Assembly authorizes ferry fix

PALMER — The Mat-Su Borough Assembly voted Tuesday to sink additional funds into the M/V Susitna.

The assembly voted 4-2 to borrow about $2 million from the Land Management Permanent fund to cover the cost of repairs to the ferry's damaged engines at a joint meeting of the assembly and school board. Borough officials will add the $2 million self-loan — the fund comes from the proceeds of borough land sales — to roughly $1 million already authorized for repairs.

Assemblymen George McKee and Steve Colligan voted against the expenditure. Assemblywoman Barbara Doty participated in the first portion of the meeting by phone, but was aboard a flight from Juneau when the ferry vote was taken.

The vote came after borough officials provided a signed agreement from the Philippine Red Cross extending the delivery date of the Susitna to June 30. The vessel is a unique icebreaker landing craft prototype once intended for use as a ferry across Knik Arm between Anchorage and the Mat-Su.

Borough attorney Nick Spiropoulos told assembly members he would continue to work to obtain a possible 45-day extension in the event repairs take longer than planned. Borough manager John Moosey previously authorized $16,000 so crews could begin work disconnecting the engines.

The agreement means the Susitna can still be sold for $1.75 million to the Red Cross, a price worked out late last year. But first, repairs must be made to the four German-manufactured engines, which will have to be cut out of the ship’s hull and taken to a specialty contractor for repairs. The engines were damaged during a rainstorm at the Ward Cove dock in Ketchikan in January 2015. Last month the ferry was towed from Ketchikan to the Foss shipyard in Seattle for repairs.

Once repairs are complete, Moosey says he’s confident the borough will recoup some portion of the cost of the repairs from the borough’s insurance company, Lloyd’s of London. Lloyd’s has previously insisted on removing the engines from the ferry for the repairs, work that roughly triples the cost of the repairs. The insurance company has set the range it will pay for the repairs as between $420,000 and $1.1 million, based on the belief that repairs would involve three of the four engines. Since that estimate, surveyors for the borough and insurance company have agreed that the fourth engine, which has a bent rod, will also require additional repairs.

Even assembly members who voted for the loan asked pointed questions about the deal. Deputy mayor Matthew Beck said that against a $3-million repair bill, the insurance has set the maximum it will pay at $1.1 million, and the sale will pay out $1.75 million if it goes ahead as planned.

“So basically, we’re gonna give this boat to the Philippine Red Cross potentially where we pay $243,488, if I did the math right,” he said. “Is that kind of where we’re at right now?”

If the insurance company doesn’t adjust its figures, that figure is roughly correct, Moosey said. However, the assessed liability to the borough could be higher or lower, depending on what the two surveyors — one hired by the insurance company and the other hired by the borough — say. Some assembly members, including assemblyman Jim Sykes, have suggested the matter could ultimately end up in court.

“The insurance company is claiming we have to pay more because we waited too long, we didn’t do anything to preserve the engines,” Moosey said. “Our surveyor is saying ‘Woah, wait a second, that is incorrect.’ And that is why we hired that person to work on our behalf.”

Taxpayers could still wind up paying money, though Moosey told the assembly he thinks the borough will recoup at least the cost of repairs.

“Bottom line: we could lose money on this deal,” he said. “I personally don’t think that we will.”

Susitna captain John Stormmont told the assembly any additional preparations for a voyage from Seattle to the Philippines will be covered by the Red Cross.

“Once we do the repairs, it’s setting in the dock, and then it’s the Phillipines’ problem?” McKee asked.

“That’s right, that’s it,” Stormmont replied. “You’re just fixing the engines. Everything else is their problem.”

At least one participant in Tuesday's discussion seemed to think the assembly's vote carried the air of finality.

“Thank you, and I guess I wish that boat well,” said mayor Vern Halter.

Contact reporter Brian O’Connor at 352-2270, brian.oconnor@frontiersman.com, or on Twitter @reporterbriano.