Feds approve Alaska’s plan for securing ferry funding grants

The Federal Highway Administration this week approved a key component of the state’s plan for building new ferries and repairing existing Alaska Marine Highway System infrastructure.

A federal infrastructure bill signed in 2021 promised to bring hundreds of millions of dollars in ferry funding to Alaska — with more than $400 million already awarded — but much of the money awarded required the state to pitch in with some funding in order to secure the lion’s share from federal sources.

Gov. Mike Dunleavy first announced in February of last year that his administration would aim to rely on an obscure method — toll credits — to meet the state funding requirement without necessarily spending any state dollars.

Toll credits have never previously been used by Alaska. The credits can be earned by a state when it reinvests toll revenue in its transportation maintenance. Alaska collects toll revenue both from the ferry system and from the Anton Anderson Memorial Tunnel, which is used to access Whittier.

The state calculated that it has earned $42.2 million in credits since 2020. Transportation Commissioner Ryan Anderson last year called the toll credits “a real advantageous way to move forward.”

What followed was months of work with federal officials to get approval for the new plan.

“The effort is the culmination of roughly a year and a half of work within the department, the legislature, our congressional delegation, and our federal partners,” Anderson said in a written statement Thursday.

In a letter late last year, U.S. Sen. Lisa Murkowski urged Dunleavy to include in the budget the $23 million required for the state to receive a $92 million federal grant to replace the aging Tustumena ferry, which serves Southwest Alaska. Dunleavy included that funding in his budget proposal in the form of toll credits despite the fact that federal officials had yet to approve the state’s toll credit use plan. This week’s federal approval will allow the state to move forward with the plan, pending inclusion of the funds in the budget passed by lawmakers.

Alongside the replacement of the nearly 60-year-old Tustumena, the federal toll credits will be used for several federally funded projects, including a low-emission shuttle ferry; improvements to existing ferries Matanuska, Kennicott and Columbia; crew quarters for the Tazlina; a new mainliner replacement ferry; and terminal construction in Yakutat, Pelican, Auke Bay, Kake and Angoon. The projects are all included in the State Transportation Improvement Plan recently approved by federal officials, after it was initially rejected.

The toll credits can be used to satisfy the requirement for a state match, but ultimately, the state will have to come up with a funding source to pay for parts of any given project that would have been covered through state dollars, had the state not used a credit to receive the grant. Shannon McCarthy, a spokesperson for the transportation department, said the department plans to rely on another federal funding source to cover the cost of the projects.