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'Free' ferry running up multimillion-dollar tab for Alaska borough's residents

By ZAZ HOLLANDER | Alaska Dispatch News, Anchorage | Published: February 1, 2015

WASILLA, Alaska (Tribune News Service) — The Matanuska-Susitna Borough’s “free” ferry Susitna has cost local taxpayers more than $4.4 million.

That figure includes just over $2 million to keep the vessel at Ward Cove, near Ketchikan. The 195-foot twin-hulled vessel — billed as the world’s only icebreaking catamaran — sits idle, seats still covered in plastic and hulls attracting barnacles, instead of shuttling people and vehicles across Knik Arm between Anchorage and Alaska’s fastest-growing region.  

It also reflects a little over $2.4 million to “match” federal grant funds. The grants paid for the ferry’s overhaul in Ketchikan, work on Anchorage and Mat-Su landings, and a $4 million ferry terminal on the Mat-Su side that now sits largely empty and locked up, sporadically used for port director offices and seasonal tenants. The figures come from the borough, in response to a request from Alaska Dispatch News.

The borough could be on the hook for far more. The Federal Transit Administration wants Mat-Su to pay back $12.3 million in ferry grants because it's never served the public.

No ferry landings were ever built, so the vessel waits at Ward Cove.

And the bills keep adding up.

Borough officials consistently say they got the ferry for free.

The Office of Naval Research built the vessel as a beach-landing prototype and then handed it over to the Mat-Su to start ferry service in Cook Inlet. The unusual exchange marked a rare instance that a Navy prototype would be put into service rather than scrapped.

Documents indicate the Navy paid $74 million for the prototype, though the borough was later responsible for roughly $237,000 for work in Ketchikan refitting the craft to carry up to 129 passengers and 20 cars or trucks.

“Honestly, the boat was free,” Borough Manager John Moosey said. “We did have a match, and all the other costs I would characterize (as) the ongoing costs.”

The borough always knew there would be a cost to operate and maintain the ferry, and the local matching funds were part of the original grant agreements, Moosey said.

There’s a “golden lining” to all this, he said. “Through the Navy, this shipyard in Ketchikan got the contract to build this … that’s good for Ketchikan. It’s good for the state."

The ferry got its start a decade and a half ago as a way to bring snowmachiners from Anchorage to the Valley, former Borough Manager John Duffy said. Former Borough Manager Mike Scott, former Borough Mayor Darcie Salmon and Anchorage Mayor Rick Mystrom convinced the late U.S. Sen. Ted Stevens to tuck money for the ferry into a defense appropriations bill, Duffy said.

By the time ferry funding crystallized, Duffy was manager. He pushed the craft as a way to boost the borough’s sluggish port.

Duffy said no one expected the ferry to stay free for long.

The cost of public transit is rarely covered by fares, he said. “I always knew at the end of the day that the borough would be responsible for the operating costs, just like running a bus service.”  

Then Anchorage pulled its promised support for a landing in the Ship Creek area, the U.S. Army Corps of Engineers permits hung in limbo, and everything fell apart, borough officials past and present say.

That’s when the bills started — for a ferry with no fares at all.

Officials here say the ferry was doomed from the start: half the size it was supposed to be, overpowered, too expensive to run without major subsidies. Anchorage’s kibosh on the Ship Creek landing was the final straw.

Given the hurdles emerging, the Federal Transit Administration halted any spending of the pivotal grants necessary to finish work on the ferry and landings in 2012. The borough took title to the Susitna a few months later.

By then, Mat-Su was already on the hook for the required local match to the grant funding. The local match totaled $2,407,977, according to the borough’s expense document. The lion’s share was a little over $2.1 million for the terminal, but the borough also had to pay a roughly 9 percent match toward the ferry overhaul and landing design.

The borough also had to start paying moorage and other fees just to keep the ferry somewhere.

Since 2011, the borough has paid $2,037,754 in costs associated with berthing the Susitna at a dock in Ward Cove, according to the borough’s expense documents.

The costs include a little more than $1 million paid to Associated Maritime Providers Inc., ferry captain J.P. Stormont’s company contracted to keep the vessel in good condition. They also include more than $330,000 for electric and moorage fees, more than $555,000 in insurance, and other costs such as fuel and travel expenses for port director Marc Van Dongen.

The Assembly voted in late 2013 to cut the roughly $70,000 a month going toward Ward Cove costs to an average of $30,000 in monthly costs by putting Susitna in lay-up status and saving money on fuel, staffing, insurance and utilities.

The borough started trying to either sell the ferry or give it away for free to a government entity in 2012  and by January 2013 was offering it for free to any government entity willing to take the much-maligned vessel off their hands. 

But some Assembly members suddenly changed course on sale or giveaway plans in 2013 with a push to bring the ferry to Port MacKenzie, where it would sit in a muddy trench until a potential buyer surfaced with an interest in Cook Inlet service. Part of the borough’s list of ferry expenses include more than $44,000 paid to Cruz Construction to examine that prospect before the idea was unanimously voted down. 

Assembly member Ron Arvin supported the Cruz proposal but regularly votes against even paying the monthly costs to keep the ferry at Ward Cove.

“What the public does not support, and this is why I have voted consistently not to fund it, they do not support subsidizing the ferry operations,” said Arvin, who sat on the borough’s port commission for most of the ferry discussions.

The borough in mid-January sent Federal Transit officials a letter contending they shouldn’t have to pay back the entire $12.3 million because factors outside local control killed the ferry. The letter from a contracted Washington, D.C., law firm claimed the feds should get only an 80 percent share of the terminal’s value — estimated at $3 million — as well as a share of whatever the ferry sells for.

But while officials say they’ve got a legitimate sale prospect in the form of an unidentified Turkish rental car company owner, the borough hasn’t been able to sell the Susitna yet, despite several years of trying.

A $6 million offer fell through in 2013. The borough didn't act on several offers ranging from $1 million to $2 million, the latter from an Abu Dhabi company that hoped to use the ferry in the islands of the United Arab Emirates.

Jim Sykes, a Mat-Su Assembly member, points out that FTA actually owns only a 7 percent share in the vessel — the Navy poured in the majority of the money — but it’s the agency’s “tiny” percentage that’s holding the borough hostage.

Sykes said the borough needs to sell the ferry and cut its losses.

“The sooner we sell it, the sooner we pay the money back to the FTA, the sooner it’s an obligation off our back,” he said. “I know it’s unusual that anybody makes a mistake in either the private sector or government but they are made. We need to move forward and move on.”

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