The Anchorage Daily News (Alaska) - by Lisa Demer

The Mat-Su Borough soon will take ownership of a unique ferry born out of a partnership with the U.S. Navy that cost local taxpayers almost nothing.

Until now.

The Susitna -- paid for in an era of federal largesse and congressional earmarks -- will be turned over to the borough as soon as next month, the Mat-Su Assembly was told this week at a work session.

And with the ship title comes bills for berth fees, utilities, security and a minimal crew, no matter whether the Susitna is used as a ferry or not.

Just to store the ship in Ketchikan, where it was built and still is being docked, could cost the borough an estimated $1.3 million a year, Assembly members were told. Docking it at the borough's Port MacKenzie could be even more expensive.

So the Assembly has some difficult decisions to make, new borough manager John Moosey said at Tuesday night's session.

The possibilities include some surprising twists. The borough could abandon the project and sell the ship, but for a fraction of its cost. It could store it, though at which port hasn't been decided. It could lease it to another operator. Or it could sell it, then lease it back and keep the ferry dream alive.

None of these ideas is likely to come cheap, and the Assembly hasn't yet chosen its path.

If the borough decided to forget about ferry service and sell the vessel, it would have to repay the federal government $21 million in transit grants it received for the project, the Assembly was told.

The Susitna is a 195-foot-long, 60-foot-wide steel and aluminum ship with a barge deck that can rise for faster sailing and lower for beach landings. It's the world's first twin-hulled vessel that can break through ice. It's a Navy prototype but instead of ending up at a scrap yard like most models, this ship is supposed to be turned over to the Mat-Su Borough for use as a ferry.

And while the borough seems to be pleased overall with its boat, the vessel is not without problems. The ramp that lowers to let vehicles on and off, for instance, failed at a key connection and is being revamped at the shipyard, the borough's ship consultant told the Assembly. The consultant said the reworked system will include a manual override.

Some Assembly members are upset that the ship is heavier than expected, about 1,000 tons fully loaded, but will carry just 20 vehicles and about 134 people, fewer than Mat-Su originally wanted, which means less potential revenue.

For years, the borough has been trying to boost business at its rarely used port. Some thought a ferry making quick trips across Knik Arm to Anchorage and longer excursions to communities up and down Cook Inlet could be part of the answer.

Moosey inherited the project when he took office in May. The former manager, John Duffy, was its chief booster. Moosey says he sees opportunity in the Susitna but notes that the borough may have gotten more than it bargained for when it signed on with the Navy for the project

"We needed a red wagon and they gave us a rocket ship," Moosey said in an interview.

As of May, the prototype had cost $78 million, counting early design work and model testing, and the figure is growing.

Millions more in public money went for the borough's $4.5 million ferry terminal, design and engineering of landings, and feasibility studies.

THE COSTS

Neither Port MacKenzie nor the Port of Anchorage have landings to accommodate vehicles rolling on and off, and foot traffic alone wouldn't be enough to justify its operation, borough officials say. There's not enough money in hand to build landings, and there's not an approved site on the Anchorage side, borough Assembly members were told.

And there's little assurance of a customer base big enough to support the cost of running a ferry between Anchorage and Point MacKenzie.

Lew Madden, a retired Navy captain who now works for the borough as a consultant on the ship, told the Assembly it could make a profit after five years of operation, but that's with high fares: $15 one way for a passenger to make the short trip across Knik Arm, $25 for a driver and vehicle, $100 to take a driver and vehicle to Kenai.

The Assembly hasn't yet set fares. Madden said the Assembly might want to consider lower rates to encourage more ridership. But that would mean subsidizing the ferry system, he said.

Port Director Marc Van Dongen told the Assembly he doubts it will ever break even. Madden's calculations understate the real cost, he said, by not factoring in costs such as building the landings or operational costs like pay for workers to collect fares, tie down the ship and de-ice it.

Assembly member Ron Arvin, on speaker phone for Tuesday's meeting, called the project "a huge sinkhole of cash."

"When this idea was first launched some years ago, there was never this talk about losing money," Arvin said.

THE POSSIBILITIES

Madden laid out options for Assembly members. Among them:

• Sell the ship outright. If the money were put back into the ferry system -- spent on a different ship, for instance -- the borough wouldn't have to repay the feds, Madden said.

The downside is how little money the ship would bring in, maybe just $5.5 million, he said.

"I was shocked at valuation," he said. "Right now there is no market for ships, in the world, with the economy right now."

• Sell the ship, then lease it back for ferry operations. The borough wouldn't be responsible for mechanical failures or major maintenance, Madden said.
• Mothball it until landings are ready. If the ship were docked at Port Mac, Madden estimated it would cost $1.7 million a year to store it, compared with an estimated $1.3 million -- maybe less -- in Ketchikan. Even without berthing fees, Port Mac would cost more, largely because of higher utility costs due to the colder winter, and the extra winter crew that would be needed to deal with inlet ice, Madden said.

Assembly members, Madden and Port Commission members also discussed whether the ship could be hauled out of the water at Port Mac and stored on land, for less cost. The borough could seek proposals for a giant boat trailer, Assembly member Mark Ewing said.

The idea is worth looking at, Madden said. But he noted that the twin hulls present a challenge for such a maneuver. As an engineer at Lockheed Martin, Madden co-invented the unusual ship and has been part of its life ever since.

Van Dongen offered other ideas, including seeking federal legislation to wipe out any obligation to repay the grants even if the borough never establishes a ferry system.

Moosey, the borough manager, said he was going to collect more information on various proposals, including getting an independent analysis of costs, revenue and projected ridership.

The Assembly will take up the matter again at a meeting soon, he said.