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H.R. 316, THE CRUISES-TO-NOWHERE ACT OF 1999
Wednesday, July 28, 1999
House of Representatives, Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, Washington, D.C.
The subcommittee met, pursuant to call, at 10:00 a.m., in Room 2167, Rayburn House Office Building, Hon. Wayne T. Gilchrest [chairman of the subcommittee] Presiding.
Mr. GILCHREST. Good morning everybody. The hearing will come to order. Before we start this morning, I just wanted to say that many Members of Congress have flown to California for a memorial service for Congressman George Brown, an esteemed colleague of ours who served many years in the House of Representatives. I served on his committee, Science Committee, a number of years ago for one term and found him to be an extraordinary human being, a man with character, who set a positive example for this place.
So Gene Taylor and I wish to express our feelings for a wonderful, kind, good, human being who helped our careers by setting a positive example.
We are here this morning to discuss H.R. 316, the Cruises-to-Nowhere Act of 1999. This bill was introduced by the Chairman of the Transportation Appropriations Subcommittee, Representative Frank Wolf. I won't say ''Frank who?'' this morning, Frank. That is a little joke in the campaign we had a number of years ago. I look forward to Frank's testimony this morning.
I also look forward to the testimony of other witnesses today, especially those of you who have traveled great distances to testify before us this morning.
Before being amended in 1992, the major Federal law regarding shipboard gambling, the Johnson Act, prohibited the use of gambling devices on U.S.-flag vessels in international waters.
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Section 2 of the Johnson Act prohibited the transportation of gambling devices into State waters unless the State had passed a law legalizing the transportation of the devices.
Section 5 prohibited the repair, transportation, possession, and use of gambling devices on U.S.-flag vessels. Because of a Justice Department opinion that the Johnson Act did not apply to foreign-flag vessels, gambling was allowed on foreign-flag vessels but not on U.S.-flag vessels in certain States.
In 1992 the Johnson Act was amended to allow the transportation and possession of gambling devices on U.S. and foreign flag vessels if the gambling devices remained on board the ship and are used only in international waters.
Section 5 of the Johnson Act was also amended to allow a State to prohibit the use of a gambling device on cruises to nowhere.
H.R. 316 amends the Johnson Act to emphasize that Federal law does not preempt State law. We have several questions about the legal and practical effect of H.R. 316 on the international domestic cruise industry as well as the cruises to nowhere that are operating today. And following this hearing, we will be discussing the legal effects of this bill on Federal law with the Justice Department.
I might add that these issues are fairly confusing. And so, as we go through this, we have a feeling that gambling isn't always good in communities if it is carried too far. We want to make sure that the shipbuilding industry, especially small boats in the United States, stays healthy and productive. And we want to make sure we don't give any advantage to the foreign cruise industry over the American counterpart.
So we look forward to the testimony from everyone here this morning. And I will now yield to my colleague from—used to be Pocomoke in Maryland, now in Mississippi, Gene Taylor.
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Mr. TAYLOR. Thank you, Mr. Chairman. And I thank Mr. Wolf for being here. Mr. Wolf, you may not remember, but you were absolutely one of the first people I met when I came to Congress in October 1989. You handed me a tape to give to my kids, called ''Where is Dad?'' and I very much appreciate you and very much appreciate the tape. My disparaging comments about what you are trying to do are directed towards the legislation, and certainly not you, and I hope you will understand that.
I introduced, back in 1991, H.R. 3282 for one purpose, and that was to put Americans in the maritime industry back to work. We needed jobs in the shipyards, we needed jobs for American merchant mariners. The Commission of Merchant Marine and Defense, known as the Bennett Commission in honor of our former colleague from Florida, Mr. Bennett, concluded its study of the U.S. Maritime industry with the warning the industry was so deteriorated that the national security of the United States was in jeopardy. Deterioration was industry wide; shipyards closed, and were closing. Skilled shipyard workers were out of work; a steep decline in the number of U.S. Vessels and the reluctant decline of the number of jobs for American merchant mariners.
The marine supplier base was so eroded that it was no longer possible to build a ship in the United States without importing basic vessel components.
Passage of H.R. 3282 helped stop the decline of the U.S. Maritime industry and brought new life and new jobs into the American shipbuilding industry, U.S. Merchant marine. We did it because the time had come to provide American ship operators with the same benefits that were owned by the their foreign competitors. If foreign-built, flagged, and crewed vessels could attract 500 or so passengers in Florida or California or Washington for a voyage to the high seas and offer those passengers casino and electronic gaming as entertainment, then a U.S.-built and flagged vessel with an American crew should be allowed to do the same.
It was ridiculous that the Gaming Devices Act denied American vessel operators the opportunity to compete in this lucrative business. It was unfair that the Gaming Devices Act stood in the way of giving the U.S. Treasury a desperately needed infusion of tax dollars.
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With my Republican colleagues, I will remind you that almost every single Republican on the then-Merchant Marine and Fisheries Committee co-authored this bill. We worked together and changed the law to what we thought then would allow approximately 5 million Americans to take a cruise to nowhere on a U.S. Flag vessel.
Since then, nearly $900 million has been spent in U.S. Shipyards on gaming vessels; same shipyards that were in desperate need of work because of the decline in naval shipyarding. More than 30 new United States flag vessels entered the day cruise industry. That alone employs 4,000 Americans, with an annual payroll of over $75 million. The industry pays an estimated $7 to $10 million in Federal taxes and millions more in other taxes. I will remind you of what Carnival Cruise Line pays in Federal taxes. It wouldn't buy you lunch today.
The industry purchases in excess of $100 million from American vendors. I also remind you that in the bill that we passed, we gave to the States the right to decide whether or not this would be allowed in their State. We never took that away from them. As a former city councilman, as a former State senator, I wanted to make it abundantly clear that every State would have solemn jurisdiction within the shoreline to 3 miles out to sea. That is the law now; that is the way the law should be.
And I would think it would be a horrible mistake to undo what we did in 1992, to send us back to the days when the only time you could legally take a cruise to nowhere was on a foreign-made, foreign-crewed, foreign-operated vessel. I will remind you that just last week, one of the major cruise lines was fined something like $18 million for the flagrant disregard of American pollution laws.
Now, I would think it is going to be very hard to get that money because, quite honestly, the corporate headquarters of that business and the owners of that business live someplace else.
In the case of the U.S. Cruise ships, they are built here, they are crewed here and they are owned here. And if we go back to some of the oldest laws in our Nation, the cabotage laws passed in the 1790s which reserved coastwide commerce for American-made, American-crewed, American-owned vessels, that is what our Founding Fathers had in mind then, it is what our Congress ought to keep in mind now.
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Thank you, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Taylor.
Mr. Wolf, thank you for coming this morning. We look forward to your testimony.
TESTIMONY OF HON. FRANK R. WOLF, A REPRESENTATIVE IN CONGRESS FROM VIRGINIA
Mr. WOLF. Thank you, Mr. Chairman. Let me just second your comments with regard to George Brown. The comment that I think was made by, I think Congressman Boehlert, but I am not sure, he said that because of his civility and his decency, if everyone in the Congress were like George Brown there would have been no need to go to Hershey to learn to live together. So I want to reiterate and second your comments with regard to our former colleague, Mr. Brown.
Chairman Gilchrest, good morning. I want to thank you for holding today's hearings on this very important issue of gambling cruises, or cruises to nowhere. Today's hearing is particularly important for two reasons. One, this is a fundamental matter of restoring control to the people; two, cruises to nowhere have opened the door to casino gambling at the same time the federally mandated National Gambling Impact Study Commission has called for a pause in the expansion of gambling until policymakers at all levels of government better understand its impacts.
In addition, among the gambling commission's recommendations is one which mirrors H.R. 316: The commission which, as you know, had both people who are gamblers and non-gamblers on it, unanimously recommended that gambling cruises be permitted only in States which adopt legislation specifically legalizing such cruises.
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Mr. Chairman, I would like to point out a recent decision by the U.S. Court of Appeals for the Fourth Circuit which essentially overturned Casino Ventures v. Robert M. Stewart which prompted my legislation. I applaud and am encouraged by the recent Court of Appeals decision which is consistent with H.R. 316. Still, we must keep in mind that this decision affects only those States in the fourth circuit. Rather than going through a long and drawn-out legal process to apply this decision to the other circuits and the rest of the Nation, H.R. 316 should be a clean and, I would say, noncontroversial vehicle to codify this important fourth circuit decision.
I want to briefly give some background information on ''cruises to nowhere.'' essentially cruises to nowhere are floating casinos. They offer the same high-stakes glitzy gambling as a Las Vegas style or the other places gambling casino. The only difference is that the casino floats. This type of gambling cruise is one of the most simple and easiest ways to bring high-stakes gambling to any coastal State, regardless of that State's laws which may in fact explicitly prohibit gambling. No other gambling operation can simply circumvent State law like ''cruises to nowhere.'' .
The reason for this exception is a 1992 Johnson Act amendment enacted from H.R. 3866 of Public Law 102-251. Proponents maintain that prior to enactment of the 1992 amendment to the Johnson Act, foreign-flagship passenger vessels calling on American ports were permitted to offer gambling but U.S. Flagships could not.
The 1992 amendment was offered, they say, to allow U.S. Passenger vessels to offer gambling and even the playing field between foreign and U.S. Flagship vessels. However, the 1992 law was crafted to create a ''quasi'' State preemption. In effect, if a State did not have an explicit prohibition on cruises to nowhere prior to 1992, the gambling cruises could operate in that State. After 1992, if a State decided to ban cruises to nowhere, it could.
To date, two States have bans: California and Hawaii. While proponents maintain this change provides a fair playing field, in reality it is very difficult for States to assert their jurisdiction with regard to cruises to nowhere. The fact is that cruises to nowhere show up at a port and begin operating, period. The reactions from local government officials is typically one of bewilderment.
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My office has received phone calls from town mayors and county supervisors, asking how can the cruises operate and what can they do to get rid of them? The answer is for the State legislatures to pass a law banning the gambling cruises. But that becomes a difficult proposition, and at that point it is really too late. Once the gambling industry gets its foot in the door, they are there to stay.
Just as the gentlemen from Mississippi was saying, it would be very difficult to roll back gambling in his State. Places like Tunica and Gulfport have just about been taken over with regard to the gambling industry and it would be very difficult to roll back. Mississippi made that decision. But these States have made a decision to go the other way.
Once the gambling industry gets a foot in the door, they are there to stay. The cruises to nowhere now operate up and down the East Coast, many in States where the citizens of that State have voted to reject gambling. People in New York, Massachusetts, and Florida, and I believe Florida on two different occasions, but the attorney general can better State that, have all rejected gambling; yet, without any debate in their State legislature or local town halls, gambling cruises began operating despite the will of the people.
Many States are on record in opposition of river boat gambling, casinos, slot machines and other forms of gambling; yet the Federal Government in essence has sanctioned gambling cruises to States' shores.
If the people are lucky enough to debate gambling cruises in their State legislature. Usually the fight has just begun. The gambling industry spends huge sums on lobbying on both the national level and State level. If and when the debate does come in the State legislature, local towns and citizen groups are outspent by well-financed lobbying efforts by the gambling industry. The gambling industry can afford to hire lobbyists who are the best in the business. But who is there to represent individual people, the moms and the dads and the families and the citizens from their communities who are in States that do not want to have gambling?
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According to one news report, and I quote, ''South Carolina's fledgling casino boat industry will not be sunk without a fight. The owner of the Victori Casino has hired four Columbia lobbyists to fight legislative efforts to outlaw cruises that pick up passengers in South Carolina and take them outside State waters to gamble. And a least a few lawmakers are beginning to listen.'' from The State (Columbia, South Carolina) titled ''Casino Ships Launching Lobbyists,'' January 12th, 1999.
It should not be a surprise that South Carolina's cruises-to-nowhere bill to date has not been passed.
Mr. Chairman, H.R. 316 is a fair solution. It does not ban ''cruises to nowhere,'' but simply maintains State sovereignty. Under H.R. 316, States will have the right to debate, vote and ultimately decide for themselves if they want this type of gambling. If States choose to permit ''cruises to nowhere,'' they can enact appropriate legislation. This legislation simply will allow each individual State to make its own decisions and not be forced by Federal law to decide this issue.
For instance, in the State of Maryland, if they wanted to have gambling cruises coming out of Ocean City, they would have every right to do that if the Maryland General Assembly were to pass that. But right now on the current situation, boats could come to Ocean City, go out with gambling ''cruises to nowhere,'' back and forth, and perhaps even change the whole context of the type of place that Ocean City is. I think that decision ought to rest with the people of Maryland and the Maryland legislature.
H.R. 316 has the support of 15 attorneys general from the States of Maryland, Oregon, Alabama, New York, Florida, Texas, Washington, Rhode Island, South Carolina, North Carolina, Virginia, Georgia, Connecticut, Louisiana and Massachusetts.
Mr. Chairman, I hope you and the subcommittee members will agree that this is an issue to be left to the States and that H.R. 316 is the proper vehicle to restore the right of the States. Again, the National Gambling Commission unanimously recommended that gambling cruises be permitted only in States which adopt legislation specifically legalizing such cruises.
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I would hope that the committee would act on this recommendation and favorably report H.R. 316. Thank you, Mr. Chairman and Mr. Taylor.
Mr. GILCHREST. Thank you, Mr. Wolf.
Does the Casino Ventures case, recently issued by the Fourth Circuit of Appeals, accomplish the same thing as your legislation in the fourth circuit, which includes Maryland, Virginia, West Virginia, North Carolina and South Carolina?
Mr. WOLF. I think Mr. Butterfield could better answer that, but my sense is the answer is yes. In the fourth circuit it would, but in other circuits it would not. So you have a difference. South Carolina is in the fourth circuit, it would. Florida is not in the Fourth Circuit; it would not.
Mr. GILCHREST. So that means that a State has to first approve this type of gambling before it can take place instead of having to vote to ban it?
Mr. WOLF. If that decision were upheld, and I am not sure if it will be appealed to the Supreme Court, that would be the case.
Mr. GILCHREST. Do you believe gambling, on cruises to nowhere is in any way different from gambling conducted on large international cruise ships?
Mr. WOLF. Personally, I don't. But I guess there could be a distinction made with regard to boats that go out several times a day, coming out of a locality, versus a cruise line that bypasses the region. I think the personal impact here is like the people in Florida who have contacted us, who are living in the community where the cruises go out from, they are the ones—and I think they are going to be testifying today—who can better tell you what the impact is on their local community, just as if you were to take it to Ocean City, what the impact would be.
Mr. GILCHREST. So, Frank, right now a ship can show up at Atlantic City, New Jersey, if there is a place to dock there, and begin a ''cruise to nowhere'' operation without getting any kind of permits or asking anybody in the local community or the State?
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Mr. WOLF. Correct.
Mr. GILCHREST. So somebody could pull into San Diego, California with a cruise—with a small boat; people would board and they would go out 3 miles, conduct their gambling operations and cruise back into San Diego without an expression from the local town council, county commissioner's office.
Mr. WOLF. That would be the case, except in California and Hawaii. Those two States have passed a ban. But in Alabama, yes. They could do it, or in Mississippi or wherever the case may be, or in Oregon and in Washington State they could. And I believe there is now—that is what has happened. I don't know if the mayor of Gloucester is scheduled to testify. I heard he was. Apparently that is what happened in Gloucester, Massachusetts. They just showed up, they got a boat, they go out beyond the 3-mile limit and the locality had no control, nor did the State.
Mr. GILCHREST. Well, thank you Mr. Wolf. It is a process that I am going through learning. I share your sense of urgency when it comes to the problems that gambling has with families and communities. And the example that you gave from South Carolina, I guess you weren't—when you said people came up to defend the practice of cruises to nowhere from Columbia, you were—.
Mr. WOLF. No, I was quoting from a newspaper in—it was—the newspaper is, I believe, the The State. It is The State in Columbia, South Carolina. That is their newspaper.
Mr. GILCHREST. Oh, a town called Columbia. I am glad I asked that question. I was wondering what the connection was.
Mr. WOLF. It is where you go into basic training when you go into the army.
Mr. GILCHREST. I thought I went to Columbus. That was Columbia?
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Mr. WOLF. You were so stunned. I went to Fort Knox and I felt the same way.
Mr. GILCHREST. That is near Parris Island.
Mr. WOLF. No, that is in South Carolina. Parris Island is a little further up the coast. Columbia is in. You must have been stunned. Did you do KP your first day? I did. They told me to tie a towel around my bunk and I didn't know what that meant. What it meant is, that gave them the signal that at 3:30 in the morning, they woke me up on my second day in the military, meant that I was to go KP. At the end of the day, at 4:30, I asked if it was over they said no. We went into about 10 o'clock at night. But that was at Fort Gordon—Fort Knox, Kentucky.
Mr. GILCHREST. We were hoping to get into KP in Parris Island. That was good duty for us.
Mr. WOLF. I understand. That was a day off.
Mr. GILCHREST. That was. We looked forward to it.
I will now yield to a veteran of the Coast Guard, Mr. Taylor from Mississippi.
Mr. TAYLOR. Who also never did KP. Mr. Wolf, are you a proponent of Federal laws to regulate gun ownership nationwide?
Mr. WOLF. No.
Mr. TAYLOR. Beer sales nationwide?
Mr. WOLF. No.
Mr. TAYLOR. Bingo games?
Mr. WOLF. No.
Mr. TAYLOR. State lotteries?
Mr. WOLF. No.
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Mr. TAYLOR. Marriage between minors?
Mr. WOLF. No.
Mr. TAYLOR. The reason I ask, these are all things that are not prohibited under Federal law, that are regulated in some States, that we allow the States on an individual basis to decide for themselves whether or not they want these things to happen or not to happen.
Again, I used to be a State legislator. The cause for this bill was I happen to be one of the three sponsors of the bill to allow river boat gaming in Mississippi. And as one of the conditions that I insisted on in that bill was that the ship be American-made and American-crewed and American-owned, only to discover back in 1989 we could not legally put that requirement on that ship because another piece of legislation banned American flag vessels from having gaming devices on board in American waters.
So the first river boats in Mississippi were foreign-owned boats with foreign crews, something completely contrary to everything I believe in, operating out of the State of Mississippi. It was only after coming to Congress, with the help of Mr. Davis and others, were we able to change that law, see to it that what the State of Mississippi wanted all along, which was American-made, American-owned, American-crewed, could take place.
What I have a little trouble with in your analogy, you say by doing this we could somehow save these folks from gaming. But isn't the truth that if we were to revert to what you would like to do, all we would do is prohibit Americans from doing this? If a foreign ship with gaming devices on board would still be allowed to pull into the exact same port, load up with the exact same people, sail 3 miles out to sea and do exactly what they are doing now, the only difference is it wouldn't be Coast Guard inspected, would not have American crew, it would be a heck of a lot harder for our Federal Bureau of Investigation to have good look around and make sure everyone was treated fairly, and we would derive no tax benefits from it.
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Mr. WOLF. No, that is not accurate. We fundamentally have a difference. Even the language that you are using, I am using, are totally different. You talk about gaming. Gaming is Checkers, it is Monopoly. This is gambling. There is a difference.
Secondly, your legislature in the middle of the night put this in and the people in Mississippi never really had an opportunity to vote on it. What was—what we are asking—Mr. Taylor, I am answering your question. What we are asking here is to go back whereby the people of that State can make a decision. If the people of the State of Mississippi want a vote to have—and their legislature wants to vote to have gambling in Tunica, Mississippi or Gulfport, that is their choice. But to flip it the other way around, whereby then you could have a State like Maryland, or like Delaware, that all of a sudden wake up and find—or like Massachusetts—that the boats are going out and they have no control of it.
So what we are trying is to go back and to give the State the right to make the choice. That is all it does. It doesn't ban ''cruises to nowhere,'' it merely gives the State and the citizens of that State the opportunity.
Mr. TAYLOR. Mr. Wolf, let me remind you that—and having been one of the sponsors of the bill, I take very strong exception to your statement that it was done in the middle of the night. It was after much debate. First the measure passed out of the Senate Finance Committee, then was debated on the Senate floor, passed in an hour, the vote; went to the full House, first their Ways and Means Committee, then the full floor, then called for a local referendum in each of the counties that has accepted gaming and each of the communities. And several communities have turned it down.
So I hope you will stand corrected because you are talking about my back yard.
Mr. WOLF. You know precisely what happened. I will send you the articles pointing out that people of Mississippi never had an opportunity to vote on this issue to make a decision. And the way it was run, and I will send you several articles, we have actually chatted about this if you recall several times, but that is not the issue here. The issue here is I think the States ought to have the right to make what choice, such that Mississippi or whatever State, if they want to have it, they can have it. I think the States ought to have to right to make that choice.
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Mr. TAYLOR. I will remind you that also the local referendum feature of that bill was at my insistence. I am very much aware that there is a local referendum in Mississippi and several communities in my congressional district have voted it down. So I want the record to show that you are inaccurate on that point.
Number two, all we are saying is as a Nation, is that we are going to reserve the right to the States to make this decision. We are not as Big Brother going to say you can't do it unless you pass legislation asking for permission from Big Brother to do so. I thought that was the full Republican approach to government.
Thank you, Mr. Chairman.
Mr. GILCHREST. Hank you, Mr. Taylor.
Mr. WOLF. We are going to put Mr. Taylor, then, as undecided on this issue; right?
Mr. GILCHREST. This is to Mr. Butterworth's children in the back—this is how democracy works. You have people that have a difference of opinion, and they come here to Washington and discuss that difference of opinion by exchanging information and having a sense of tolerance for someone else's point of view. And then at the end of the day, we take a vote and that is where Majority rule comes in.
So I appreciate Mr. Wolf's coming here this morning to express his opinion, his strongly felt opinion on this issue. And I certainly appreciate my colleague whose ancestors were from my district on the eastern shore of Maryland for doing the same.
And Mr. Taylor has one more question.
Mr. TAYLOR. Mr. Wolf, I have noticed over the years that on occasion things that did not clear a committee of jurisdiction ended up on different appropriations bills as riders. Is it your intent to attach your legislation as a rider to any of the appropriations bills that we will be voting on this year?
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Mr. WOLF. I would not say that I would, nor would I say that I would not.
Mr. TAYLOR. Sir, I will be on the lookout.
Mr. GILCHREST. Thank you, Mr. Wolf.
Mr. WOLF. Thank you, Mr. Chairman.
Mr. GILCHREST. Our next witness is Attorney General Bob Butterworth from the State of Florida. I would ask if we can find three seats together in the audience, somewhere, maybe over in this section, for Brandon, who is 10 years old, Brianne, who is 8 years old, and Mrs. Marta Prado who is the wife of Mr. Butterworth, so they could sit down—there are three seats, I think right up front, Mrs. Prado.
Mr. BUTTERWORTH. That is right next to our Congressman also.
Mr. GILCHREST. Oh, you have a Congressman here; that is good, Mr. Deutsch.
Mr. Butterworth, thank you for traveling so far to the Nation's Capitol to give us your perspective on this most important contentious issue. We look forward to your testimony, sir.
TESTIMONY OF ATTORNEY GENERAL BOB BUTTERWORTH, STATE OF FLORIDA
Mr. BUTTERWORTH. Thank you very much, Mr. Chairman and members of the subcommittee. It really is an opportunity to be here and the need to preserve undisputed State control of floating casinos to nowhere grows more pressing every day in my State. The floating casino industry has grown considerably over the past several years. Legal authorities, and those involved in floating casinos to nowhere believe that the 1992 fairness amendments to the Johnson Act created a Federal right to operate floating casinos to nowhere. A significant byproduct of this expansion has been a diminished quality of life for increasing numbers of individuals who find themselves in its path. It is nowhere more evident than in my State of Florida where floating casinos threaten to overwhelm our coastal communities.
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Florida, by constitution, does not allow casino gambling. And prior to 1992 we had a few vessels, large vessels, cruise to nowhere where the actual—in most of the cases if not all the actual vessel itself would probably be put into a very large cruise vessel which also offered gambling. Today we have over 30, and the vast majority of them now are those literally small boats which offer only gambling and a primary purpose of that vessel is for gambling.
And in many communities, more and more citizens are voicing strong objections to an activity operating in their backyards. They believe it is detrimental to the well-being of their families. We have severe environmental destruction, obstruction of navigation lanes, local traffic congestion, et cetera.
And we add to that the fact that over the past 21 years, three times the people of the State of Florida have overwhelmingly rejected efforts to legalize casino gambling in Florida. And given such sentiments, it is inconceivable that those of us charged as myself with protecting the interest of our citizens in this area are rendered powerless to do so by an act of Congress.
It is therefore heartening to read the opinion which Mr. Wolf mentioned, the United States Court of Appeals for the Fourth Circuit, which said that the 1992 amendments to the Johnson Act did not preempt law enforcement powers of the individual States.
Even though that case is only 3 weeks old, we don't know what the impact will have in our State because we are part of the 11th. In one jurisdiction in northeast Florida, the city did not want the floating casino, and we entered on behalf of the cities—entered on behalf of the city to defend the city, and we were thrown out of court because of the amendments. So whether or not this will have an effect on us in the future we do not know.
The court also concluded that the criminal regulation of gambling, even at sea, is not a field over which Congress has sought exclusive regulatory authority and displacement of State law. And as chief legal officer of the State of Florida, I applaud the clarity and reasonableness of the court decision. Unfortunately, the scope of this is limited, as Congressman Wolf had stated, to just a few States involved. Without conclusive uniform reading of the Johnson Act, we will remain under a cloud of uncertainty.
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As you may know, we have a lot of boats. We probably have over 1 million boats. Only a few of them are involved in the actual floating casino issue. Ironically enough, the chief of the Seminole Tribe was up before a committee the other day, and one of his arguments in favor of Class 3 gambling on the reservations is that the State of Florida was allowing the floating casino, whereby we have been advocating that we have not authorized the floating casino; it has been misinterpreted by the courts and others to whereby the Federal Government has imposed that upon us.
The core issue here is not whether cruises to nowhere should be banned. The core issue is whether the States should have the power to enforce their own laws in a manner of such great importance to their citizens. I believe that, and I am joined by, I believe now, every attorney general in the country who represents a coastal State, and we believe that the States should have the power to determine what should happen with the issue of floating casinos. And we are pleased to lend our voice to the strong support of House Resolution 316, urging to move this bill because we do believe it will give us a national standard and really a States' rights issue standard. Thank you.
Mr. GILCHREST. Thank you very much Mr. Butterworth.
If H.R. 316 were enacted tomorrow, would foreign-flag vessels be allowed to operate cruises to nowhere in the State of Florida?
Mr. BUTTERWORTH. We—that is an issue which I believe the courts are going to determine, because we do not allow under State law for there to be slot machines entering into the State of Florida. We enacted legislation in the mid-1980s in order to allow foreign vessels to be able to come into the United States, which did have gambling equipment on it, and then we amended it to allow that gambling equipment also to be fixed or serviced but must be locked down.
But at that point in time, as Mr. Taylor stated, the United States ships were not able to carry gambling equipment. Many of us thought that was unfair.
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We have no problems with the 1992 amendment which—the fairness amendment which did allow the United States floating casino vessel to compete with the foreign-flag vessel. No problem at all. Whatever authority a foreign-flag vessel has in Florida, that we—we have no problem at all, obviously, with the United States flag having that same authority.
And I agree with Mr. Taylor, I would rather have the American-flag vessel be the one to have the authority. So whatever it turns out to be, I believe the Johnson Act would be interpreted to where if you allow something for a foreign vessel, you will have to allow it for an American vessel.
But many of us did not understand why people were saying that our particular laws in Florida were preempted by your 1992 amendments. We do not believe the 1992 amendments allow there to be floating casinos in the State of Florida when the State of Florida has rejected casinos three times in the last 20 years. It is a matter of our State constitution; casinos are not allowed.
Therefore we believe that the courts have misinterpreted the 1992 amendments. And if I understand Mr. Taylor's comments correctly, from what I have heard, he is also advocating that the State is the one that should be able to determine what is going to be happening in that particular State. We, the attorneys general say the same thing; that let our States determine. I do not personally believe that it is good government for the States to have legislation and then Congress proceed to preempt that legislation in an area where they do not wish to preempt, and then force the States into a negative option of you have to accept what we did here unless you come about and do something else. Florida has already spoken on this issue, just as South Carolina has spoken on the issue.
Mr. GILCHREST. So the State of Florida does not allow casino gambling in the State.
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Mr. BUTTERWORTH. The State of Florida does not allow casino gambling in the State of Florida by the constitution.
Mr. GILCHREST. By the constitution.
Mr. BUTTERWORTH. State constitution.
Mr. GILCHREST. Was that the original State constitution?
Mr. BUTTERWORTH. I was not there then, but it is.
Mr. GILCHREST. Was that an amendment to the State constitution? Was it always like that?
Mr. BUTTERWORTH. It probably was at a point in time years and years ago. Florida does have quite a bit of gambling, obviously. We do have the perimutuels, we do have the State-run lottery, we have a number of Indian tribes who are able to operate under various Class 1 and Class 2 gambling. And we are still in the process of compact negotiation and talks on the Class 3 gambling. But there is an argument for Class 3 gambling that we can use casinos because we allow the floating casino.
Mr. GILCHREST. I see. But it is unclear in your mind, either with the fourth circuit or with Mr. Wolf's legislation, that if Florida—with Mr. Wolf's legislation, Florida could then stop cruises to nowhere, it is clear, by U.S.-flag vessels. But it is somewhat unclear that you can stop casino gambling with foreign-flag vessels?
Mr. BUTTERWORTH. My office takes issue, and we would be able to attempt to prevent both American- and foreign-flagged vessels that are primarily for gambling. And the way I read the proposed legislation, it says that the gambling cruise-to-nowhere voyages in which a vessel departs a State, sails 3 miles into international waters for the primary purpose of offering gambling, the Florida—.
Mr. GILCHREST. Is that a subjective decision, then?
Mr. BUTTERWORTH. I believe that would have to be interpreted either further by Congress or by the courts. But the word ''primary'' to me would mean—and you asked a question of Representative Wolf—.
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Mr. GILCHREST. Fifty-one percent of their income would come from gambling?
Mr. BUTTERWORTH. I don't know. But you asked a question of Representative Wolf, whether or not we had the—let's say 1,000-foot vessel or 800-foot vessel that offers—that is a leisure cruise, offers many services, and also offers gambling—if in fact that is one thing.
What we have seen in the State of Florida over the past few years has been proliferation of that 100-foot vessel which offers literally nothing but gambling and a peanut butter sandwich. So that, I believe, is where we are at in Florida.
And on the Florida cabinet of the Governor—and six independently-elected officials sit as the Governor and cabinet of the State of Florida, and we sit as trustees for land owned by the State of Florida. And we have added paragraphs into our particular land leases that no one can lease—this will be in the future—that no one can lease lands from the State of Florida and sublease—or, from that particular location, allow a boat to leave which is primarily used for casino gambling.
Mr. GILCHREST. How much authority does the State of Florida have to regulate the cruises to nowhere now?
Mr. BUTTERWORTH. According to the court decisions, what happened here in 1992, we don't have any. You have preempted us. Florida is still preempted by the 1992 fairness amendments, which I know from what I am hearing today, it was not intended to preempt Florida law, it was only meant to make sure that the American-flag vessels received what foreign-flag vessels received.
But now we are being hit two ways. One, it is being misinterpreted; we don't believe we are preempted. And number two, the Indian tribes are now using that to try to Class 3 gamble.
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Mr. GILCHREST. Now, part of what I meant by the State of Florida's ability to regulate the cruises to nowhere would be to investigate criminal activity, environmental violations on the ship, safety violations, violations of, I don't know, the 40-hour work week, how they deal with their crew. Is there any way you regulate or investigate any of those activities?
Mr. BUTTERWORTH. I can regulate them, I can investigate them in the same manner I can investigate any other vessel. If, in fact, they are tearing up the sea bottom, we can go after that particular boat for that particular reason. But other than what we already have on the books, there is nothing special that we can do with reference to the floating casino.
Yes, if they gamble within the 3-mile limit as a number of them have, yes, we can do something about that. But there is no separate category. It is very difficult to explain. Some of the citizens that are here today can explain that they cannot understand why they have a gambling vessel in their front yard, with people parking in their front yard, and the State cannot do anything about. And when we attempted to—as I stated, the judge advised that we were preempted by Federal law in 1992.
Mr. GILCHREST. If you don't have—and this will be my last question— you don't have casino gambling in the State of Florida based on the constitution of the State of Florida, but--.
Mr. BUTTERWORTH. That is our impression, our State of Florida constitution. In order to have the lottery we even had to amend the constitution to have a lottery in the State of Florida.
Mr. GILCHREST. Has there been an attempt with the general assembly in the State of Florida to ban cruises to nowhere?
Mr. BUTTERWORTH. There has been a legislation to regulate, but our problem is that we have and I do believe that the—that the Florida legislation, as presently constituted, would probably look towards some way of regulating, if they could, the cruises to nowhere. Whether or not they say that a 100 foot boat is okay, whether it has to be primary, where it might be up to the legislature, the problem we are having is that if we go too much into regulating the casino vessels, the cruises to nowhere, then, on the other hand, are giving away a lot to the Indian tribes of saying, wait a minute now; you are regulating casino gambling in the State of Florida; we are regulating a cruise to nowhere; therefore, by inference, you have allowed casino gambling in the State of Florida; therefore, we can open up our casinos on the various Indian tribes.
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We are caught in a Catch 22. I believe the legislature and the Governor can work out legislation dealing with the cruise to nowhere. Florida can do that. But we can't be put in a position of, so called, being preempted and having people believe that the cruise to nowhere had a Federal right to operate their floating casino, and then have the tribes come back and say, State of Florida, you are allowing this.
Mr. GILCHREST. The tribes right now don't have casino gambling?
Mr. BUTTERWORTH. They are operating a number of what we consider to be video slot machines. We have attempted to take action against them. We have been told by the Federal courts that only the United States Attorney can take such action. There is a case pending in the Middle District of Florida at this time.
Mr. GILCHREST. All right. I have a couple more questions, but I will yield to the gentleman from Mississippi. Thank you.
Mr. TAYLOR. Mr. Butterworth, a point of clarification. Does the State of Florida ban gaming within the 3 miles that is the State's sole jurisdiction, gambling—.
Mr. BUTTERWORTH. Yes, sir, it does.
Mr. TAYLOR. Is there anything in the present law that keeps them from doing that?
Mr. BUTTERWORTH. No, sir.
Mr. TAYLOR. What I don't understand then is why you, as an attorney general, obviously a legal scholar, would have us change the laws for the whole Nation to put American-owned vessels at a disadvantage once again, if you already have the right as the sovereign State of Florida to ban gaming within 3 miles of water that is clearly the State of Florida's.
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Mr. BUTTERWORTH. The State of Florida may not wish to have casino gambling or slot machines in their ports. Not just ports, in their waterways. What I am saying is the law that you passed, I believe is misinterpreted by many courts in this country, including Florida. I believe that the fourth circuit has properly interpreted that law.
From your comments, I believe you probably agree that the State should be the one to determine what type of gambling should be in the State of Florida. I concur with you that gambling should not be just for foreign vessels, it should be foreign and American vessels.
What happened in Mississippi was incorrect. That was just the laws of many years ago. Florida was faced with the same thing. But you may agree with the fact that the State should be the one to determine what type of gambling should allowed in that particular State.
I am not out here advocating for or against casino gambling. What I am saying when you have floating casinos, the State of Florida should be the one to determine what type of floating casinos we should have. And sure, if we allow for foreign, we should allow for American. We have to. But also if we decide as a State, as a matter of public policy, that we don't want to have just a gambling ship going out there, we want to have a vessel, a 900-foot vessel—many people see a difference between a 900-foot vessel and a 100-foot former shrimper or barge— just let the State determine what the State wants to do.
Mr. TAYLOR. Mr. Butterworth, what was your profession in 1992?
Mr. BUTTERWORTH. I was an attorney general.
Mr. TAYLOR. Then also. Counsel reminds me that in 1992 the State of Florida, prior to the passage of this, had at least 13 foreign-flagged cruises to nowhere operating out of the State of Florida. And with the passage of the Cruise Ship Act, we actually gave Americans the opportunity to compete with those foreign vessels.
I don't recall you coming before the then-Merchant Marine Committee—and my memory is far from perfect—saying we would like legislation to ban these foreign cruises to nowhere. So why now? Is it a problem when it wasn't a problem then?
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Let me take it a step further— and I can see some merit to what my colleague from Virginia is trying do— because the only exception to the cabotage law, some of the oldest laws in our Nation that reserve coastwide commerce for American-made, American-crewed, American-owned vessels— shrimpers can't do it, they have to be American-made, American-owned, American-crewed. Offshore supply boats, crew boats, tugboats, passenger ferries, all the folks you see at the dock are living by the rules American-made, American-owned, American-crewed. U.S. Coast Guard standards.
The only exception to the rule and something the foreign cruise ship industry would prefer the American people didn't know: cruises to nowhere. They leave the dock, they go 12 miles out, they turn around and they come back, to violation of cabotage laws, not because Congress let them but because of a horrible ruling by the Customs Department that both Democratic and Republican presidential administrations have failed to close that loophole.
Now, if that is the problem, and I agree that it is a problem, and I think Mr. Wolf agrees that it is a problem, wouldn't we as a Nation be much better off passing legislation, as this House has done on three separate occasions, to close that loophole and say that the only folks who can operate in American waters are Americans? That if you take a true international cruise, as some of the cruise ships do, that is fine. That is international commerce. But the sham of going 12 miles out to sea, turning around and coming back, to avoid American laws, is indeed a sham and that loophole ought to be closed. Would you agree with that?
Mr. BUTTERWORTH. It is very difficult to explain to people of Florida that they have voted three times in the last 21 years not to have casino gambling and then to see in their backyard—not in a port, in their backyard—a vessel which is used primarily for gambling, whether it be an American vessel or a foreign vessel. They cannot understand why no one can do anything about it.
I represented a number of the cities who were trying to move these vessels and to be turned down by the courts and to say the reason we cannot do anything about it is because Congress passed the 1992 amendment. Our playing field might change because of the South Carolina case. I hope it does. But the only way for it to change, I believe, is for Congress—if, in fact, if I am hearing correctly here, I believe Congress could correct all the inequities. But why leave it to the courts, waiting a number of years? You can do it here very easily.
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Mr. TAYLOR. Mr. Butterworth, do you believe in our representative form of government?
Mr. BUTTERWORTH. I sure do.
Mr. TAYLOR. It is my understanding that the States of Hawaii and California have both passed statutes that specifically prohibit gaming activities or voyages to nowhere and voyages between two points in their State. Why doesn't the representative government of the people of Florida pass such a law if that is indeed the will of the people of Florida?
Mr. BUTTERWORTH. And those laws, I believe, were passed after your 1992 amendment. So what you are seeing—or at least California was. Whatever then Florida does pre-1992, because you took action here because you wanted to, for whatever reason, we have to go back and take action again? That seems inappropriate.
Mr. TAYLOR. Counsel instructs me that the Hawaii act is pre-1992 and remains on the books. So my question is, are you asking Big Brother to save you from the Florida legislature?
Mr. BUTTERWORTH. No, I am not. I am just asking to allow the Florida legislature—for the laws of Florida to be interpreted as Florida's laws are and state specifically here—.
Mr. TAYLOR. But other States have already passed laws that ban this sort of thing. Then it tells me if two States are doing it and one of the largest States in the union is doing it, then why doesn't Florida do it, if that is really the will of the citizens of Florida?
Mr. BUTTERWORTH. Whatever laws we have on the books are pre-1992. Subsequent to 1992, and I agree with you whatsoever the books are, whatever laws are on the books, allow the courts to interpret them. But what I am saying is that the courts are interpreting Florida laws based upon what you have done. If what you are saying here today, I am going to, if you don't mind, say this is what the legislative intent was in 1992. Whatever the law is in Florida, the law is in Florida. If the courts agree with us and say slot machines cannot be used in the State of Florida, fine. Not allowed. Cruises to nowhere, fine, if that is the law. But that the Federal law has not preempted whatever the State of Florida has done in the past or may do in the future.
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As Attorney General, I do not want to have my State bound by congressional action when Congress never intended for Florida to be bound by that particular action. In our case, in northeast Florida, we stated—we even brought in the legislative background saying that legislators got on the floor and asked questions whether or not this was going to affect laws already on the books, and they were told, no, it wouldn't. And still we had a district court, a Federal district court in South Carolina say that State laws were preempted.
So this, to me, I think is good from the standpoint it is going to help us in our future cases. Whatever Florida law is, Florida law is.
Mr. TAYLOR. If I could take it a step further, if, as the primary sponsor of this legislation back then, if you would like me to drive to Tallahassee or wherever, I would be more than happy to do that. I would truly hate to muck up Federal law just because one judge has made a bad decision. I would truly hate to go back to the days when Americans were discriminated against in their own country just because one judge made a bad decision.
If we need to tighten the rules on cruises to nowhere with regard to foreign vessels because of a bad Customs Department ruling that has stood though both Democratic and Republican administrations, let's close that. But, for gosh sakes, let's not go back to discriminating against our own folks.
And I think Mr. Davis was a very active member of the Merchant Marine Committee back then. He is a high-priced lobbyist now, so you would have to pay him to come. But I would be more than happy to come when I can because indeed that was our intention. There are a number of members who were members of the committee then that remember that was our intention, and I would sure as heck hate to take a judicial mistake and then compound it by a legislative mistake trying to fix the first mistake.
Mr. BUTTERWORTH. With all due respect, Mr. Chairman, I do not read the Wolf proposed legislation to do anything other than what you have already stated. I think it will define the legislative intent originally, congressional intent originally, and I do believe that this would assist those of us who do believe in States' rights in this issue to be able to prevail.
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Mr. TAYLOR. But it still doesn't close the loophole on cruises to nowhere foreign flags.
Mr. BUTTERWORTH. I think you could put that in here, as far as I am concerned.
Mr. TAYLOR. I will ask Mr. Wolf to do so.
Mr. WOLF. We made that offer to cover that, to put foreign vessels—we made it with your staff, and they rejected it. I would say put it in and cover the international cruises. We made it several times, and I would say that the staff just said, no, they were not interested. If you gentlemen want to add that as an amendment, I would be glad to take it. Pardon me.
Mr. GILCHREST. Thank you, Mr. Wolf.
Mr. TAYLOR. In their defense, my LD tells me that his memory doesn't recall it quite that way, the conversations. So we will hash this out later.
Mr. GILCHREST. Mr. Taylor qualified that as not quite that way. We all want to defend our staffs.
Just in—are you done, Mr. Taylor? Thank you.
In closing, does California or Hawaii to your knowledge have a problem with cruises to nowhere from foreign flag vessels?
Mr. BUTTERWORTH. I am unaware of any problems that they have. I believe that they have taken action. As Mr. Wolf stated, once something is in it is kind of hard to get it out. So what we would like is legislation passed, if you can resolve the compromises, to where you preserve, as we want to also, the American flagships. Just this type of legislation I think will help us go a long way with the States' rights issues, not having to wait for years and years for court decisions and have more and more neighborhoods upset and us not being able to do our jobs in the States.
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Mr. GILCHREST. I see. Thank you very much.
The gentleman from New Jersey have any questions?
The gentleman from Oregon?
Mr. DEFAZIO. No, Mr. Chairman.
Mr. GILCHREST. Mr. Butterwolf—not Butterwolf. Frank is here and the—Butterflies? Mr. Butterworth, thank you very much. And enjoy your time in Washington and take the kids to a museum or something.
Mr. BUTTERWORTH. Thank you very much, Mr. Chairman and members.
Mr. GILCHREST. Thank you.
Mr. GILCHREST. Our next panel is Allen Walker, President of the Shipbuilders Council of America; Dean Hofmeister, Chairman/CEO, SeaEscape Cruises—that sounds like a pleasant way to go; Lester Bullock, President, Day Cruise Association; and Robert Williams, Chairman, Port of Palm Beach.
Gentlemen, thank you for coming this morning. We look forward to your testimony. This is a most fascinating issue that we hope to resolve in some mutually beneficial way.
TESTIMONY OF ALLEN WALKER, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA; C. DEAN HOFMEISTER, CHAIRMAN/CEO, SEAESCAPE CRUISES; LESTER BULLOCK, PRESIDENT, DAY CRUISE ASSOCIATION; AND ROBERT L. WILLIAMS, CHAIRMAN, PORT OF PALM BEACH
Mr. GILCHREST. Mr. Walker, you may begin.
Mr. WALKER. Thank you, Mr. Chairman and members of the subcommittee, thank you for the opportunity to testify this morning in opposition to H.R. 316. My name is Allen Walker, and I am the President of the Shipbuilders Council of America.
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SCA is the national trade association representing the domestic shipyard industry that builds and repairs small and mid-size commercial and government vessels. SCA represents 51 shipyard companies that own and operate over 100 shipyards in 20 States. Our members employ more than 35,000 shipyard workers building and repairing gaming and casino boats, as well as a wide variety of other vessels including tugboats, towboats, barges of all kinds, vessels and rigs for the offshore oil industry, fishing craft, small cruise ships, research ships and vessels for the Coast Guard. We also represent 30 affiliate companies that provide goods and services to the industry.
Our commercial shipyard industry has made significant progress over the last decade toward becoming a more competitive and vibrant industry. The U.S. Industry suffered through a severe depression during the 1980s and early 1990s. Construction of casino and gaming vessels, spurred on by the passage of the 1992 amendment to the Johnson Act, was one of the few bright spots for the industry during those dark days.
Since enactment of the 1992 amendment which puts U.S. Flag vessels on equal footing with foreign flag vessels in the cruises to nowhere trade, over 50 casino and gaming boats valued at almost $900 million have been built in U.S. Shipyards. Construction of gaming vessels enabled shipyards during much of this period to retain workforces that otherwise would have been dislocated.
In some cases, this work was all that kept companies from closing their doors. In other cases, the revenue generated by casino and gaming boat construction allowed shipyards to modernize and become more competitive. The industry desperately needs the work generated by the cruises to nowhere trade to continue along the road to recovery and modernization.
Mr. Chairman, it is my understanding that the bill before you this morning was introduced substantially in response to a 1998 ruling in a South Carolina District Court. The District Court found that the 1992 amendment to the Johnson Act preempted a State's right to determine whether gaming cruises to nowhere could operate out of ports in their jurisdiction.
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In July of this year, the Fourth Circuit Court of Appeals reversed the District Court's ruling. The Appeals Court found in its reversal that there is no basis for a finding that the 1992 amendment to the Johnson Act created a Federal preemption of South Carolina's right to restrict gambling within its borders. The Appeals Court clearly stated that Congress' intent when passing the 1992 amendment was not to preempt a State's right to regulate gambling, only to put U.S. Flag vessels on an equal footing with foreign flag vessels.
Prior to the enactment of the 1992 amendment sponsored by Congressman Taylor, the Johnson Act prevented U.S. Flag vessels from participating in the gaming cruises to nowhere trade, while foreign flag vessels suffered no such restriction. This meant that U.S. Corporations employing U.S. Citizens paying U.S. Taxes and complying with our environmental and safety laws did not have the same rights in our own country as foreign corporations which are not required to pay U.S. Taxes, employ Americans or comply with our environmental laws.
We believe that general fairness dictates that American companies should enjoy the same rights as foreign companies under our own laws.
As the Appeals Court ruling makes clear, States under current law have the right to pass a law prohibiting gaming cruises to nowhere from operating within their borders. Passage of this bill would serve no purpose but to put U.S. Flag vessels again at a disadvantage against their foreign flag competition. In the State of Florida, where a majority of the cruises to nowhere take place, State law expressly allows this trade on foreign flag vessels only. The 1992 amendment put U.S. Flag operators on equal footing with their foreign flag competitors and today almost 95 percent of all gaming cruises to nowhere take place on U.S. Flag vessels. The law, as Congress had intended, worked.
Enactment of H.R. 316 would force these U.S. Flag operators to either go out of business or reflag foreign. Either way, U.S. Workers, State and Federal treasuries and our domestic shipyard industry would be the losers.
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Mr. Chairman, H.R. 316 has already had a chilling effect on the U.S. Shipyard industry. Shipyard contracts for gaming and casino vessels have almost disappeared since its introduction. I am told that companies with plans to add additional vessels to their fleets are finding it increasingly difficult to obtain vessel financing due to market uncertainties created by this bill. In fact, plans by Sun Cruz to build $100 million worth of new vessels has been jeopardized by this legislation. Sun Cruz is one of the largest operators of gaming cruises to nowhere; and, Mr. Chairman, the company in the past has built four casino vessels valued at more than $20 million at Chesapeake Shipbuilding in Salisbury, Maryland, sustaining hundreds of jobs in your district.
In closing, I want to reemphasize that States already have the right to prohibit gambling within their borders. Enactment of this legislation would only reverse the benefits provided to American companies by the 1992 amendment. We urge you to please put this issue to rest once and for all so that U.S. Companies participating in this business and the shipyards that supply them can continue to operate and prosper. Thank you for the opportunity to testify.
Mr. GILCHREST. Thank you very much, Mr. Walker.
Mr. Hofmeister.
Mr. HOFMEISTER. Mr. Chairman, members of the subcommittee, thank you very much for the opportunity to speak to you today with regard to the day cruise or cruise to nowhere industry generally and our company's participation in that industry.
The day cruise industry has been in place in Florida ports for the better part of the last 20 years. Initially, it was started as part of the operational program of vessels cruising to Freeport, Grand Bahama, and in more recent years significantly expanded with what I call the second phase of the industry's development, i.e., smaller boats operating from restaurants and marinas usually on the intercoastal waterway and flying the U.S. Flag.
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Hence it is my opinion that two distinctly different industries are included in what is referred to as cruises to nowhere. These two different operations consist of larger sea-going vessels generally over 400 feet in length and 7,000 to 16,000 gross registered tons. These vessels operate from international deep water seaports, comply with all Federal safety and health requirements, and pay the same passenger taxes including Federal boarding fees, port charges and tonnage costs as those required from larger cruise liners operating on extended itineraries to foreign ports. We also pay or U.S. Taxes at SeaEscape. These ships are of foreign registry and sail to a foreign port every 29 days for foreign crew compliance with U.S. Immigration requirements.
These vessels present a full cruise program of passenger entertainment, organized by a cruise director and staff. The program includes a show lounge featuring professional entertainers, a complete spa program, cinema, broad outside deck areas with an outdoor swimming pool and, during summer months, a youth camp called Camp SeaEscape. The effort is to present to passengers a typical one day out of an extended cruise itinerary. And, as with extended cruises, our ticket price includes all meals in our large dining room.
This is the type of vessel recently just referred to by Attorney General Butterworth.
The second industry operation consists of much smaller vessels with some—that with some exceptions are generally around 200 feet in length and gross registered tonnage of a few hundred tons. These vessels operate from berths generally on the intercoastal waterway or rivers located at marinas or restaurants.
Other than gaming, these boats offer little if any entertainment program and only very limited dining facilities for their passengers. Contrary to ships operating from seaports where 40 percent or less of usable passenger area is devoted to gaming activities, these boats use 90 percent or more for these purposes.
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Our company, SeaEscape Cruises, has operated from Florida deep-sea ports for the past 17-plus years. During this period, the company has been under different management and ownership at different times. The present ownership and management has been in place since taking over the company in January, 1997. We operate a 16,000 ton cruise ship formerly registered in the Ukraine and now flagged in the Bahamas. Our crew is international but includes many Americans, and we do utilize the American Marine Officers Association for consultation and training.
We have been operating from Port Everglades since September, 1996, using terminal space leased from the Port Department of Broward County. To obtain the terminal lease we had to guarantee the Port total passenger carryings each year of 350,000, which ranks us among the three top passenger producers in the Port.
SeaEscape has always prided itself on its ability to generate positive economic impact on the community. As a partner in the local tourism and hospitality industry, we have annually generated through participation in tour programs approximately 150,000 room nights in South Florida hotels. For support of our operation we purchase annually over $13 million in fuel and other goods and services from area suppliers and businesses. Additionally, our shoreside payroll is approximately $1 million, and we have over 200-plus employees on the vessel who shop, dine, and make major purchases in South Florida. Our payments for the use of facilities at Port Everglades are about $3 million annually.
In summary, we are proud that SeaEscape has over $15 million in direct, positive economic impact every year on the South Florida community. As a participating member of the maritime industry, SeaEscape has always exerted full effort to adhere to the requirements of that industry. Recognizing that our vessel was of foreign registry and capable of worldwide cruising with a full complement of cabins, we accepted the responsibility to meet and exceed the requirements of U.S. Federal agencies, including the Federal Maritime Commission, the U.S. Coast Guard, U.S. Customs and the U.S. Public Health Services.
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These are the same requirements imposed on cruise vessels, the majority of which are also of foreign registry, that sail from U.S. International seaports.
In conclusion, our concern is that a legislative effort to influence the control over a small segment of the maritime industry will have direct and indirect detrimental impact on the entire industry. The maritime industry internationally has historically been the stimulus that generated reciprocal agreements between countries. It would be extremely complicating to an industry that is already very complex if agreements recognizing countries' vessel registry on a reciprocal basis were inadvertently disturbed.
Mr. Chairman, thank you very much for the opportunity to speak.
Mr. GILCHREST. Thank you, Mr. Hofmeister.
Mr. Bullock.
Mr. BULLOCK. Thank you, Mr. Chairman, members of the subcommittee. I thank you for giving me the opportunity to speak today. My name is Lester Bullock, and I am President of the Day Cruise Association.
The Day Cruise Association is a national organization which represents day cruise vessels in Massachusetts, New York, South Carolina, Georgia and Florida. The Association was formed in 1994 to promote the industry and to provide political and legislative support for its members. The Association represents over 24 vessels, with a total investment of over $500 million. Ninety-five percent of all the vessels in the industry today are now U.S. Flagged.
The amendment that Congress passed in 1992 accomplished exactly what it was designed to do. It allowed U.S. Flag vessels to compete on a level playing field with foreign flag vessels.
To understand the extent of the size of the industry today, please let me give you some facts. The industry has an annual payroll in excess of $75 million, with over 4,000 employees, all of which are U.S. Citizens or are legally allowed to work in this country. The industry pays in excess of 7 to $10 million in Federal excise taxes. The industry also purchases in excess of $100 million worth of goods and services from local vendors, which generates an enormous amount of sales taxes for the different States.
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It is very important to understand that a change in the current law will affect all U.S. Flag vessels and put them into bankruptcy. This is hard for me to understand after 7 years and in excess of $500 million worth of investments and we played by the rules that were set up in 1992.
Federal law, as it currently stands, has a provision for any State to opt out of the Johnson acts. The State of Florida has addressed this issue on more than one occasion and has chosen not to opt out. This has allowed the industry to move forward under the assumption that any State may choose not to permit this industry.
Should you as Members of Congress decide to change the law after a 7-year period it will be devastating to the U.S. Flag vessels. If you choose to change this law, what do you say to the investors of these vessels or all the employees that will be put out of work? In the State of Florida where a majority of the vessels operate, a reversal in the Federal law will only affect U.S. Flag vessels. The State of Florida has a law that specifically allows foreign flag vessels to carry gaming equipment. The 1992 amendment only affected U.S. Vessels. Foreign flag vessels operated from the State of Florida prior to 1992 and will continue to operate even with a reversal of this law.
A reversal in Federal law is not necessary as there is an opt-out provision. Let each State decide for themselves, based on this opt-out provision, whether or not they want a cruise to nowhere industry. Not only will the bill put many of the U.S. Flag vessels out of business, but this will affect their shipyards, their employees, vendors in five States, and small businesses that rely on these cruises to nowhere for their business. This bill will put many of them out of business. U.S. Shipbuilding will be affected. We will not be able to build new ships, and we also have interval dry docking every 18 months to 24 months, so the U.S. Shipyards would not get that business.
Many local communities rely on their vessel to provide many of the contributions to local charities that can and are provided by our operations. If this type of entertainment were not popular, then these operations would not exist. The industry carries several million passengers each year.
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I have attached for submission a review of a survey on the Day Cruise Association and all of its members and their operations.
By passage of this bill reversing the amendment of 1992 after so many years, its effect will be felt by tens of thousands of employees from many different areas. U.S. Companies with U.S. Flag vessels paying U.S. Taxes with U.S. Employees will be forced immediately into bankruptcy. Foreign flag vessels will continue to operate.
I urge you to consider all that will be affected by the passage of this bill and urge this bill not to move forward. Allow each State to determine whether or not they want this industry by the opt-out provision.
Thank you, Mr. Chairman, for the chance to testify today.
Mr. GILCHREST. Thank you, Mr. Bullock.
Mr. Williams.
Mr. WILLIAMS. Good morning.
Mr. GILCHREST. Good morning.
Mr. WILLIAMS. I also travelled from the State of Florida to be before you this morning.
Mr. Chairman, members of the subcommittee, my name is Bob Williams, and I am the Chairman of the Port of Palm Beach which also is an elected position, so just keep those remarks in mind.
This is maybe a little different presentation from some of the other speakers here. I just want to talk about the revenue the industry provides to the Port. Our Port is—we are one of 14 deep-water Florida ports, and we are located between Miami and Port Canaveral, the fourth largest container Port in the State of Florida and the 19th busiest in the whole United States.
The gaming industry has provided us an additional revenue source which has been very, very vital to some of our expansion plans. We have been expanding for the last 3 or 4 years to provide better job base and provide the economic benefits to our region; and having this expanded revenue source has allowed us to increase our rating, allowed the rating agencies to increase the rating to us and, as you know as you are issuing bonds, rating agencies have a lot to say about the money they demand to be paid back. By our ratings being increased, we have saved a lot of money to continue our expansion programs.
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One of the major issues in this rating has been the diversification of our revenue base. This particular industry has doubled for our Port of Palm Beach from 1997 to 1998, so the fact is that we have now generated over $2 million to a $10 million port, which is in excess of 20 percent. So, as you can tell, that is a major impact on our port.
The Port district and the surrounding region have gained exponentially from this business. More than 1,300 residents in our immediate vicinity are employed in this industry, 500 directly by the ships that operate out of the Port of Palm Beach and 800 more in ancillary cruise-related positions.
Mr. Chairman, the coastal cruise industry is a vital component of the Port of Palm Beach business base. If H.R. 316 were allowed to become law, it would effectively eliminate over a quarter of our current revenue base, hinder the services we offer not only to the residents of Palm Beach County but to Southeast Florida. This bill would liquidate thousands of cruise-related jobs, hamper and curtail the current pace of economic development at our Port, which I am proud to say we have put over $50 million to $60 million into our community just in the past 3 years.
In conclusion, the Port of Palm Beach is opposed to this bill as it would be devastating to our business, our operation and our future economic development.
The Port of Palm Beach is a taxing district, so we obviously can levy taxes within our district. In over 30 years we have levied no taxes. Part of the reason why is because we have been able to come up with the additional revenue, and by diversifying our revenue we have been able to leave our residents in our Port district to not be taxed. So I just want to make a few of those comments to you this morning, and it is a privilege to be here this morning.
Thank you.
Mr. GILCHREST. Thank you, Mr. Williams. Is it this hot in Florida?
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Mr. WILLIAMS. It is close.
Mr. GILCHREST. Mr. Bullock, you made a comment in your testimony that I wanted to question you about. I think you said, at least this is my interpretation, if H.R. 316 became law and a State took no action in a positive response to cruises to nowhere, then there would not be cruises to nowhere for U.S. Flag vessels, but there could be for foreign flag vessels?
Mr. BULLOCK. That is correct, Mr. Chairman.
It is my interpretation that if this bill were to pass and there is no affirmative law passed in a particular State, the U.S. Flag vessels would have to cease operations immediately and the U.S. Lending institutions—and all of the U.S. Employees would be put out of work. The U.S. Lending institutions lose their money.
There is a statute in Florida, I believe it is 830.231, that gives a foreign flag vessel exemption for carrying gaming equipment. So in my opinion—and I am not an attorney, but in my opinion foreign flag vessels would continue to operate even if this bill were to pass, but U.S. Flag vessels would be put out of business immediately.
Mr. GILCHREST. Do you know what the status of that situation is right now in California and Hawaii?
Mr. BULLOCK. No, sir, I do not. They wanted out originally, and they did an amendment I believe. Mr. Taylor may be able to tell about the amendment in California, the Cruise Ship Act of something or other that allowed some gaming between two specific ports in California. But I am not familiar with those two States.
Mr. GILCHREST. I think we can probably follow up on that question. How many U.S. Citizens and legal aliens are employed in the cruise industry?
Mr. BULLOCK. We estimate right now over 4,000.
Mr. GILCHREST. Do you know how many of those are U.S. Citizens and how many of those have work visas?
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Mr. BULLOCK. About 98 percent are U.S. Citizens and 2 percent are visas.
Mr. GILCHREST. I see.
Mr. Hofmeister, you have SeaEscape Cruises?
Mr. HOFMEISTER. Right.
Mr. GILCHREST. That is a wonderful sound for troubling souls: SeaEscape. It brings visions of big sailboats in the South Pacific 200 years ago.
What country owns SeaEscape?
Mr. HOFMEISTER. It is U.S. Owned.
Mr. GILCHREST. It is U.S. Owned? It is not a foreign flag vessel?
Mr. HOFMEISTER. Our vessel is registered foreign, which we have under a bare boat charter.
Mr. GILCHREST. Where is that registered?
Mr. HOFMEISTER. It is registered in the Bahamas.
Mr. GILCHREST. How many ships do you have?
Mr. HOFMEISTER. We only have the one vessel.
Mr. GILCHREST. You have one vessel. So you are U.S. Owned, but the vessel is registered in the Bahamas?
Mr. HOFMEISTER. Right.
Mr. GILCHREST. Your comment about H.R. 316, would that affect your business differently than a business that was U.S. Owned and the ship was U.S. Built?
Mr. HOFMEISTER. Yes, I believe it would.
Mr. GILCHREST. In what way?
Mr. HOFMEISTER. I have a feeling about this legislation that it goes a bit beyond just trying to control cruises to nowhere, and especially in connection with foreign registered vessels. It brings into question the reciprocal agreements between countries with regard to the recognition of those foreign registered vessels and the operation of the Port.
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When we first started SeaEscape, the vessel was under Ukrainian registry.
Mr. GILCHREST. Where was it built?
Mr. HOFMEISTER. It was built in Russia. Actually, it was built in Finland but by Russia. The vessel is certainly complemented to do extended cruising, worldwide cruising. And the ship—we were notified by U.S. Customs that we would have to post a $350,000 bond because the reciprocal agreement between the Ukraine, or when Russia—when everything changed in Russia and the Ukraine became independent, there was not a reciprocal shipping agreement initiated or extended, at least between the U.S. And the Ukraine, and a U.S. Vessel was detained and so we had to post a bond when they started looking around to find the closest Ukrainian vessel that was in a U.S. port.
It brings into question, I think, a lot of implication with regard to reciprocity on flags of registry.
Mr. GILCHREST. It creates a little more complexity than what now exists?
Mr. HOFMEISTER. Yes, it does.
Mr. GILCHREST. I think there is enough complexity now.
Mr. HOFMEISTER. Certainly in our industry, yes.
Mr. GILCHREST. Mr. Williams, the Port of Palm Beach, what is the depth of the channel?
Mr. WILLIAMS. Thirty-five feet.
Mr. GILCHREST. Thirty-five feet. Is that 35 feet at the berths as well?
Mr. WILLIAMS. Yes, sir.
Mr. GILCHREST. And do you have any intention of deepening that channel?
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Mr. WILLIAMS. No, sir.
Mr. GILCHREST. So you have a niche market for containers from what source? Where do those ships come from?
Mr. WILLIAMS. Our container business? We have a major vender named Tropical Birdsall Shipping, and they do the majority of their shipping to the Bahamas, to South America, but they are the main producer of the whole Bahamian and all their goods and services.
Mr. GILCHREST. Do you have much other cargo, bulk cargo? Automobiles, things like that?
Mr. WILLIAMS. Automobiles are slowly moving up from Miami and Port Everglades. It is still not a major part of our business. The bulk cargo and fuel oils, cement, molasses, a big sugar industry is shipped out of our port.
Mr. GILCHREST. So the depth of your channel is fine with you?
Mr. WILLIAMS. Yes, sir.
Mr. GILCHREST. Do you have any maintenance dredging?
Mr. WILLIAMS. Of course, when big storms come through and mess up our channels, the boats sit offshore for several days while we get that channel cleared. But the Army Corps of Engineers has been very helpful.
Mr. GILCHREST. Where do they dispose of that material?
Mr. WILLIAMS. We are also very fortunate that right off of our port we have a little 80-acre island called Peanut Island, and a lot of that material goes right on our Peanut Island.
Mr. GILCHREST. So that is beach restoration?
Mr. WILLIAMS. Not quite beach restoration. It is more just getting the channel back to where the ships can bring their cargo in.
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Mr. GILCHREST. But that goes to the island? Is it upland disposed?
Mr. WILLIAMS. I actually—.
Mr. GILCHREST. Or overboard? Ocean dumping?
Mr. WILLIAMS. No, sir, no, we just dump it right there on the island. We don't take it out there.
Mr. GILCHREST. Do people use the island for recreation?
Mr. WILLIAMS. Sure.
Mr. GILCHREST. So much of the material is fine grain sand?
Mr. WILLIAMS. We separated the island, half to be used for the inland navigation people and the other half to be used for recreation purposes.
Mr. GILCHREST. I see. So the cruise industry is an important issue with you because of its monetary impact?
Mr. WILLIAMS. Absolutely. And that is why I mentioned some of the numbers to you. That even though we might not be the biggest port in the United States, when you are looking at 20 percent of our revenue source and that allows rating agencies to come in and say we have a great debt coverage ratio and we have over $70 million of construction on the books right now because we are able to go out and finance these projects to improve our port.
Mr. GILCHREST. Do you find any problem with criminal activity at all related to the gambling casino gambling?
Mr. WILLIAMS. No, sir, none whatsoever. If there was any hint of that I can promise you, as an elected official, we would be right on top of that and taking a close look at that. But the ships that operate from our port provide a nice experience for the people that choose to do that.
Mr. GILCHREST. The last question, Mr. Walker, how many ships, if you know, are under construction right now for this kind of vessel and this type of cruise?
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Mr. WALKER. Right now, I don't know of any ships that are under contract or construction in the casino or gaming boat. I do know that there are discussions for additional vessels to be built. However, there is a hold on signing contracts pending what results from this legislation.
Mr. GILCHREST. When was the last ship built?
Mr. WALKER. I can't answer that. There were casino boats built last year in 1998. I don't know exactly which one was the last one.
Mr. GILCHREST. Can these size vessels that are used for cruises to nowhere that we are talking about here this morning be successful in any other type of venue? Whale watching? Just a cruise out there? Fishing parties? Is this about the only thing that these boats will be built for?
Mr. WALKER. That is what they are built for, Mr. Chairman. And I think that there is a fairly large investment in the equipment that goes on them that is not part of the shipyard contract. So I am not sure—I am not an operator, but I am not sure if the economics of the situation would allow these vessels to then convert to the sightseeing or just industry—but we are talking about vessels in the neighborhood of 100 to 300 feet long. People are sort of acting like that is not very much of a vessel, but to the longer extent that is the size of a football field, which is not a small vessel and anywhere from 5 to $35 million.
Mr. GILCHREST. I just want to close with a comment. Various people have mentioned today environmental regulations and foreign flag vessels. It is my understanding that the Coast Guard—it is my clear understanding that the Coast Guard does not look at the flag when it inspects or has a right to inspect a ship in which they all must comply, foreign or U.S., with domestic environmental regulations. That is a comforting thought for us up here.
I will now yield to the gentleman whose grandfather lived in Pocomoke, Maryland.
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Mr. TAYLOR. And is buried in Pocomoke, Maryland, but otherwise he would be voting for you, sir.
Mr. Bullock, I am a little confused by your statement because it tends to fly in the face of some things that Mr. Butterworth said. I thought I heard you say that the State of Florida has chosen not to opt out. That would lead me to believe that there have been some sort of at least attempts within the Florida legislature to change the law. Could you clarify that for me?
Mr. BULLOCK. Yes, sir, I would be happy to, Congressman.
There have been bills introduced in the State legislature to exactly do what the amendment to the 1992 Johnson Act requires them to do, and that is opt out. There were public hearings held, committee hearings held, and it did not get out of committee in the House of Representatives in the State of Florida. The bill was introduced by Representative king, I believe, from Jacksonville. So, in my opinion, my statement that they have chosen to not opt out, that is the legislative enactment that is representative of the people of the State of Florida. When you have a bill that says they are opting out and they choose to not pass it, that tells me that they have chosen not to do so.
Mr. TAYLOR. Has there been any action in the Florida State Senate?
Mr. BULLOCK. There was not a corresponding bill at that time, and I would have to get back to you on that.
Mr. TAYLOR. Mr. Bullock, I take it from your line of work you spend some time at the State House in Florida?
Mr. BULLOCK. A little, yes, sir.
Mr. TAYLOR. In the Mississippi legislature, to its credit, we had tremendous freedom on the ability of a member to amend a bill, tremendous freedom. Here in Washington we have very, very limited opportunity to amend a bill. It is just the opposite there. Literally, someone could scribble out an amendment on a piece of paper and force an up or down vote on it. A, number one, is there that type of freedom in the Florida legislature, in fairness? And if there is that type of freedom, has anyone actually tried to put every member on record as voting one way or the other on trying to repeal this?
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Mr. BULLOCK. Congressman, I am not familiar enough to tell you whether they have the up or down ability to do so, and I do not believe that there has been an up-or-down vote on it.
Mr. TAYLOR. Mr. Hofmeister, I was remarking that the end is truly near when I find myself and the foreign cruise ship industry agreeing on some things, and as a Catholic I better get to confession. But I do have to drive home a couple of points today. I understand your vessel was built in Finland, flies the Bahamian flag. If you catch on fire tonight on one of your cruises, are you going to call the Bahamian Coast Guard to put the fire out?
Mr. HOFMEISTER. It depends on where that vessel is when it catches on fire. If it is in a Bahamian port, yes we would. And I—in my experience of having vessels in Bahamian ports, my experience has been that that response has been very quick and very efficient.
Mr. TAYLOR. If you catch on fire tonight 3 miles from the shore of Florida, who you are going to call?
Mr. HOFMEISTER. Well, we have a fully trained Ukrainian deck and engine crew on there that was on that vessel for the past 5 to 10 years—.
Mr. TAYLOR. If they cannot handle the fire, who will you call?
Mr. HOFMEISTER. Well, we will call the U.S. Coast Guard.
Mr. TAYLOR. If there is a hostage situation on board the vessel, a crazy man pulls out a gun and threatens to harm passengers, are you going to call the Bahamian Navy Seals to come to the rescue?
Mr. HOFMEISTER. No, we would not.
Mr. TAYLOR. So the cost incurred of putting out that fire and rescuing that vessel would be to the American taxpayer.
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Mr. HOFMEISTER. Yes.
Mr. TAYLOR. Even though the ship doesn't fly the American flag, was not built in America and by your admission doesn't have a majority of crew members that are Americans?
Mr. HOFMEISTER. No, the majority are foreign.
Mr. TAYLOR. Mr. Walker, I thank you for coming and speaking for Mr. Davis and me and the other members of the subcommittee back in 1992. It really does make us feel good to hear that something we did made a difference.
Mr. WALKER. The shipyard industry wants to thank you as well for what you did.
Mr. TAYLOR. And again we are in prosperous times right now. We are quick to forget that when we were trying to pass this legislation our shipyards were hanging on by their fingernails with the downturn in Navy work and the oil patch being virtually dead. And for all of us who were here then and helped make this possible, I thank you for coming today and giving us a report card on what we did.
Mr. WALKER. Thank you for doing it.
Mr. TAYLOR. I would also ask that you get with your different shipyards and your supplier base, and since Mr. Wolf has made it I think fairly apparent that he is going to try to change the law by authorizing on an appropriations bill, that you make them aware of this threat.
Mr. WALKER. We sure will.
Mr. TAYLOR. Because, again, I think we are finally starting to do the right thing. I would love to see the remaining loopholes closed. I would love to see Mr. Hofmeister come in here with a ''Made in America'' button on his ship and crew.
Mr. HOFMEISTER. Could I comment on that?
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I would like to say that one of the projects that we have at SeaEscape through a company that we own and an application that was approved by the Maritime Administration for title XI financing is the building of a vessel to run from Miami to Key West and that will be American-built, American-staffed; and so some of those results of our foreign operation are going to good American use. Thank you.
Mr. TAYLOR. Mr. Hofmeister, I would remind you that the same folks that changed the law in 1992, in 1994 passed that extension to the title XI program and so once again we are heartened to hear that what we did is making a difference and it got guys like to you buy American. That is what we were trying to do; and, believe me, it is well appreciated by all of us.
My last question, and I will open it up to the panel because it does trouble me that so many of my colleagues on a daily basis come to the floor and say Big Brother government, why are we trying to wrestle control from the local governments? And yet on something like this, this is clearly a case where the State government is not doing something that a local congressman would like to see them do. So rather than letting the city council of that town or the State legislature of that State make the decision, they are saying we have to pass a Federal law to save us from ourselves.
Do any of you see the necessity of passing a law up in Washington to save the cities and the States from themselves when it comes to this issue?
Mr. HOFMEISTER. I do not.
Mr. WALKER. No, sir. It seems to me that States have the right to restrict gambling now. There is no need to pass a new law.
Mr. BULLOCK. I would also like to answer Congressman Taylor that, in fact, there is a couple of occasions in Florida where the local community has passed different zoning laws with parking and everything else to prevent an operation from docking in their locality and if that location cannot fit within their zoning requirements, a ship cannot go there. So there is lots of local zoning issues and lots of occupational license issues. And you are going to be hearing some horror stories from one or two locations, but in each and every industry there is always that one or two locations that have a problem, and they should be worked out at the local level and not the Federal level. Thank you.
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Mr. TAYLOR. Thank you, gentlemen, for appearing today.
Thank you, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Taylor. He is welcome on the Republican side at any time.
Mr. DeFazio, do you have any questions?
Mr. DeFazio comes in with one cup of cappuccino. I thought maybe he would bring three.
Thank you very much, gentlemen.
Our next panel, Linda Thomas Lowe, General Counsel, City of Gloucester, Massachusetts; Bernie Horn, Political Director, National Coalition Against Gambling Expansion; Steve Welsch, President of the Beach Defense Fund, representing the Coalition of Hollywood Citizens.
Thank you for coming, Mr. Welsch, Mr. Horn. Is Ms. Lowe here this morning? She is not here?
Well, gentlemen, thank you for coming to the hearing. We look forward to your testimony in this lightly salted debate.
TESTIMONY OF BERNARD P. HORN, DIRECTOR OF POLITICAL AFFAIRS, NATIONAL COALITION AGAINST GAMBLING EXPANSION; AND STEVE WELSCH, PRESIDENT OF THE BEACH DEFENSE FUND, REPRESENTING THE COALITION OF HOLLYWOOD CITIZENS
Mr. GILCHREST. Mr. Horn, you may go first.
Mr. HORN. Thank you very much, Mr. Chairman.
I am the Director of Political Affairs for the National Coalition Against Gambling Expansion, a national group of grass-roots groups and individuals, Republicans and Democrats, conservatives and liberals from all areas of the country.
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Our organization does not oppose gambling. We are not moralists. We are not trying to prevent people from gambling. We are not trying to close down Las Vegas or Biloxi. We are, rather, seeking to oppose the expansion of gambling because we believe as a public policy the costs exceed the benefits. And we think that that is true with respect to cruises to nowhere as well.
Mr. Chairman, in addition to serving in this capacity, I am also the Executive Director of No Casino Maryland, which is the group that has opposed the legalization of casino gambling and slot machines in Maryland for the last 5 years. I have done that since 1994.
Mr. GILCHREST. Are you from Maryland?
Mr. HORN. Yes, I am.
Mr. GILCHREST. Where do you live in Maryland?
Mr. HORN. Silver Spring.
Mr. Chairman, as you know, the leaders of Ocean City, Maryland, have been among those people who have worked the hardest to oppose, to stop the expansion of gambling in Maryland. They have been almost personally responsible for killing several of the bills legalizing casino gambling or slots at the tracks.
Now, imagine before the Fourth Circuit decision a boat had come to Ocean City to dock with a cruise to nowhere. I mean, those same political and business leaders from Ocean City would have turned to Attorney General Curran and said they cannot do that. We have a law in Maryland that makes it illegal to possess gambling equipment. They cannot possess it here.
And the Attorney General would say, well, there is this 1992 Federal act that appears to preempt Maryland State law, give a special exemption to these cruises to nowhere. Everybody in the State is bound by this Maryland State law except for this boat that seeks to dock in Ocean City.
So those Ocean City leaders—what? Are we to require them to go to the Maryland General Assembly and pass a bill? If they were to have docked a few weeks ago, would we have required them to wait until next January to introduce a bill and then hope to pass one and hope that it goes into effect by July of next year and have this boat operate for a year? It is wrong. It does not make sense. That is anti-democratic. It is contrary to the laws of Maryland.
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This preemption—this Federal preemption is a bad public policy per se. State law should control, unless there is an express preemption which is, therefore, an extremely good reason. There is no express preemption; and, as the Fourth Circuit ruled, there is no implied preemption either. Unfortunately, the Fourth Circuit's ruling doesn't apply outside the Fourth Circuit; and we have States like New York and Massachusetts that are struggling with this question now.
Mr. Chairman, I would like to address a question you asked, which is, is there a difference between cruises to nowhere with gambling and international cruises with gambling? And actually there is. It is the same distinction between destination resorts like Biloxi and convenience gambling like slot machines in South Carolina. That is when you have—the more accessible you make gambling, the more dangerous it is for gambling addicts.
When gambling is available on international cruises, people are not going to become gambling addicts by going on cruise after cruise after cruise. They have to be awfully rich to do that. But when you have a cruise to nowhere, it is accessible. An addict can go out day after day after day, and that is the difference that makes—it is a real difference in terms of public policy. And if a State wants to make a distinction, they should be able to. State law forbids cruises to nowhere almost uniformly, except for—almost uniformly as far as I know. And those laws should not be preempted.
I believe, Mr. Chairman, that this discussion of the foreign flag versus the American flag is a complete red herring with respect to this legislation. The legislation only applied to preemption. It doesn't affect the rest of the legislation that was passed in 1992. It does not reverse the 1992 law. It adds a sentence to the 1992 law.
But if this legal dispute bothers anyone, rest assured that there is no one, none of the proponents, who would oppose an amendment authored by Congressman Taylor or anyone else which would make the foreign flag vessels on the same footing as the U.S. Flag vessels. It is simply not an issue. We do not oppose it. Any member is welcome to do it, and we would support such legislation.
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I am out of time, but I direct your attention to my written statement which makes several points about the lack of regulation of the gambling on these cruises compared to State regulation of gambling cruises. Congressman Taylor's legislation in Mississippi had extensive regulation of gambling. That is missing from cruises to nowhere.
Thank you, Mr. Chairman.
Mr. GILCHREST. Thank you, Mr. Horn.
Mr. Welsch.
Mr. WELSCH. Mr. Chairman, committee members, thank you for your invitation to present testimony on behalf of the Coalition of Hollywood Citizens and Beach Defense Fund.
For nearly 4 years, the small neighborhood I live in has been the battleground for an industry that demonstrates blatant disregard for the citizens and the environment of the State of Florida. Our quality of life has been severely compromised by cruises to nowhere. Some people may argue that this is nothing more than a ''NIMBY'' (Not In My Back Yard) issue. That is just not true. Up and down the Florida coast and in other coastal communities throughout the U.S., tens of thousands of citizens are affected by cruises to nowhere. Impacted by an industry they know little or nothing about, impacted by an industry that refuses to take no for an answer, and impacted by an industry that Federal law protects.
For me to tell you more about the problems that accompany this particular type of business, let me tell you a little bit about my neighborhood. North Beach is a one-block wide by nine-block long, 75-year-old village of quaint one- and two-story mom and pop motels and single family residences. It has a permanent population of approximately 175 property owners, and during season that swells to the grand number of 500 people. It is a barrier island community surrounded by State parks, nature preserves and the Atlantic.
North Beach is best described as one of the last old Florida seaside communities. Until just a few years ago it was an idyllic place to enjoy the beach, laze in the sun and raise a family. Everything changed in the fall of 1995. That is when the Sun Cruz cruises to nowhere operation docked at our front doors.
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The arrival of the Sun Cruz brought problems that still plague North Beach today, from drunken patrons urinating in our front yards to shootouts in the middle of our neighborhood streets. We have experienced the very worst of the cruise to nowhere industry; and, after 4 years, the operators still thumb their nose at the community and at city hall.
The current ship, a 150 foot swath type boat, has no occupational license, uses illegal docking facilities and causes immeasurable damage to the mangroves located along the Intracoastal. The money that it generates for its owners finds its way to city hall, of course. It helps to finance political campaigns and greases the way for whatever it needs to stay in business.
Prostitutes subtly service patrons of the boat, police are belligerent with the citizens who find their driveways blocked by boat patrons. Law enforcement is selective. Crime goes unreported by off-duty police officers hired to protect the boat owner's interests, and emergency calls have skyrocketed in the area because of accidents, injuries and cruise-related maladies.
Once pristine stands of native trees have been cut to make way for an asphalt jungle of parking lots for cars and buses. Rowdy customers load and unload all hours of the day. At 10:30 a.m. To 1:30 in the morning, horns honk, car alarms go off, and the tranquility of the community is shattered by the predominantly local clientele that succumb to the lure of loose slots.
I can continue to regale you with the horrors of the Sun Cruz operation, but you have heard it all by now. The owner of Sun Cruz doesn't play by the rules. The industry is a bad neighbor. There may be exceptions to that statement, but certainly not in our backyard.
With your help, the State of Florida and other coastal cities can take things back into their own hands. They can establish regulations that would make sure these businesses followed the same rules anyone else would have to abide by. It will not be easy because the cruises to nowhere operators have amassed huge treasure chests for political clout and financial credibility. They have managed to stave off regulation for 4 years in Florida. Their campaign contributions have effectively marred the process in political rhetoric and blame passing.
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Mr. WELSCH. Many citizens view the cruises-to-nowhere industry as an enterprise not unlike gangster movies on television, bullies throwing their weight around until they get what they want. Who knows? The State of Florida has no laws governing the operations. Federal law prevents the opportunity for any type of regulation. No one tracks cash flow, no one checks the odds against the patrons, no one checks out the backgrounds of the owners or the employees. Giving the States back their ability to regulate this industry is the right thing to do.
If the laws of the State of Florida can prevail over Federal regulations, we can move the large vessels to areas equipped to handle such large ships and their attendant problems. Land use and development regulations have been gutted, so the cruises-to-nowhere operators can thrive without regulatory intervention. Politicians have sold their souls to the industry claiming they are unable to do anything because of the Johnson Act.
You can take these lame excuses away from weak politicians by embracing H.R. 316. It may not put an end to the cruise-to-nowhere business, but will put the industry under the control of the States and the people of the communities where they tend to locate.
We do not have the ability to stand up against high-priced lobbyists and lawyers. The difficulty of passing legislation in Florida is no different than the difficulty that you have here passing legislation. Your legislation at this particular time discourages new State legislation.
As with all issues, there is always more than one side to the story. In this case, there are three. The cruise operator and the State of Florida are squared off in their continued litigation, a battle that is severely weakened by the Johnson Act. The States want to regulate and tax the industry. The operators want to continue to run their businesses free from interference of government. Lost in all of the profiling and the dialogue is the side that gets stuck holding the bag: the neighborhoods that suffer the indignities associated with the industry.
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You have a brief overview of the problems accompanying such an intense enterprise. Only you can help put the bite back into the States' rights. Thank you.
Mr. GILCHREST. Thank you, Mr. Welsch.
Who is your Congressman? Who represents Hollywood?
Mr. WELSCH. I believe Mr. Deutsch is one of our Congressmen, I believe.
Mr. DEUTSCH. I represent 80 percent of the city of Hollywood, but Clay actually—.
Mr. GILCHREST. Who represents the other side?
Mr. DEUTSCH. Clay Shaw.
Mr. GILCHREST. Have you discussed the issue of the problem with not docking at a legal facility did you say? Illegal docking. What is the name of the ship?
Mr. WELSCH. Sun Cruz.
Mr. GILCHREST. And they dock at a facility that they are not supposed to dock at?
Mr. WELSCH. This has been a city land use issue. I believe there was some discussion on land use issues and regulations where the city has rolled over and essentially played dead, or certainly bowed to the pressures of high-priced lobbyists. So certainly—.
Mr. GILCHREST. So this is the mayor and the council.
Mr. WELSCH. I believe more so the Florida Marine Patrol has been ticketing the ship on a regular basis.
Mr. GILCHREST. The Florida Marine Patrol has been ticketing the ship for what purpose?
Mr. WELSCH. Apparently they feel that the boat interferes with the fairway of the Intracoastal. The fairway, of course, is the area—.
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Mr. GILCHREST. Because of the size of the ship.
Mr. WELSCH. Yes. And in my testimony, in my package, it shows the size of the ship in relationship to the community. I am not sure—.
Mr. GILCHREST. That was the Florida Marine Police ticket the ship, they don't—do they pay the fines?
Mr. WELSCH. I believe most recently the judge indicated that the tickets did not have enough information; in other words, the tickets had only cited the regulation that the boat was violating, and they did not go into detail, and that was enough of a technicality to throw the tickets out. However, I believe the Florida Marine Patrol had—excuse me, Florida Marine Patrol has continued ticketing. I believe it is under appeal.
Mr. GILCHREST. So are there any State legislators that have been contacted on this issue of the boats violating certain—they are violating State law, I would assume, if the State marine police have stopped them and ticketed them. And the State of Florida has no authority to say your boat has to be docked here until this issue is resolved?
Mr. WELSCH. I mentioned to you the political profiling and the rhetoric that goes around, and while I am sure not all of the blame would rest on the regular—or the rule here that we are trying to change, modify, I believe some of that rests—a great deal of that rests with the politics in the State and the respective counties and communities.
Mr. GILCHREST. What kind of damage to the mangroves has been done?
Mr. WELSCH. If you do an aerial of it, if—for example, if you go up in a helicopter or a light plane when this particular boat, the Sun Cruz 6, is leaving or coming back in to dock, and which, by the way, is a very narrow area of the Intracoastal behind the restaurant—.
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Mr. GILCHREST. Where they are not supposed to go.
Mr. WELSCH. Absolutely not. The Corps of Engineers has made it clear that the dock was only supposed—was only meant for smaller boats that were docking at the restaurants.
Mr. GILCHREST. Is there—are they violating any environmental regulations, State environmental regulations?
Mr. WELSCH. Well, we are hoping to find that out. Most recently there was a diver, the restaurant operator, who is very closely aligned with the cruise operator because of the ownership gray areas, they have the desire to now build more of a parking lot to handle more vehicles for their ship.
Mr. GILCHREST. You live in Hollywood.
Mr. WELSCH. Yes, I do.
Mr. GILCHREST. Hollywood, as you describe, is a small community, and that community elects the mayor. Is there a mayor of Hollywood?
Mr. WELSCH. Yes, there is.
Mr. GILCHREST. And is there a town council?
Mr. WELSCH. Yes, there is.
Mr. GILCHREST. Does Hollywood have its own police force?
Mr. WELSCH. Yes, it does.
Mr. GILCHREST. Would you say most of the residents are totally dissatisfied with this cruise-to-nowhere boat?
Mr. WELSCH. Well, I think enough of the residents are dissatisfied to have recently changed the complexion of the town council by reelecting—or electing two new members to the commission that are—have a tendency to be more responsible and responsive to its citizens. One of those commissioners—as a matter of fact, both of those commissioners were elected by substantial margins.
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So, yes, I would say that I could easily be speaking on behalf of the citizens of the city of Florida—Hollywood.
Mr. GILCHREST. I would guess that if the residents of Hollywood are disgusted with the operations of the boat and those people that allow that to continue, that they would in the next election throw them out and elect a new mayor, town council that were more amenable to their problems. And I guess State delegates should be questioned. Maybe Mr. Deutsch can call the State and see why some of these environmental issues aren't being enforced. You could call Clay Shaw and do the same thing. Was that the—.
Mr. DEUTSCH. There is a city election in March, a very hotly-contested election.
Mr. WELSCH. Actually the election is in February, February 8th, and the coalition of Hollywood citizens that I am representing here is an active group that intends to do just that on a local level, county level and a State level. Thank you, sir.
Mr. GILCHREST. I wish you luck with all that. Democracy in action.
Mr. Horn, you mentioned a couple of times Ocean City, and you are exactly correct, the residents of Ocean City, the mayor and town council of Ocean City have for more than 20 years been absolutely against any type of casino gambling similar to what you see in Las Vegas or Atlantic City in New Jersey in Ocean City because they feel it would change the complexion of that family resort area. I know they would have some problems with a cruise ship pulling in there and setting up shop. Can you just describe, based on what Mr. Welsh said and what you are trying to do with some of your organizations given the general effect of cruises, Mr. Welsh described his situation in his community—and this will be my last question, and I will yield to my colleague from Mississippi—some general problems with cruises to nowhere in communities of Florida or South Carolina or some of the other places where they exist.
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Mr. HORN. Well, Mr. Chairman—.
Mr. GILCHREST. Are there any positive things that you see for cruise to nowhere?
Mr. HORN. Well, gambling always has positives and negatives, and it would be wrong to say that there are no positives. People are employed, and some people enjoy the activity. And there may be some tax revenue generated. The negatives are addiction, bankruptcy and crime, which is brought by the expanse of gambling.
This Congress or earlier Congress created the National Gambling Impact Study Commission, which was a nine-member panel that studied the issue of gambling in America for 2 years and issued its report on June 18th of this year. This was a ground-breaking study. They spent $5 million, they heard hundreds of witnesses, they had dozens of experts, and what they found was there are positives and there are negatives. Each jurisdiction ought to be able to decide whether the costs outweigh the benefits or the benefits outweigh the costs.
Dozens of States in the past 4 years or so have considered the expansion of gambling either through their legislatures or through referendums. And in about 95 percent of the cases, gambling has been rejected because the costs exceed the benefits.
I use Ocean City as an example just because we are familiar with it, but you know there is a witness that apparently couldn't appear from Gloucester, Massachusetts, where they didn't have a choice. The boats came in. This witness represents general counsel, City of Gloucester, and there wasn't anything the city could do to stop it. And to say, oh, well, let's just turn over to the Massachusetts Legislature and pass a new bill, is unrealistic. The Massachusetts Legislature is going to take years to pass a bill. And right now, you try to argue this in the Massachusetts Legislature, they will say, well, we are going to wait and see what happens with the Wolf bill, or they are going to say, we are going to wait and see what happens with the fourth circuit opinion.
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And that is the nature of legislatures. They are going to take whatever excuse is available to delay or not pass a bill. It is a hundred times easier to stop a bill than pass a bill in the State legislature. So those cities that see the harms to them and wish to prevent it are powerless because of this implied preemption in the 1992 law.
Mr. GILCHREST. Thank you very much, Mr. Horn.
Mr. Taylor.
Mr. TAYLOR. Let me first thank both gentlemen for being here. And you both strike me as incredibly decent human beings, and you would probably be surprised that some members of my family who were very much involved in keeping gaming out of downtown Bay St. Louis, Mississippi, my hometown, the way they succeeded was to tell the elected city council that if you don't vote to ban this by zoning it, you will be voted out of office. They succeeded. And a number of communities in my congressional district, city councilmen and mayors have been replaced because they did not openly oppose gaming. Long Beach, Mississippi, cleans house every 4 years because it seems once they get in office, they kind of weaken in their stance on gaming, are replaced by someone with a stronger stance against it.
So what I can't understand, Mr. Welsch, is in a community as small as you describe, where you don't need a lot of money to run for office, where you can truly go door to door and be elected, why does the Federal Government have to save Hollywood from itself? Because my town is bigger than yours, but I can assure you in Bay St. Louis, Mississippi, you don't have to spend money to get elected, you just have to go ask people for their vote. So why can't the people of Hollywood save themselves?
If I may, you mentioned that the people are flagrantly violating the DUI laws, flagrantly violated public urination. Again, can't your city commissioners tell the police to enforce the laws on the books? Because almost every community in America has laws against driving under the influence, has laws against public exposure. I am missing something here, because I also come from a small town, but I come from a small town that decided that the one place we are going to have a casino is kind of out of sight, out of mind. That was the majority decision. So I can't understand why your small town, if it is the will of the majority, as you say, can't do the same thing, and why it takes the Federal Government to do for Hollywood what Hollywood won't do for itself. Please.
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Mr. WELSCH. I am not sure if it is a question or if it is rhetorical.
Mr. TAYLOR. Well, it is both, but it is a question.
Mr. WELSCH. I guess—I think you may have the answer. I think certainly the Federal Government has tried to do everything, or there are many legislatures that are talking about campaign reform. Local level maybe is where it should be happening, because certainly in our community the lobbying efforts and the resources that the industry, the cruises to nowhere—cruises to nowhere industry has far exceeds the resources that a community of 150,000 residents—.
Mr. TAYLOR. It is 150,000.
Mr. WELSCH. I live in the small community of North Beach in Hollywood. The city of Hollywood is a city of, I think, approximately 150,000 people. The police are off-duty details that now are a slave to two masters instead of just one master. They earn an additional 20- or $30,000 per year by protecting the interests of the boat under the guise, of course, of protecting the community, but, in fact, they protect the interests of the boat.
Our confrontations as a community in a peaceful manner and in a not-so-peaceful manner with the police have been met with a great deal of resistance from the operator of the Sun Cruz operation violating codes, violating zoning and land development regulations. There is a litany of issues that go with this particular operator. Unfortunately I am not privy to all of the other operators in the industry, but certainly this person sets a bad example. And I believe this person has 11 or 13 of the ships that ply the intracoastals and the rivers of Florida.
And I think the question you asked again is why don't we take it into our own hands. We have tried to take it into our own hands, and we have put in two new commissioners. However, I believe that it goes beyond just the city's ability to exercise.
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This boat came in before we knew we had to worry about zoning and land development regulations to control that industry. Had we known that this legislation existed and that there was a possibility a boat could come into our community, I am sure there would have been legislation that would try to regulate it in some way or put it in areas where it belonged. That is really—excuse me, if I can say one last thing—that is really where our problem lies. It is where the boats are able to locate. And, of course, you made it very clear that someone in land development regulations, one of the two of you, should normally preempt this, but it doesn't always.
Mr. TAYLOR. Mr. Welsch, by clarification, and please correct me if Florida law is contrary to my understanding, but it is my understanding that in every law of the Nation, inland waterways are subject to the State laws. Therefore, the rivers you describe, the intracoastal waterway that you described are State waters and are treated just the same as State land as far as gaming. If the State of Florida has laws against gaming on land, then those laws also apply within the 3-mile territorial limit that the States own as far as their water.
If the State of Florida does not want gaming on land or within 3 miles of the shore and on all of the rivers and lakes and bayous of the State of Florida, they can ban that right now. And apparently they have. What the law we passed in 1992 did was just to say for those States that wanted to have gaming between the shoreline and 3 miles out to sea, not the rivers, just between the shoreline and 3 miles out to sea, then if they so choose, then American vessels may do so unless the State turns around and says they can't. The States are still supreme within 3 miles. That doesn't change. This does not tell the State you have to take a gaming ship and allow them to operate.
And so, again, as someone who has helped to legalize it in Mississippi, but insisted on legal jurisdiction and local referendum, that that remain intact, I have trouble with a locality coming up to Washington and say, please save us from ourselves. And I will contrast that with something that I know the citizens would very much like to see—Mr. Wolf, I am sorry he has left—but I know the people of Virginia, from reading the Washington Post, would love the opportunity to ban out-of-State garbage being brought into Virginia. I know the people of Mississippi that are on the receiving end of about 800 tons of garbage a year from Louisiana would love the opportunity to ban our out-of-State garbage. We can't because of the interstate commerce clause, and Congress won't act on that. We won't even give them the right to ban it.
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So I find it strange that in this instance where your local government is not asking, you want us to in effect tell them you can't. Because again, I don't see any representatives of the Hollywood City Council here. I don't see any State lawmakers here. I have seen the State attorney general, who cannot hold up even one recorded vote in the Florida Legislature indicating the will of the elected representatives and the people they represent to ban this. And it is a democracy. And the majority rules. And we try to protect the rights of the minority, but the minority does not rule, the majority rules. Please.
Mr. WELSCH. Mr. Taylor, our constitution does ban gambling, and I think we are asking you to save us. And certainly I may not be saying the right thing when I get back to Florida and city legislatures, county legislatures and State legislatures take a shot at me, but maybe our legislatures are too weak, and maybe we need to come to Big Brother. I have not looked upon you as Big Brother, though. I have looked at you really as our helper in this process to then help encourage State legislatures, county legislators and city legislators to do the right thing.
And I believe, if I understand the legislation, I have heard two sides of the story on this legislation, but it is my understanding that this legislation does preempt—it is the impression or it is the interpretation of the State of Florida that it preempts the State since it did not opt out in 1992 from taking a stand on this. And it is my understanding from the State, from the county, and from our city leaders that if the Federal Government will clarify, simply clarify this, that it will make it easier for them to do. And if I understand H.R. 316, that is its purpose, its sole purpose, not to put anyone out of business, not to put cruises to nowhere out of business.
And that is a very sensitive issue for me. We have been blamed at times in our community of trying to take jobs away from people. That is just not true. I am a kind, good person, and I don't want to see people lose their jobs. At the same time I don't want to lose my business. I don't want to lose my quality of life, my peace of mind. And some of the cruises-to-nowhere operators give the rest of the industry a bad name. That is certainly what our Sun Cruz operation has done. It has given the rest of the industry a bad name. And you can help by at least clarifying the law for the State. Thank you.
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Mr. TAYLOR. Mr. Welsh, again, I understand your request. I will try to dig up as much of the—as you can see, there is a stenographer over there. I will try to dig up as much testimony as possible that was made available in 1992 to put in your hands. And I think there is more than abundant testimony from when we passed the original legislation to show that it was clearly Congress's intent to allow the States absolute jurisdiction within that State and within its territorial waters.
What I don't want to do is further muddy the waters. That is where you and I come to a disagreement on the Wolf bill. I think the Wolf bill only will serve the lawyers of this world, because it is so thoroughly convoluted that it will take years for these high-priced guys to figure out what it really means and to circumvent the intent of the people's elected representatives. But I would be more than happy to supply to you, and I think you will find reams of testimony from people, Democrats, Republicans, from Alaska to Mississippi, said that it was never our intent to circumvent State law, and that we always intended for the States to be the final decision-makers. If that is what it takes to get the so-called weak politicians you keep referring to to do the right thing, then I hope it helps you.
Mr. WELSCH. Thank you, sir.
Mr. GILCHREST. Thank you, Mr. Taylor.
Mr. DeFazio.
Mr. DEFAZIO. Thank you, Mr. Chairman.
I am sympathetic to the concerns being raised, but there is one big problem here. Even if the Wolf bill passed, all I see happening is that this person who you know in both cases—you raised this issue. You talk about international cruises. We are not talking international cruises, we are talking about cruises to nowhere, and they can be foreign-flagged or U.S.-flagged. If the Wolf bill passes and they convert to foreign flags, they can operate with impunity, unfortunately.
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Mr. HORN. Congressman, I disagree with that legal opinion, even if that is correct.
Mr. DEFAZIO. Well, I am not a lawyer, but my understanding is we can't ban the entry of ships that have these devices on them from our ports. Do you think we can do that? I hate foreign-flagged ships. I think they are junk. They are destroying our industry, they are destroying the world economy, they are destroying the environment in my district. I would be happy if I could figure out a way to outlaw foreign ships. If it is simple as saying if you have a device on your ship which we have banned you can't call in our port, then I would be fighting for that in an instant.
That is the logic, as I understand it, of the Wolf bill which is to say if a ship has these gaming devices on the ship, then a foreign-flagged ship can't enter port in Maryland. Now, if we can do that, then I could say, well, if you have latrines, you can't enter. I mean, I will find something that foreign-flagged ships have on them or don't have on them and figure out to ban them. But I am told that our hands are tied because of international law and the IMO and the all of the covenants of the seas.
Mr. HORN. I don't believe that is true for a cruise to nowhere, which is defined as leaving the United States and returning to the United States the same day. I believe you do have the authority. I believe that if you will look at Hawaii, they do not have foreign-flagged cruises to nowhere. I am not specifically familiar with California, but I don't believe that there are any in California. I don't believe that the fourth circuit decision is going to result—.
Mr. DEFAZIO. If I could, what staff tells me is what Hawaii did is they banned cruises to nowhere for any flag. So it is a State law. So you are trying to use a Federal solution, which, as I understand it, the Federal solution is crippled because of this Federal flag loophole. You are still going to have to go back to the State legislature because the ships are going to convert to foreign flags, and they are still going to come there. We lose the U.S. Jobs, you end up with substandard crews, less safe ships, and you haven't solved any of your problem.
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That is the way I understand this coming out. If you can provide me with a legal opinion from someone that says we have the authority to ban both U.S. And foreign-flagged ships, I would be interested in that. And like I said, I would look for ways to expand the law to ban all foreign-flagged ships from the United States, but that is something that I don't believe is practical.
Mr. HORN. Congressman, you are suggesting that the State legislature has authority, and the Congress does not have that same authority?
Mr. DEFAZIO. For the activity of gaming on—see, the Wolf bill is trying to get at this in a bizarre way. It says--as my understanding in reading it, and it is a little bit arcane--that we are going to ban ships which have these gaming devices on them. Now, the U.S. Government apparently has the authority to do that with U.S.-flagged ships. According to Mr. Oberstar, who is much more of an authority on these issues than I, we do not have the authority because of international law to ban foreign ships. So the ships convert to foreign flag, and they continue to operate because you haven't banned the activity of gaming, you have just banned equipment on these particular ships. That is my understanding.
Mr. HORN. It doesn't say that, Congressman. The bill simply says that preemption, Federal preemption, does not exist over the States in the area of cruise to nowhere. It doesn't say anything about—it doesn't change.
Mr. DEFAZIO. Why does it talk about devices? Maybe I have an earlier draft of the bill. The one I saw had some language about devices and such in it.
Mr. HORN. Congressman, maybe I saw an earlier draft of the bill.
Mr. DEFAZIO. If all we are doing is we haven't preempted States, I think Mr. Taylor and I would agree with that.
Mr. HORN. That is all we are asking; believe me, that is all we are asking. Rewrite the bill so it just says we do not preempt States, and that is all we are asking. I believe that is what the bill does. And if we wrote it wrong, I am sorry.
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Mr. DEFAZIO. In any case, I am new to this subcommittee. I am not an expert on international maritime law. I hate foreign-flagged ships. If I can figure out—you know, if there is some way to get at some portion of foreign-flagged ships through this, then I am going to look to expand it.
Mr. TAYLOR. Would the gentleman yield?
Mr. DEFAZIO. I would certainly yield.
Mr. TAYLOR. I would also remind Mr. Horn that Mr. Wolf was the sponsor of a $5 million study on the impact of gaming. That used to run my hometown for a whole year. Police, fire, sewer, water, everything. Five million dollars is a lot of money. So there really isn't much doubt in this Member's mind where Mr. Wolf is coming from. He would like to see a total prohibition.
Number 2 is his history has shown us on three occasions the House of Representatives has passed language to ban foreign cruises to nowhere. On all three occasions that bill went to the United States Senate, where it wasn't even given the courtesy of a hearing. So we know where they are coming from. So if there is reluctance on the members of this committee to support this legislation, it is because, A, we know that Mr. Wolf would just as soon see all gaming banned, and B, we know the United States Senate has shown a preponderance of effort to support the foreign cruise ship industry and not a great deal of support for the American cruise ship industry.
Mr. HORN. I am a Democrat. I am not usually in the position of defending Congressman Wolf, but this bill does not ban gambling, and it does not give an opening to ban gambling. I am very familiar with the National Gambling Study Commission. It included three representatives of the Nevada gambling industry, including the CEO of MGM Grand Casino, one of the largest in the country. They unanimously recommended the adoption of this very legislation, including the progambling commissioners, because they don't have the regulation that Mississippi has, which is so important. You don't know when the games are fair. You don't know who owns the boats. I mean, who is really owning the boats, who is really benefiting, the way that you know in Mississippi because of the legislation which strongly regulates the gambling industry. And that is the major reason why the commission, which is not an antigambling commission, came out in favor of this legislation.
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But I must point out this legislation does only one thing, and that is it says nothing in this section will be construed to preempt the law of any State or possession of the United States. That is all it does. That is all we ask.
Mr. TAYLOR. Mr. Horn, for the record, again, I am hearing some things about my State today that I know not to be true. And in defense of the State of Mississippi, I have to respond. Regulations that you are so proud of regarding the State of Mississippi were originally for cruising ships. It was only after the removal of language that said this ship must be underway, making way, did it become dockside. It is the exact same regulations, the exact same regulations.
So, again, there is a gaming industry in Mississippi. It started off as cruise ships. It has worked well. It is now a $2-billion-a-year industry that gives people, many people, for the first time in their lives health insurance for not only themselves, but for their families. We have local option. We have communities that are saying, you can't do it. We also have communities that say, in only these neighborhoods.
I don't see the need for the Federal Government to rescue Hollywood, Florida, or the State of Maryland. We are not telling the State of Maryland you have to it, we are saying you can do it. But if you want to prevent it from happening to Maryland, you have every right to do so. And I don't see how the Wolf bill makes things any better for anybody but the attorneys of this Nation who are going to spend decades arguing what its intentions would be.
Mr. GILCHREST. Thank you, Mr. Taylor.
Gentlemen, we appreciate your attendance at this hearing. We have great sympathy for the problems that you may be experiencing, and certainly if there is anything we can do to alleviate the burden of illegal activity in any jurisdiction, whether it be Florida or Maryland or some other place, don't hesitate to contact us. This is a contentious issue. We will continue to take a look at it in the weeks and months ahead.
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Thank you for your testimony. The hearing is adjourned.
[Whereupon, at 12:35 p.m., the subcommittee was adjourned.]
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