A second investigation into local ferry company rates ended Thursday with the Public Services Commission once again adopting recommendations to hike prices across the board on runs between St. Thomas and St. John. The new rates are scheduled to go into effect in 10 days.
The only price that will not change is the $1 fare for children traveling between Red Hook and Cruz Bay, according to Varlack Ventures principal Delrise Varlack.
The initial rate investigation started in mid-December 2007 and ended in April 2009 with commission members voting to increase the rates. However, that decision was stalled by a petition filed a few weeks later by the V.I. Unity Day Group, whose request for reconsideration prompted the PSC to revisit the issue.
The group’s petition cites seven different errors in the original hearing examiner’s report, some of which were affirmed Thursday by the PSC’s new hearing examiner, attorney Jennifer Jones.
In short, Jones’ report said the previous hearing examiner, Richard Moore, had factored in $235,000 worth of non-recurring ferry company expenses, including a lawsuit settlement and parts inventory write-downs. These calculations resulted in a 38-percent rate of return on the companies’ net out of pocket investments — money spent on things such as employee payments and insurance for the boats, Jones explained later.
"For all public utilities, the Legislature makes sure you set the rate of return between 6 to 8 percent," she told PSC members during Thursday’s meeting on St. Thomas. Once PSC technical consultant Avery K. Williams adjusted the figure back down to 8 percent, it was found that $1 could be knocked off the adult ticket price previously proposed by Moore, Jones added.
Williams, who participated in Thursday’s meeting via telephone, put the ferries’ total investment around $1.2 million, which would — with an 8-percent rate of return — pull in a $90,000 profit per year for each of the two franchise companies.
Unity Day Group President Lorelei Monsanto called the PSC’s decision a partial victory. While the second rate investigation did turn up some previous errors, the PSC should still look at the "lower end of the scale," using a 6-or-7-percent rate of return instead of starting at 8 percent, she said during Thursday’s meeting.
In turn, Jones responded that the percentage remained unchanged because it wasn’t previously challenged.
The Unity Day Group had also challenged the accuracy of the ferry companies’ financials, which Williams said later did not appear to present a problem.
"What often gets brought up is that the auditor made an exception in the statement for the accounts receivable numbers, which he said couldn’t be verified," he explained during the meeting. "But that doesn’t mean he couldn’t verify the other numbers in the statement, so all the other numbers except for the accounts receivable are good. And we don’t use the accounts receivable in any portion of the rate investigation, so there was no concern as to the accuracy of the financials."
The investigation was based on the companies’ fiscal year 2007 financials, which allowed for any changes in ridership or expenses that might have been brought on by the national economic downturn, Jones added later.
Williams also pointed out that if the rates weren’t increased at all, the ferry companies would be facing at least a $1 million shortfall each year.
Before voting to adopt the new rate recommendations, PSC chairman Joseph Boschulte also noted that the commission could change the increased fares if the ferries were to receive any future government subsidies.
Ferry company representatives discussed their losses later in the meeting and proposed reducing, during the months of August to November, the Red Hook to Cruz Bay runs by two round trips and eliminating the downtown run entirely from July to November.
Boschulte said the PSC would "push to consider this in the very near future" after an analysis is conducted.
In August, the PSC approved the ferries’ request to cut in half the number of downtown runs until Nov. 1. The route should resume Sunday, but both ferry operators noted they are running low on boats, which have either been struck by mechanical problems or are scheduled for a follow-up inspection by the Coast Guard.
The new rate schedule, which goes into effect 10 days after Thursday’s meeting, is as follows:
Red Hook to Cruz Bay:
Adult – $6 (round trip $12)
Child – $1
Senior – $1.50
Commuter – $3.50
Bulk – $3
Students – $2
Charlotte Amalie to Cruz Bay –
Adult – $12 (round trip $24)
Child – $3.50
Senior – $6
Commuter – $7
Bulk – $9.50
Baggage – $2.50
Voting for the increases were commission members Boschulte, Donald "Ducks" Cole, Verne C. David and Elsie V. Thomas-Trotman. Members Sirri Hamad and M. Thomas Jackson were absent.