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Ferry Foolish


Ferry Foolish

November 8, 2004
Urban PolicyNYC

THE largest privately run ferry service be tween New Jersey and Manhattan is seeking a financial bailout for at least some of its operations from the Port Authority of New York and New Jersey, which already controls most of the bridge, tunnel and rail network that ferry riders are paying a premium to avoid.

Everyone seems to agree that ferries can play a valuable role in regional transportation — but this is no justification for a government takeover or subsidy of New York Waterway, the operator in question. Better to let the company go broke or give up some routes than to solidify the Port Authority's virtual monopoly on Hudson crossings.

New York Waterways claims to be running short of cash thanks to rising fuel costs and a drop in commuters to lower Manhattan, but it's still not clear that private operators can't make a go of the Hudson ferry business.

The post-World War II demise of the region's formerly private bus and subway lines was hastened by regulated fare caps. Private ferry service around New York, on the other hand, developed over the past two decades while charging close to a market rate. Public support has been limited to some equipment and piers.

Nearly 16,000 commuters a day (roughly 7 percent of all the Jersey residents crossing to work in Manhattan) are paying more to take the ferry than it would cost them to use a PATH train. As one frequent New York Waterway passenger put it: "The boats are full, and they charge $8 for a round-trip ticket. It seems like a money-maker, and it is a premium service people want to pay for."

She's got a point there. The City of New York, no one's idea of a low-cost operator, claims to spend about $3 per passenger to run its free, 24-hour Staten Island Ferry. Why can't New York Waterway make ends meet while charging an average of 30 percent more for shorter crossings part of the day? Without access to the company's books, the public has no way to know the real answer.

Some contend that any subsidy would be only temporary until ferry operators turn a profit. But history suggests it is more likely that public support for ferry companies would mushroom into long-term, cost-plus contracts that guarantee operators a nice fee with no incentive to improve service or efficiency. That's the deal a group of franchised bus companies nailed down with New York City in the 1960s and 1970s — with lasting negative consequences for service quality and costs.

Public policy should not perpetuate inefficient monopolies in the private or public sector. Instead of feeding the bloated and unaccountable bureaucracies of the Port Authority and the Metropolitan Transportation Authority (MTA), elected officials should be seizing every opportunity to inject more competition into mass transit throughout the region.

The cross-Hudson ferries are a good place to start. It won't be the end of the world if New York Waterway shrinks or even goes out of businesses. Bankruptcy, if it came to that, would put the company's assets up for sale to other firms that might be able to run the service profitably.

A public operating subsidy for any Jersey-to-Manhattan ferry should be considered only as a last resort — and, above all, without any role for the Port Authority. After all, the goal of a well-run ferry service should be to woo customers away from the bridge, tunnel and PATH crossings that the authority already controls.

If public money is funneled to any ferry outfit, it should go through an agency other than the Port Authority, such as New Jersey Transit. And it should be awarded only through an open competitive bidding process, accompanied by stringent standards for good performance and binding requirements for periodic re-bidding.

Competition is an essential spur to improved performance and efficiency in every human endeavor — and when it comes to transit, it should not be limited to ferry service.

For example, based on the experience of some other major cities around the world, New York could save over $100 million a year in tax-supported subsidies if the MTA would seek competitive bids for privately franchised bus lines.

Nor is rail transit necessarily immune from a competitive approach. A few years ago, the regional transit agency in Massachusetts sought bids on what had been Amtrak's sole-provider contract to run Boston-area commuter rail lines. The winning bidder was a consortium led by a French company that runs the commuter rail lines in Stockholm, Sweden. And now, for the first time in memory, Bay State taxpayers have a contractual mechanism for forcing improvement in this service — which will be re-bid every few years.

The New York Waterway situation may seem like only the latest chapter in a seemingly never-ending storyline of private transit failures giving way to government-run monopolies. But this time, the story should have a different ending.