T ferry operating costs going way up
Only Boston Harbor Cruises bid on the latest contract
THE MBTA’S COST to provide ferry service is going up dramatically, in part because only one company, the incumbent operator, submitted a bid to provide the service.
Jeff Cook, the MBTA’s new chief administrator, told the MBTA’s Fiscal and Management Control Board on Monday that the transit agency contacted more than 30 US ferry operators before putting the service out to bid, but only two expressed an interest in actually bidding and one of the two pulled out due to “equipment constraints.”
The lone remaining bidder, Boston Harbor Cruises, which currently runs the service and provides most of the ferries, submitted an initial bid of $86 million on the five-year contract. Cook said the T was able to negotiate that price down to $66.2 million, but even that was well above current pricing levels. The T pays on a cost-per-trip basis and that price is going up between 30 percent and 63 percent on the three routes, increasing operating losses for the T.
“Our costs are dramatically going up,” Cook said, suggesting the T needs to come up with a new operating model for ferry service. He said some sort of public-private partnership might make more sense.
Exact apples-to-apples price comparisons are difficult because the T signed a contract with Boston Harbor Cruises in 2013, which was extended four times and expires on November 26. In fiscal 2018, which ended at the end of June, the annual cost to the T was $10.1 million, not including the cost of fuel. Under the initial Boston Harbor Cruises bid, the cost in fiscal 2020 (the first full fiscal year of the contract) was expected to be $17.2 million. That price was negotiated down to $13.6 million, with an escalator clause hiking the cost 3.1 percent a year.
The MBTA’s ferry service runs between Hingham and Rowes Wharf; between Hingham and Hull, Logan Airport, and Boston; and between Charlestown and Boston. The three routes serve about 1.5 million passengers a year. Boston Harbor Cruises provides the vessels for the trips between Hingham and Rowes Wharf and between Charlestown and Boston. The MBTA provides the vessels running between Hingham and Hull, Logan Airport, and Boston.
On a cost-per-trip basis, the price the T pays to its ferry operator is going up 30 percent on the Hingham to Rowes Wharf route, 63 percent on the Hingham/Hull/Logan to Boston route, and 41 percent on the Charlestown to Boston route.
The overall cost of the nearly five-year contract is expected to be $81 million — $66.2 million plus $14.8 million in fuel. The net cost to the T will be far less than $81 million because the transit authority keeps all fare revenue. One-way fares range between $3.50 and $18.50.Cook didn’t have fare revenue information at the control board meeting, but a T spokesman said afterward that ferry fare revenue in fiscal 2018 was just over $11 million. That means the T lost money providing ferry service in fiscal 2018, when it paid $10.1 million to Boston Harbor Cruises and another $2.2 million for fuel. The losses will probably mount in the coming year.
Brian Shortsleeve, a member of the control board, said the lack of competition among ferry service operators was troubling. “Competition is a good thing,” he said. “Clearly here we don’t have much competition.”