Homer Alaska - News

Story last updated at 4:12 PM on Wednesday, July 4, 2012

Nothing new in latest GAO report, say SVT, critics

By Michael Armstrong
Staff Writer

Highlights of report as PDF

Highlights of report as PDF

In using its passenger and light-freight ferry, the M/V Kachemak Voyager, for sightseeing the Seldovia Village Tribe did not comply with some federal funding grant requirements, the Government Accountability Office concluded in a recent report released June 27, the latest of two federal investigations into the ferry.

"The tribe needed prior FTA (Federal Transportation Administration) approval before using the ferry for nonpublic transportation activities, such as sightseeing, but did not obtain approval," the report said.

As of this summer, the 150-passenger, 83-foot Kachemak Voyager no longer includes sightseeing to Gull Island in its Homer-Seldovia route, a "corrective action" the GAO report acknowledges. When it started in 2010, the Kachemak Voyager included a non-direct route to Gull Island on some of its sailings.

In response to the latest GAO investigation, SVT said there's nothing new in the report.

"The Government Accountability Office has once again spent public funds to conduct an examination nearly identical to those previously conducted by the GAO and the Departments of Interior and Transportation," said SVT public relations and marketing director Ian McGaughey.

"In those extensive examinations, the findings were clear: the Kachemak Bay Ferry project was found to be transparent, vetted and approved by the Department of Transportation, the Bureau of Indian Affairs and the state of Alaska at every step over multiple years."

The Kachemak Bay Ferry project, now known as the Seldovia Bay Ferry, started in 2002 when SVT proposed building a year-round high-speed, vehicle, freight and passenger ferry serving Homer, Seldovia, Jakolof Bay and Halibut Cove. The goal of the project was to help spur economic development and create jobs in Seldovia. After years of study and design, SVT scaled back the ferry to a summer-only passenger and light-freight ferry between Homer and Seldovia that began service in May 2010. The ferry now runs two trips a day, five days a week.

A 2009 Inspector General report done at the request of Sen. Mark Begich, R-Alaska, had earlier concluded SVT did not misuse federal funds under an Indian Self-Determination and Education Assistance Act contract with the Bureau of Indian Affairs. The GAO report also affirms that SVT kept BIA informed of the project, including changes in the project's design, but BIA and the Department of Interior did not provide guidance to the tribe as SVT changed the project. The self-determination act transfers control over program funding and decision-making to tribes.

Those are some of the conclusions reached in "Kachemak Bay Ferry: Federally Funded Ferry was Constructed With Limited Oversight and Faces Future Operating Challenges," an investigation started in 2011 by the GAO at the request of Congressman Don Young, R-Alaska, and Sen. Lisa Murkowski, R-Alaska.

The GAO report also makes these findings:

• The $8.8 million federally funded project as built differed significantly from its original 2002 proposal of a multi-port vehicle, passenger and freight ferry.

• Federal agencies provided limited oversight of the project, funded in an agreement with SVT through the Indian Reservations Roads Program and under the Indian Self-Determination and Education Assistance Act. SVT reported quarterly to the Department of Interior in the planning, design and construction phases of the project.

• In response to the 2009 Inspector General investigation, the Department of Interior changed its procedures to preclude transportation projects like the Seldovia Bay Ferry from being funded through such agreements.

• Using information from the 2010 and 2011 Seldovia Bay Ferry operating seasons, the GAO said the ferry most likely will not become profitable as expected by 2013, and projected losses of $350,000 for 2012 and $400,000 for 2013.

• The GAO also said "losses will most likely continue to grow, which will make the ferry financially unsustainable without further government subsidies."

SVT requested operating subsidies for the 2012 season from the Federal Transportation Administration, but that request was turned down because of other budget priorities, the report said.

Rainbow Tours and Alaska Coastal Marine, two private tour companies offering sightseeing trips from Homer to Seldovia, criticized SVT's Seldovia Bay Ferry as using a state and federally funded boat to compete directly with them when the Kachemak Voyager did a Gull Island and Eldred Passage sightseeing tour on some of its earlier summer sailings. The Seldovia Bay Ferry also received $200,000 in federal subsidies to operate the boat in the 2010 season, the year it went into service.

The ferry project dates back to 2002, when SVT proposed a project for a high-speed, year-round vehicle, freight and passenger ferry serving Homer, Seldovia, Halibut Cove and Jakolof Bay. In 2004, the late Sen. Ted Stevens, R-Alaska, helped get $2 million appropriated to study a fast ferry. In 2006 the city of Seldovia approved a legislative grant priority list that included $1.5 million for a Kachemak Bay ferry. That amount was included in the fiscal year 2007 state capital budget for construction of the ferry and related docking sites. In 2007 SVT scrapped the larger project in favor of a light-freight and passenger catamaran that would run only in the summer between Homer and Seldovia.

"The Seldovia Village Tribe is not operating a tour boat," SVT President Crystal Collier told the Homer News in 2010. "The Seldovia Bay Ferry is just as it states, a 'ferry.' It operates with fixed points of access, set schedules and direct routes."

The GAO report notes that the Bureau of Indian Affairs, Alaska Region, did not act to object or provide any guidance or direction to the tribe regarding changes in the project. The self-determination contract required SVT to submit reports and requests for payments, but gave responsibility for decision-making to the tribe, the GAO report notes.

"BIA had no role in approving or disapproving the decisions the tribe made regarding the type of ferry or its operations," the GAO wrote.

Receipt of reports or disbursement of funding should not be construed to mean the BIA approved of the tribe's decision, the GAO also said.

Tim Cashman Jr., a partner in Alaska Coastal Marine, praised the GAO report, saying it affirmed what was widely known,

"The tribe took a little over $11 million from the federal and state government with the legal requirement of building a vehicle, freight and passenger ferry," he said. "Instead of doing as they were required to do, the tribe diverted that money to a $3.3 million tour and tour boat business."

Cashman said revenue from his Seldovia tours has dropped 30 to 40 percent since the Kachemak Voyager started running in 2010.

"They undercut our costs using federal and state money," Cashman said. "They're cutting the legs off of private business."

SVT said in a reply to a draft of the GAO report that ridership in general declined because of economic conditions, citing city of Seldovia information. One tour operator provided the GAO with ridership information from 2003 to 2011. The GAO report said it could not independently verify either set of information and did not include it in the report.

Cashman supports his tours through other aspects of his business, such as halibut fishing charters, he said. He said he's determined to keep running tours to Seldovia.

"I refuse to give up because it's just wrong," Cashman said.

In 2010, SVT got a $475,000 American Recovery and Reinvestment Act grant through the FTA for dock improvements in Homer and Seldovia. In Homer, a new ramp and freight loading dock was built to the Kachemak Voyager's berth at the JJ float. The tribe also built a new dock in Seldovia outside the main harbor, but because of exposure to storms, the city of Seldovia has determined that dock is unsafe to use. In November 2010 SVT asked for modification to a U.S. Army Corps of Engineers permit to reorient the Seldovia dock because of storm damage, but as of March the tribe had not submitted a permit modification application.

The Kachemak Voyager averaged 13 passengers a trip in 2010 and 14 in 2011, and in 2010 made 44 one-way trips out of 792 trips without any paying passengers. In 2010 and 2011 the boat ran six trips a day for 132 days.

"The resulting ferry did not meet local communities' expectations or needs for year-round daily vehicle ferry service to multiple ports, and it is questionable whether the ferry will achieve the objective of encouraging economic development for the communities, since it duplicates existing transportation options and competes with existing businesses," the GAO report concluded.

The GAO report also considered where the proceeds would go if SVT sold the Kachemak Voyager. The GAO recommended that the Secretary of Interior and the Secretary of Transportation and its officials collaborate in determining how federal statutes regard disposition of ferries. In its written comments, the federal Department of Transportation said it would assist Interior in determining the proper disposition of the ferry should the tribe sell the boat.

SVT has no intention of selling the Kachemak Voyager, McGaughey said.

"(SVT) is disappointed that the GAO would spend so much of its report on unfounded speculation. We are proud to offer this important transportation link to the communities of Homer and Seldovia," he said on behalf of the tribe.

Murkowski and Young's offices commented on the report on Tuesday.

"Senator Murkowski is monitoring the situation as it proceeds, and sees the Kachemak Ferry as a learning experience that will benefit Alaska moving forward in how decisions are made regarding future federally funded projects," said Matthew Felling, Murkowski's press spokesperson.

Young said he takes Congress' oversight role very seriously, his spokesperson, Luke Miller, said.

"In this case, Congress appropriated funds in order to help a community and unfortunately the Executive Branch (Agencies) did not handle the money responsibly," Miller said. "The Congressman is pleased that corrective actions were taken in order to correct this. At the end of the day, it's Congress' job to appropriate funds and it's the agencies' job to ensure the funds are spent responsibly on the intended project."

Cashman said he appreciated Young and Murkowski asking for the investigation.

"Senator Murkowski and Congressman Young took the difficult choice of requesting this audit," Cashman said. "It was greatly appreciated."

An executive summary and the full report are available at the Homer News website at www.homernews.com and at the GAO website at www.gao.gov/products/GAO-12-559.

Highlights of report as PDF

Highlights of report as PDF

Michael Armstrong can be reached at michael.armstrong@homernews.com.