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Mat-Su on brink of selling never-used ferry to Philippine Red Cross

  • Author: Zaz Hollander
  • Updated: September 28, 2016
  • Published September 2, 2015

PALMER -- The Matanuska-Susitna Borough is finally on the verge of selling the ill-fated ferry Susitna after four years of trying and more than $2 million spent to store the never-used craft.

The borough Assembly late Tuesday voted unanimously to sell the 195-foot ferry to the Philippine Red Cross. Little fanfare accompanied the 11:30 p.m. action and just a handful of people were left in chambers. The Assembly was one member short: ferry spending critic Ron Arvin left to catch a flight.

The agreement they approved amounts to a $1.75 million payment for the ferry the borough originally hoped to sell for more than three times that amount.

The borough says the Philippine Red Cross plans to use the ferry in the Philippine Sea delivering food and supplies to island shores and serving as a floating hospital after hurricanes. The organization didn't immediately respond to an email for more information.

The Susitna was supposed to carry passengers and cars across Knik Arm from Point MacKenzie to Anchorage, but money and political will for landings fizzled and the ferry never made it to Southcentral Alaska, moored instead since 2011 at a dock in Ward Cove near the Ketchikan shipyard where it was built.

Now the 195-foot, twin-hulled barge with beach landing ability capable of breaking ice over its bow doesn't even run: Heavy rains earlier this year damaged three of its four engines, and officials estimate repairs at around $1 million.

Most ferry-weary Assembly members said they were eager to get rid of the beleaguered "boat," as some call it, and cut mounting losses while they could.

"We've got two choices: We either move ahead and have a buyer with a boat they know is going to get fixed or we allocate the money to just scrap this thing now and dispense with the expenses," said Wasilla's Steve Colligan, who estimated scrapping costs at $500,000 to $1 million. "I'm in favor of us moving ahead."

Storing the ferry at a Ward Cove and paying insurance premiums have cost the borough more than $2 million, finance officials estimated earlier this year. The borough also spent about $2.4 million on matching grants associated with the vessel it ostensibly got for free from the Navy.

The borough is in a difficult budget year and still faces a federal demand to repay as much as $12.3 million in grant money spent on the ferry, though officials hope it will be less.

The long-awaited vote approved a proposed purchase and sale agreement with the international humanitarian organization that reflects the ferry's dead-in-the-water status now.

Here's the deal, finalized Monday afternoon, according to a letter from internal auditor James Wilson:

The Philippine Red Cross will make an initial deposit of $250,000 to pay the borough's insurance deductible on the engine repairs. The deposit is nonrefundable provided the borough completes repairs and provides a necessary export permit.

The Red Cross will make a $60,000 deposit to cover borough costs during repairs.

The organization will make a $750,000 deposit, or half the purchase price, and then pay the remaining $750,000 once repairs are done.

The potential sale still faces two risks, Borough Manager John Moosey said: The borough's insurance holder could balk at completing repairs necessary to get the damaged Susitna running again, or the federal government could balk at the sale of the publicly funded former military craft to a foreign entity.

The engines must be repaired and certified prior to transfer, Wilson's letter said. If the ferry isn't delivered to the Philippine Red Cross by March 31, both sides could terminate or extend the agreement.

Moosey said several "slight risks" added urgency to the transaction with the Philippine Red Cross: the need to find someone willing to pay for repairs before buying the craft, and concerns that the borough's ferry insurance holder -- Lloyd's of London -- would cancel the policy if repairs didn't start soon.

Moosey, who has tried to get rid of the ferry for years, got visibly animated late in the evening, when Assembly member Vern Halter voiced hesitation about the urgency driving the deal.

If Lloyd's drops the borough, there's nowhere else to get insurance, Moosey said. The potential buyer is covering the deductible plus the extra costs.

"We have never gotten this far," he said. "And if they walk away, they forfeit those dollars. We've had a lot of talk … they're in it much more so than we've had anybody else."

The borough has tried for years to sell or give away the ferry, but offers as high as $6 million failed to materialize. The only other recent offer officials referenced was $4 million, from the owner of a Turkish rental car company, among other businesses, Moosey said during a break in the meeting. But "that was before the boat broke," he said, and that sale was bogged down in questions about sale to a foreign buyer.

Several Assembly members on Tuesday pressed staff for more information about the pace of the decision from federal agencies -- Department of Defense, Department of Commerce, Office of Naval Research and Federal Transit Administration -- determining the fate of any transfer restrictions for the ferry. Borough attorney Nick Spiropoulos said the borough is at the tail end of a 60- to 90-day period within which the decision was supposed to be made.

The Red Cross can terminate the purchase if Lloyd's doesn't repair the ferry to a level both sides agree on, or if the federal government doesn't agree to the transfer, Moosey said. For any other reason, the Philippine organization will forfeit the deductible payment.

"Honestly, this is the best deal we could get for the large investment in the boat," he said. "This puts an end to the story for the borough."

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