Study mulls costs of building ferries out of state

OLYMPIA — A new study tackles a nagging question of whether it’s cheaper for Washington State Ferries to have vessels built at shipyards in other states.

And it found the state could pay less in construction costs but endure a short-term hit to its economy.

The Washington Institute of Public Policy reached its conclusion after approaching the issue from two angles, one focused on the costs and benefits and the other on the economic impact.

Under the first analysis, Washington State Ferries could save $10.5 million to get a 144-car ferry like the Tokitae built in another state. But it would mean a loss of $7.25 million in income for shipyard employees in this state who lose the work. That adds up to a net benefit of $3.25 million, the study found.

When examining the potential effect on the state’s economy in a projected two-year construction period, authors of the study predicted a yearly loss of 650 jobs and $68 million in consumer spending.

The two analyses “provide somewhat contradicting information on the impact of moving ferry construction out of state,” concluded authors Madeline Barch and Neil Bania. “Neither analysis predicts a substantial impact on Washington’s economy (either positively or negatively) from keeping ferry construction in state or moving construction to out-of-state shipyards.”

The report went to Gov. Jay Inslee and members of the House and Senate transportation committees in December.

Sen. Marko Liias, D-Lynnwood, had not read it but upon hearing the findings said it confirmed his understanding of the situation.

“We can save a little money in the construction costs but keeping the work in Washington ends up having a net positive impact for the state and our economy,” he said. “This work offers access to family wage jobs and supports the ship-building industry.”

Sen. Doug Ericksen, R-Ferndale, challenged the report’s conclusions. He said state laws requiring boats be built in Washington and by firms with an approved apprenticeship program limit the number of firms bidding on contracts. Without competition, taxpayers wind up paying more, he said.

“We should change the regulatory climate in Washington so we can get more boat builders in Washington,” he said. “That’s how you create more jobs, not by requiring ferries be built in Washington.”

Opponents of the 1993 Build in Washington restriction have contended for years getting bids from out-of-state firms would push down the price of new ferries. Supporters counter that means sending tax dollars elsewhere.

The issue heated up after revelations in a 2013 state audit of the construction tab for the 64-car Chetzemoka used on the Coupeville-Port Townsend route.

It found the final price of $83.6 million in 2010 was nearly $50 million higher than what a Massachusetts ferry operator paid three years earlier for a boat with a comparable design.

In the past 20 years, all the state’s new ferries have been built by Todd Pacific Shipyard of Seattle, which was acquired by Vigor Industrial in 2011.

Only one shipbuilder, Vigor, was eligible to bid to build the Chetzemoka and the other two 64-car ferries in the Kwa-di Tabil class that replaced the Steel Electrics. The firm led a consortium of other shipyards in the state on that project.

When the state sought bids to the 144-car ferries of the Olympic Class, Vigor again stood out as the only firm eligible in Washington. It is again heading a consortium of in-state shipyards that has delivered two boats with a third coming in 2017 and another in 2018.

A second firm capable of doing the work, Dakota Creek Industries of Anacortes, was not eligible to bid because it lacked a state-approved apprenticeship program.

The newly released study is the result of a provision in a 2015 transportation reform bill.

The researchers compared what the state historically has paid for a ferry with what other states, counties and cities in the United States spent on publicly owned ferries.

They accounted for a number of factors such as differences in passenger and vehicle capacity, hull material, vessel weight, horsepower and labor. They also considered the impact of regulations.

The analysis suggested Washington State Ferries pays on average about 9 percent more than other ferry buyers for a similarly equipped vessel. It estimated shipyard employment in Washington would drop 1.2 percent if building of a state ferry is moved to another state.

After crunching the numbers through 500,000 simulations, they came up with the net overall savings of $3.2 million in taxes.

A top Vigor official said the report provides no reasons for Washington to change course.

“In general, we are pleased to see there is no compelling information in the report that indicates a strong benefit to building anywhere other than in Washington state,” said Jill Mackie, Vigor’s senior vice president of public affairs.

“While there would appear to be a minor savings to the state in moving the work to a lower cost region, it is not clear whether the report takes into consideration the not-insignificant cost of transporting a completed new ferry back to the Puget Sound, nor does it appear to consider the increased cost for (Washington State Ferries) to oversee construction in a remote location,” she said.

Liias said he’d like to see more competition in the bidding, but “we need boats in service and Vigor has been a good partner,” he said.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com. Twitter: @dospueblos.

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