SSA approves terminal plans, new boat contract

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The Island Home sets sail on a calm Wednesday afternoon. — Photo by Michael Cummo

The Steamship Authority moved forward last week with plans for two large capital projects, a new passenger/vehicle ferry that will serve the Vineyard route and the reconstruction of the Woods Hole terminal and relocation of the boatline’s administrative offices.

Meeting last Thursday in Hyannis, authority members awarded a $36,448,000 contract for the motor vessel Woods Hole to Conrad Shipyard of Morgan City, Louisiana.

The overall budget for the project is $40,236,500, which includes the cost of design and engineering services, SSA oversight and SSA furnished equipment. The board has authorized the sale of up to $38,250,000 in bonds to pay for the new vessel.

The single-ended boat will have an uncovered back deck and be capable of carrying 384 passengers and 50-55 cars or 10 semi-trailer trucks. It will serve as a replacement for the aged Governor, which will be sold or scrapped.

The members also approved a report by Betreaux and Iwerks Architects for a feasibility study of the reconstruction of the Woods Hole terminal that includes a proposal to move the SSA’s administrative offices from Woods Hole to a new building that would be constructed on SSA property adjacent to the Palmer Avenue parking lot in Falmouth. Management concluded that the Woods Hole site could not accommodate needed office space and parking.

In a telephone conversation, Wayne Lamson, SSA general manager, told The Times that after a rocky start the SSA and community members led by Catherine Bumpus, co-president of the Woods Hole Association, had worked well together and reached consensus on most issues.

The existing terminal building that also houses administrative offices would be demolished, opening up views to the water, and the existing terminal pier would be partly removed to make way for a relocated slip number three. The new terminal would be set back from the water. The price tag for the entire package is expected to be close to $61 million.

Fuel for the fire

SSA officials also told The Times that despite a drop in oil prices, boatline managers have no plans to reconsider a slate of rate hikes approved October 21 that are scheduled to take effect in the new year.

Beginning January 1, the discounted vehicle excursion fare for Island residents, parking rates at Falmouth lots, and passenger fares for all travelers will increase.

In October, Mr. Lamson said the hikes were needed to cover increased operating costs projected for 2015, including fuel costs, vessel maintenance, employee salaries, health care benefits, and pension benefits.

At the October meeting, several members questioned the budget projection for fuel costs, given the current downward trend in wholesale oil prices.

“The market is correcting right now,” SSA treasurer Robert Davis said on October 21. “Talking with our consultant, he is still feeling the $90 range is a good range to be targeting.”

In public comment, Oak Bluffs businessman Todd Rebello, a former selectman, said, “I do believe there is a little fluff in the potential fuel budget that could be significant.”

Mr. Rebello said he did not expect any savings to be passed on to the ratepayers. “You’ll find another place in the budget to plug a hole,” he said.

This week the price per barrel of crude oil had dropped close to $60.

No rollbacks planned

In an email to The Times on Wednesday, Mr. Lamson said at this point he is not recommending that the SSA forestall the rate increases approved in October.

“Fuel is only one of the SSA’s expenses, and we already know that we will be incurring significant unbudgeted increases in our repair costs next year,” he said.

He cited almost $1.4 million in higher than expected costs to replace the dolphins at the Vineyard Haven terminal, repair the older portion of the dock at the Oak Bluffs terminal and dry-dock the Island Home next March.

“In addition, while we may all have opinions as to the range of oil prices that we are likely to see going forward over the long term, no one knows for sure at this point where the price of oil will ultimately settle at in 2015,” Mr. Lamson said. “The Department of Energy’s latest forecast says that WTI crude oil prices are expected to average $78 per barrel in 2015.  If that prediction proves to be accurate (and even the DOE cautions that energy price forecasts are highly uncertain), the SSA might spend around $1,300,000 less in vessel fuel expense next year than projected in its 2015 budget, but that amount will still not offset the unbudgeted increases in our repair costs that we already have incurred.

“Further, given that the SSA’s vessels consume almost 60 percent of their fuel during the months of July through December, it would not be prudent to base all of next year’s fuel price assumptions on the price that we are currently paying, which by most accounts may only be temporary.”

Mr. Lamson said the 2015 budget projects a net annual income of a little more than $3,000,000, which provides for “a very thin margin of error. “Even just a few unexpected events can turn the SSA’s black ink to red. On the other hand, if we do end up with a larger surplus next year than anticipated, the extra money will automatically flow into the SSA’s special purpose funds to be used to pay for the cost of our capital projects, which will help keep our rates lower in the future.”

Marc Hanover of Oak Bluffs, the SSA’s Martha’s Vineyard member, supported Mr. Lamson’s reasoning in a telephone conversation on Wednesday. Mr. Hanover said the SSA must take into account the volatility of the market and its future capital expenses. He said the notion that the boatline is socking away money at the expense of the ratepayers is not accurate.

For example, he said any unexpected surpluses would help lower borrowing costs.

“This is the first rate increase in four years,” Mr. Hanover said. “Costs have been up 2.5 to 3 percent per year and it is a $1 on a car and 50 cents on a person and it is pretty nominal at best.”

Rob Ranney, the Nantucket SSA member, agreed with his island counterpart. “Of course, there is also no way of knowing how long fuel costs will remain low for now,” he said in an email to The Times. “I don’t know what gasoline prices are on the Vineyard, but here on the outer island I paid $3.95/per gallon for the cheap stuff yesterday to fill up my car.”

Mr. Ranney said the SSA takes a longer view on these issues, “due in part to mandated bond repayment requirements, pension, healthcare and labor costs, maintenance schedules and unforeseen expenses.

“Also, despite outward appearances to the contrary, nobody at SSA likes rate increases, not me, not management, not passengers, not the ports, not anybody.”