To fix the ferry system, sell those boats

The governor's proposal to shift some funding to a local district just moves the problem around. So how about privatizing the system?

How are we going to keep the state's ferries afloat?

How are we going to keep the state's ferries afloat?

In her state-of-the-state message, Gov. Chris Gregoire reiterated her proposal to reform Washington State Ferries, adding, "If not this, then what? The status quo does not work."

It's unlikely that her proposal, which was quickly declared DOA in the Legislature, will make it happen. Instead, we ought to consider ways to privatize the ferries and get Washington state out of the business entirely.

The status quo of red ink, vessel-construction issues, labor-relations problems, management miscues and more were exposed last year by KING 5 television’s award-winning "Waste on the Water" investigative series. Two years ago I wrote on Crosscut’s pages that ferry-procurement practices were expensive and wasteful. According to the governor’s office, there’s a 10-year, $900 million ferry-budget hole that needs to be plugged now.

The governor’s plan transfers operation of the ferry system to a regional ferry district made up of all or parts of nine counties served by WSF. Governed by a combination of elected and appointed board members, the district would manage the system and have the power to raise taxes within it to supplement a state subsidy and fare-box revenue.

The proposal has more holes than an old Steel Electric ferry. It's been panned by editorial boards throughout the region and has next to no support in the Legislature. The AP has reported that Senate Transportation Committee Chair Sen. Mary Margaret Haugen, D-Camano Island, won’t even give it a hearing.

Executive Policy Adviser Teresa Berntsen in the governor's office, a key player in drafting a ferry-district bill, acknowledges that there are unanswered questions. Who will own the ferries, terminals, and the Eagle Harbor maintenance facility, the state or a new ferry district? Or will there be a lease arrangement between the state and a new ferry district?  Will the statutory requirements that certain boats be built within Washington state or that ferry runs continue apply to a new ferry district?  Who will be liable for mishaps like the Wenatchee's August 2009 "hard landing" (or worse), the state or a new ferry district?  

Perhaps the sharpest criticism is that it's an end-run around newly-enacted Initiative 1053's requirement that a two-thirds vote of the Legislature is required prior to a tax increase. By transferring ferry-related taxing authority to a new district, is the governor trying to sidestep I-1053? Could a court strike down the creation of a ferry district by finding that it's a sham attempt to stymie the voters?  

But the governor has signaled that her proposal is meant to be a conversation starter. Her director of communications Cory Curtis told me that, except for the need to fill the $900 million budget hole, it's all up for grabs. As the governor said, "If not this, then what?"

Since the status quo doesn’t work, variations on it won’t either. So what about genuine privatization? Aside from the governor's proposal is anyone offering anything substantive? The Seattle Times editorialized that "the ferry system should fight it out for funding, the same as other state programs." Swell — a fiscal-food-fight.

Reps. Jeff Morris, D-Mt. Vernon, and Glenn Anderson, R-Fall City, have introduced a bill that privatizes WSF management, but it mandates that existing union contracts be retained. When the contracts are part of the problem, how does that help? Many insist upon full funding and no cuts in service because ferries are a part of the state highway system. While the state may build highways, it doesn’t buy everyone a car. The analogy doesn’t hold. 

None of these proposals places a priority on cost management and cost containment, which are givens in the private sector. As long as the ferry system is politically run it cannot be cost-driven. Until zealous cost management replaces political-patronage management, don’t expect anything different.

After the governor’s state-of-the-state message, Senate Ways and Means Chair Sen. Ed Murray, D-Seattle, told me that privatizing the ferries “just doesn’t pencil out.” Well, the state’s debt burden and unfunded liabilities aren’t penciling out either. Time to get the lead out because when you look at Washington State Ferries in the context of existing state IOUs, the fiscal-air gets sucked out of the ferry-room.

The state’s 2010 Comprehensive Annual Financial Report (what budget wonks call the CAFR) reveals the Big Picture: The unfunded liability of workers compensation is now $12.8 billion; unfunded pension obligations are $6.9 billion; the state's general obligation bond debt is $19.6 billion. CAFR’s red ink adds up to over $40 billion, which is more than half of the current biennial budget. Squaring these accounts won’t leave much for education, human services, and public health and safety — let alone the ferry system.

On the tax-revenue side, a continuing weak economy means we may not see a return to pre-recession revenue levels for year. Add to that the clear message from taxpayers from the last election that they’ve had enough. All this doesn’t leave room for current ferry subsidies, let alone an additional $900 million over 10 years. 

We’re used to kicking the ferry can down the road and calling it a fix. We’ve run out of road. The state has sold ferries before. Let's call a broker and give her the listing.

Eric Lohnes assisted in the preparation of this article.


About the Author

An investigative journalist with the Evergreen Freedom Foundation, Scott St. Clair is based in Olympia. He can be reached at SStClair@EFFWA.org.

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Comments:

Posted Thu, Jan 20, 4:23 p.m. Inappropriate

Let us look at a couple examples of priveate industry.

Black Ball line the original ferry system operator taken over by state.

Seattle had two power utilities - one was Puget. Granted in mid 1930's I was not alive then but why did city take over power system?

Local fishing outfit found by Coast Guard of sinking vessel and killing crew because of poor maintenance?

Boeing modern management - cant get the 787 out on time.

Old public transportation system 1966 era - myriad fleets with no commonality except the passenger.

Re the ferry system wasing money by paying people to travel to other locations - are you willing to get a callout, drive over several counties on YOUR time? If no then why do you expect them to do so? With modern management I have worked for I will not answer the phone when I am off work lest it be them wanting me to come in - nuts to em.

The problem in this state is the people who want everything and want to pay nothing. Tim Eyman is really doing the public favors by cutting taxes and NOT cutting services - just where does he think the money is going to come from?

The ferry system got a good grade from other system operators. The one negative comment was too much oversight. So all you micro managers get out of the way of people who are doing a fine job and get them the money they need to keep doing a good job.

Dan Bentler

leitmotif

Posted Thu, Jan 20, 5:33 p.m. Inappropriate

The Seattle City Light running the power system avoided the WPSS bond default because the citizen who had a say in how the power company was run didn't want anything to do with nuclear power, something that Puget Power Rate payers are probably still paying off.

The citizens of Bellevue et.al. could take back Puget Power and run it as a city/county owned enterprise but it would be expensive and the owners of Puget Power would fight it tooth and nail.

The original private ferry system was bankrupt when the state took it over. I don't want to return to that.

GaryP

Posted Thu, Jan 20, 8:43 p.m. Inappropriate

@leitmotif

Blackball?? That was what? 60 years ago.

Boeing? Really? I'd LOVE it if Boeing took over ferries. Really.
Or ... the US Navy. Really.

Employees driving all over? Hellooooo. Hire within the geographic area they will work in. If they are on call, and cannot get in to work, they either move, or forfeit their job. Just like in the private sector.

Just a few points to consider.

Posted Thu, Jan 20, 9:01 p.m. Inappropriate

Wow Dan Bentler - you’re obviously a big fan of the state ferry system. Heck, you’re not even above putting on some platform shoes and pimping for some more tax revenue for ferries:

“So all you micro managers get out of the way of people who are doing a fine job and get them the money they need to keep doing a good job.”

Do you mind sharing with us how much new tax revenue you think the ferry system needs?

Would $65-70 million more this year be enough? And then after this year, that amount would keep growing every year, for decades? We need to gauge the need for more revenue you perceive. You haven’t given any indication you’re realistic; so far you’ve just called for more.

Let’s say you think that kind of increase would be reasonable. Sound Transit could negotiate a new deal with representatives of its bondholders. They’d undoubtedly agree to amend the bond sale contracts so that going forward the $1.3 billion in long term debt ST has issued could be secured by $28 billion in pledged tax collections, instead of the $35 billion ST’s board already committed to confiscate. After that amendment – which would be more than reasonable for everyone – the legislature wouldn’t be prohibited by the constitution’s contracts clause from eliminating 10% of ST’s taxing authority and diverting it to ferries.

In other words, don’t tell us it couldn’t happen. Ferries could get 10% of ST’s current tax revenue streams.

I’m sure you’d favor that kind of resource reallocation, right Dan? Explain why that would be a good state taxing and spending policy shift. You seem articulate enough and it’s early in the legislative session, use this bully pulpit to advocate giving some of ST’s tax streams to ferries.

Taxes on people should not be raised for ferries – I’m sure you weren’t suggesting that. People here pay FAR too much in direct taxing for transit already.

crossrip

Posted Fri, Jan 21, 5:07 a.m. Inappropriate

Why not build a bridge to Bainbridge and put a $10 toll on it while exempting green public transportation. It is technically feasible now from West Seattle across to the Kitsap Peninsula, and then another hop north to Bainbridge. Do an estetically pleasing structure. Shift dollars from high risk ferries - how long until an accident/sinking or pollution incident -- to a safer means. There would need to be some road improvements but looking at the long term cost of building, maintaining, operating and staffing the state ferry system you would be better off with a bridge. Put a second over to Whidbey Island and one from Edmonds to Kingston, all supported by tolls with public transit exempt. The people on the west side would object that it would open them up to development, but that is life. They want their cake and to eat it too.

Grizzzfan

Posted Fri, Jan 21, 7:02 a.m. Inappropriate

To start with, the Black Ball line was taken over because they were going to raise rates on the boats higher than people wanted to pay and they wanted to remove minor routes. Which, were removed anyway when the State took over. However, that, is past history.

If we privatize the ferry system, this will be the start of breaking up our state highway system. I do not ride the ferries, I do not want to. But, if we are not willing to pay as a state for the greater good, then I do not want to pay for US 2 past the summit of the Cascades, nor do I want to pay for I 90 past the summit of the Cascades. As for US 395 and other minor highways of Eastern Washington, let them turn to gravel. This is what that style of philosophy encourages. Is this the way Washington wants to travel?

Posted Fri, Jan 21, 7:37 a.m. Inappropriate

Disappointing. I was hoping to see some numbers from Mr. St. Clair, how much a private operator might pay to buy the system, how much rates might be to cover the debt service, plus operations and mainenance costs, and profits to shareholders. The current system's numbers are all out there in public documents, so it shouldn't be that hard to come up with a reasonable estimate as to how much a private operator could save in O&M; costs, and debt service and profits could also be estimated with some validity.

Let's see some numbers. Where's the beef?

Posted Fri, Jan 21, 10:12 a.m. Inappropriate

Did Mr. St. Clair simply forget to suggest privatization of the highway system? My family traveled from San Juan Island to Leavenworth two weekends ago. On the trip home there were almost more snow plows than cars. Seems like we subsidize a lot of expensive transportation on land and water. I believe the voters made some poor decisions in the last election--we need taxes for important programs and infrastructure. The question now is how to equitably reduce spending. Not sure Mr. St. Clair's method, or reasoning, is something Washingtonians should get behind.

strehlou

Posted Fri, Jan 21, 11:25 a.m. Inappropriate

"While the state may build highways, it doesn’t buy everyone a car. "

This made absolutely no sense at all. Why should the ferries be privatized if the state highways are not? They are simply part of the same transportation system. Garfield and most other eastern Washington counties get back way more in state transportation and other tax dollars than its residents contribute. San Juan and Island get back considerably less than they contribute. That sounds really "inefficient" to me (not to mention unfair), subsidizing part of a highway system that the users aren't willing to pay full freight for. Those highways should all be converted to toll roads and maintained only up to the amount collected. Hell, why stop there? I'll put in a bid to buy the 3 mile stretch of county road in front of my house. There's a community that has a lot of commuters that use it. I'll do okay off of it. I don't have a clue whether the total cost of maintenance will be more or less than the county currently spends, but I won't be paying taxes to maintain it for those commuters any more and I'll make a bundle. And isn't that what its all about.

Everyone knows that the "Free Market" or its Apostle "Privatization" is automatically more economically efficient, works better, costs less to maintain, lasts longer, is stern but just, looks nicer, and fulfills all who worship it with the dazzling glory of its blinding brilliance. Just ask any Free Marketeer Fundamentalist.

Steve E.

Posted Fri, Jan 21, 12:23 p.m. Inappropriate

Many knee jerk assumptions here; few facts, no real analysis. Overall, not very helpful.

Ross Kane
Warm Beach

Ross

Posted Fri, Jan 21, 3:24 p.m. Inappropriate

"seattlelifer" writes: "To start with, the Black Ball line was taken over because they were going to raise rates on the boats higher than people wanted to pay and they wanted to remove minor routes."

There's more to the story than this. All throughout WWII, the employees of the Black Ball Line worked without pay raises, as did most workers, to help the war effort. By 1950, their salaries were well past due for a cost of living update, and Black Ball management agreed. But the Black Ball Line was regulated as a utility by the State. They could not afford to raise wages without raising fares, and the State refused to allow them to do so. So the union went on strike, and rather than hire scab labor, management tied up their boats in solidarity with the union, assuming that the State would soon have to allow a rate increase. However, the Black Ball Line had very little cash on hand due to their pre-war fare structure. After a few weeks, they were forced to file for bankruptcy, and the State picked up all of the domestic routes and infrastructure at fire sale prices. It was a cynical nationalization of an industry which and tinpot dictator would be proud of.

The State told the people that the ferry system was an anachronism anyway. They were doing the people a favor by easing the transition from a service for which the handwriting was already on the wall. All the ferry lines would be replaced by cross-Sound bridges by the mid 1980s. Of all those promised bridges, only one was built: the Hood Canal Floating Bridge. And the "temporary" state ferry system, with infrastructure upgrades, is still basically the same one the Black Ball Line was cheated out of 60 years ago.

dbreneman

Posted Fri, Jan 21, 4:09 p.m. Inappropriate

For those Capitalists pushing privatization, why not just raise the prices now and make people that use the ferry system pay the actual cost?
That's what will happen if it goes back to a for profit bushiness. Of course that will mean huge increases in ticket prices. Because it's not just the sky high cost of the fuel to cross back and forth, that's probably the least of the costs involved, you have to figure in the total cost of the entire system, just like any real business, plus taxes and profits. Which brings up the next question, just because it's run by the government, why does that mean it shouldn't pay it's own way? The only benefit a government run entity should have is the lack of a need to make a profit, and pay certain taxes, the rest of the costs still apply and those using the service should be paying the whole bill. Privatizing makes the cost to the end user higher, to cover all costs including taxes and profits; well that's the way it's supposed to work.
If it ever did work like that it stopped many years ago. Keep it or sell it, either way the end user needs to be footing the whole bill. I'm sure the millions of people living east of the mountains would agree with that statement.

Slaptop

Posted Fri, Jan 21, 4:54 p.m. Inappropriate

Currently, the state says the fares are at least 25% below costs.
To me, this clearly means that if nothing else was improved or changed, privatizing the ferries would mean an immediate doubling of fares. Realistically, probably tripling, as the WSF does not pay the state rent, nor mortgage payments, for its docks or Eagle Harbor. Add those costs to the current underfunding, add in profit, and you quickly get to tripling of current fares, and that is assuming that oil prices dont go up. And we all know how likely that is.

So privatizing the ferries is implicitly accepting the idea that ferries will be for the wealthy, and that we are willing to stifle the economy and development of the Olympic Peninsula.

Which is fine, I guess, as long as you are honest about it.

Realistically, driving everything the long way around will reduce income, and increase prices for everything, in Port Townsend, Port Angeles, and the rest of the Olympic Peninsula.

Bridges would be great, but again, incredibly expensive. Similar bridges, like the one between Malmo and Denmark, cost 40 Euros ($54 US) for an automobile and driver.
Or- look at the Confederation Bridge in Canada that goes to Prince Edward Island- $43 Canadian. (thats a 2 way fare, as they only charge going out)

These are realistic prices for funding a toll bridge crossing distances like Mukilteo/Kingston.

Makes ferries sound cheap.

Rniemi

Posted Fri, Jan 21, 5:14 p.m. Inappropriate

From the article "Many insist upon full funding and no cuts in service because ferries are a part of the state highway system. While the state may build highways, it doesn’t buy everyone a car. The analogy doesn’t hold."

Washington State Constitution:
SECTION 40 HIGHWAY FUNDS. All fees collected by the State of Washington as license fees for motor vehicles and all excise taxes collected by the State of Washington on the sale, distribution or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes. Such highway purposes shall be construed to include the following:
(b) The construction, reconstruction, maintenance, repair, and betterment of public highways, county roads, bridges and city streets; including the cost and expense of .....(5) operation of ferries which are a part of any public highway, county road, or city street;

Posted Fri, Jan 21, 11:01 p.m. Inappropriate

To R on Beacon Hill...Mr. St. Clair is an investigative journalist, not a legislator. It is not his responsibility to submit to the P & L or financial analysis you seek...this is a function to be handled by the Governor's Office. In effect, the Governor made an announcement of intent to shift the problem...without a developed, strategic proposal and policy to craft a bill. The analysis you call needs to be procured by the state government who own the 10 year $900 million budget hole, as it would surely support St. Clair's suggestion for privatization unencumbered by labor union meddling.

The article offers a factual report of the WA State Government's Red Sea of ink, excess and waste from a failed state government operated ferry management further noting the lack of solid policy preparedness in the eminent draft of a ferry district bill. The Governor does not have a remedy to the ferry deficit when she says "if not this, then what". Is that conviction? It is a defensive, not the offensive position taxpayers deserve of an elected "leader" of the state government.

The majority of states do not have ferry systems. They are experts with the building, management and maintenance of state highways. Ferries are complicated, costly and highly specialized. This calls for specialized know how to run the system like the business it is. The point to keep politics OUT of ferry operations is a nugget of wisdom. If the US Government ran the country like a profitable business we would not have the soaring deficit we do. Same applies at the state level.

The headline..."To Fix the System, Sell the Boats"...is the message of the article. Fix the problem, don't shift the deficit. Remedy not rumination should be the expectation of the voter and responsibility of the Governor.

Savannah

Posted Sat, Jan 22, 6:15 a.m. Inappropriate

"Investigative journalist?" "With the Evergreen 'Freedom' Foundation?" ROTFL!

ivan

Posted Sat, Jan 22, 7:50 a.m. Inappropriate

KCDCC member? ROTFL!

Cameron

Posted Sun, Jan 23, 10:53 p.m. Inappropriate

Are we to believe that in the middle of the wine tasting celebrating the ridiculously expensive tunnel/park design for downtown, and the ridiculously expensive Disneyland I-520 termination for the Montlake neighborhood, someone yelled..."Hey, we forgot about the ferries?"

Wouldn't you make sure you could pay for the basics before you started ordering the leopard skin couches?

Who's driving the bus guys?

jmrolls

Posted Mon, Jan 24, 9:48 a.m. Inappropriate

"jmrolls" writes: "Wouldn't you make sure you could pay for the basics before you started ordering the leopard skin couches?"

If you could find a way to make ferries run on rails, government officials would be jumping all over each other to fund them.

dbreneman

Posted Mon, Jan 24, 11:09 a.m. Inappropriate

There was a nice theme song:

"The Black Ball Ferry Line, up in Seattle.."

Who can remember the rest of the lyric?

On morning radio, chirping: "Ivar's Acres of Clams...Pier 54, foot of Madison Street"

and..

"Seattle: Queen City of the Pacific Northwest"

Posted Mon, Jan 24, 11:35 a.m. Inappropriate

I've got "The Black Ball Ferry Line" in the jukebox in my living room. It's by Bing Crosby and the Andrews Sisters, although it was covered by a couple other bands that I know of. Of all the ferries mentioned in the song, the last ones still in service were the Steel Electric Class boats, recently retired. It's a catchy tune, but suffered from the writer's inability to find any good rhymes for "Seattle." Therefore, we're stuck with:

On the Black Bell Ferry Line up in Seattle
Ev'ry single G-O-P and Democrat'll
Hear the whistles go [Toot-toot]
And the bells go [Ding-ding]
As the ferry boats go chuggin' right along.

And let's hope we can revive Bing's dream of bipartisanship on the ferries...

dbreneman

Posted Fri, Jan 28, 8:47 a.m. Inappropriate

"Could a court strike down the creation of a ferry district by finding that it's a sham attempt to stymie the voters?"

Whether or not the court "finds" that it is - it is.

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