Southeast Conference study aims for ferry system reforms

While new ferries are being built, others are being jettisoned or idled for lack of funding as a stakeholder group searches for ways to set the Alaska Marine Highway System on a more stable, long-term path.

The Southeast Conference unofficially kicked off a two-phase study Aug. 20 that over the next two-plus years will hopefully identify structural changes to improve the operability and financial health of the state ferry system.

The Southeast Conference was originally formed in 1958 to help residents of its namesake region of then-territorial Alaska lobby for a regional transportation system. It has since evolved into one of the 10 Alaska regional development organizations, or ARDORs, in the state.

Executive Director Shelly Wright said the study process has been dubbed the Alaska Marine Highway Reform Project.

“It’s our hope that we can define a governance strategy and reform the system with a strategic plan,” Wright told the state Marine Transportation Advisory Board during the board’s Aug. 19 meeting in Anchorage.

The Southeast Alaska development organization held an Aug. 20 summit for stakeholders in the ferry system in Anchorage that coincided with the MTAB meeting.

Wright said in an interview that Phase 1 of the study will focus on the governance portion in an attempt to de-link the state agency from politics, and turnover in leadership, as much as possible.

The Southeast Conference has no interest in separating the ferry system from state government or the Department of Transportation, Wright emphasized.

“The important thing that we are thinking of as the Southeast Conference is, first and foremost, finding a way to govern the Alaska Marine Highway with continuity,” she said.

Jim Calvin, a principal at McDowell Group, the local research firm that is compiling data for the project and has authored numerous reports on the AMHS, said the foundational work for the governance phase should be done by the end of the year.

The Southeast Conference and McDowell Group plan to examine governance models and operating structures of ferry systems worldwide, Calvin said, to see if there is a better fit for Alaska’s than its current status as essentially a division of a cabinet-level state department.

The State of Alaska already has several “quasi-government” entities organized to run as public corporations with modest political interference including the Alaska Housing Finance Corp., the Alaska Industrial Development and Export Authority and the Alaska Railroad.

They have boards comprised of governor-appointed public members and state commissioners and their budgets are not typically debated during the annual state budgeting process.

However, those agencies are mostly self-sustaining, while the ferry system doesn’t come close to breaking even. In fiscal year 2015 the system generated a record $53.9 million in revenue and shaved $5.2 million off its operating expenses, but still needed more than $100 million in state budget support, making the AMHS inherently political.

Funding for the Alaska Marine Highway System has been at the center of budget battles for the last several legislative sessions. The system’s budget has been cut by 15 percent since fiscal year 2013.

At the same time, fares on many ferry routes have been raised twice to increase revenue and make the overall fare structure more equitable.

Compiling information for the 25-year strategic plan, conversely, will be a deep look at the market forces, finances, economics and demographics that make the state ferries what they are, Calvin described.

“The Marine Highway is woven into the fabric of coastal Alaska and has impacts all across the state and understanding how changing the system either from a governance perspective or from an operational perspective — how that unfolds is just a really complex, year-long exercise,” he said to the MTAB board.

A final report on both aspects is expected near the end of 2018, according to Wright.

In January, the McDowell Group published a report that concluded the state’s 11-ferry system generated $273 million of economic activity across Alaska for the $114 million in state support it received in 2014.

The Alaska Marine Highway Reform Project spawned from a memorandum of understanding, or MOU, signed in May by Gov. Bill Walker and Southeast Conference leadership to develop ways to improve upon the 53-year old Alaska Marine Highway system from an organizational standpoint.

“We’re here to find out what Alaskans need the Marine Highway System to be,” MTAB chair and Southeast Conference Energy Coordinator Robert Venables said.

The Department of Transportation contributed $250,000 to the planning effort in conjunction with the MOU and the Southeast Conference is working to raise another $150,000 for what is expected to be about a $400,000 examination.

DOT Commissioner Marc Luiken said at the MTAB meeting that he, Deputy DOT Commissioner Mike Neussl and AMHS General Manager Capt. John Falvey “all stand ready to support the effort with data, subject matter expertise or anything else we can provide.”

Wright said numerous groups from areas beyond coastal Alaska have contributed to the $68,000 the Southeast Conference has raised for the effort so far.

Implementing a finite, generational plan for who to serve and how to serve them will provide stability between state administrations even if a new governance framework cannot be established, she added. It will also give legislators something to budget on.

“There’s not really any financial trust in the Alaska Marine Highway System because there’s nothing you can really look to and say, ‘What are you doing and why are you doing that?’” Wright said.