the short term, who will pay?

Will it be the NYCEDC who built the terminal without this already proven "shore power" infrastructure that was being used up and down the West Coast a decade before? Will it be the Port Authority who own the terminal, but who, according to one of their spokesmen, weren't aware of the pollution mitigating practice of "cold ironing" till 2007 (despite the U.S. Navy using it for decades)? Will it be the City of New York that benefits economically from the visitors that the cruise ships bring ($145 Million last year), but, despite the proclaimed "green" credentials of the Mayor himself, seems slow to acknowledge and address the health burdens the operation of their ports - cruise, container, etc. - puts on the residents of the city? Will it be Carnival, a company that in the 5 years since this terminal was built has seen profits of $11.3 Billion, while paying little tax, but can't seem to "cough" with the added cost of using electricity while in port, instead of burning extra dirty diesel?

No one seems to be putting up their hand.

Meanwhile, the residents of Brooklyn are still breathing in these carcinogenic and otherwise harmful substances. The residents of Brooklyn, especially our most vulnerable, are paying with their health, and as the statement of the Port Authority to the Public Service Commission states, "we estimate that the annual health benefits emissions reductions arising from a switch from on board generation to shore power at the BCT (Brooklyn Cruise Terminal), adjusted for Kings County, approaches $9 Million".

That's a $9 Million Per Year health cost to Brooklyn residents - to our kids - to our elderly - to our minority communities - you know, in cancer, asthma, heart disease, premature mortality - right now.

I wonder how much of that is covered by the 1.1% tax rate that Carnival currently pays?



  1. What will happen is this will get dragged out for another 4 years at which point it will be moot as all ships entering US water will have to conform to 2015 Emissions Control Area requirements.

    At that point Carnival will have to upgrade its emissions control technology and possibly switch from high sulfur residual oil to ultra low sulfur diesel.

    Given a cost of diesel at $20/dth and the heat rate of the reciprocating engines on the ship of ~8 it will cost them $160/MWh to make their own as opposed to buying from Con Ed at under $150/MWh.

    Right now they probably use cheap residual fuel at $14/dth so the economics work out to about $110/MWh.

    Why should the cruise ships, which you have pointed out do not pay much of any taxes, get a special reduced tariff rate versus you and I? Because they are extra good at polluting? Well gee, my building still uses dirty as hell #6 oil so I suppose I should get cheaper electric from Con Ed too.

    The cost of maintaining and upgrading the system is the same, the end result is that everyone else on the electric system ends up bearing the costs that are not paid by Carnival.

  2. Thanks for posting, this is incredibly informative (and infuriating). Do you know where the 2/17 hearing is going to be held?