Privatize Alaska ferries? ‘Not feasible,’ Dunleavy administration consultants say

The ferry Malaspina is in drydock and the Columbia tied up at the Ketchikan Shipyard in 2012. (Ed Schoenfeld/CoastAlaska News)

A $250,000 study looking for ways to wean the Alaska Marine Highway System from state support has finally been made public. Although Gov. Mike Dunleavy has floated the idea of privatizing the system, the hired consultants have concluded that isn’t feasible.

The Dunleavy administration commissioned the report last spring and received it in the fall. But the state wouldn’t release it until Wednesday’s Marine Transportation Advisory Board meeting.

Read our continuing coverage to the cuts to the Alaska ferry system

That didn’t sit well with MTAB’s newest board member: former Gov. Frank Murkowski.

“I understand the administration has had the report for some time and chosen not to issue it,” Murkowski, a Dunleavy appointee, said at the meeting. “If you’re an adviser, you need the information before you hold can hold a meeting that’s meaningful such as this.”

Nobody from Northern Economics, the company that wrote the report, was at the meeting. The report examines 11 scenarios. Five of them involve some degree of privatization. Others look at transferring responsibilities to new local agencies that would run regional routes.

The Anchorage firm tried to find out what kind of ferry service it could deliver for $24 million a year. That’s the ferry subsidy Dunleavy proposed last year, which was only enough for a few months of operations.

The consultants’ answer was: not much service. Its best scenario was splitting the Alaska Marine Highway System into two regional public entities. Fares would go up 25%. Wages would fall nearly 9%. And there’d also be deep cuts to service: No more stops at the Canadian port of Prince Rupert. Prince William Sound, Homer and Kodiak Island would see no winter ferries.

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The consultants concluded that cutting the ferry subsidy to the governor’s magic number of $24 million would be “extremely difficult.” That is, if the system would continue to provide a minimum level of service to coastal communities.

Of course, the governor’s $24 million ferry budget wasn’t to be. A legislative compromise last year approved a $46 million subsidy.

Even so, AMHS General Manager John Falvey told the advisory board it’s been hard to keep the system afloat.

“What’s happened with the cut — it’s been so massive,” Falvey said. “It’s been very, very challenging.”

Four ferries are now laid up, either waiting to be sold off or in need of expensive overhaul and offline, Falvey said.

Pelican Mayor Walt Weller said his Chichagof Island community has been virtually cut off. It’s turned to fishing boats and occasional floatplanes to deliver groceries and other supplies, and he said residents are extremely concerned.

“And I don’t know what to tell them. They feel like they’ve been cut off by the state,” Weller said.

The report also looked at the advantages of transforming the ferry system into a public corporation. That’s been a central aim of the Alaska Marine Highway Reform Project. Advocates of that effort want to insulate the ferry system from political meddling. As governors change every four or eight years, so do priorities, making long-term planning difficult.

The consultants also suggest renegotiating labor contracts to cut wages, but they acknowledge this could be difficult without legislative action. And they poured cold water on privatization. That’s because few of the routes break even. It found the most profitable route is the 45-minute trip between Ketchikan and Metlakatla. Even that would require a $370,000 subsidy.

No significant changes are planned for this year. The governor has proposed flat funding to the marine highway. Any big changes would need to be approved by lawmakers for 2021.

The Marine Transportation Advisory Board plans to schedule a future meeting to discuss the report’s findings in depth.