Consultants hired by Dunleavy administration say privatizing Alaska ferries ‘not feasible’

The ferry Malaspina is in drydock and the Columbia is tied up at the Ketchikan Shipyard in February, 2012. Federal funds have covered millions of dollars of repairs. (Photo by Ed Schoenfeld/CoastAlaska News)
The ferry Malaspina in dry dock and the Columbia tied up at the Ketchikan Shipyard in February 2012. (Photo by Ed Schoenfeld/CoastAlaska)

A $250,000 study looking for ways to wean the Alaska Marine Highway System from state support is finally out. Gov. Mike Dunleavy has floated the idea of privatizing the system, but the hired consultants have concluded that isn’t feasible.

The Dunleavy administration commissioned the report last spring and received it in the fall. But the state wouldn’t release it until Wednesday’s Marine Transportation Advisory Board meeting.

That didn’t sit well with MTAB’s newest board member.

“I understand the administration has had the report for some time and chosen not to issue it,” former Gov. Frank Murkowski, a Dunleavy appointee, said at the meeting. “If you’re an adviser, you need the information before you hold can hold a meeting that’s meaningful such as this.”

Nobody from Northern Economics, the company that drafted the report, was at the meeting. But their report looked at 11 different scenarios — five of which involved some degree of privatization. Others looked at transferring responsibilities to new local agencies that would run regional routes.

While not explicitly stated, the Anchorage firm was tasked to see what kind of service it could deliver for $24 million a year. That’s the ferry subsidy Dunleavy proposed last year, which was only enough for a few months of operations.

The consultants answer was: not much service. Its best scenario was splitting the Alaska Marine Highway System into two regional public entities. Fares would go up 25%. Wages would fall nearly 9%. And there’d also be deep cuts to service: no more stops at the Canadian port of Prince Rupert. And Prince William Sound, Homer and Kodiak Island would also get no winter ferries.

But the economic team concluded that cutting the ferry subsidy to the governor’s magic number of $24 million would be, in their words, “extremely difficult.” That is, if the system would continue a minimum level of service to coastal communities.

Of course, the governor’s $24 million ferry budget wasn’t to be. A legislative compromise last year approved a $46 million subsidy.

Even so, AMHS General Manager John Falvey told the advisory board it’s been hard to keep the system afloat.

“You know what’s happened with the cut — it’s been so massive,” Falvey said. “It’s been very, very challenging.”

He added that four ferries are now laid up either waiting to be sold off or in need of expensive overhaul and offline.

Pelican Mayor Walt Weller said his Chichagof Island community has been virtually cut off. It’s turned to fishing boats and occasional floatplanes to deliver groceries and other supplies, and he said residents are extremely concerned.

“And I don’t know what to tell them. They feel like they’ve been cut off by the state,” Weller said.

The report also looked at the advantages of transforming the ferry system into a public corporation. That’s been a central aim of the Alaska Marine Highway Reform Project. Advocates of that effort want to insulate the ferry system from political meddling. As governors change every four or eight years, so do priorities, making long-term planning difficult.

The consultants also suggest renegotiating labor contracts to cut wages, but they acknowledge this could be difficult without legislative action. And they poured cold water on privatization. That’s because few of the routes break even. It found the most profitable route is the 45-minute trip between Ketchikan and Metlakatla. Even that would require a $370,000 subsidy.

No significant changes are planned for this year. The governor has proposed flat funding to the marine highway. Any big changes would need to be approved by lawmakers for 2021.

The Marine Transportation Advisory Board plans to schedule a future meeting to discuss the report’s findings in depth.

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