Joint Transportation Committee Feasibility of Private Auto Ferry Service between Washington State and Vancouver Island, B.C. EXECUTIVE SUMMARY December 2020 Draft DRAFT Acknowledgments The study was prepared by: Consultant Team: Progressions Community Attributes Inc. with Elliott Bay Design Group Collier Walsh Nakazawa Norton Rose Fulbright Paul Neal, Washington State Legislature Joint Transportation Committee The Staff Workgroup and Policy Panel were instrumental in supporting this study. Staff Workgroup Policy Panel David Bremer, Washington State Legislature Gordon Baxter, Ferry Union Lobbyist Dave Catterson, Washington State Legislature Captain Eric Von Brandenfels, Puget Sound Pilots Joint Transportation Committee David Bremer, Washington State Legislature Mickey von Dassow, San Juan County Dave Catterson, Washington State Legislature Joint Economic Development Council Transportation Committee Ray Deardorf, Washington State Ferries Victoria Compton, San Juan County Economic Reema Griffith, Washington State Development Council Transportation Commission Laurie Gere, City of Anacortes David Gudgel, Clipper Vacations David Gudgel, Clipper Vacations Erik Hansen, Office of Financial Management Rick Hughes, San Juan County Terri Mast, Inlandboatmen’s Union Liz Lovelett, Washington State Senator, District 40 Danny Masterson, Washington State Legislature Danny Masterson, Washington State Legislature Senate Transportation Committee Senate Transportation Committee Hannah McCarty, Washington State Legislature Hannah McCarty, Washington State Legislature Travis McGrath, Puget Sound Pilots Matt Miller, HMS Global Maritime Martin Presley, Washington State Legislature Martin Presley, Washington State Legislature Dana Quam, Washington StateDRAFT Legislature Dana Quam, Washington State Legislature Beth Redfield, Washington State Legislature Alex Ramel, State Representative, House Transportation Committee 40th Legislative District Eric Shjarback, City of Anacortes Beth Redfield, Washington State Legislature House Brenda Treadwell, Port of Anacortes Transportation Committee John Sternlicht, Economic Development Alliance of Skagit County John Vezina, Washington State Ferries Dan Worra, Port of Anacortes Summary of Findings Feasibility Private ferry service from Washington to Vancouver Island is feasible. Any private operator would have to comply with the same regulatory requirements as the current service. Private ferry service operators have expressed interest in providing the service. Economic Impacts Washington State Even if the ferry service is privatized, Washington State Ferries (WSF) still needs to replace the MV Elwha or face a high risk of system-wide service disruption. Privatizing service could result in a relatively minor cost increase or savings to the Motor Vehicle Fund over the next 20 years. Anacortes/Fidalgo Island Anacortes/Fidalgo Island could experience an economic loss if a smaller vessel provided service or a positive economic impact with a larger vessel. Establishing a private international ferry terminal in Bellingham would have a negative economic impact on Anacortes/Fidalgo Island and a positive impact on Bellingham. DRAFT San Juan Islands It is unlikely that a private ferry service would be allowed to stop in the San Juan Islands. San Juan County would lose a direct ferry connection to Sidney and the economic impacts generated by the current Sidney service. Regional Maritime Jobs While WSF could lose a position and summer crew, private service could create additional maritime jobs that may be non-union or unionized labor. Executive Summary Contents Purpose & Approach 5 Feasibility 7 Defining feasibility Is there private sector interest? What are feasible private ferry service models? Potential Impacts of Privatization 12 What are the impacts of feasible service models? Impacts to WSF Economic impacts Sales tax revenue Family wage jobs DRAFT Conclusion 22 4 Purpose & Approach Purpose With the retirement of the MV Elwha, one of two Washington State Ferries (WSF) vessels capable of providing international service, a private operator approached the Legislature proposing private auto ferry service between Washington State and Vancouver Island. During the 2020 Legislative session, the Senate considered a bill modifying pilotage requirements to facilitate private service (SB 6667). While the bill did not pass, the Legislature commissioned this study, examining the feasibility of replacing the current WSF route between Anacortes and Sidney, B.C. with private auto ferry service along a similar route. This study provides information to decision makers about the feasibility of potential private auto ferry service and the anticipated impacts. This study does not include a comprehensive assessment of a specific route, public- private partnerships, or steps toward implementation. Approach The study was completed in a two-step approach. First, this study outlined the feasibility of private auto ferry service and developed potential private ferry service models. Then, impacts of the potential ferry service models were evaluated. Is private auto ferry service feasible? Can legal requirements be Is there private sector satisfied? interest? No Yes Yes No Service cannot Service cannot be privatized be privatized What are feasible service models? What areDRAFT the impacts of the feasible service models? Impacts to Economic Sales Tax Family WSF Impacts Revenue Wage Jobs 5 Purpose & Approach Staff Workgroup and Policy Panel The study was strengthened by the Staff Workgroup and Policy Panel, who provided valuable feedback as the approach and findings were developed. The Staff Workgroup was convened to provide expertise and represented the interests of state and local agencies. The workgroup was consulted at three meetings during the study to review and provide input in advance of presentations to the Policy Panel. The Policy Panel participants included District 40 Legislators as well as local government elected officials and agency representatives. The Policy Panel was briefed on operational, budget, and economic issues specific to this study. The Policy Panel discussions identified a number of policy considerations that, while outside the scope of this study, were considered highly relevant to some policy panel members. In an effort to provide a discussion of those concerns while still delivering the study required by the budget proviso, we invited the policy group to write a report chapter explaining their concerns. District 40 Legislators City of Anacortes San Juan Economic Development Council Economic Development Washington Washington State Alliance of Skagit County State Ferries Legislative Staff Puget Sound Pilots Port of Anacortes Inlandboatmen’s Union (IBU) HMS Global Clipper Vacations DRAFTMaritime The San Juan County Economic Development Council prepared a report on other considerations. The San Juan County Economic Development Council prepared a report in response to the policy considerations that were not included in the scope of this study. Refer to Part II of the report for the Additional Considerations Regarding Anacortes-Sidney Ferry Privatization Feasibility. Click here for more information on the study’s purpose and approach 6 Feasibility Defining feasibility The first step in this study was defining the feasibility of private ferry service. For this study, feasibility included identifying legal requirements surrounding private auto ferry service from operating in the Puget Sound and understanding the level of private operator interest in providing this service. With this information, the team developed potential ferry service models that had a sufficient rate of return that could make service feasible for a private operator. The team reviewed terminal and route options centered around two distinct vessel types, significantly differing in speed and capacity. Based on the operating profile and level of service, including frequency of departures and vessel capacity, the team estimated the fares necessary for an operator to make a 10% profit. >> Can legal requirements be satisfied? Identify state statutes that would require amendment to accommodate private auto ferry service business needs. >> Is there private sector interest? Reach out to private ferry operators that provide international ferry service and discuss their interests. >> What are feasible private ferry service model(s)? Develop ferry service models that provide a return on investment. The process of reviewing feasibility is illustrated in the feasibility flow model. Is private auto ferry service feasible? Can legal requirements be Is there private sector satisfied? interest? No No Yes Yes Service cannot Service cannot be privatized be privatized DRAFT What are feasible service models? Evaluate options. Identify Develop Terminal Location Route Profile Fare Range Vessel Type Ridership Operating Costs 7 Feasibility >> Can legal requirements be satisfied? There are different regulations and standards for U.S. Built and Yes, the operator could U.S. Flag vessels compared with Foreign Built and Foreign Flag vessels. The following sections outline potential legal constraints feasibly utilize a Foreign for alternative vessels and ferry operations. Built, Foreign Flag vessel with no intermediate stops Pilotage requirements could be cost prohibitive. if pilotage requirements Washington pilots board vessels and guide them to safely transit were amended. within Puget Sound waters. The Washington State law requires vessel operators to hire a Washington State Pilot for