As approved by the Task Force Members January 15, 2001
[This task force was formed due to a funding crisis caused by sudden
funding change] [All text in [] is Coastal Council Finance Ctee. Comment or
text interpolated from other parts of the report by editor
This is a draft excerpt Jan 18th 2002]
BACK to response draft
In the 2000 supplemental transportation budget the Legislature created the Joint Task Force on Ferries, comprised of Legislators, citizens, ferry management and ferry workers. The Task Force was charged with reviewing the workings of the Washington State Ferry system (WSF) and answering specific questions, detailed below, regarding the recommended future direction for the system.
In recent years, WSF has witnessed dramatic shifts in its funding. In 1998, the voters approved Referendum 49 (R-49) to provide additional transportation funding through bonding and by shifting additional Motor Vehicle Excise Tax (MVET) funds to transportation. In November of 1999, the voters approved Initiative 695 (I-695), which abolished the MVET. This terminated both MVET revenue and R-49 bond revenue.
Finding: The MVET provided 20% of the funding for the ferry operating program. A combination of MVET and R-49 bonds provided 82% of ferry capital funding . Beginning July 1, 2001, there are no funds in the Puget Sound Capital Construction Account. The new revenue currently earmarked for the ferry capital account during 2001-03 is not sufficient to cover existing debt service payments.
After fully reviewing and discussing the information presented, the Joint Task Force on Ferries voted to present a slate of recommendations to the Legislature. Those recommendations are summarized below and discussed in greater detail in the body of the report.
1. Ferries are part of the state´s highway system and should remain open. Washington law, in both the State Constitution and in statute, identifies the state operated ferry system as a part of the state´s highway system. As with the other links in the state highway system, no currently operated ferry routes should be terminated.
2. The state should continue to provide and maintain both auto ferry and passenger-only ferry service.
a. Alternative service providers are not able to offer the current level of service as cost effectively as the state, in part because of the need for significant capital investment.
b. If an alternative service provider offered Puget Sound ferry service, the entity would require a significant level of subsidy.
c. State-local or public-private partnerships may be a viable option if the Legislature wishes to explore expansion of the passenger-only program at some future date.
3. WSF should maintain an in-house maintenance and preservation facility. The Eagle Harbor maintenance and repair facility provides irreplaceable 24-7 coverage for ferry and terminal maintenance needs. The need for in-house support of maintenance is clear.
4. The majority of ferry users recognize the need to pay a greater share of operating costs. [In BC ferry users already do pay a considerably higher share] The Legislature should pass a waiver of I-601 for ferry tariffs so that the Transportation Commission can phase in tariff increases that will: (a) raise farebox recovery to 80% of operating costs over six years; (b) result in passenger-only tariffs set at double the level for passengers on the auto ferries by May of 2001 [this is for ferries that are only carrying passengers-commuter ferries in the Seattle area]; and (c) implement a journey time-based model of time based tariff structure (tariff route equity).
a. Under current law ferry tariffs cannot be raised by more than the I- 601 fiscal growth factor. By passing a permanent I-601 exemption in the first part of the 2001 session, the Legislature would enable the Commission to begin phasing in the recommended tariff increases in time for the summer 2001 season.
b. Raising tariffs over the next six years in an amount sufficient to generate 80% of the systemwide operating costs would significantly increase the share of operating costs paid by the users.
[From Executive summary of Report:
A Note About Farebox Recovery [in Washington State]The farebox recovery percentages discussed in this report represent the percentage of operating costs, i.e. operation and maintenance of the ferry system, generated by farebox revenue. This does not include the capital costs of the system, approximately $275 million for the 2001-03 biennium.
[An excerpt from the executive summary addressing what user cost recover should be related to:] WSF and the tariff policy committee should consider restating ferry operating costs to exclude maintenance costs. In this way maintenance costs for the marine highway, as with maintenance costs for the land-based highway, would not be covered in full or in part by user fees.]
[Compare to BCFC 84% recovery rate including capital (based on Wright report figures), or 114% of direct operating costs based on WSF methods and Wright report figures!]
c. Currently, passenger-only tariffs cover 30% of their portion of the systems operating costs. Doubling passenger-only tariffs by June 2001 and then increasing them on the same schedule as auto tariffs will achieve farebox recovery comparable to the auto ferries. Such an increase should be reviewed periodically and reconsidered if:
i. The ridership drop due to elasticity threatens viability of the program; or
ii. The Bremerton passenger-only ferries are no longer allowed to run at high speed.d. Implementing the ferry tariff policy committee´s time based tariff structure (tariff route equity) proposal would address long-standing equity issues between routes. Adjusting tariffs to be more equitable across routes is an important part of any tariff increase program.
[Tariff equity (rationalization) program already in process of implementation in BC]
5. Ferries should continue to provide the reduced level of service funded in the 1999-01 supplemental budget through the 2001-03 biennium, including passenger-only service.
a. Following the repeal of the MVET, the Legislature cut funding for auto and passenger-only ferry service. In response to the cuts, WSF reduced service to the level prescribed by the Legislature.
b. If the Legislature considers restoring any of the service eliminated during the last legislative session, restoration of the Pt. Townsend - Keystone and Pt. Defiance - Talequah cuts would be the most cost- effective.
c. The operating program cost of providing the current level of service through the 01-03 biennium is $344 million. Approximately $199 million of that amount is generated from user fees in the form of tariffs. After taking into account current tariff levels and other projected revenue, approximately $44 million in operating costs to come from other revenue sources. Significant capital program costs are in addition to this amount.
d. Future service needs should be reevaluated once WSF is able to more accurately assess the impact of tariff increases on ridership.
[This report displays a clear appreciation of elasticity issues]
6. Short-term and long-term capital preservation requirements should be met in order to ensure the delivery of operating services. The Legislature should fund ferry capital program to a level that allows the ferry system to catch-up and keep-up with deferred life-cycle preservation and maintenance needs and replace aging vessels and terminals as needed.
a. Current life cycle preservation activities do not address the replacement of assets as they reach the end of their service life.
i. Replacement of certain existing terminals and vessels is essential to maintaining current operating services into the future.
ii. New vessel and terminal construction takes many years to accomplish. For example, in order to have new vessels ready when needed, the state would need to launch the eight year vessel procurement process during the 01-03 biennium. Major terminal construction takes even longer.
b. “Catching up and keeping up” with ferry and terminal preservation and maintenance needs means:
i. Raising the condition rating for Coast Guard regulated capital systems to between 90% and 100% by 2011. The condition rating for those systems was at 79% at the beginning of the 1999-01 biennium.
Ii Raising other systems´ condition ratings to 70% by the 2011 planning period. The condition rating for those systems was at 66% at the beginning of the 1999-01 biennium.
c. Meeting these goals and existing debt obligations will require $275 million in the 2001-03 biennium and an average of $346 million per biennium. This is in addition to the $344 million operating cost identified in no. 5, above.
i. Preservation of existing facilities: $167 to $225 million per biennium.
Ii Replace four auto ferries scheduled for retirement: $63 million per biennium.
iii. The Mulkilteo and Anacortes terminal projects that address preservation and multimodal needs: $7 million in the 2001- 03 biennium with a $41 million per biennium ten-year average.
iv. Replacement of two aging passenger-only boats with one new boat during the 01-03 biennium with no loss of service.
v. New construction to replace vessels and terminals is expected to eliminate the need for $38 million in preservation costs.
vi. The WSF maintenance and repair facility is in need of additional investment. During the 2001 interim, WSF should review the Eagle Harbor facility and present investment options and recommendations to the 2002 Legislature.
7. The state needs to do a better job of telling citizens what they are getting for their ferry operating and capital investments.
a. Display ferry capital investments in the same format and in the same location as WSDOT highway projects.
i. Format the presentations under maintenance, operations, preservation and improvements.
Ii Include ferry capital reporting in the transportation executive information system used by the Legislature.
Iii Present information in a performance based budgeting module similar to that used by WSDOT´s maintenance accountability program.
b. Increase information available to the public.
8. Washington State Ferries must continue to adopt operational efficiencies. Implementing further efficiencies includes:
a. Continuing to implement efficiencies proposed in the 1998 Joint Legislative Audit and Review committee´s performance audit; and
b. Investing in the technology needed to enable WSF to implement time-of-day and day-of-week variable tariffs.
9. The Legislature should review ferry governance options. Possibilities include:
a. The creation of local or regional ferry transit districts as a funding mechanism for the expansion of passenger-only ferry service; and
b. Once the Legislature establishes a predictable continuing funding base for the state ferry system, the Legislature should examine options for ferry governance as part of the overall review of transportation governance recommended by the Blue Ribbon Commission on Transportation.