Rough waters ahead for the ferry system

Marine highway must raise fares or cut costs to comply with advisory board

Posted: Thursday, October 11, 2007

Alaska's ferry system will have to cut costs or raise fares to meet a new goal of increased service, which its advisory board approved Wednesday.

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The Marine Transportation Advisory Board voted to increase trips between towns in fiscal year 2009, but keep the state subsidy flat, at about $85 million.

Leo von Scheben, the Commissioner of the Department of Transportation and Public Facilities, told the Marine Transportation Advisory Board that the ferry service faces many challenges in the years ahead as state oil revenue declines, federal dollars dry up and prices for construction and materials skyrocket, placing more stress on the state general fund. Fuel and labor costs for the ferries also have been on the rise.

"The governor doesn't want us to live beyond our means," von Scheben said.

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The board, whose members are appointed by the governor, makes recommendations to the Transportation Department.

The system's operating budget stands at around $135 million a year. Revenues from fares bring in around $50 million, and about $85 million is needed in subsidies from the state.

The board hopes to increase trips between communities, which would raise operating costs to around $150 million, but it told the ferry system to find a way to meet that goal by cutting costs or increasing fares.

Board member JC Conley, of Ketchikan, suggested the plan.

"We are recommending that we provide more service and the additional service be paid for by the people using the system," Conley said.

He hoped the system could save money by increasing efficiency or by cutting staff overtime. Conley said he'd "scream" if the ferry system just raised rates across the board.

"If they do that, that's just bunk," he said.

The system is in contract negotiations with its labor unions.

It also sees challenges in long-term capital costs. The ferry fleet is aging, with many ships more than 40 years old. The cost of replacing the boats range from $70 million for smaller ships to $250 million for a ship such as the Colombia.

Shelly Wright, executive director of Southeast Conference, pushed Scheben for solutions to the ferry's problems. The Southeast Conference is an organization whose members are business and government representatives aiming to promote development within the region.

"We've all heard your message. We've heard it over and over and over again. My frustration is we don't hear anything on what are we going to do about it? How do we fix it? What are the new ideas?" Wright said.

"There's got to be a way for Southeast Alaska to maintain their highway, and their business and their service and their viability with what we have, and we need ideas," Wright said.

Fundamental changes have occurred in Southeast Alaska's economics since the ferry system was established in the 1960s, said Jeff Ottesen, the Transportation Department's director for program development.

Those changes include diminishing revenue for the ferries on freight services, as private air cargo and shipping services have grown in the region. Also, the growth of the cruise industry has changed how many tourists use the ferries.

"These factors have changed the role of the ferry system because you have all these competing services for that traffic," Ottesen said.



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