CBC details high NYC Ferry costs as $10 per-passenger subsidy faces scrutiny

Politicians and policy wonks have begun to question whether a $10 per-passenger subsidy for the NYC Ferry system is a sound use of city transportation dollars. (Photo via NYC Ferry)

One of the greatest trick Bill de Blasio’s administration ever pulled was convincing New Yorkers that the ferries were a legitimate form of mass transit, worthy of hundreds of millions of dollars of taxpayer subsidies as the subway and bus system collapsed around them.

Now, after years of hiding spending, costs and ridership demographics behind the frustratingly opaque New York City Economic Development Corporation, rather than tasking the city’s public-facing Department of Transportation with running the boat network, the administration is finally taking heat for the ferry system. A recent report by the Citizens Budget Commission detailed how the ferry subsidies reach nearly $11 per ride and could spike to up to $24 per passenger on future planned routes. The city’s Comptroller Scott Stringer has also recently blocked city spending on boat acquisition, and with policy wonks turning a skeptical eye toward the costly ferries, the future of public spending on a little-used and costly boat network that seems to serve well-off neighborhoods that already have transit service may be in doubt. For this ferry skeptic, it’s a reckoning that can’t come a moment too soon.

My love-hate relationship with Mayor de Blasio’s ferry system is hardly a secret. I first cast a doubting eye on the mayor’s plans for a five-borough ferry system in early 2015 when, quaintly, the cost estimates included just $50 million in capital money and a $20-$30 million annual operating subsidy, two figures that would be a good deal today. At the time, I tried to fix his proposal, suggesting higher fares (and thus lower subsidies, a point to which I’ll return later). My pleas fell on deaf ears, and the mayor went forward with his ferry system as costs ballooned. When I wrote a piece for Curbed questioning the usefulness of a specialized low-capacity ferry service, subsidies were $6.60 per ride and capital costs nearly half a billion dollars. It’s only gotten worse from there.

In a report released last month, the non-partisan Citizens Budget Commission highlighted how the city is now spending $10.73 per ride to ensure ferry fares are kept at the same cost as the swipe of a Metrocard, and the report highlighted the seasonal nature of ferry ridership, indicating that the boats are more for leisure and convenience rather than for transit. In tandem with the report, Stringer declined to approve more city spending on ferry acquisition, calling instead for a DOT takeover of the program, and any 2021 mayoral candidate should heed the CBC’s recommendations. “New York should invest its transportation dollars wisely,” Andrew S. Rein, President of the Citizens Budget Commission, said. “When deciding how to expand services to those who may need them, the city should make policy choices that increase the ferry system’s cost-effectiveness, especially when it comes to weekend and leisure ridership.”

While my incessant harping on ferries has earned me the reputation of a hater, I take little joy in being right about the wasteful spending, especially at a time in which transportation dollars are at a premium and high-capacity, lower-cost solutions are obvious. I believe there’s a narrow path toward rescuing the ferry system, but it’s one that relies on choices that will result in higher fares and fewer year-round routes. But let’s dive in.

CBC study highlights high costs, lack of EDC transparency

The CBC’s report landed in late March while I was on vacation in Madrid, and from the title alone — “Swimming in Subsidies” — I knew it would be a good one. The essence of it is simple: Without even exploring who rides and which New Yorkers are enjoying the benefits of the subsidies, the city is spending $10.73 per passenger on a heavily-subsidized ferry service that serves fewer passengers in one year than the subway serves on a typical weekday. Future planned routes to Coney Island may require a subsidy of over $24 per passenger, and the CBC questions whether steep spending on low capacity boats is the way to improve mobility in New York City. “Before an expansion of service is implemented,” the report states, “city officials should reconsider the policy choices that contribute to the high subsidies, evaluate options that would reduce the level of subsidy, and consider whether alternative uses would meet the city’s transportation needs more efficiently and more effectively.”

The numbers are stark. The NYC Ferry system enjoys subsidies that lag New York City’s express buses by only a dollar per ride and are over ten times more than the subsidy for bus and subway rides. The ferry subsidy outpaces Metro-North by over $5 per passenger and the LIRR by around $4.50, and these are hardly paragons of efficient transit. Notes the CBC: “The high subsidy is due to high operating costs and low revenue, which are the product of policy choices to keep fares low and to provide daily service on routes with variable demand, low ridership, and high fixed operating costs. Spending to date includes some one-time costs associated with launching new routes; the per-ride subsidy may decline in future years as operating costs stabilize and ridership grows. Even with these developments, NYC Ferry would still require a greater subsidy than competing modes of transit while serving a smaller number of passengers.”

In discussing these subsidies, the CBC highlights the seasonal nature of ferry routes as a leading problem. Over the course of 2018, the ferries served just 91 passengers per revenue hour, and the ferries are particularly sensitive to seasonal demand, a clear indication that many riders view the system as one for leisure rather than for commuting. The report states:

The sharp increase in summer ridership is driven primarily by additional weekend travel. Weekend ridership, consisting predominantly of trips for leisure, is more responsive to seasonal trends than weekday ridership.12 Most of NYC Ferry’s weekend ridership accordingly takes place in the summer. During summer months weekend trips make up 40 percent of NYC Ferry ridership, up from 21 percent during the winter. 13 (Overall weekend ridership on NYC Ferry is higher than that of its peers, with weekend trips accounting for 33 percent of ridership compared to 22 percent on the Staten Island Ferry and 15 percent on the private ferries.) This extreme seasonality is also a byproduct of NYC Ferry’s comparatively small base of regular commuters.

EDC’s strategy to address the extreme seasonality of NYC Ferry’s ridership also has increased operating expenses and subsidies. NYC Ferry has struggled to meet its on-time performance target of 94 percent when ridership peaks in the spring and summer months, particularly on the Rockaway route.15 In response EDC has paid to charter additional vessels to add capacity to meet peak summer demand, rather than increase fares to reduce demand. While this improved on-time performance on some routes, it also increased operating costs and subsidies.

Future ferry routes won’t improve this picture. The Coney Island route is expected to cost the city $24 per passenger and Ferry Point service to the Bronx will come with a price tag of $16 per passenger. On the capital side, including dock build-up and boat acquisition, the city is projected to spend $638.5 million on the ferry network. Meanwhile, the CBC had a harsh assessment of the financial relationship and EDC’s involvement in the project. I’ll quote a length:

The decision to place NYC Ferry under EDC has created redundancies within City government. DOT sets transportation policy and operates the country’s largest municipal ferry service; EDC’s role historically has been to manage piers and waterfront properties and to oversee private ferry companies that operate in New York City waterways, including managing the operations of the East River Ferry that preceded and was integrated into NYC Ferry. The original operating agreement with Hornblower anticipated EDC’s role in NYC Ferry would be limited to managing the on-shore infrastructure and setting the fare and service levels–tasks within EDC’s core competencies and the scope of its Maritime Contract. Subsequently, EDC has expanded its responsibilities, primarily by exercising its contractual options to acquire and expand the NYC Ferry fleet and to build a City-owned homeport. Going forward, EDC and DOT will own and operate separate ferry fleets.

Second, funding NYC Ferry through EDC rather than through the City budget limits the ability to track the dollars allocated to ferry service and to exercise oversight. DOT’s expense budget for the Staten Island Ferry, for example, includes detailed operating and maintenance data, including headcount and spending on personnel, contractual services, supplies, fuel, and other expenses. Similarly, the Mayor’s Management Report tracks indicators that tie back to these expenses.

In contrast, NYC Ferry is not funded through general fund revenue appropriated through the budget process, and EDC is not required to report detailed operating or budget data about its ferry service. EDC funds NYC Ferry’s operations through an arrangement in which the Mayor allows EDC to retain a greater share of the revenue it generates from operating City-owned commercial properties than is expressly allowed under its contracts with the City. While the City Council must approve any capital spending, paying for NYC Ferry’s operations through EDC means that its operating budget is not subject to City Council review. This funding model also differs from the operations of the now-defunct East River Ferry service, which was subsidized from the City’s General Fund.

In essence, the Citizens Budget Commission doesn’t believe the current system is transparent, sustainable or a good use of transportation dollars. “[The] ferry network,” the report concludes, “serves a small number of New Yorkers, is expensive to operate in part to support leisure-oriented travel, and requires a high subsidy that will grow higher to extend service to Coney Island and Ferry Point. Reviewing the system’s costs and subsidies through its first full year of operations should prompt consideration of whether maintaining the same operating strategy, pricing model, and expansion plans will be the most efficient and most effective use of city transportation funding.” They’re almost being too kind.

Fallout: The Mayor responds; the Comptroller calls for a takeover

Now, City Hall has not historically taken kindly to any criticism of the ferry system. For better or worse, the boats are Bill de Blasio’s signature transportation policy, one that just so happens to benefit many of his wealthy real estate donors with substantial interests in the waterfront who like to point to nearby ferry docks as a perk. Following the report, the mayor took the time during his weekly appearance on WNYC’s Brian Lehrer Show to address the critique, and he simply could not respond on substance. His answer is one for the ages. He said:

I disagree with the analysis to begin with because I think it’s a very short sighted analysis. I appreciate the Citizens Budget Commissioner, I think they’ve done some important work over the years, but I think they have a fatal flaw. They often misunderstand the value of government investment for the long haul and this is a government investment for the long haul. Let me sober everyone right here, Brian, 8.6 million people today. We’ve added half a million people over the last 15-20 years. We’re going to add another half million people over the next 15 to 20 years ahead. Anyone who thinks our existing transit system can handle all of that is someone who thinks marijuana is already been legalized in New York State and is smoking some. The fact is it is impossible to do what we have to do with the city if we don’t expand mass transit options.

It’s something else to hear the mayor claim that anyone who criticizes his boats must be high on marijuana, but that’s the city we live in these days. The mayor urged critics to talk to ferry riders — which is besides the point — and also claimed that delivering a one-fare option via a transfer to MTA-operated buses or subways would drive up ferry usage. Such a relationship would also require the city to reimburse the MTA for lost revenue, leading to even higher per-passenger ferry costs, and the biggest boats in the fleet max out at 350 passengers, hardly a high-capacity system. The mayor’s defense is a flimsy one and ignores the substance behind a critique of what is in essence a low-cost, niche transit system (that largely benefits those who live in watefront condos and want to avoid the subway). Doesn’t this exacerbate, rather than solve, NYC’s tale of two cities?

Meanwhile, NYC Comptroller Scott Stringer (and a likely 2021 mayoral hopeful) used the report and a subsequent story in The City on the high cost of boat acquisition to call for a city takeover of the ferry system.

“New Yorkers deserve reliable and comprehensive public transit systems, but not at the expense of transparency, accountability and fiscal responsibility. The Economic Development Corporation’s contract with NYC Ferry operator Hornblower raises serious questions about the exploding costs and liabilities that the City is choosing to absorb, all while handing over millions in revenue to a private contractor – questions that to-date have not been sufficiently answered,” he said. “We must do better. That’s why I’m calling on the city Department of Transportation to immediately explore taking over NYC Ferry. This has the potential to improve efficiency and public savings across the board – capitalizing on DOT’s experience running the Staten Island Ferry, eliminating administrative redundancies, allowing the City to keep all fare box and concession revenues, and providing a level of budgetary and operational transparency that EDC has to-date refused to provide. Given all of these potential benefits, DOT should examine the feasibility of such a takeover as soon as possible.”

What Comes Next: Fixing the ferries through higher fares

At this point, clear battle lines have been drawn around the ferries. Ridership isn’t substantial or persistent enough for politicians to cower in fear over challenging the costs of the system, and while the mayor is committed to building out the routes the CBC has highlighted as particularly cost-inefficient, he’s in office for only two more years. The 2021 mayoral race will, in way or another, include jockeying on ferries, and as the current candidates appear to be more attuned to the transit needs of New York City than de Blasio has been, half a billion dollars in ferry spending and constant subsidies with diminishing returns will likely be on the chopping block. The city can and should spend this money to bolster bus service and a bike share system, two transit modes with far higher usage numbers (let alone pollution impacts) than ferries.

But in the short term, the city should consider reassessing the fare structure. It’s a nice gesture to keep fares for boats pegged at the cost of a Metorcard swipe, but it’s also an empty gesture. These ferries aren’t serving real transit deserts, and people who take ferries have long shown a willingness to pay a premium for what they view as a more comfortable or leisure-type service. In fact, the CBC recommends as much in its report:

EDC and City officials can take actions to improve the system. The high rate of leisure travel offers an opportunity to charge higher fares on weekends and for noncommuters to offset the cost of subsidies for daily commuters. Other premium transit options, like the private ferry services and the MTA express bus service, charge higher fares that are commensurate with their operating expenses. Other services use dynamic pricing that increases along with demand. When it was a standalone service, the East River Ferry charged a higher fare on weekends, which allowed it to recoup a larger share of its operating costs than NYC Ferry currently does. Private ferry operators offer limited weekend service because it is not profitable. Dynamic pricing models could be more appropriate for long, low-productivity routes that require substantial subsidies and see demand spikes on weekends. A different fare structure could also mitigate the need to charter vessels or purchase larger boats.

Ultimately, though, the ferries offer a lesson in government transparency: The EDC has long resisting calls (and FOIL requests) to release ridership data and demographics information. Capital costs continue spiking without City Council oversight, and the mayor’s response is catty defensiveness on the radio. That’s not a prescription for sound transit policy at a time when mobility is under scrutiny. The city should charge more for ferries, reducing the subsidies and freeing up taxpayer money for transit investments with a higher return. Until then, the ferries are simply a giveaway masked as whatever the mayor thinks passes for transit.