Ferry system braces for cuts; state funds down 15% since ‘14

  • The Alaska Marine Highway System ferry Taku will be laid up this year to save money, but it will still cost the system $3.6 million to keep it minimally staffed while tied at the dock. Photo/Michael Penn/Juneau Empire

“There is no money, so our approach should not be ‘How do we get more money?’” Marine Transportation Advisory Board chair Robert Venables said. “While there may not be money, there are solutions.”

Venables’ remark, which opened the Nov. 16 Marine Transportation Advisory Board, or MTAB, meeting, was specific to the Alaska Marine Highway System but could have been directed to countless state functions.

As references to the state budget deficit grow from $3 billion, to $3.5 billion to more, the state ferry system and the public board are working on ways to optimize ferry service and revenue.

The Alaska Marine Highway System, which operates 11 ferries for 35 ports from Dutch Harbor to Bellingham, Wash., is projecting a $25.5 million budget cut in the 2017 fiscal year compared to 2014, according to Deputy Transportation Commissioner Mike Neussl.

“That’s a huge hit,” he said.

In fiscal year 2014, the Marine Highway System was appropriated $162.6 million by the Legislature. It will have a budget of about $137 million in the 2017 fiscal year, which begins next July 1, if the administration’s projection holds true.

The current fiscal year 2016 system operating budget is $14.6 million less than the 2015 fiscal year, which ended June 30.

 “Extra” amenities, such as gift shops and bars on the vessels that have them, have been closed to save money over the past couple years. This year, 45 positions were eliminated and significant service cuts are starting.

The Marine Highway System measures its service level by the sum of the weeks its 11 ships are sailing. From 2011-2013, the state ferries provided more than 400 combined weeks of service; the last two years service declined to about 378 weeks as several vessels returned to work late after winter overhauls. Most notably was the M/V Tustumena in the spring of 2014.

This fiscal year’s operating plan calls for 350 weeks of service as vessels are laid up to save money. The fast ferries Fairweather and Chenega are scheduled to enter layup May 1 after coming out of federally-funded winter capital improvement programs.

The M/V Taku will be in layup for the entirety of fiscal 2016 because a pot of state capital money used for repairs to assure the ferries pass annual U.S. Coast Guard inspections shrank from $12 million to $10 million this year, which left the Taku tied to a dock, according to Neussl.

“We’re starting with less (money) than we normally do with vessels that are older and need more work than years ago,” Neussl said.

Nearly every vessel had “discovery work,” or additional repairs that were found when the inspections began, straining that budget item even more, he added.

Further harm could come from the federal government, if ferry formula funding for capital projects is cut for Alaska, as proposed in the Senate version of the long-term transportation funding bill, according to Neussl.

Taking vessels out of service to save money isn’t free, either.

Laid-up ferries must be manned with minimal crews while dockside. The 352-foot Taku, a mid-sized Alaska ferry, will cost the system $3.6 million to sit idle this year, Neussl said.

The proposed 2016 summer schedule reflects the anticipated 2017 fiscal year funding hit that will take effect July 1. Most notably, Sitka’s service is reduced from near daily fast ferry service last summer to twice-weekly visits from mainline vessels next summer. Also, Prince William Sound ports will not have service for six weeks beginning in mid-September under the draft schedule.

Neussl said he was pleased to see the public focus on the tangible impacts of reduced service in public comments on the proposed 2016 summer schedule, which he called “bleak.”

Solutions to managing Alaska’s ferry fleet on a shrinking budget need to be locally based with an emphasis on providing basic transportation for Alaskans, while working to at least narrow the system’s internal budget challenges, Venables said.

The Alaska Marine Highway System never has been and never will be a profitable venture for the state. Making money was never its intent.

Since the current 11-vessel fleet took shape in 2006, the system’s “fare box recovery rate” has been between 30 percent to 35 percent of its overall budget. Getting back to the 50 percent recovery range achieved in the early 2000s would be a success, system officials have said.

That likely means reducing the fleet size and compressing traffic onto fewer sailings, according to Neussl.

At the same time, providing some level of service to all 35 port communities is the Alaska Marine Highway System’s first goal, he said. From there, providing tourism and commercial opportunities, while maximizing revenue, becomes a challenging mix.

While ferry ridership remained fairly steady, the number of sailings continued to increase when the state was flush with cash in the mid- to late-2000s.

Southeast Conference Executive Director Shelly Wright also said at the Nov. 16 meeting that striking a balance between service and budgets starts at the local level. The Southeast Conference, a regional development organization, is organizing a series of community meetings with DOT to discuss the importance of the system directly with the public.

Senate Transportation Committee chair Sen. Peter Micciche of Soldotna held an Alaska Marine Highway System listening session in Sitka Oct. 23 and said during the MTAB meeting that he hoped hold additional meetings to hear from other coastal Alaska communities.

Legislators from areas not served by the ferry system have been blamed for dismissing the transportation service and quickly looking to it when state budgets need to be tightened.

“I believe (legislators) are ready for a change; they’re ready to listen to something new; they’re ready to support the Marine Highways as long as they know that it’s not going to be just business as usual — ‘please give us more money and we’ll figure it out,’” Wright said.

She added that legislators need to know about the social and cultural importance of the system beyond the bottom line “because we all know the bottom line is never going to be a black one.”

AMHS General Manager Capt. John Falvey said the system commissioned a study to examine the economic impact the system has on the entire state, not just the regions it serves. The last such study was done in 1995.

The final report should be done in time for the upcoming legislative session that begins in late January, he said.

It’s widely understood that communities along the Marine Highway rely on the ferries to bring tourists and serve as a freight carrier to communities without barge service, but the actual benefits have been anecdotal.

A new online reservation system, set to go live in May, should also help the system collect data on its riders and eventually develop a fare formula, both of which will help optimize revenue, Falvey said.

Historically, fares have been set at the discretion of the DOT commissioner and that has led to a disjointed structure of more than 20,000 fare combinations.

Falvey and Neussl admitted there is no rhyme or reason to the fare structure and the new reservation system should be a good starting point to overhaul fares and get to a system-wide fee-per-mile structure.

Fares on a majority of routes were increased 4.5 percent earlier this year to bring them more in line with the most expensive ferry trips, but the fares are so disjointed that much more work is needed.

New ferries

A bright spot for the beleaguered Marine Highway System, construction of its Alaska class ferries, or day boats, at Vigor Alaska’s shipyard in Ketchikan is on schedule and going well, Neussl said. The pair of $60 million, 280-foot ferries is destined to serve Haines, Skagway and Juneau in Lynn Canal. The first of the twin vessels is scheduled for completion in October 2018, with the second coming shortly thereafter.

Replacing the 51-year old Tustumena, the only ship that can adequately serve the Homer, Kodiak and Aleutian ports, is off to a good start, too. Falvey said the final design of the 330-foot vessel is coming in at about $6 million, less than the $10 million set aside for it in the state’s Vessel Replacement Fund.

Overall replacement of the Tustumena has been pegged between $211 million and $237 million.

The final design is expected in January from Glosten, a Seattle-based marine engineering firm.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
11/18/2015 - 3:24pm

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