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?

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

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

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.


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