Ten days into his administration, Mayor Bob Duffy stood in the
City Hall atrium — reporters and photographers spread out in front of him,
City Council members and staff (many of whom who had worked frantically on the
ferry for nearly a year) watching from the balcony — and delivered the bad
news. The city was getting out of the ferry business.
To ferry enthusiasts, myself included, it was a sad moment.
And Duffy’s precise, no-nonsense presentation was devastating: the ferry board
had projected that it would lose $700,000 in its first 12 months. It had lost
$10 million in 10 months. The ferry board had projected that, worst case, it would lose $2.7 million more by the end of the
year. Duffy’s team had concluded that a $2.7 million loss was the best we could
expect. The ferry board had come up with what it said was a sound business and
marketing plan. The Duffy team’s conclusion: the plan
wasn’t at all sound. And Duffy said the city’s decision to “get into the ferry
business in the first place” was “unfortunate.”
“Now,” said Duffy, “is the time to
cut our losses and stop piling up more debt on the backs of Rochester’s
taxpayers.”
And so Duffy — who had been supported by former Mayor Bill
Johnson, and who said he would never, ever criticize Johnson — pulled the
plug on what had come to be viewed as Johnson’s baby.
Duffy’s ferry numbers were simple fact, well publicized over
the past few months. And he said he wasn’t pointing fingers. But his were
strong words, and outside of City Hall the finger-pointing, aimed at Johnson
and the old City Council, began immediately. The public,
which had turned out by the thousands to watch when the ship first came in,
turned against its owners once again, firing off angry letters to newspapers.
The Democrat and
Chronicle’s coveragehas been merciless.
“Off-course from the start,” was the page-1 headline two days after the Duffy
announcement. “Who’s responsible?” demanded a D&C editorial insisting that Johnson and City Council “must
account for ferry mistakes.”
That there were
mistakes is clear. The ferry board consisted almost exclusively of city
officials, most of whom not only lacked business savvy
but were also ferry partisans or employees of the mayor. There was no single
person in charge on the city’s side; city officials who already had day jobs
— financial officers, the commissioner of parks and rec, the commissioner of
environmental services — had to help supervise Bay Ferries, the company hired
to run the boat.
Decisions had to be made with breathtaking speed: by the
time the city got the ferry, we were headed toward peak travel season. There
were no promotional packages in place, no advertising plans under way. The
city, which hadn’t been able to inspect the boat until it took ownership, found
that it needed extensive repairs.
And, says ferry board president and City Council member Ben
Douglas, there was public-relations debris everywhere: people who had bought
tickets to ride the boat last year and had gotten stung. Vendors
who had gotten stung.Promotional partners in Canada
who had gotten stung.
The ferry board heard stories of companies in Canada who
were left holding the bag for hundreds of thousands of dollars. “They wouldn’t
talk to Bay Ferries,” says Douglas. City officials had to rebuild trust with
vendors, hotels, tourism officials.
The city also had to build trust with Bay Ferries, which, as
a private company, was reluctant to release detailed financial information —
what kind of deal it was getting on fuel, for instance; the salaries of the
crew. That led to delays in the ferry board itself getting information — and
to the ferry board’s releasing only minimal information about how the boat was
doing. And that led, justifiably, to public suspicion.
After a bit of a shaky start, ridership had begun to build
during the summer. But it wasn’t enough, and the ferry was gobbling up its
reserve funds. The city didn’t go public about it until late October, though,
when it said the ferry had lost about $4.2 million by the end of August. In
December, Mayor Johnson announced that the loss had climbed to $10 million and
the ferry board needed to borrow $11.5 million.
Should the ferry board have told the public earlier that it
was losing so much money? Douglas says in retrospect, maybe so. But, he says,
the ferry board and city officials were afraid that publicity would have hurt
what they needed most: ridership.
Tom Richards, who is the
city’s new corporation counsel and who spearheaded the Duffy team’s assessment,
says there was a more basic problem: “Some of the principal driving assumptions
that were going to make it viable are now longer true,” he says.
Those assumptions: that the trip to Toronto would be faster
and less expensive by ferry, that the ferry would operate 12 months a year, and
that truck traffic would provide important income.
Traveling by ferry didn’t save time, and it wasn’t cheaper
than driving. The city had decided it wouldn’t be able to get enough passengers
to operate the boat year-round. It was more complicated to get trucks on and
off the ferry than had first been thought, says Richards. And worse, trucks are
heavy; they would slow down the boat and increase the cost of fuel.
“When you pull all of those assumptions out of the business
plan,” says Richards, “you don’t have the economics.”
What if there’d been better marketing for the ferry? “That
calls size into question,” says Richards. “It is so large, and so expensive to
run, and our season is so short. To pay the debt and operating expenses, you’re
approaching needing close to 400,000 passengers. Every year.All the time.”
The ferry board’s 2006 business plan projected that it could
break even with just under 300,000 passengers.
In the end, Richard’s decision was that “the potential for
losing more is bigger than the potential for gaining more, because you have to
fill the boat.”
Johnson, City
Council, and the ferry board wanted to give the ferry one full year of
operation. That wouldn’t have cost much more than it will cost to cease
operations, they say. And if they’re right, you could argue that there’s another
cost to the shut-down: the damage to the city’s reputation.
Ben Douglas says he disagrees with Richards’ projections “in
essence.” But, he adds: “I respect his analysis, and I thought we needed to
move forward and that it was not useful to second-guess. He made enough of a
case where it could be respected.”
“It comes down to what level of risk you find acceptable,”
says Douglas.
“The real story” — which “has been lost in all the recriminations,”
says Douglas — “is that this whole ferry saga has been a rescue mission. It
was not the city’s intent to be in the ferry boat business. It was an effort to
catch an asset that was about to fall through the cracks.”
Was the ferry an asset, an economic-development tool? Early
on, some supporters talked about the ferry being a transportation path to
Canada from throughout the eastern US. That seems a reach. There are lots of
quicker, less expensive ways to get to Canada from New York or Philadelphia by
car than driving to Rochester and boarding a boat.
Priced right, though, the ferry does seem an attractive way
to get to Toronto from the Greater Rochester area, the near Finger Lakes, and
parts of the Southern Tier. Perhaps more important, it could be a tourism
development tool to get Canadians to that great, undertapped area, the Finger
Lakes.
Could it have been viable? We’ll never know. We couldn’t
know until the ferry had one good year of operating. It’ll never have that.
I thought that with the right business plan, the ferry might
make it. I was certain that it would need to be subsidized, but I was
comfortable with that because I thought it could boost the region’s economy.
But I’m absolutely convinced that the ferry couldn’t make it
under the business and marketing plans the ferry board released in
mid-December.
For months, the ferry board had insisted that the problem
wasn’t expenses, it was revenue: not enough people were riding the ferry. We
had to have more riders. Many more riders.
The ferry had needed much more start-up money than the city
anticipated. It also needed a high-powered, expensive advertising campaign.
Both sides of the lake should have been blanketed with ads. Instead, the
deadline-stressed ferry board went for marketing on the cheap. And, most
tellingly, it was planning to do the same thing for the 2006 season. It had
budgeted not a dime more for marketing. It would rely heavily on leveraging and
“partnering”: on somebody else’s money and effort.
All of this is moot,
now. We’ll sell the ferry, and some sad day, it’ll pull out of the Port of
Rochester for the last time.
A former Rochesterian called me last week, in a fair rage.
“Put this on your front page,” he growled, and proceeded to describe a cover
illustration he was imagining. It’s a little ripe to repeat, but basically, it
would show a part of the anatomy of local business leaders — if you’re
familiar with the names of local business leaders’ groups, you get the picture
— and a hand dropping a tissue down on the port area.
That’s a harsh assessment, and I don’t share it. People with
a strong business orientation were certainly involved in shutting down the
ferry, but whether you agree with them or not, given the statistics, it’s hard
to say they didn’t make a good case. Operating the ferry another year would
have been a big risk. It is, as Ben Douglas says, a question of how much risk
we’re willing to tolerate.
Maybe the ferry wasn’t the risk we should be taking. But we
can’t keep running this region the way we’ve been running it. We’re going to
have to take risks, take bold steps, to pull ourselves out of the depression
we’re in. And my former Rochesterian raises a crucial point: how willing are
local business leaders to think big, to take risks? Other cities have taken
risks, and their cities have profited. Our business leaders’ vision often seem
limited to Getting Guvmint Off Our Backs.
Some years ago, local business leaders were willing to step
up and take a risk, backed by their own money. With the Hyatt Hotel sitting
half-completed on Main Street, with little prospect that construction would be
finished, a group of business leaders put up the money to get the job done. It
was a risk. It paid off, for them, and for the community.
With the ferry in jeopardy a year ago, business leaders were
silent. So a gutsy mayor stepped forward.
Yes, the city has enormous challenges ahead of it. Yes, we
must fund education and fight poverty and crime. And, as the new mayor has
said, we must boost economic development.
We can’t do that in the same old way, though.
If not the ferry, what?
This article appears in Jan 18-24, 2006.
