Reducing subsidy for ferries will keep system afloat - Must Read Alaska
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Thursday, May 13, 2021
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Reducing subsidy for ferries will keep system afloat

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One of the most vehement fiscal debates this year concerned reductions to the Alaska Marine Highway System (AMHS) budget. Initially, the Dunleavy administration cut $97 million but ultimately agreed to a $43 million decrease – representing about one-third of AMHS’s operating budget.

From a high of $108 million in 2014, the state subsidy is now under $50 million – and covers 50 percent of AMHS operating costs.

This action allowed AMHS to continue operations, but necessitated fare increases, the sale or layup of existing vessels and schedule changes.  Public outcry has continued amid predictions of economic dislocation and health and safety concerns.

Hardest hit were smaller communities off the road system where ridership dwindles to extremely low levels during the fall and winter months. 

Administration officials pointed out that the economics of operating ferries, especially in smaller communities, mandated inevitable changes.

As an example, the Prince William Sound route, servicing Cordova, averaged 13 passengers and seven vehicles on winter runs.  According to AMHS, the cost of running the ferry Aurora in Prince William Sound, with a crew of 24, and a capacity of 250 passengers and 33 vehicles, is $186,000 per week. 

Consequently, Cordova is without winter ferry service until next May.  Commensurate reductions will be experienced by ferry-served communities from Kodiak to the Aleutian Chain as well as communities in Southeast Alaska.

We might remember that before the days of state-subsidized ferry service, numerous private marine sector transportation providers served our coastal communities. Beginning in the 1880’s, with gold discoveries in Juneau and Douglas, the Alaska Steamship Company provided passenger and freight service throughout Southeast and later, Southwestern Alaska. 

100-year-old Juneau newspapers featured daily ads for the S.S. Georgia of the Juneau Steamship Co. running between Juneau, Sitka, and Skagway stopping in Hoonah, Tenakee, Excursion Inlet and Haines.

Steamers, like the S.S. Dora, plied the waters between Valdez, Kodiak and the Aleutian Chain.

Private transportation services cropped up wherever the economy was growing.

After World War II, rising labor costs and new competition from truckers and air carriers negatively impacted shipping companies. But it was after the AMHS’s inaugural voyage in 1963, that the Alaska Steamship Company was forced out of business in 1974.

Now, because of budget cuts, coastal non-roaded communities will need to explore other options to fill transportation gaps.

After AMHS’s strike this year, several companies took up the slack.  Allen Marine of Sitka sent vessels to Haines to help move people to and from the Southeast Alaska State Fair.  Alaska Airlines diverted flights in Southeast Alaska to help move stranded passengers.

This is evidence of short-term capacity available to assist for unusual situations and one-time events.

Will the private sector ever offer services approximating those once offered by AMHS?  Demographics and economics will initially inhibit large investments of this type.

Realistically, what will occur is a division between scheduled passenger-only service and cargo-only service.  Tourism-based catamaran vessels based in SE Alaska and Prince William Sound are logical choices that could offer passenger service before and after their summer seasons. Also, there are any number of landing craft operations based in Cordova, Kodiak, and Juneau that could offer cargo services to surrounding towns with expanded barge service picking up the slack in larger communities.

This will come at increased cost and less convenience.  But, reductions in heavily subsidized ferry service are unavoidable, and, with AMHS’s new dynamic pricing structure, ferry fares will now be competing more closely with other forms of transportation.

When times are challenging, Alaskans usually respond with ingenuity and self-reliance.  After all, there are over 100 roadless communities in Alaska that have no state-subsidized transportation options whatsoever. 

Coastal communities served by the AMHS will now split the cost of ferry travel 50/50 with the state. 

Some believe year-round more highly subsidized ferry service should be provided no matter the cost. For that to happen, someone else’s budget must suffer, or Alaskans would be forced to accept even smaller Permanent Fund Dividends.

Communities that get no state-subsidized transportation service would be asked to help pay the tab.  

Suggesting that cuts be reversed and service restored is self-serving and ignores how inequitable that would be – and eventually would sink the system for good.

Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.

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Latest comments

  • Yeah adding that the amh is a lifeline for health is a joke. Get on a plane. If your health is at risk why would you get on a slow boat to China? Also because you choose to live in such a rural area like I do, you can expect to pay a little bit more for your milk and can of pork and beans and spam. Why should the rest of the state pick up the bill? Yes you had it good for a long time but when the state has to tighten its belt to offer a sustainable budget, stop thinking of only yourself and ask what you can do for the state versus what can the state do for you.

    • Cordova Mayor was whining about a$150 one way airfare ticket to Anchorage. Most of the Villages on the YK Delta can’t even get to Bethel for that. I’m betting Cordova groceries are cheaper than Bethel.

      • He used to cost us $100 for a 10-minute flight in the dillingham until we moved away can no longer had to use that particular airlines. It’s a rip-off that greedy people use to extort money from good people in the village.

      • I’m not complaining about Alaska Airlines service or pricing except where freight is concerned and I’m taking that up directly with them – not airing it. I am extremely grateful we have Alaska Airlines as our only regularly scheduled commercial transportation service for the next 7 months. I was using airfare pricing to indicate that reducing AMHS fares to be competitive with airfare actually grew ridership and revenues substantially without, ironically, reducing air ridership. People simply traveled more = more shopping in Anchorage, less on Amazon.
        But like many things AMHS, there is no institutional memory and successes get shelved while failures get repeated. Mayor Clay Koplin, Cordova


    • The Berners Bay terminal is intended to shorten the trip between Juneau and Haines, Skagway to allow the new day ferry to operate without crew quarters and it is only to operate during Summer, so far. This is part of a new idea of not operating ferries alongside roads and the present system allows the trip from Auk Bay to Berners Bay alongside an existing road of approximately 30 miles. This will make walk-ons more difficult but will greatly shorted the trip and make it more economical for riders and AMHS.

  • A friend of mine in a more remote area invested in a great snow plow for his snow plowing business. He made money for two years.
    Then the local native organization got a grant for a couple new trucks with plows. Easily able to underbid all jobs since it was ALL subsidy, my friend’s plow business went idle over the next couple seasons and he had to get a job in a field where he wasn’t competing with subsidies- other people’s money.
    Free money isn’t free.

  • There’s a prime business opportunity here for someone that will pursue it. No reason a private party can’t provide transportation.

    • Lori, unfortunately SE Alaskans are addicted to government. Here’s a suggestion:. Get a citizens group together and approach the big three cruise lines that make billions $$$ in Alaska waters every season. See if they would be interested in purchasing the entire fleet of ferries and operating them as a combination year-round tour/shuttle network. You never know…..

      • Norwegian Cruise Lines is going to spend over $50 million on ANOTHER cruise ship dock facility in SE. You know, Gypsy23 may be on to something.

  • So, SE Alaska, Lynn Canal can get an improvement and upgrades at the expense of Prince William Sound / Cordova, with no road access. Sounds like a sweet deal for an area that actually doesn’t need it.

    • It has nothing to do with PWS/Cordova. The AMHS’ new policy is for ferries to (not) run alongside roads and to do that new terminals are required. And these new terminals come from highway funds and not fuel/maintenance funds.
      What is needed are reduced expenses and that Berners Bay terminal would greatly reduce expenses. There will be some push-back from walk-ons that may have difficulty getting from BB to Juneau but that is another issue that will be addressed, most likely.
      Anyway, the “agenda” that you bring up is to reduce costs of AMHS.

    • Cordova has fought road access for decades. Perhaps they shouldn’t have. Cheers –

      • Yep. The good folks of Cordova were clear that they did not want a road connection. Now it is coming back to bite them. But it may also be that they may want to play the victim role and perfect their complaining skills. Gotta love Alaska sometimes.

      • Have you ever taking a boat or hiked along the proposed Copper River Highway route(s)? Are you aware that we’ve lost 23 miles of that highway just in the last 10 years – and repairs to replace a washed out bridge at 38 mile, washed out highway, and ruined Million Dollar Bridge ice-breaking pier, and all this after a $17M bridge span raise in 2004-5. During that raise, they couldn’t keep the road plowed for the 6-8′ silt/snow berms that pile up every night in the 75-100 mph winds that can blow for weeks. Cordova very carefully worked with ADOT in the 1990’s era PWS Transportation Plan which identified the Ferry as the most feasible over rail and road. That was before gravity took over and the wandering Copper River assaulted the highway. If the Federal Government spends $1B rebuilding the exsiting bridges, erects the necessary new ones, and builds the highway to tie in to the Richardson or Edgerton, is the state going to spend millions developing ADOT maintenance stations like at Thompson Pass, and spend millions a winter trying to keep it open, or are they just going to call the expensive O&M it would require a “subsidy” and close it for 8 months every winter? We fought road access because it is not as sustainable as a well-managed, right-sized, consistently scheduled ferry – something we have not seen for decades and feeds our frustration. Cordova is as self-reliant and self-sufficient as any Alaskan community and we aren’t complaining loudly about school bonds and other items that we shouldn’t expect other communities to pay for, but the Highway system is, unfortunately, built by the Federal Government and managed by the State. I also personally support a move toward privatization, but let’s please run the ferry a few times this winter while working out a longer term solution. Is that fair?

        • Clay, do you see any solution that would allow one of those new day ferries to operate in PWS? I know Tazlina operated in SE this Summer with crew overnighting in hotels in Haines to be able to handle the 12 hour maximum crew work hours-how would something like that work for PWS in winter?

  • this guy is on the right track, now off road communities need time to build an alternative transportation plan, and AMHS needs to explore smaller, more efficient boat options
    that combination will keep bush economies, which include the tourism, sport fishing and commercial fishing so valuable to the entire state, functioning and all of us moving forward
    I support lobbying for advance notice on scheduled sailing changes, as much as is practical, so a realistic timeline can be established to develop alternatives without being cut off during budget battles
    private industry will step up to fill in where needed without disproportional subsidies

  • Roads need to be built to improve ferry service. For example, a road between Sitka and Chatham would allow for more enlightened ferry service. Greenies are opposed to such infrastructure. Perhaps greenies should concern themselves with the “carbon footprint” of a 600 gal per hour ferry that only hauls a dozen passengers.

    • As I understand it Sitka is already planning a new terminal that does cut of much of its present route-it’s not on Chatham, however.

  • We lived in Bethel for 30 years. We never got a subsidy to travel to Anchorage. We dealt with the cost. Maybe it’s time to allow private companies to take over the ferry system. You can bet they would do it in the most efficient way possible ( not running a 300 person ferry with 13 passengers).

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