Fare hikes loom in SSA draft budget

By Nelson Sigelman - September 14, 2006

Steamship Authority (SSA) management is expected to present for review at next week's September board meeting, a 2007 draft operating budget which will include proposed hikes in passenger and vehicle fares.

Wayne Lamson, SSA general manager, said that despite efforts to economize, the boatline faces a rising tide of operating costs. These include insurance for the boatline's new ferry Island Home, employee medical insurance, and fuel. When coupled with a slight drop in passenger traffic this summer, these may make fare hikes next year unavoidable, he said.

The board is scheduled to meet at 9:30 am on Tuesday in the Hyannis terminal. No vote on the budget is expected until the board meets in October on the Vineyard.

Mr. Lamson said he is still working on the operating budget and where possible searching for efficiencies. The boatline has managed to save money this year by reducing speed, which cut fuel costs, and eliminating some scheduled weekend trips, running them as needed.

Management will propose berthing the Island Home in Woods Hole next spring which will allow the boatline to run an early morning trip at 6 am out of Woods Hole, which will likely be used by truckers and contractors. That would help to eliminate a freight trip.

Berthing the Island Home in Woods Hole would also mean that the last boat on the schedule from Woods Hole would change from 10:30 pm to 9:45 pm. The number of round trips, seven per day, would remain the same.

Nonetheless he said the budget would "most likely require some type of a rate increase." The fare hike would be for both Islands and likely affect passengers and vehicles, he said.

"We have gone back over the last month or so and tried to identify costs that we could eliminate or defer," said Mr. Lamson, "how we could squeeze the budget, but at the same time do the things that have to be done."

He said there are a number of repairs that must be made to terminal facilities on both islands. Not making those repairs could lead to bigger problems, he said.

Describing some of the pressures on the budget Mr. Lamson said that the Island Home, a new boat with a higher value, would increase the costs associated with insurance and depreciation.

Summer passenger traffic was down less that one percent, continuing years of flat growth.

Health insurance costs for boatline employees are also expected to rise. In agreements negotiated over two years, all but one of the boatline's unionized and non-union employees have agreed to contribute 5-percent to the cost of health insurance.

But for more than three years, the SSA and the Marine Engineering Beneficial Association (MEBA) have so far been unable to agree on a contract that would include a contribution to a medical plan, under which the boatline now pays 100 percent.

Overall, medical insurance costs the boatline approximately $6.6 million. Employee contributions reduce that amount to about $6.3 million.

He said that despite some negotiated manning reductions on the vessels, labor costs still account for two-thirds of the budget. "It has come down, but that is partly due to other expenses such as fuel going up so much in the last couple of years," he said.

In October 2005 the SSA members voted unanimously to approve a $72-million 2006 operating budget that included across-the-board rate hikes, mostly on the Vineyard route. The increases, which also extended to the Nantucket side of the route, were needed to help make up an estimated $4 million revenue shortfall, according to management.

The fare increases were based on the cost of service and fell most heavily on the Vineyard side of the ledger - to the tune of $3,200,000 of the $4 million that boatline management said is needed in 2006.

Previewing next week's meeting agenda, Mr. Lamson said it would include a preview of the 2007 summer schedule, an update on capital projects, including the construction and delivery date of the Island Home, plan for the mid-life refurbishment of the Nantucket, and the proposed sale of the fast ferry Flying Cloud.

Potential buyers of the fast ferry that has served the Nantucket route had until Wednesday at 2 pm to submit a bid. The SSA had committed to sell the boat for any amount over $5 million, but that did not preclude the board from deciding to sell it for less.

Late yesterday afternoon, a disappointed Mr. Lamson said there were no bids.

Mr. Lamson said the current climate for selling a boat was not advantageous to the boatline. He said there are currently fast ferries for sale in the New York City region and Seattle, Wash for less money.

Mr. Lamson said he plans to speak with some of the people who expressed an interest in the ferry to see what may have affected their decision not to bid. The SSA could explore chartering the vessel. Mr. Lamson will discuss the possibilities with the board next week.

The Island Home, which will replace the venerable Islander on the Vineyard route, is contractually due to be delivered by Nov. 29, approximately six months after the initial delivery date. But that delivery date could change again, said Mr. Lamson.

The lingering effects on the work force from Hurricane Katrina, one of the most destructive hurricanes ever to hit the United States, may lead to more delay. The category-four hurricane came ashore last summer just west of the VT Halter Marine shipyard in Pascagoula, Miss., where the $31 million ferry is being built.