This was originally posted to: Guemes Island Ferry Committee

Ferry Committee's Response To Ferry Replacement Plan


March 9, 2014


Capt. Rachel Rowe
500 I Avenue
Anacortes, WA  98221        Via electronic mail


Re:  Guemes Island Ferry Committee’s Comments on: M/V Guemes O.N. 601686 Ferry Replacement Plan, Rev B, Prepared by Elliott Bay Design Group (EBDG)


Dear Rachel:

The Guemes Ferry Committee appreciates Skagit County’s initiative in undertaking a serious and thoughtful investigation of future needs for the Guemes Ferry operation. We appreciate this opportunity to offer our thoughts on Revision B of the M.V Guemes Ferry Replacement Plan prepared by Elliott Bay Design Group, dated November 22, 2013 (which for convenience we will call the “Plan”).

We believe the Plan is a useful compilation of public information and professional evaluation regarding the ferry situation.  One of its most important contributions is the attention it draws to areas where data remains open to interpretation and to topics on which the Ferry Committee can contribute further information.  As a result, we do not believe the County should proceed on the recommendation in the Plan at this time, and should continue to work with the Committee to refine it and further inventory the response options.  There are three matters highlighted by the Plan that we want to pursue in the present context.

1.  Focusing on Replacement.  As an initial matter, we were a bit surprised to see that the contractor had proceeded directly to a Ferry Replacement Plan, as contrasted with what we had expected would be a more modest survey of the condition of the current vessel.  Of course the Plan does offer considerable valuable information in that regard, but we note that the overall tone seems to go beyond what we expected and to be more aggressive than we expected at this time given that the Coast Guard inspections have not noted any deficiencies and the 2010 Belford “Guemes Hull Condition Survey” established hull deterioration at only 4%. 

Also, the economic comparisons of the future options do not use Net Present Value calculation methodology.  NPV takes into account the time-value of money (that is: a dollar you spend today is worth more than a dollar spent in the future because while you still have the dollar, you can invest it elsewhere; in addition, inflation erodes the value of a dollar over time).  The Plan did not do an NPV analysis.  It looked only at the total dollars spent for the 3 options at the end of the planning horizon (23 years).  This flaw in the financial analysis greatly favors option A since options B & C delay expenditures, and therefore according to industry standard NPV analysis, options B & C spend “cheaper” dollars than does option A.  

2.  Ridership.  In two places the Plan postulates that the ferry is currently operating at maximum practical capacity.  (Pages 7, 12.)  This postulate, and the data supporting it, are difficult to evaluate.  First, the Plan does not explain what it means by “capacity” or “practical capacity.”  Does it mean that on certain runs vehicles may not get on the next ferry due to a long ferry line?  How does the term “capacity” accommodate the fact that the great majority of runs through the year are less than fully loaded?  The County’s data show that the number of runs for which a driver is forced to wait for one or more ferry runs because of crowding is indeed relatively small.  Thus, we are interested in better understanding the concept of “capacity” in the Plan and in the County’s thinking.

Second, the Plan’s conclusion about capacity seems unpersuasive.  On page 7 the conclusion is based on the Plan’s observation that data show vehicle traffic has leveled off in recent years.  One’s first reaction to that data is that, given that most runs are less than full, there is no capacity problem.  That is, there is not a backlog of vehicles that a larger ferry or more frequent runs would accommodate.  While, again, we know there are backlogs in the summer, if the Plan is suggesting that the overall ferry operation must be designed around peak demand, we would need to be persuaded that such an approach is cost effective in this setting.  There is no discussion in the Plan of adding extra runs during peak season, which might address the matter more cost effectively.

Similarly, the statement on page 12 that “passenger ridership also has the potential to reach ferry capacity” is difficult to accept.  (Again, we note that it is unclear exactly what “capacity” means.)  The statement seems to be contradicted by the Plan’s analysis at page 7 which postulates a 10% increase in passengers (over the 2007 numbers) by 2033.  Since personal experience teaches that the passenger compartment is rarely full, and the Plan’s data do not show an upward trend in passengers, it is very difficult to accept the Plan’s apprehensions about reaching passenger capacity.

3.  Condition of the Guemes:  The Plan concludes that the current vessel needs replacement due to its “fair” condition.  The Guemes is about 35 years old yet her hull is in good shape. 

“The overall structural integrity of the hull is considered good.  An ultrasonic thickness (UT) survey of the hull conducted in October 2010 indicated a large majority of the hull is sound with little corrosion.  Wastage in the shell plating was generally less than 4%.”  p. 13

The report details a number of areas, such as corrosion in the engine foundations, that need correction.  Certain items of machinery, like the outdrives, and such items as electronics need replacement or upgrading.  The total cost for attending to these overhaul items comes to about $929,000 but yields  a vessel serviceable for at least another 15 to 18 years (p. 17).  This contrasts with the estimated capital cost for a new vessel of about $8.4 million.
   
Given this cost contrast, it is our view that extending the life of the current vessel warrants stronger consideration.  This is especially true since the immediate replacement suggested in the Plan does not consider that in 20 years many of the “new” vessel’s components will be obsolete in the same way that causes the Plan to condemn the current Guemes; for example, advances in electronics, engine efficiency, and propulsion mechanisms must be expected in the next 20 years.

The Plan seems to strain to downplay the current good condition of the Guemes.  The report does a 23 year maintenance cost analysis, but there are assumptions in the figures which we find prejudice the conclusion toward “an immediate replacement” of the Guemes.

Importantly, the Plan incorporates data arising from alterations made to the vessel in 2005.  In that year, a series of expensive “upgrades” were performed on the vessel that totaled over $750,000.  The problems started with dolphin replacement on the Guemes side.  The old dolphins had been placed further toward the end of the vessel when it was docked.  The new dolphins were placed about amidships when the vessel docked.  When the vessel rolled, especially in a strong westerly wind, there was an unacceptable risk that the bridge (conning tower) of the vessel could hit the dolphin causing severe damage and possibly injuring the captain.  To correct this problem a wide apron was welded to the vessel.   About the same time, a decision was made to repower the vessel with heavier four-cycle Cummins KT 19-M3 engines replacing the lighter two cycle Detroit Diesels, even though the latter three engines (one in spare) still had significant operational hours in them.  When the ferry was launched after the alterations and additions, it listed to one side.  Tons of permanent ballast had to be added to correct the list.  None of these one-time alteration costs should be considered routine maintenance.  To average them into the maintenance cost data for the Guemes skews the maintenance cost curve higher for this vessel.  Yet that was done as noted on page 52 of the Report:

    Items that had occurred only once during the recorded period were assumed to have a 20 year maintenance cycle.  While these specific items were likely incidental repairs that will likely not require repair again, when taken together they represent an AVERAGE COST (GIFC capitalization) associated with incidental repairs.

Also, we are uncertain about the Plan’s assessment of the potential useful life of the Guemes.  Option B (“minimal” overhaul) offers a 10-year extension of the Guemes’ life.  Option C (“major” overhaul and hull extension) offers 18 years, a difference of 8 years.  But the only differences in the bulleted overhaul lists for the two Options (setting aside the 22 foot extension in Option C by foregoing greater “capacity”) appear to be (i) refurbishment of hull, and (ii) refurbishment of piping systems.  In light of the 2010 confirmation of the solidity of the hull, we do not understand the need for the first refurbishment.  If the 18-year life extension can be achieved by adding piping refurbishment to Option B overhaul, this possibility should be strongly considered.

Conclusion
 
We do not at this time endorse the Plan’s conclusion that the County should proceed immediately to replace the Guemes.  Rather, if the $929,000 in recommended upgrades and overhauls are accomplished, perhaps adding refurbishing the piping, the vessel should last another 15-18 years, which might be preferable.  We cannot agree that the flat to declining ridership curves support the statement:  “Vehicle ridership indicates that the ferry has been operating at maximum practical capacity for some time.”  Further, the replacement maintenance cost analysis is suspect both for its averaging in one time costs, not using NPV, and comparing a 35 year old vessel to a new one. 

We hasten to repeat, however, that it is propitious that the County is pursuing a plan for the replacement of the Guemes when it reaches the end of its useful life.  We sincerely appreciate the County’s initiative and look forward to working periodically with the County on this important matter.

Sincerely,

Guemes Island Ferry Committee