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94 Guidelines for Ferry Transportation Services Because they are usually smaller entities with a few routes, private operators must be able to forecast as accurately as possible the rate of return on their investment in any new route. Private operators do have greater flexibility in modifying or cancelling routes than public operators, who are beholden to their public constituents. Conversely, private operators are often long- established companies in remote areas, and while they do strive to create a profit, they can also have a culture that values the community they operate in and their responsibility to the public (which is often their friends and neighbors). Public Operators Public operators consider starting new ferry routes for a variety of reasons and to do so often accept financial deficits. Public operators begin new service to reach new or growing communi- ties, satisfy mission statements, or because of the local political climate. Obtaining capital grant monies is a common way to offset the cost of new vessels, and new operations and maintenance costs are covered through farebox recovery and subsidization. Assessment of All Transit Alternatives--Incorporation of Goals, Criteria, and Measures Ferry planning is often undertaken in the context of land-based versus water transportation decisions. Ferry projects are not as prominent as land-based transportation decisions, whether it is bridges, tunnels, and highways for automobiles or buses and rail for public transit. Given that the ferry industry in the United States varies widely, and that public benefits are perceived differently in different locations, factors affecting public goals should be considered during ferry planning and development. These factors include the following (Norris, 1994) Transportation demand. A main factor for any new, proposed, or expanded route is transporta- tion demand. Consideration of this factor should take into account existing traffic congestion, landside public transit demand, RO-RO demand, interstate/state transportation systems, and legislative policy. Economic development. Ferry service demand is a function of land use and economic devel- opment. Ferries can be used to respond to economic growth within a region or can be used as a catalyst to encourage new and more intense land uses. In this context, ferry terminals take on the role of community gateways, similar to rail or other multimodal transit stations. Safety and regulatory compliance. Public policy places a high value on safety and security-- in fact, these goals are the highest priority of the ferry operator and government regulators. Cost-effectiveness. Cost factors must be considered during ferry planning, especially for pub- lic projects involving public funding. Cost analyses must look at capital and operating costs, public versus private operation, and technological advances when assessing a preferred mode or route. Environmental issues. The environmental impact of new or expanded ferry service must be considered under NEPA and under any relevant state environmental disclosure laws. These pieces of legislation ensure that critical environmental issues, such as coastal zone issues, energy efficiency, air quality, water quality, wildlife habitats, and community impacts/concerns, are adequately addressed and mitigated. Geographical conditions. Separate from environmental concerns, geography plays a major role in water-related decisionmaking, and influences waterborne transportation differently than landside transportation. Decisions are affected by weather patterns, shore conditions, type of water body and conditions, tide/flood conditions, and year-round versus seasonal operation requirements.

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Strategic Planning in Ferry Service Development 95 Linkages between these six factors should also be considered during ferry planning and devel- opment. Some of the linkages that should be considered are discussed below. Transportation Demand and Economic Development Transportation demand and economic development are linked. The case studies undertaken for TCRP Project H-40 indicate that urban ferry travel is directly related to land development. Future ridership on a new or modified ferry route is projected in a way similar to many other transit projects, by taking into account future land uses, future transportation demand, service frequencies, and travel time compared to competing travel modes. Projected ridership levels are taken into account in decisions about appropriate vessel size and carrying capacity. Operators need to ensure that they will carry the minimum number of passengers per trip necessary to break even on their cost per trip (for a private operator) or meet criteria for farebox recovery (for a sub- sidized public operator). Operating a vessel that is too large for a particular route can adversely affect an operation's economic bottom line when the costs of fuel and staff are included. Operat- ing a vessel that is too small on a popular line can cause passenger frustration, leading to rider- ship loss as passengers turn to other transportation modes and lose confidence in their ability to make certain scheduled crossings. Ferry routes and terminals have recently begun to be part of larger land use and transporta- tion planning conversations that seek to link together transportation services with developing or redeveloping land uses or specific communities. Advocates of transit-oriented developments, smart growth, and other related planning ideals highlight ferry terminals as potential attractors that can assist in bringing activity to underused areas. Ferry terminals are seen as downtown anchors, helping to revitalize former main streets as well as supplementing supporting businesses who serve ferry passengers. Tradeoffs for the development include allocating the necessary land and water area for the ferry facility, as well as designing the terminal to be functional while minimizing its impact. Ferry service sponsors must consider the economic catalyst effect against existing demand. Each route and terminal must be carefully analyzed to determine whether there is enough demand for them to be financially and operationally viable. The type of ferry service offered is also a crit- ical factor in stimulating economic activity. Passenger-only ferries are more likely to draw passen- gers to supporting businesses than vehicle ferries, where passengers never exit their car at the terminal. Further discussion of analysis factors when considering economic development as part of new ferry service is provided later in this report. When deciding whether ferries should be used to provide access to a new development site, prior to entering into elaborate and expensive ridership projections, decisionmakers should determine whether ferries can provide the access to the destinations that is desired, at a level of service that can be sustained. The following factors should be taken into consideration: The size of the site (larger sites can result in financially sustainable ferry services). The type of land uses (more intense uses generate more traffic, but niche uses--such as a park--can be successful for ferries). The trip market (for instance, whether the anticipated trips are concentrated in one area, such as to a central business district). Other modes (whether other modes are inconvenient, over capacity, or non-existent). Water conditions (whether there is adequate water depth, the ability to provide terminal facil- ities, harbor traffic, and so forth). In Ferry Intercity or Ferry Essential operations, where ferry service links metropolitan areas to other metropolitan areas (and where other modes do not exist) or where small communities are

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96 Guidelines for Ferry Transportation Services linked to a metropolitan area, the primary policy considerations are economic development of the non-urban area and statewide policy provisions that seek to increase and support access to isolated areas. These policy considerations are subjective and based on a perception or an understanding of how a ferry operation might affect local economies. For example, if the state chose to encourage tourism and recreational activities, then ferry service may be increased or supported. On the other hand, if resource conservation was an important goal, then ferry access could be limited. In areas like the Seattle, Washington, metropolitan area, ferries are part of state highway sys- tems and can move millions of passengers a year. The geographical nature of a region and its economy can require a robust ferry system that is able to move millions of people on a daily basis. In other instances, such as islands off of the mainland, ferries provide the only transportation. In both of these examples, ferries compete well or have little competition with vehicular or tran- sit travel, taking advantage of built-in ridership demand. Ferry operators in these situations must still ensure that fare levels and service frequencies are constantly adjusted to market demand as tourists often make up a large part of the yearly revenue intake and swings in fares could dissuade local and visitor ridership. Safety and Regulatory Compliance Regulatory compliance is an important aspect of ferry service. While economic regulation has diminished in the last 20 years (i.e., regulation of tariffs and schedules), environmental, work- place, safety, and security regulations have all increased. Ferry systems of all sizes must take into consideration the risk of accidents, such as collisions, groundings, allisions, fires, and explosions (Harrald et al., 1999). The Coast Guard certifies the vessel and conducts annual vessel inspec- tions. The Coast Guard also enforces laws and regulations pertaining to minimum crewing levels, licensing for vessel crews, security threats, and the origin of passenger vessels. Cost-Effectiveness and Environmental Issues Cost-effectiveness and environmental issues are also closely related. The ability to reduce marine emissions is an increasingly critical component in determining the viability of new ves- sels and routes. In the last decade, on-road vehicles have become extremely clean, with emission reduction levels (relative to direct engine exhaust) of 98 percent or more. Studies have concluded that ferries will have to reduce emissions by 85 to 98 percent to make the impacts of ferry com- mutes less than the impacts of on-land commutes (CALSTART, 2002). Since 2007, all new vessels have had to meet Tier 2 engine requirements, part of a broader effort to use technologies that reduce emissions. The case studies conducted for TCRP Project H-40 found that several ferry operators have participated in a government grant program to repower their vessels with newer engine technology. The operators were uniformly pleased with the results of the program because the public benefited through reduced emissions and the operators ben- efited through reduced fuel consumption. Additional emission reduction can result from the use of alternative fuel sources, such as biodiesel. Biodiesel may be used in almost all diesel engines (the predominant propulsion mode in vessels) at concentrations of up to 5 percent. New engines can use up to 20 percent biodiesel and remain within warranty requirements. A 2002 EPA study found that use of 20-percent biodiesel (B20) results in a minor increase in oxides of nitrogen (NOx), but provides double-digit percentage decreases in particulate matter (PM), hydrocarbons (HC), and carbon monoxide (CO) (see Table 7-1). (The EPA report doc- umented these trends continuing as the biodiesel percentage increases. At 100-percent biodiesel, NOx increases by about 10 percent, but PM and CO both decrease by about 50 percent and HC

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Strategic Planning in Ferry Service Development 97 Table 7-1. Emission impacts of 20-percent biodiesel. Emission impacts of 20 vol% biodiesel for soybean-based biodiesel added to an average Percent change in emissions NOx 2.0% Pollutant PM -10.1% HC -21.1% CO -11.0% Source: Assessments and Standards Division, Office of Transportation and Air Quality, 2002. decreases almost 70 percent. Carbon dioxide emissions would also decrease significantly when considering the entire production process). Virgin Trains, a UK passenger railroad operator, expects that a 20-percent biodiesel blend in its fuel mix will result in a carbon dioxide emission reduction of about 14 percent. (Assessments and Standards Division, Office of Transportation and Air Quality, 2002; BBC News, 2007) The cost of biodiesel has been estimated to be comparable with petroleum when oil costs $70 per barrel (in 2011, oil traded from $80 to $130 per barrel). As the biodiesel industry expands and develops new technologies and as worldwide petroleum demand increases, it is likely that biodiesel will represent a lower cost option for ferry operators. New engines are certified by manufacturers to operate on B20. These new engines are also cleaner burning, and the case studies conducted for TCRP Project H-40 indicate that operators replacing engines experience about a 20-percent overall reduction in fuel use. Since new engines are both more efficient and allow use of alternative fuels, these engines provide ferry operators with the ability to reduce emissions and costs in multiple ways. Using biodiesel in a new engine could reduce overall costs by about 20 percent and reduce emissions of PM, CO, and HC by 20 to 35 percent. Balancing Constraints and Limited Resources with Market Opportunities The ferry industry serves a wide range of users. Ferries that serve areas with multiple trans- portation offerings are in a complicated position--trying to compete for a discrete number of riders who have many choices for transportation to their destination. In these situations, ferry passengers can often be categorized as "choice riders," those who make a conscious decision to ride ferries when they may be more expensive or less convenient than landside transit or driving for reaching the passengers' destination. Ferries must maintain a delicate balance between fare prices and operational and maintenance costs to meet budget requirements. The ferry operator should consider the importance of the following to marketing ferry services: Attractive terminals. A ferry terminal is a gateway to the community and is also a storefront for prospective customers. Terminals provide a welcoming experience for disembarking pas- sengers, as well as providing connections to other travel modes. The terminal itself can be seen as a multimodal center comparable to other transit facilities. The terminal provides passen- gers with information on routes and schedules, the ability to pay for tickets, protection from