From the privatization file … the city of Rochester, NY has closed its high-speed passenger+car catamaran service between Rochester and Toronto. According to an article from Newsday,
The city’s new mayor, Robert Duffy, rejected a $11.5 million loan request to bankroll the Lake Ontario ferry service in 2006. Instead, he will ask the City Council to transfer $9.5 million in insurance reserves to cover the cost of disposing of the 284-foot-long, five-story-tall vessel.
“Rochester will no longer be in the ferry business,” Duffy said Tuesday night. “I’d rather take the hit right now and … stop the bleeding.”
The city bought the ship at auction last February for $32 million but quickly ate up an $8 million operating cushion and even had to borrow an extra $2.5 million from operator Bay Ferries Ltd.
Some backstory: a private owner/operator (Canadian American Transportation Systems) bought this Australian catamaran that could cross Lake Ontario at 55 mph. They started operation in June 2004, good timing for the popular summer travel season, but shut down in September 2004 with $1.7 million in debt.
Rochester bought the ferry, and contracted with an operator (Bay Ferries). Passengers could pay $32-35 per car for the 2.5 hour trip to Toronto, missing congestion on the highways around Niagara Falls and the US/Canada border.
The policy question was whether or not the city should float an $11.5 million bond to fund the ferry’s operations. Rochester mayor Robert Duffy said no.
Not surprisingly, I think that’s the right choice. It’s one thing for a private firm to risk its capital on a new venture like this, but quite another to risk taxpayer resources through a political, collective action process. But, you might argue, what about the public good aspects of the ferry service? My rejoinder is that the private benefits far outweigh the public good aspects; people who are willing to pay $35 ($70 RT) to avoid possible congestion and an annoying drive around the western end of the lake would see benefits that would have been likely to outweigh the economic stimulus benefits of the service.
Sadly, those private benefits were insufficient to support the investment. Some commenters think that the service was poorly marketed. From the Newsday article:
All along, the upscale customers that the ferry owners needed to target weren’t aggressively pursued, said Eugene Fram, a marketing professor at Rochester Institute of Technology. Walk-on fares during peak sailings were $32, and $35 for most cars.
“It added panache to the city – and upstate New York needs that,” Fram said. “But if your market doesn’t even know about you or can’t see the benefit of using your service, you’re dead in the water before you begin.”