In the face of complaints that it would inconvenience large numbers of customers and potentially damage business, Steamship Authority management will abandon a plan to reduce summer ferry service out of Oak Bluffs.
The plan, which would have cut two inbound and two outbound sailings from Oak Bluffs and run them instead to and from Vineyard Haven, would have reduced costs by allowing the Oak Bluffs terminal to close earlier.
The total savings from the measure would have amounted only to about $45,000, but the recent hard financial times for the SSA, mostly arising from steep increases in fuel costs, have encouraged the contemplation of a raft of small measures, most of which have the enthusiastic backing of the governors.
The new proposal would have affected a 6:30 p.m. freight boat trip and the 7:30 p.m. trip by the passenger vessel Martha’s Vineyard out of Woods Hole, and the vessels’ respective return trips at 7:30 and 8:30 p.m., between June 24 and Sept. 9.
But this cost-cutting suggestion, put up for discussion at Tuesday’s monthly boat line meeting in Hyannis, met with resistance from the Vineyard boat line governor Marc Hanover.
Mr. Hanover said he could not see the logic in reducing services out of his town, particularly in view of the fact that the SSA was in the throes of improving the terminal facilities there.
Why spend $10 or $12 million on new facilities and then use them less, while putting added strain on the crowded facilities of Vineyard Haven, he said.
The operating savings, he said, did not warrant the inconvenience.
“I would not support this,” he said.
Mr. Hanover was supported by port council member Bob Huss, also from Oak Bluffs, who had examined the passenger numbers on the services and found they were well-patronized boats.
The two boats brought an average of more than 300 walk-on passengers into the town each day, he said.
“I think it would be tough on passengers. It also would be tough on the economy of Oak Bluffs,” he said.
Falmouth governor Robert Marshall agreed, and the board decided to send the proposed operating schedules back to the drawing board.
Boat line general manager Wayne Lamson said it was safe to say the proposal would not be included in the schedules for next summer when they come back for a vote next month.
The pressure for cost-cutting had eased considerably anyway, he noted, along with the fall in fuel prices — world oil prices have declined about 50 per cent — over the past few months.
But the decline in costs presented its own dilemma for the board. The 2009 $85 million operating budget, approved at the meeting, projects a fuel saving of $425,000 (4.1 per cent) compared with this year, based on an assumed oil price of about $105 per barrel, or about $3.48 per gallon of fuel.
But currently the oil price is about $70, which would translate to a per-gallon cost to the SSA of about $2.80.
This prompted considerable discussion about whether the SSA should move to lock in all or part of its fuel contracts at the current level for the coming year, which would avoid the risk of another price rise but also deny any benefit if fuel prices continued to fall.
Mr. Hanover was keen to lock in a firm price, saying that while the boat line might look “like idiots” if the price continued to tumble, at least they would “not get caught like this year.”
If management could lock in a price of $2.80, Mr. Hanover said, he would ask them to lock in contracts for at least half the coming year’s fuel supply.
In the end, the governors left it to management to decide what percentage of the fuel should be bought at a fixed price, but the indications were it would be split roughly 50-50. Mr. Lamson said management could look to “other tools, to hedge the downside risk” of further price declines.
Even without potential savings on fuel, the budget brings good news for boat line customers. It includes no fare increases in the coming year, largely because of increases that went into effect in May this year.
Due in small part to the projected decline in fuel prices, and in much larger part to large savings on maintenance, operating expenses are projected to increase just 0.8 per cent in 2009 to $79.9 million. Nonoperating expenses, including interest payments, are projected to decline 6.3 per cent to about $2.6 million.
Maintenance expenses for the coming year are projected to be about $9.5 million, more than $1.9 million below those incurred in 2008.
The major cost increases for the coming year are depreciation costs, up almost $1.2 million to about $9.3 million, and payroll taxes (Social Security), up more than $190,000 to almost 2.3 million, and general expense, up more than $850,000 to almost $17.7 million.
Operating revenues are expected to increase by 2.3 per cent, to about $85.2 million, and other income should be up 5.9 per cent to $1.7 million.
This makes for a bottom line of $4.1 million in net income, an improvement of almost 58 per cent on 2008.
Though the high fuel prices which made 2008 such a difficult year appear to have declined as a management problem, the faltering economy has thrown up new difficulties resulting from uncertainty in the financial markets.
At the beginning of Tuesday’s meeting, Mr. Lamson was decidedly down-beat about the prospects for getting a good interest rate on $5 million in bond anticipation notes, to be rolled over on Oct. 30.
Asked by vice chairman and Barnstable governor Robert O’Brien how the prospects looked, Mr. Lamson said not very good.
Mr. Lamson said he had been advised the SSA might expect to pay 2.5 to 3 per cent.
“We do not anticipate we’ll be able to get the 2.13 per cent we got back in February,” said treasurer Robert Davis.
But at the end of the meeting, the governors were told one bidder, Eastern bank, had offered 2.168 per cent, a sign of the SSA’s credit worthiness, and also perhaps greater fluidity in the previously-frozen markets.
In other business, governors approved changes requested by New England Fast Ferry to service from the Vineyard to New Bedford. The service now will run twice daily, seven days a week until Nov. 30, then twice daily on weekends only, until next April 17.
They also disposed of some surplus equipment at bargain prices — a 35-foot workboat for $28,000, and a 40-foot floating dock for $21,000.