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HomeNewsLocal newsFerry Companies Tell PSC That Year-Round Downtown Runs Are ‘Financially Crippling’

Ferry Companies Tell PSC That Year-Round Downtown Runs Are ‘Financially Crippling’

Varlack Ventures Inc. Ferry Line. (Varlack Ventures photo)
Varlack Ventures Inc. Ferry Line. (Varlack Ventures photo)

Regulated ferry companies told the Public Services Commission Thursday that reinstating the halted ferry runs between Cruz Bay, St. John and downtown Charlotte Amalie would severely weigh down the companies’ finances, even as they continue to deal with post-hurricane recovery and drastically reduced ridership.

Charlene Turnbull, controller of Transportation Services of St. John, testified before the Commission in response to a Sept. 20 order by the PSC. According to Turnbull, they can comply with the order to continue full Cruz Bay-Red Hook runs until midnight but cannot reinstate their downtown runs.

“Our company does not have the infrastructure to accommodate the downtown schedule at this time,” said Turnbull, whose company comprises half of the St. Thomas-St. John franchise. “For us to attempt the ferry schedule stipulated by the commission in this order will be financially crippling to our company.”

Delrise Varlack of Varlack Ventures, the other half of that franchise, painted the same financial picture.

Ferry owners testify Tuesday before the Public Services Commission. (April Knight photo)
Ferry owners testify Tuesday before the Public Services Commission. (April Knight photo)

“In order to survive, we’ve had to look at our operation very carefully and make decision that would allow us to stay above water,” Varlack said. “We can continue to provide a service if seasonality is taken into consideration.”

Varlack proposes downtown runs between mid-December and April, when tourist season is at its peak. The downtown service mostly accommodates vacationers, she said. With the 60 percent decline in tourist-ready accommodations on St. John, coupled with insufficient commuters working downtown requiring the service, the ridership figures simply do not exist to support the downtown runs, she said.

The ferry companies were hit hard by the hurricanes. According to Turnbull, Transportation Services saw total ridership fall 40 percent, roughly 137,000 passengers, the majority of whom were adult non-residents, the “lifeline” of their passenger rate categories. Their revenues also dropped by some $750,000 as of August , according to Turnbull, and the total cost to replace hurricane-related losses went up to at least $3 million.

“Any further losses of considerable magnitude will drive the company into bankruptcy. We are in a precarious position,” Turnbull said.

Even with the increase in non-resident adult rates – from $7 to $8.15 per person – sales revenue for that category still decreased by about 50 percent for the first eight months of 2018, Turnbull said.

Late in the hearing, the commissioners present voted unanimously to make permanent the “temporary” rate increase, which had been set to expire in January.

The vessels currently in operation also make the downtown runs impossible, according to the ferry companies.

Transportation Services sent two of its four vessels to the mainland for repairs. One of its remaining operable vessels, Cruz Bay I, is leased from the government and cannot run the downtown route due to federal restrictions. The other vessel, Caribe Tide, suffers from mechanical issues making it difficult to navigate the rough passage to downtown, according to Turnbull.

PSC Executive Director Donald Cole, left, and Commissioner Kent Bernier listen to the testimony at Tuesday's PSC meeting. (April Knight photo)
PSC Executive Director Donald Cole, left, and Commissioner Kent Bernier listen to the testimony at Tuesday’s PSC meeting. (April Knight photo)

Commissioner David Hughes, attending via teleconference on St. Croix, criticized the companies for unilaterally deciding to halt the downtown runs without coming to the PSC to get the change approved.

“These are regulated utilities. They run regulated routes,” said Hughes.

Commissioner Andrew Rutnik suggested the possibility of the two companies eliminating the downtown run from its franchise altogether, adding the reason the companies are holding on to the franchise is to avoid competition to the extent that the companies had to resort to subcontractors to maintain the service.

“You’re either going to offer the service or you’re not going to offer the service,” said Rutnik. “You should look at that and understand maybe it’s time to focus on your core business which is to transport people from Cruz Bay to Red Hook.”

Varlack Ventures said keeping the downtown run in their franchise is still within the company’s interests.

“Competition, on the other hand, is good,” she said. “However, if you don’t have a franchise, it is absent.”

Rutnik suggested that ferry companies go before the Legislature with a plan that includes the regulation of all ferry services – including the car barges that take away some of their business – and to straighten out the government subsidies missing since the hurricanes.

Commissioners present on St. Thomas were Rutnik, Kent Bernier and Chairman Raymond Williams. PSC Executive Director Donald Cole was also present. Attending via teleconference on St. Croix were David Hughes and Johann Clendinen.

The commission also voted unanimously to:

– Engage the services of Avery Williams to assist the commission no later than Nov 18, in determining the parameters for a forensic audit of the regulated ferry companies with respect to their franchises, and appoint Rutnik as liaison between the Commission and the ferry companies during this process.

– Suspend fines to be levied against the ferry companies for failure to pay their annual and docket-specific assessments, provided they file a petition for reconsideration before the Nov. 18 PSC meeting.

– Set the combined annual assessment for all public utilities at $1.78 million for fiscal year 2019. These assessments fund the PSC, which does not get funding from the general fund.

Telecommunication
The Commission also voted down a motion to fine Viya the amount of $1,000 a day starting Nov. 1 if the company does not completely execute the required interconnection agreement with telecommunication companies Tier One and Century Link. The interconnection was completed on Sept. 24.

When telecommunication companies complete PSC requirements to operate as a telecommunications carrier in the territory, they then go to Viya, the largest such provider in the Virgin Islands, which is required by law to strike an interconnection agreement with these companies.

According to Viya Chief Executive Officer Alvaro Pilar, the delay in execution of the interconnection agreement, which was struck 18 months ago, is mainly due to capacity and inter-island transport issues. Pilar denied that the delay was part of a “procedural maneuvering,” as Clendinen described it, to put its competition at a disadvantage. Clendinen voted in favor of the motion to fine Viya.

Cole also drew attention to consumer concerns about Viya requiring them to report certain issues over the phone only. Some consumers, said Cole, prefer face-to-face interaction over telephone transactions that can become problematic.

According to Pilar, a combination of personnel shortage, union constraints and the sheer volume of calls they receive every month – roughly 55,000 – stretch the company’s customer service capacities but they are working to “fix it.”

The Commission also voted unanimously to:

– Recertify Viya’s proposed Universal Service Charge with the stipulation that a five-year plan be provided no later than December.

– Recertify the Universal Service Charge by Choice Communications and Vitelcom.

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