Alaska’s ferries are facing a forecast of some rough seas ahead.
How that will manifest largely depends on the conclusions of a study examining the options to reshape the Alaska Marine Highway System that Department of Transportation officials are currently reviewing.
DOT Commissioner John MacKinnon said in an interview that the study, conducted over spring and summer by the Anchorage-based research firm Northern Economics, evaluated 11 different options for overhauling the network of large vessels that move people, vehicles and goods between 35 communities spread across more than 3,000 miles from Bellingham, Wash., to Dutch Harbor.
The desire to reshape the ferry system follows years of budget cuts that correspond to significantly diminished service across much of the network. Since peaking at $111.2 million in the 2012 fiscal year, the state-funded portion of the annual AMHS operations budget has roughly been cut in half. Service levels, measured by the cumulative number of weeks ferries in the 12-vessel fleet operate over a year, have been cut about 25 percent over that time, according to AMHS figures.
This year’s budget calls for a $56 million state subsidy — a compromise between the Legislature and Gov. Michael J. Dunleavy’s original proposal of $21.8 million, which would’ve resulted in shutting the system down in October.
The prospect of no ferries running for nine months or more generated strong backlash from many legislators and Alaskans in coastal communities and led to the softer, but still significant budget reduction for this year.
While the budget cuts on the state side of the ledger are mainly due to lower oil revenues that have driven major cuts across state government, AMHS leaders have also had to deal with fewer ferry riders, even when the service reductions are accounted for. Ridership has declined over the past 20-plus years from about 350,000 ferry passengers in 1998 to 251,000 passengers in 2018.
At the same time, vehicle transport has remained steady at about 100,000 car, truck and van shipments per year, according to AMHS figures.
The prevailing belief is that coastal travelers have turned to the skies, favoring speedy and ever-more reliable jet traffic over more leisurely, scenic and cheaper ferry trips. Alaska Airlines offers daily flights to nine communities the ferries also call on and small regional airlines fly to most of the others.
MacKinnon said that the drop in ridership coincides with GPS and other advancements that have made flying through coastal Alaska’s notoriously bad weather safer and more consistent.
“The chance of them doing a flyover now and not being able to land is a lot smaller than it used to be, so our competition is just technology that the airlines have been able to use to improve their performance,” MacKinnon said.
The final and possibly biggest challenge facing ferry managers, according to MacKinnon, is the age of the fleet.
Most large vessels are retired and scrapped once they reach 30 or 35 years old, he said, while six of the 12 ferries are already more than 40 years old. Additionally, twin fast shuttle ferries Chenega and Fairweather, built in 2004 and 2005, are currently docked and up for sale; they have proved to be expensive to run — favoring speed over fuel efficiency — and have been plagued by engine problems and hull cracking.
DOT sold the 55-year old ferry Taku in January 2018 to a Dubai-based company for $171,000.
“I’m sitting here looking at the Malaspina, 56 years old, and then we’ve got the LeConte, the Columbia and the Aurora in the 45-year-old range and then from the late ‘70s to ’98 we didn’t build a ship,” MacKinnon said. “So we’ve got some newer ones and then we’ve got some older ones that should’ve been scrapped.”
The ten operating ferries average 37 years old and that includes the Tazlina and Hubbard “day boats” that entered service earlier this year.
The collective age of the fleet makes for costly routine maintenance that often leads to longer dry dock layups as more areas in need of repair are discovered.
The Matanuska, one of the original mainline ferries launched along with the state system in 1963, recently received about $40 million of work to repair damaged steel and upgrade some systems to current safety standards.
Its sister ship, the Malaspina, is scheduled for a long-term layup in January. Repairing the Malaspina is estimated to cost upwards of $16 million, but that bill could approach the Matanuska’s total as the vessel is examined in dry dock, according to MacKinnon.
The smaller LeConte was docked in October for a regularly scheduled $1.2 million overall, but it was determined that further hull steel repairs were needed for a total bill of about $5.2 million. MacKinnon said the similarly sized and aged Aurora, which went in for its evaluation Nov. 4, could need similar attention.
The cost led DOT to halt repairs to the LeConte until it’s known whether it or the Aurora will be cheaper to repair. That question should be answered later this month, according to a department statement.
MacKinnon is working to tally all of the recent repair bills for the older vessels to see just how much of the mostly federal money has been spent keeping them on the water.
“We probably could’ve built a couple new for that kind of money,” he surmised.
He stressed in a follow-up email that while the age of some of the ferries means they require significant upkeep, it doesn't mean they aren't safe. Each vessel is inspected by the Coast Guard before receiving an annual approval to operate from the Coast Guard.
"Ships are required to dry dock three times every five years, but out of an abunance of caution, the ships are dry docked every year. "Crews also perform a variety of inspections on a regular basis," he wrote.
When the ferries are laid up for repairs longer than expected — a common occurrence of late — it simply means some communities don’t get the service they planned on. That deters riders as well.
The system has lost a lot of its formerly consistent commercial customers because of its inability to be reliable, MacKinnon added.
It all paints a picture of a ferry system beloved by countless Alaskans that is in need of change to pull it out of what is now a slow, downward spiral.
But a group of Southeast legislators insist there is already money available to fix the vessels that the administration is choosing not to use.
Democrat Sen. Jesse Kiehl, Reps. Jonathan Kreiss-Tomkins, Sara Hannan, Andi Story and Independent Rep. Dan Ortiz sent a letter to Dunleavy and MacKinnon Nov. 12 in which they call the decisions to lay up the LeConte and Malaspina "a funding priority crisis that can be solved."
The lawmakers wrote that the Legislature put $20 million aside in a previous budget to deal with unexpected costs to the ferry system. They argue the administration has a responsibility to Alaskans to use that money to repair the vessels. Not doing so puts the small Southeast communities served by the vessels — towns and villages with limited transporation options — "in an existential crisis," they wrote.
"With the multitude of recent, severe budget cuts to AMHS, and delayed maintenance to system vessels, this is leading to future economic and social disasters, if management action is not taken quickly," the letter states.
According to Kreiss-Tomkins staffer Kevin McGowan, the extra $20 million is in the Alaska Marine Highway System Fund, the system's operating fund. To access the money, the administration would have to send a request to the bicameral Legislative Budget and Audit Committee, which typically handles out-of-session funding issues. DOT would then be able to spend the money on ferry repairs if the request were approved by the committee.
The AMHS Fund held $35.6 million at the end of October, according to state Treasury Division records.
The Journal is awaiting a response from DOT officials on the matter.
The reshaping plan now being vetted by the Dunleavy administration is the second attempt in recent years to address the ferries’ systemic challenges.
In May 2016, former Gov. Bill Walker signed a memorandum of understanding with the Southeast Conference — a community development group originally formed in 1958 to advance a transportation network that became the ferry system — directing DOT to partner with the nonprofit in addressing the system’s mission statement, governance structure, operations, revenue opportunities and other potential partnerships that could support major changes to the system.
That report concluded that a public corporation — similar to the Alaska Railroad Corp. — with an expert-filled board of directors would be the best option for Alaska’s ferries.
The public corporation model would provide stability in management and board oversight that could translate into the long range planning that is needed to maximize efficiencies available in vessel operations and overall fleet management, according to the report.
However, MacKinnon contends the prior administration’s attempt to fix the AMHS didn’t do enough to fundamentally change how it operates.
“Our study is a broad study looking at a variety of things, there’s was focused on one thing,” MacKinnon said, “basically change the management structure from government managing it to a board of stakeholders.”
A public records request for a copy of the draft report was denied by department officials, who cited deliberative privilege authority while it is being internally reviewed and finalized.
The latest study is scheduled to be finalized in December. The state's contract with Northern Economics to produce the document was for up to $250,000.
The first big, system-wide change the Dunleavy administration made was to implement a “dynamic” pricing schedule that increases fares as more passenger, vehicle and cabin tickets are sold for a given sailing.
Dynamic pricing, along with new change fees and increased fares around special events in port communities, are all intended to take the amount of fare box revenue from current levels of about 35 percent up to 50 percent of the system’s overall operating revenue, MacKinnon said.
The 50 percent mark is a goal set by the Legislature during the budget debates earlier this year.
Hitting the 50 percent fare box recovery mark “requires concentrating on the high revenue runs, raising rates where the market will bear it and dynamic pricing. Dynamic pricing works well for airlines,” MacKinnon said.
He suggested the broader reform effort could include local ferry authorities that manage vessels and runs in more isolated route segments, such as Prince William Sound. That would allow for dedicated vessels that are purposed specifically for certain runs to maximize efficiency.
It’s a model that has worked well for the Inter-Island Ferry Authority between Ketchikan and Prince of Wales Island, he said.
“I think it’s great when a community steps up and says, ‘We’d like to take control of our own destiny,’ and it will take investment by the state,” MacKinnon said.
The public corporation model floated by the Walker administration required significant changes by the Legislature to AMHS statutes, and though it’s unclear exactly what plan the Dunleavy administration will settle on, it will undoubtedly require legislative buy-in as well.
MacKinnon added that it’s a time to examine the overall concept of state-run ferries.
While many residents of isolated coastal communities consider the ferries to be their version of Alaska’s road system, he contends the analogy misses a couple key points.
“We don’t operate the busses on public roads. We run the airports; we don’t run the airlines, but on the marine side we not only own the ships and the ports, we operate them,” MacKinnon said, adding that he’s heard from private vessel operators who’ve told him they don’t even try to compete with the state ferries.
“Our goal is not the demise of the system; it’s fixing the system,” he said. “You can always fix it by throwing more money at it but I think the reality is there’s no more money to throw at it.”
Elwood Brehmer can be reached at email@example.com.
Correction: A previous version of this story incorrectly reported that repairs to the ferry LeConte are estimated to cost $4 million in total. DOT estimates the unexpected work will cost $4 million, for a total repair cost of about $5.2 million.