The Alaska marine highway system: staying afloat on troubled waters.

Can the Alaska Marine Highway System keep up with the demands for its ferry services in southcentral and southeast Alaska?

Southeast Alaska's Prince of Wales Island is ready to commit mutiny over ferry service from the Alaska Marine Highway System (AMHS). After long drives from all points

on the huge island to the ferry terminal in the tiny coastal community of Hollis, Prince of Wales residents have to sail only about 35 miles to reach Ketchikan, the region's second-largest population center. But winter ferry service consists of infrequent runs and overcrowded boats, causing residents to refer to themselves as "Prisoners of Wales."

Community leaders say years of mostly fruitless negotiating with the AMHS have compelled them to seek a new direction. Now, Prince of Wales islanders are considering forming a port authority, buying a vessel and providing themselves with twice-daily ferry service.

Reliable ferry transportation is one of the single biggest factors in the island's economic development, says Craig businesswoman Bobbie Permenter, who relies on the ferry to transport most of the stock for her office supply store and her gift shop, as well as her husband's appliance business. She says all of the island's 6,000 residents depend on the ferry for much of what they eat, wear and do.

Further up the coast in Sitka, a strident crowd of business people, public officials and retirees pack a small public hall to complain about ferry service. AMHS director Gregory Dronkert attends the session, one of the many meetings he has held with his constituents, up and down the coast, since taking the helm of the ferry system in January. On this spring day in Sitka, Dronkert hears a familiar refrain. While half the people at the meeting call for more summer-time stops to bring in tourists, the other half say the ferry system spends too much of its resources on visitors, giving Alaskans short-shrift on ferry service.

Dronkert, 32, is seen as the wunderkind who will bring new solutions to ferry system problems. He continually ponders such questions as: Who should get more ferry service -- tourists or Alaskans? How much should AMHS capitalize on existing markets? How much should it be used to expand to new markets?

Dronkert says he has decided that the ferry system should be considered an essential service for economic development, a service that is being subsidized by the state because the private market cannot afford it. The ferry can and should help local economies develop by providing trade to get things rolling, he says, and that includes transporting tourists as well as residents. Once local development has progressed to a point where commercial or locally-run alternatives make sense, they should be encouraged. Growth past a certain point, especially in the tourist trade, he says, can only occur with an increase in the private sector.

"They have an economy on Prince of Wales Island which is right now at the crossover point; it looks like they could sustain their own commercial alternatives," Dronkert says. "If that happens, they should be considered a template of what the marine highway should be doing."

Dronkert says the chance for re-allocating ferry "assets" is good news for communities or regions that are now underserved, such as Kodiak and southwestern Alaska. It may take time, he cautions, but in the future such communities might reasonably expect a bigger piece of the ferry system pie.

THE TURN OF THE SCREW

Money is, of course, the fly in the ointment.

First formed in 1960 to connect the major Southeast communities to the road system, the ferry system was not expected to break even. Over the years, subsidized by the state, AMHS grew with links to ever smaller Southeast communities and extended routes into southwestern Alaska as far as Unalaska/Dutch Harbor.

But in 1990, the Alaska Legislature began letting the system keep its receipts and asked only for additional subsidies. While under this policy, the operating revenues of the marine highway have gone up by an average of 7 percent annually, and the new accounting has become a two-edged sword, says Bob Ward, the director of the Skagway Convention and Visitors Bureau and a longtime ferry service activist.

"When a scheduling decision has to be made, given the choice of providing service or generating revenue, it will generally fall on the ability to generate revenue," Ward says. "If that will continue for the long term, you'll see the more popular runs maintain their service level, but the ones that are less popular but provide an essential service will suffer."

That service, often winter runs, is critical in places like Petersburg, where the school district is forced to spend $2,600 instead of $353 to fly the volleyball team to a tournament, because the students would have to miss a week of school in order to make necessary ferry connections.

At a regional music festival in Sitka this spring, many Ketchikan high school students were forced to sail all the way up to Skagway first and then come all the way back down to Sitka, because there was no usable northbound connection. Going back, they had to do the same thing in reverse, because there was no southbound ferry service.

Sitka merchants depend on ferries having a sufficient layover time on Saturdays to permit residents of outlying villages to come to town to shop and take care of other business.

But in places like Prince of Wales Island, ferry service is essential for visits to the doctor, groceries, even mail. Float plane service is expensive, and winter gales often make flying inadvisable, if not impossible. "It's just so important here," stresses Tom Briggs, city administrator of Craig, which at 1,700 people is the largest of the island's dozen or so communities. "Everyone knows exactly when the ferry service is."

PLANNING A PORT AUTHORITY

Prince of Wales Island, at about 130 miles long and 60 miles wide, is the third-largest island in the United States, after the big island of Hawaii and Kodiak. It is larger in area than several eastern states. Long a main source of timber for the Ketchikan Pulp Co., the island is singular in Southeast by being crisscrossed with more than 1,000 miles of drivable road.

Bobbie Permenter says it takes her about 45 minutes to drive from Craig to the ferry dock in Hollis. Lab Bay to Hollis is 135 miles and Thorne Bay about 65 miles. It takes about three hours to drive to the ferry from Coffman Cove and about an hour from Hydaburg. Two and a half hours on a comfortable boat to Ketchikan is just a local trip for these people. Last year the ferries carried 56,000 passengers to and from Hollis, along with more than 8,500 vehicles and more than 2,000 freight vans.

Briggs says numbers like that -- easily doubling if year-round service becomes reliable, he believes -- make him and other planners think a dedicated service can pay for itself. A 25 percent increase in ridership would cover debt service on the total $6 million to $7 million investment. With a 50 percent ridership increase, a "substantial surplus would result," according to a recently completed planning document. A regional port authority, states the report, would probably be formed by selling bonds for the initial financing and then count on having to run itself "out of the fare box."

"Every year on the island, we went to Juneau to lobby for better service, and it just hasn't gotten any better," says Briggs. "Finally Greg Dronkert said, 'You know, I don't think it could get any better.' But there is a way of beating this problem and that's to take it under your own power."

Preliminary plans call for the purchase at $4 million to $5 million of a 210-foot-long former oilfield supply vessel, now being used as a ferry in the eastern United States.

The vessel would carry up to 160 people and 30 vehicles and freight vans at 14 knots, roughly equal in capacity and performance to the M/V Aurora, the main ferry serving the island at present. The new vessel would make two round trips per day between Hollis and Ketchikan, where a new dock would be built about 10 miles closer than the present AMHS facility, to cut down on ferry run time.

A HOME-GROWN FERRY FLEET

The Prince of Wales vessel could be tailored to its mission. The ship would not have to be equipped with the same food service and entertainment options of a ship also used for overnight service, nor would it be required to have the crew to man such facilities. But the ship's design should give a comfortable ride.

Such custom engineering would not be possible for the marine highway's current fleet, because these ships do double duty as long-distance vessels, as well as running the relatively short hops.

But that should change, says Dronkert. He'd like to see the day runs made on ships without such elaborate food or hotel accommodations. Passengers from Petersburg to Juneau, for instance, would make the trip in about eight hours. Those continuing on to another port would spend the night in a shoreside hotel, catching another ferry for the next leg the following day.

"That's actually better for the local economies," Dronkert says. "We're not subsidizing the (tourists); they're actually paying market rates in communities for accommodations."

And if Prince of Wales Island has reached the crossover stage, Sitka is nearing it.

Barge service, provided twice-weekly from one company and once a week by at least two others, has captured the lion's share of waterbound freight. Yet another company, Allen Marine Inc., believes it can make money transporting people in and out of Sitka aboard the aluminum catamaran-style boats the company builds in town.

Sitka, like Ketchikan, is a regional hub offering shopping, education and professional services for a number of villages and small settlements. And Juneau, in turn, with new Kmart and Costco stores, along with Fred Meyer and two small malls, has developed into a shopping destination for Sitka and other midsize Southeast communities.

In response to increasing interport traffic, Allen Marine's Harvard-educated vice president, Rob Allen, envisions 160-foot catamarans running at around 20 knots -- six hours from Sitka to Juneau. The company has previous experience moving people -- Allen supplied commuter vessels for the now-closed Greens Creek Mine and regularly offers special runs from Juneau to Haines for the Alaska State Fair. The Juneau school district chartered an Allen boat to take 135 music students to Sitka for a festival at half of what it would cost to fly the students.

WESTWARD, HO

Passengers using the Allen Marine "ferry" service should expect to pay more than the state ferry presently costs, but less than flying. Such services as Allen's may become an even better deal if state ferry officials decide to bump up their fares in the peak summer season, when the system is, in Dronkert's words, "maxxed out." Dronkert would also like to increase the ferry system's freight business in the wintertime when the RVs are gone, ridership shrinks and freight transport becomes less profitable for commercial firms, especially to smaller communities that don't generate much business.

If Dronkert's vision is manifested and if the major communities in Southeast grow sufficiently to have commercial firms hang up shingles, then the state ferry's focus can shift more to western Alaska. The western region is, at present, the underserved "stepchild" of the marine highway, says Skagway's Ward.

In Cordova, Kodiak and Unalaska, officials echo the refrain heard often from Southeast ferry riders -- increase the basic service to residents wanting to move cars and household belongings to and from the nearest highway connection, but also bring the tourists in.

Cordova Mayor Margie Johnson says she could pack her Reluctant Fisherman Inn with visitors if ferry service improved. Tourism bureau head Allen Osterman of Kodiak says the same is true of the streets and shops in his town.

Unalaska/Dutch Harbor businessman and Chamber of Commerce president Terry Bennett says the cultural, wildlife and especially military history aspects of his region are just beginning to be explored for tourism. He sees increasing tourism in the future for Unalaska and even further out to the Pribilof Islands, which are asking to be considered for future ferry service.

"You could promote St. George-St. Paul-Unalaska as a kind of package deal if the ferry would go that way," says Bennett. "I see it growing into something quite extensive."

The AMHS plans to ask for proposals to build its newest vessel for the state ferry fleet in the third quarter this year. The yet-unnamed ship will be able to serve all the ports presently in the system and all that might be added. The $85 million project ($65 million from federal highway funds) would produce a 380-foot-long oceangoing vessel with accommodations and services that could handle 500 passengers and a voyage of up to a week long. The vessel is slated for Southeast service in summer and then to spell the only other ocean-going vessel, the M/V Tustumena, when it goes down from serving Kodiak and other Southwestern and Prince William Sound ports. The new vessel is scheduled to come on line in 1997.

Dronkert feels helping to usher in new westward tourism would be an appropriate use for the AMHS. He says the system's history has shown that when the ferry moves in, business grows.

"We know from what happened in Southeast that it takes us getting out there and stimulating those economies, and the commercial alternatives will be running in parallel to us, developing as these communities develop," he says.

Dronkert is proud of his system's record of turning a $30 million subsidy into $150 million in indirect economic benefits to the state.

But he reminds those seeking change that the ferry as a publicly owned system is subject to the whims of the Alaskan public and political system -- which will make the ultimate decisions about how the system can change or grow.

No one knows that better than Ward, who battled for years to increase ferry service to both Skagway and Sitka, against the conflicting needs of other towns. Ward is one of a growing number of people who are now questioning whether the marine highway service should extend to Bellingham, or even to Prince Rupert, British Columbia, the main highway connections for Lower 48 visitors.

Ferries to Bellingham spend three days of the week south of Ketchikan and out of the region. Restricting them to service to Ketchikan and points north would increase the possible port calls in the region they are charged to serve. Commercial alternatives, even from Canadian ferries, might pick up the southerly route in summer. The AMHS could redeploy in winter for heavier use by Alaskans and freight companies.

And would that shifting of resources mean a vessel might be dedicated to the popular Juneau-Haines-Skagway run, which Ward would like to see bolstered?

"All our problems can be solved with more money," he sighs. "Just like everybody else."

FERRY FACTS

System established: By the Alaska Legislature in 1959, service began in 1960 with the MV Chilkat (now retired).

Number of vessels: Eight vessels serving 33 communities

Largest vessel: MV Columbia, 418 feet long, 85-foot beam, carries 625 passengers and 158 vehicles.

Operating expenditure FY 1993: $72.4 million

State subsidy FY 93: $30 million, decreased to $28.7 million for FY 94.

Amount estimated to contribute to the Alaska economy: About $150 million, plus about $40 million to AMHS.

Number of passengers, FY 93: 396,203

Number of vehicles, FY 93: 107,893

Freight tariffs, FY 93: $1.8 million

Number of employees, FY 93: 889 permanent, full and part-time

Payroll, FY 93: $51.7 million

Number of miles traveled, 1993: 500,764

Money spent on board for personal services: $3 million for food, $664,735 on liquor, $328,685 in gift shops and $227,474 in vending machines.

Statistics provided by the Alaska Marine Highway System.