Hit by fuel costs, nothing to cut, SSA hikes rates
By Nelson Sigelman
Published: April 17, 2008
On the same day that the oil prices hit a new high, the Steamship Authority (SSA) board Tuesday voted to increase fares and rates. The hikes, effective May 1, are needed to generate additional revenue to offset unbudgeted increases in the cost of fuel, the boatline said.
At the monthly board meeting held in New Bedford City Hall management presented proposed increases designed to raise $1.5 million that fell most heavily on passenger fares and daily parking rates. The increases were based on fuel consumption on each route resulting in the need for $600,000 from the Vineyard route and $900,000 from the Nantucket side of the ledger.
The members, who have historically tried to modify proposed rate increases, decided to up the ante. Citing uncertainty over oil prices and the economy, and an unwillingness to revisit the issue in a few months should current projections fall short, the members recommended management include an additional vehicle charge in order to bring the total raised to $2 million.
The board voted four to one for an across the board menu of increases. David Oliveira, the New Bedford member, voted no.
The members increased: one-way passenger fares on the Vineyard route from $6.50 to $7 plus embarkation fee; the daily parking rate from $10 to $12 in the Woods Hole and Palmer Avenue lots; and the rate for autos and trucks under 20 feet in length by $2.50 for each segment, adding $5 to the cost of a roundtrip excursion ticket.
On the Nantucket route, the vote increased: passenger fares from $14.50 to $16; high-speed ferry fares from $30 to $32; parking rates from $12 to $15 daily; auto rates by $5 each way; and rates for commercial vehicles over 20 feet in length by five percent.
A rising tide
Sobering economic news fueled the SSA members' discussion of the need for increases. On Tuesday news services reported that crude oil futures jumped more than $2, to a record $114 a barrel on the New York Mercantile Exchange.
AAA Southern New England reported that gasoline prices in Massachusetts this week averaged $3.19 per gallon for self-serve, regular unleaded, close to the record high of $3.23 reached in 2005 following Hurricane Katrina. That is a bargain for Islanders who this week paid approximately $3.95 per gallon.
The management proposal was accompanied by an analysis of actual and projected fuel costs from SSA treasurer Bob Davis.
As background, Mr. Davis said that in 2004 the SSA used 2,950,210 gallons and paid an average of $1.315 per gallon. Fuel cost represented 6.2 percent of operating expenses, he said. In 2007, the cost per gallon increased to $2.238 and fuel represented 9.1 percent of the budget. In 2008 fuel consumes 12.3 percent of the operating budget.
The 2008 operating budget was based on the assumption that crude oil would be trading at $90 per barrel for the year. Those assumptions were now changed and the SSA expected to incur an additional $1,500,000 in additional fuel costs this year, Mr. Davis said.
Mr. Davis told the members that the captains had adjusted boat speed to conserve fuel and management had looked at consolidating some trips. Still, if fuel prices stay where they are now, an additional $1.5 million would be needed.
When Mr. Davis concluded his presentation, there was a quiet pause.
Fiscally responsible
The members did not question the need for an increase. The issue was the relative advantages of a rate increase versus a fuel surcharge and whether the proposed rate increases would be sufficient given estimates that fuel would continue to rise.
Falmouth SSA member Robert Marshall, who was the push behind management's decision to factor in higher oil prices during earlier budget deliberations, argued that the best course of action was to be more aggressive and generate enough money to provide a healthy cushion. He said the federal government had predicted fuel prices would drop. "They were wrong," said Mr. Marshall, a retired business executive. "And they could not have been more wrong. They make these predications with no background and no substance."
Vineyard member Marc Hanover initially wanted to adopt management's recommendations and add a fuel charge later in the season if that did not prove sufficient. Mr. Marshall argued that now was the time to act before it was too late in the season to recoup what was needed.
Nantucket member Flint Ranney agreed it was best to make a decision on rates that would carry the SSA through the year and not require another round of increases later in the summer. He said he did not want to do it but the board had to be fiscally responsible.
Mr. Hanover agreed he did not want to have to seek another hike in a few months. Rather than impose further on passenger fares, he supported a modest increase on the as yet untouched vehicle rates.
A key element was the need to take advantage of the summer season. Management said 50 percent of the auto spaces had been reserved.
Mr. Oliveira, the only dissenting vote, questioned the proposal to generate more money than the $1.5 million sought by management. "Isn't it fairer to the rate payers," he asked, "to increase rates in direct proportion to what your expected cost increase is and then if we have to revisit it in two months then we do that rather than potentially over budget and find ourselves in a position where we have raised rates too much."
One uncertainty among many was future traffic. While numbers remain slightly up on the Vineyard route, traffic has dropped on the Nantucket route. Mr. Marshall recommended management look to raise an additional $500,000 and bring the total to approximately $2 million. After further discussion, the board agreed to raise the additional funds by adding a charge on vehicles. A vote followed.
Mr. Hanover said the board had acknowledged the severity of the situation. "The uncertainty," said Mr. Marshall.
Art Flathers remembered
Attended by no members of the public, the morning meeting began with a moment of silence for Art Flathers of Tisbury who died last week. Although Mr. Flathers had no official position with the authority he was well known to SSA officials as a close observer of boatline policies and at times a persistent critic.
Mr. Flathers, a retired executive, contributed a great deal of his time to analyzing freight policies. In his written synopsis of the Tuesday meeting Mr. Lamson said, "The Authority is a better organization because of his contributions, and he will be missed."
Carl Walker, director of engineering, provided an update on several capital projects. He said the first phase of the Oak Bluffs terminal reconstruction project was back on schedule and expected to be completed by May 10.
The rubber fenders for the newly constructed dolphins are expected to arrive from China by May 2, a few days ahead of schedule, he said.
The newly refurbished Nantucket was in Fall River for minor repairs and maintenance. The ferry, sometimes used on the Vineyard route, features new high backed chairs, an expanded snack bar area and new pilothouse.
Mr. Lamson reported that passenger traffic (5.2 percent), auto traffic (2.7 percent) and truck traffic (4.7 percent) was up year-to-date when compared with 2007.
In other business, the board approved a change in the license for the Pied Piper that will allow the ferry to reduce the number of trips it provides between Falmouth Harbor and Edgartown Harbor. It approved a contract with Island Transport that will allow the tour bus company to stage one tour bus at the Vineyard Haven terminal this summer in return for $5,000 and a 20 percent commission on all tour bus tickets the SSA sells.
The SSA board meets next on the Vineyard on Tuesday, May 13.
