Assembly votes to unload ferry

PALMER — In the end, the sale of the M/V Susitna literally came down to the 11th hour.

The Mat-Su Borough Assembly unanimously agreed with a staff proposal to sell the one-time planned Knik Arm ferry to the Philippine Red Cross for $1.75 million at about 11:30 p.m. Tuesday night at the end of a marathon five-hour meeting.

Both the federal government and the borough's insurance company must still approve the plan. If the proposed deal goes through, the Susitna will sell for a fraction of the total cost of the boat’s development and construction, and less than the $2 million total estimated cost to the borough since it accepted the vessel from the Department of Defense in 2011.

Under the proposal, the payment would be structured in four parts, with the Philippine Red Cross paying $250,000 up front. The borough will use that money to pay an insurance deductible to repair engine damage caused during a heavy rain storm in January at the ferry's Ward Cove moorage in Ketchikan. The Red Cross will then make three more payments to complete the transaction.

A summary of the proposed deal by borough auditor James Wilson lists a completion date for the sale of March 31, 2016. However, both parties may extend that date further.

The price tag is less than half the $4 million the borough had asked for at one time.

“This is really a pittance,” said borough manager John Moosey. “We tried everything.”

Moosey first brought up the proposal during comments less than an hour into the meeting. He said the agreement has been in the works for quite some time.

“We thought it was going to happen three months ago,” he said.

Borough assembly members asked for clarification, and the sudden move apparently took several by surprise.

“Why can’t we wait?” asked assemblyman Ron Arvin.

The insurance company set the timetable, according to finance director Tammy Clayton. Borough officials decided to renew the vessel’s annual insurance after it expired at midnight on Monday. However, the insurance company, Lloyd’s of London, had threatened to eliminate coverage and the borough has no alternative insurer, according to Clayton and Moosey.

“The insurance company wants us to get that boat fixed, and if we don’t move forward with that, they have made the threat that they will drop us,” Clayton said.

The Philippine offer might be the borough's last best hope for a sale, Moosey said.

“We finally have an entity who’s going to use the boat and they’re putting up $250,000 worth of cash right up front, plus $60,000 for our ongoing monthly expenses,” he said. “We have never gotten this far, and if they walk away, they forfeit those dollars.”

The sale to the charity organization was the borough’s second choice. Borough officials rejected an earlier proposal by a Turkish buyer over concerns that the U.S. State Department would not approve the sale. The feds must OK the sale because the vessel is a prototype, meaning possible military applications must be considered, according to federal law.

If the government rejects the sale, the borough must come up with money to fix the boat to maintain insurance.

Assemblyman Vern Halter pushed to postpone the sale until the plan gets the go-ahead from the federal government.

“I don't know if time is of the essence on this, myself personally,” he said. “If we get approval to sell the boat, we’d still have time to fix the engines. If they don’t get approval to sell this boat, where is the $250,000 going to come from? It’s been one thing after another. I’ve watched this for six years. I’d be pretty surprised if this deal does go through, but I’d be very happy.”

The decision to sell the ferry came after a lengthy public hearing about whether or not e-cigarettes and vapes would be included in the borough’s definition of tobacco products. Public testimony on that issue, combined with uncertainty about the math involved in the ferry sale, forced the assembly to postpone discussion of the vessel's fate until the tail end of the meeting.

Assembly members voted 5-1 against Halter’s amendment to postpone (by this point, Arvin had left the building to catch a flight). Several said they weren't willing to risk a tangle with the insurance company.

“The only way we can sell this to anybody is if we get it fixed,” Sykes said. “If our insurance company drops us, which I think they’re trying to do, we’re really screwed. I don’t think we have any good options or time to wait.”

The question of $12.3 million owed the Federal Transit Authority for construction of the ferry terminal remains unanswered, Moosey said. Borough officials are still hammering out how much of they will have to repay for the terminal, which presently serves as a borough office building at Port MacKenzie.

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