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The Honolulu Advertiser
Posted on: Sunday, February 15, 2009

High subsidies may scuttle Hawaii's ferry

By Sean Hao
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

The Melissa Ann, one of the vessels in Honolulu's two-boat ferry service, makes a stop at Aloha Tower. City leaders are considering whether to continue the $4 million-a-year service for a third year.

Advertiser library photo

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"It makes sense you've got water, use a boat. It sounds good, but when you're in tough times you've got to spend money in ways that make the most sense. When you only have two (boats) you don't have the consistency. What you get is unreliable service."

DUKE BAINUM | City Council member

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TheBoat, Honolulu's commuter ferry from Kalaeloa to Alo- ha Tower, gives West O'ahu residents an oceangoing alternative to increasingly clogged highways, for no more than $4 per round- trip ticket.

What makes the service so cheap is that Honolulu taxpayers pay an additional $120 per roundtrip rider to cover the actual costs of operating TheBoat, according to a city study.

The cost of carrying each passenger on TheBoat is about 62 times more than the cost of an average trip on TheBus. It is also significantly more expensive than comparable Mainland ferry services.

The high average cost of a trip on Honolulu's two-boat commuter ferry service results from a combination of relatively low ridership, the actual expense of running the boats, low fares and an operating environment that leads to less reliable service than some Mainland systems, according to various sources.

Despite the high subsidy costs, Mayor Mufi Hannemann and some City Council members are considering continuing the $4 million-a-year commuter ferry service for a third year, once the current operating contract ends late this year.

City officials acknowledge the service's high per-passenger costs, but argue TheBoat is an integral part of a multimodal mass-transit strategy they hope will someday include an elevated commuter train.

"The problem is that some people look at this as a business," said Councilman Nestor Garcia. "Government is not in the business of making money. True, we have to try to make sure we account for taxpayers' dollars and make sure they're spent wisely especially in this environment. But government is here to provide a service."

Critics of TheBoat contend the cost to taxpayers is too high and that cutting the service may be one way to trim the city's unbalanced budget. Right now, nobody's ruling out possible tax hikes and fee increases as a means of filling an estimated $13 million to $40 million deficit in the fiscal 2010 budget year that ends June 30 of next year.

"If you can provide the same service (as TheBoat) at a cheaper rate through TheBus, then that's something we have to consider because as long as we can provide the basic service that's the priority," said Councilman Donovan Dela Cruz.

TheBoat may be sailing on a sea of red ink: Its $4 million annual subsidy amounts to just 2 percent of the city's $196 million public transit budget. Systemwide, TheBoat adds just 7 cents per passenger to Honolulu's public transit costs, said Wayne Yoshioka, director for the city's Department of Transportation Services, which oversees TheBoat.

"We can absorb that cost," he told council members during a committee hearing last week. "Still, we're always looking for maximum efficiency so that doesn't mean we're going to ignore this."

37 PERCENT OF CAPACITY

The commuter ferry service, which launched in September 2007, was a part of Hannemann's 2004 campaign proposals that also included commuter rail.

TheBoat started as a pilot project financed mainly via a one-year, $5 million federal grant. The city picked up $4 million in annual costs when it decided to continue the service.

The service is run by New Albany, Ind.-based Hornblower Marine Services Inc., which operates two double-decker ships capable of carrying up to 149 passengers. During the week, the ferry provides three morning and three afternoon trips between West O'ahu and Downtown. That equates to a total daily capacity of 894 passengers. However, the most recent ridership figures released by the city in September show an average daily ridership of about 335 boardings. That means the boats typically operate at about 37 percent of maximum capacity.

The Advertiser waited more than two weeks for the city to provide more recent ridership and cost figures. Yoshioka said the city has more recent figures, but would not provide them.

According to a September report by Art Anderson Associates, TheBoat was projected to carry 64,590 passengers last year. Actual 2008 ridership figures were not available from the city. The projected annual ridership level, coupled with the ferry's annual operating cost of $4 million, leads to an average per passenger boarding cost of nearly $62.

In contrast TheBus, which costs about $143 million to operate, carried nearly 72 million passengers in 2007, for an average per-passenger boarding cost of $1.99, according to the Federal Transit Administration.

The city says TheBoat's high costs are not out of line with the cost of providing some city bus express routes. For example, the 85A express bus from Kailua /Kane'ohe to Downtown/University of Hawai'i costs the city $53 per boarding. The 86A from Kane'ohe/Kahalu'u to Pearl Harbor costs about $50 per boarding, according to the city.

In contrast, the 93 Wai'anae Coast-to-Honolulu express bus has a per-passenger boarding cost of about $3.50, according to Roger Morton, president and general manager of O'ahu Transit Services Inc., operator of TheBus.

However, Morton noted that Honolulu's TheBus benefits from higher-than-average ridership, which helps drive down costs per passenger.

"I believe we are the lowest (in terms of) per-passenger cost in the country," he said. "It's because roughly our utilization is about 75 percent more than average. That's really what it comes down to."

RAISING RIDERSHIP

According to the city-sponsored Art Anderson report, there are several recommendations that could help boost ridership at TheBoat. These changes include using boats better equipped for open-ocean operations, establishing more pickup and drop-off points, and creating permanent passenger loading and dock facilities.

The single best improvement that could be made to the service would be adding a terminal location at Ocean Pointe, Iroquois Point, or Pearl Harbor, according to the report. That's because the current West O'ahu terminal at Kalaeloa Harbor requires 'Ewa commuters to travel in the opposite direction of Honolulu to access the ferry service. That means that for many commuters, the reduction in commuting times via TheBoat versus H-1 is marginal.

For Garcia, a recent commute from Waipahu to Downtown via TheBus and TheBoat took almost three hours.

"I had to go west to go east," he said. "It took a little bit longer, but I avoided the H-1/H-2 merge."

The study also recommends the city look at possibly using larger catamaran hulls fitted with ride control systems suited to O'ahu's waters. Inclement weather has caused numerous trip cancellations and incidences of seasickness among passengers.

The city's Yoshioka said a recent upgrade that included replacing one ferry boat with a newer, more efficient and stable boat should help address reliability issues. The plan is to evaluate ridership in one year then decide the future of TheBoat.

"What we would really like to see is one full year of operations with our boats in dependable service not breaking down or having a problem or things like that that affect our ridership," Yoshioka said. "When things like that happen, people start saying I kind of like it, but can I depend on this thing because it's always breaking down?"

After one year "then we can fully assess, can we get this thing to a point where the ridership is where we want it to be?" Yoshioka said.

Council member Duke Bainum said a successful ferry service will require significant added resources such as additional boats, which the city cannot afford to provide.

"It makes sense you've got water, use a boat," Bainum said. "It sounds good, but when you're in tough times you've got to spend money in ways that make the most sense. When you only have two (boats) you don't have the consistency. What you get is unreliable service."

Council member Gary Okino said it's important for the city to provide residents with transit options.

"But I think there's a point where you've got to say this is not going to help this is not significant enough to be part of that system," said Okino, chairman of the council's Transportation and Planning Committee.

Okino said he'd like to hold a hearing to explore whether the city should continue TheBoat service.

"The economy is a factor in this budget session," he said. "We're probably going to have to look at some of those things.

"If you can find several of those ($4 million programs to cut), you can solve our budget problems."

Jamie Story, head of the free-market advocate Grassroots Institute of Hawaii, said the city does not need TheBoat, especially when other forms of transportation such as TheBus are more convenient and cheaper.

"Is it fair to make everybody pay for a project that so few people use?" she said. "It does take so much longer than other forms of transportation and it is undependable.

"No wonder people don't ride it."

COSTLIER THAN PEERS

According to the Art Anderson report, the city's Mainland peers include the Vashon Island-to-downtown-Seattle ferry, part of the Washington State Ferries system; the Vallejo Baylink, which connects the city of Vallejo and San Francisco; and a Washington state demonstration ferry service between Bellingham and Friday Harbor.

The Art Anderson report does not compare the cost of Honolulu's ferry service with these systems. However, according to figures contained in a 2008 study by Seattle's Nelson/Nygaard Consulting Associates Inc., the cost of providing ferry service between Vashon Island and downtown Seattle was about $13 per passenger. The cost of providing service between Vallejo and San Francisco was about $14 per passenger.

TheBoat's $62 per passenger cost also is greater than the $44 per passenger cost of providing ferry service between Bellingham and Friday Harbor. That Washington state ferry service was operated for 18 weeks during the winter of 2005-06 under a federally subsidized demonstration project. That service was discontinued after the demonstration period because of regulatory barriers and high capital and operating costs, according to a November 2006 report by the Whatcom Council of Governments, which operated the demonstration ferry service.

For Mainland ferry services, high costs are partially offset by fare-box revenues, which helped finance between 15 percent and 56 percent of operating costs, according to Advertiser research. The amount of fare-box revenues collected is a function of ridership and fares. All of Honolulu's Mainland peers charge a higher fare than TheBoat. For example, the Vallejo Baylink charges a standard fare of $15 for the 20-mile, 60-minute ferry ride. In contrast, the maximum fare for riding TheBoat is $2. Riders pay no daily fare if transferring from TheBus or if they hold a bus pass.

The relatively low cost for TheBoat has made it an inexpensive alternative for those seeking to sightsee or take a low-cost sunset cruise. However, it's unknown how many visitors use TheBoat versus the number of resident riders. In addition, the city has not disclosed other key information including figures on the number of ferry riders who are new to public transit, versus the number that previously rode the bus. The city also does not appear to have established benchmarks to determine wheth- er the ferry is a success from either a ridership or cost-per-passenger standpoint.

"We need that sort of hard data to make those sorts of policy decisions on whether we go forward with this or not especially in these hard budget times," said Councilman Charles Djou. "If all we're doing is getting people who would otherwise be on TheBus to otherwise ride the boat, why are we spending all these taxpayer resources? It's so much cheaper to get them to ride TheBus."

Garcia, chairman of the council's Budget Committee, said it's unfair to compare the costs and ridership of TheBoat with ferries in much larger cities.

"It's apples and oranges," he said. "Cost is a factor, but sometimes cost isn't a factor. We have to give people a choice.

"I'm going to do everything I can to try to preserve" TheBoat.

Reach Sean Hao at shao@honoluluadvertiser.com.

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