To the Editor:
This letter was originally sent to the Edgartown select board.
This is written to request that the Edgartown select board utilize the services of a competent financial expert as part of its ratemaking review for the Chappaquiddick Ferry.
The August 7, 2020, opinion from attorney Jeffrey Swopes to attorney Ronald Rappaport confirmed that under MGL Chapter 88, the Edgartown select board is empowered to “license for such time as they determine to any suitable person to keep a ferry for hire, and … [to] revoke such license when necessary,” and “to establish the fares and tolls for passengers, horses, vehicles, and other things … transported.” Indeed, the statutory language envisions that the select board will ensure safe and reliable ferry service, and protect the public interest from unfair and unreasonable charges.
This month the owners of the Chappaquiddick Ferry are proposing a rate increase, and seeking the approval of the select board. However, professional ratemaking requires a comprehensive financial analysis of the Chappaquiddick Ferry — an analysis which addresses the service provider’s profitability, the reasonableness and necessity of expenses, the adequacy of capital reserves, and finally balances those items with the reasonableness and fairness of rates which are borne by the public. Consider, for example, the analysis public utilities are required to undergo for rate changes, and similarly insurance companies, the Steamship Authority, et al.
Currently, the Chappaquiddick Ferry narrowly escapes the purview of the Massachusetts PUC; however in California, the ferry upon which the Chappaquiddick Ferry is modeled is subject to state PUC oversight, and must publicly present financial records as part of its ratemaking process. (Currently, those rates are a fraction of the rates charged by the Chappaquiddick Ferry!)
As a member of the Casualty Actuarial Society, I have been dismayed that over the past 20 years, the select board has not scrutinized the financial records of licensees of the ferry service as part of the rate review process. During a 2004 rate request, as reported in the Oct. 29, 2004, Vineyard Gazette, selectman Smadbeck said he “would not ask to look at the books for the Chappy Ferry.” At the May 5, 2008, select board’s meeting, selectwoman Serpa indicated that the board itself was not qualified to analyze the increases in the more than 60 rate categories of the Chappaquiddick Ferry, and proposed using a rate specialist who was used for the water department rate review. Unfortunately, this initiative was not implemented. In 2019, the Chappaquiddick community was greatly alarmed by the lack of oversight when the ferry owners, without notice or any review, increased ferry rates. Although the select board deferred specific action, it appointed an advisory board to review the operations of the Chappaquiddick Ferry. To date, the advisory board has not been given access to the financial records of the ferry. Going forward, the fairness and the reasonableness of the rate structure and any rate increases can only be determined by such an analysis.
Dorothy Dropick
Edgartown