Last year was a landmark year for the Steamship Authority, its 50th year in service to the folks who live on and visit Martha’s Vineyard and Nantucket. A creature of the state legislature, a quasi-public agency, the Steamship Authority’s 1960 reincarnation ended several years of deficits, largely by ending the line’s service to and from its port at New Bedford. By 1962, annual deficits were a thing of the past, which pleased taxpayers of the two islands and Falmouth. They had been on the hook to cover the shortfalls.
The Steamship Authority’s annual report for 2010 tells an impressive story of growth since 1961 — passenger traffic up nearly seven-fold from 435,000 annually to 2.7 million, vehicle traffic up from 85,000 to 595,000, revenue up from $2.2 million to $80 million, assets up from $5 million to $167 million.
Impressive too are the numbers reflecting the boatline’s growth in the first decade of this century. There has been substantial growth in operating revenues, up from $59 million in 2000 to $80 million last year. Likewise, the boatline’s assets have increased in value significantly — that’s vessels, real estate, parking lots, etc. — from $96 million in 2000 to $167 million in 1010.
What is remarkable, and worrisome, is that this growth has occurred despite declines in passenger traffic — 2.9 million in 2000 to 2.7 million in 2010 — and vehicle traffic — 601,000 in 2010, 595,000 last year.
As traffic volumes for passengers and vehicles have flattened, the Steamship Authority has wisely used fare increases and cost cutting to stabilize revenue. So, between 2008 and 2010 total operating revenues declined from $81 million to $80 million, as operating expenses fell from $79 million to $76 million. These changes allowed the line’s operating income to rise during this three-year span, from $2.2 million to $4.1 million.
Looking just at comparisons between 2009 and 2010, total operating expenses rose 1.9 percent. The boatline attributes the increase to vessel fuel costs, payroll, health and welfare expenses, legal expenses, and payroll taxes.
“Vessel operating expenses increased by about $1,692,000, or 8.4 percent versus 2009. This increase was chiefly due to higher payroll expense and fuel oil expense,” the boatline reports. Payroll jumped 1.2 percent, and fuel costs rose 26.8 percent in 2010, compared with fuel costs for 2009. Payroll costs in 2010 consumed nearly 58 percent of operating expenses, a share that is slightly smaller than historical performance but higher than the comparable value for 2009, about 55 percent.
Debt service for 2010 was about $4.5 million, up from $4.3 million in 2009. Total bonds outstanding at the end of 2010 were about $62 million. The authority’s current borrowing limit is $75 million.
Since 2006, the Steamship Authority has recorded little change in the number of passengers carried, up from 2.6 million to 2.7 million. Auto traffic declined over the period, from 450,000 to 439,000. Truck traffic increased from 153,000 to 157,000, and ferry trips made by the boatline fell from 22,042 in 2006 to 21,260 in 2010.
“Demand for the Authority’s services is mainly affected by the overall economic activity on Martha’s Vineyard and Nantucket, both seasonally and year-round,” the annual report explains. “The economic activity is a reflection of the overall decline in construction on the islands as the reduction is more prominent in the larger trucks being carried. Other factors, such as weather-related conditions, capacity constraints, and operational limitations can also have an impact on the authority’s annual ridership volumes.”
How does the Steamship Authority cope? “In order to ensure sufficient income to meet the cost of service in 2011,” the report continues, “the authority members approved certain rate increases, effective January 3, 2011, that are expected to raise $2.250 million in additional operating revenue based on last year’s traffic volumes. These rate increases were needed to offset the expected increases in operating expenses, primarily vessel fuel oil expense, wages, benefits, and maintenance expense.”
Oh, and the Steamship Authority collected $902,000 in embarkation fees from passengers in 2010. Oak Bluffs got $105,456, Tisbury $244,229.
The picture from 30,000 feet is of a mature business, carefully managed through a difficult decade, but one whose successful navigation of a climate of high costs, stagnant demand, and a widespread lack of pricing power has until now depended upon its legislatively imposed monopoly, and with that the ability to raise prices when most businesses cannot.