Icy Reception

Alaska’s ferry system needs a strategic long-term plan.

By Bruce Buls, Correspondent

For the Alaska Marine Highway System (AMHS), it’s all about the money. Money to operate an aging fleet of 12 ferries that carry vehicles and passengers across 3,500 miles of ocean and islands along the rim of the North Pacific from Dutch Harbor, Alaska, to Bellingham, Wash. Money necessary to maintain and repair the hard-working boats. Money to pay the crews on board and on the beach. Money to maintain docks and terminals in 35 remote communities. Money for the design and construction of replacement vessels.

Bruce Buls

Money for consultants. Such as the $250,000 paid to Northern Economics in Anchorage for a recently released report called the “Alaska Marine Highway System Economic Reshaping Report.” The report was commissioned last year by the Alaska Department of Transportation & Public Facilities. Its task was to identify “potential reductions of the state’s financial obligation and liability as it pertains to AMHS.” Meaning: where and how can the state spend even less money on its marine highway system.

As state revenues from the north slope oil patch have diminished over the last half-dozen years, so has state spending on the marine highway system. AMHS budgets declined about 30% during that time. Then, in 2019, the new governor, Brian Dunleavy, proposed cutting the AMHS budget from $86 million in fiscal year 2019 to $21.8 million in fiscal 2020. The 75% cut would have effectively shut down the state ferry system for nine months starting last October.

People in coastal communities that depend on the ferry service were outraged.

“First, he told us while campaigning for governor that he wouldn’t cut the ferries’ budget,” said Doug Ward, a former executive at the shipyard in Ketchikan, “and then he cut the budget precipitously and without any plan. It was malfeasance.” (Ketchikan shipyard, formerly Alaska Ship & Drydock, was purchased by Vigor in 2012.)

Ward and 49,000 (and counting) other Alaskans have signed a petition seeking a recall election. Seventy-one thousand signatures are needed to get a special election.

Bruce Buls

SERVICE CUTS, STRIKE

The legislature balked at the governor’s proposed budget cuts and set the AMHS budget last year at about $48 million, a level that leaves the system “flailing,” according to Shannon Adamson, a former deck officer for AMHS and current Alaska rep for the Masters, Mates and Pilots Union in Juneau. “At this funding level, we just can’t continue to run as we have been in the past.”

With less than $50 million, service cuts have been inevitable. One area hit particularly hard is Prince William Sound, which is without ferry service until this spring. And many other small coastal communities have had their winter service cut or discontinued as well.

Another recent service casualty is the connection to Prince Rupert, British Columbia, which is relatively close to Ketchikan and has rail and road connections that cities in Southeast Alaska don’t have. Service there has also been discontinued, but not entirely due to budget cuts. There have also been security issues with it being an international port of call and disputes about building a new terminal for the AMHS.

Also disrupting ferry service in Alaska was last summer’s strike by the Inlandboatmen’s Union of the Pacific. The first strike since 1977 shut down the entire operation for 10 days in late July and early August, at the peak of the summer tourist season. At the end of the 10-day strike, the IBU got a new contract and “an agreement that addresses many of our members’ concerns,” according to a statement from the union.

The cost was significant, however, both in dollars and in perception. The state estimated that it lost about $3.2 million in revenues, money which would have been used to help provide service over the winter. The strike also forced the reimbursement of nearly 11,000 passenger and vehicle fares.

“The strike was terrible,” said Robert Venables, executive director of the Southeast Conference and chairman of the state’s Marine Transportation Advisory Board. “Devastating might be too strong, but it was certainly debilitating, and it caused a lot of problems on a lot of levels. There may have been a short-term gain in contractual relations with the IBU, but there was damage done to the economy as it disrupted the state fair in Haines, among other things. It also demonstrated to some entities in the political world that perhaps there should be private-sector solutions if the state just ceases operations.”

(The Southeast Conference was incorporated in 1958 to promote the formation of a regional transportation system that eventually became the Alaska Marine Highway System.)

PRIVATIZE AMHS?

The concept of privatizing AMHS was one of the subjects of the Northern Economics reshaping report that was released in early January. Options included selling, leasing or giving away vessels and terminals “to a private entity to run whatever service they can justify economically.”

In the end, the report concluded that, “selling or leasing AMHS assets to private entities is not feasible if minimum levels of service are also stipulated.” The report also states that, “no business owner would accept all AMHS assets with the intent to provide service as the system currently operates, since it would not be possible to do so and earn even a modest rate of return to account for the risk. The only buyer that might be willing to accept the assets would do so with the intent of reselling them for a profit (such as for scrap) rather than providing ferry service to AMHS communities.”

“It begs the question of what is the government’s role in providing transportation,” said John Waterhouse, a senior partner at Elliott Bay Design Group. EBDG has been working with AMHS for many years, going back to its predecessor company, Nickum & Spaulding Associates, which also worked with Alaska’s ferries. Seattlebased EBDG has an office in Ketchikan.

EBDG designed the two newest AMHS boats, the Alaska-class Hubbard and the Tazlina. The marine engineering firm is also actively involved with the fleet’s maintenance and repair. “So, we’ve got a good understanding of the challenges that they’re facing, especially with some aging vessels” said Waterhouse. “They really need some sort of plan for what the next 10 years is going to look like.”

Venables agreed that planning is key to the survival and success of the ferry system. “At the end of the day we still don’t have a plan,” he said, referring to the reshaping plan, and despite the need to establish continuity and predictability for both the operators and users of the system, “there is not a long-range plan.”

The Southeast Conference is also proposing a change in the way the marine highway system is managed. “Our number-one priority is a focus on the governance structure,” said Venables. “The powers-that-be will establish a budget, but to have a maritime enterprise we really need to have maritime business people at the helm. We’ve recommended that a sevenmember board would be appropriately

sized to include those involved with the maritime industry professionally. Business finance will have a seat and so would labor.”

The state legislature this winter is expected to release a proposed budget for the next fiscal year that retains the status quo. At the same time, the governor has announced the formation of a working group to consider the future of the Alaska Marine Highway System.

Meanwhile, AMHS management is working with a seriously reduced budget and an unhappy public. “I think the management team at the marine highway system is trying their absolute best to keep the boats running with the instructions that they are given from the (state) department of transportation,” said Waterhouse. “They’re trying to be good souls and deliver the mission within the constraints that they’re given. They’re juggling as best they can.”

“There’s now a general awareness of the need for better long-range planning and the administration has committed to working towards that goal,” said Venables. “But you need to understand the basic needs of the communities and the basic levels of service that is necessary.”

Bruce Buls