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January 11, 2006

Rochester to end fast ferry service

Rochester, New York, Mayor Robert J. Duffy says he will not back the City Council's request to bond for $11.5 million to keep the fast ferry Spirit of Ontario operating in 2006.

The ferry had been operated between Rochester and Toronto, Canada, by Bay Ferries Great Lakes as manager for the city-owned Rochester Ferry Co. The city borrowed $40 million last year to buy the ferry, following the failure of the initial operator Canadian American Transportation Services.

Bay Ferries Great Lakes was engaged to manage operation of the service on April 26, 2005. Because of "technical challenges in the engines and propulsion system," service did not commence until June 30, 2005.

"The City of Rochester is no longer in the ferry business," said Duffy, who took over as mayor this month. "This was not an easy decision. But after thinking about what the priorities of this city must be, weighed against what it would require to continue the ferry's operation, the choice became obvious to me."

According to statement from Mator Duffy's office, bonding for the $11.5 million would have increased the city-backed ferry debt to $51.5 million. In the past few weeks, City officials concluded that the ferry would use up most of the $11.5 million for 2006 operations and still wind up short of cash to operate in 2007, setting up yet another loan.

Duffy continued: "My job is to be the voice for the 220,000 people I work for, the residents of the City of Rochester. I asked the same questions they would ask: 'Can we afford to operate this ferry?' 'Is there a sound business plan and marketing plan in place?' 'Is there a likelihood of success?' 'Is this the best way we can spend $51.5 million dollars?' The answer to of all these questions is no."

After an extensive study of financial documents, contracts, marketing and business plans, the following factors contributed to the decision not to support the bond.

1. In the first year of operation, the Rochester Ferry Board projected a one year loss of $700,000, yet the ferry actually lost $10 million in 10 months. It was insolvent by Nov. 2005 and the City now owes Bay Ferries $2.5 million.

2. Even if the City borrowed the $11.5 million, doubled ferry ridership and increased fares by 20 percent, the Ferry Board projected that the service would still lose $2.7 million in 2006. This is the best case scenario.

3. This best case scenario is also based on spending over $2 million for marketing when there's actually only $600,000 budgeted, with no sure way to raise any more.

4. City officials concluded that a realistic estimate of the subsidy required to keep the ferry running in 2006 is closer to $5 million.

5. Significant subsidies would be required from the city budget every year thereafter, and would continue to grow as debt service increased.

The Mayor's decision to shut down the ferry will have significant economic impact on Rochester. To end this service, the city must loan the Ferry Company $9.5 million dollars. The money will be used to pay outstanding debts to the ferry operators, for various leases and contracts and debt service on the loan to buy the boat. The loan would have to be repaid over a number of years.

"The unfortunate decision to get the City into the ferry business in the first place will cost taxpayers between $2 million to $3 million dollars a year for many years to come," said Duffy. "But this shut down will at least stop the hemorrhaging of tax dollars that continued operation of the ferry would have brought upon us. Now is the time to cut our losses and stop piling up more debt on the backs of Rochester's taxpayers."

The Mayor stated the ferry cost in terms of dollars and in City staff time was a major drain on the resources needed to continue Rochester's revival and growth.

"I have stated repeatedly that this administration must focus on three things to be the best mid-sized city in America, public safety, education and economic development," Duffy said. "We have more immediate needs. Rochester leads the state in lost jobs and our homicide rate is unacceptable. The Governor's office recently acknowledged that Rochester has the greatest financial need of any city in New York. In light of that, I just don't see how can we spend $51.5 million on the ferry."

Mayor Duffy noted that while there is some benefit from the fast ferry to Rochester,particularly to the harbor community, the bulk of the benefits go to Toronto and communities outside of the city. City staff, says the statement issued yesterday, "discovered a contract with the Toronto Port Authority that has the Ferry Company paying Toronto $250,000 a year for 14 years simply to take Rochester passengers."

"In addition," says the statement, "the City-backed Ferry Board is paying Toronto an additional one dollar per passenger and three dollars per vehicle. Since two-thirds of the passengers are going to Toronto, the City is subsidizing the Toronto tourism trade by paying for its citizens to visit and spend money in Toronto. If passenger and vehicle totals were to match best case projections, the City would be paying an additional $500,000 to bring our passengers to Toronto."

To date, no other municipality or community has shown any interest in helping to subsidize the ferry.

Mayor Duffy acknowledged the disappointment of those who supported and worked for the ferry and those who worked and invested in businesses in the Charlotte area. "My heart goes out to you. We will try and continue to develop the Port, but we cannot afford to do so while operating the ferry. Rochester is poised to see a grand revival. Our greatness will not be due to a ferry, but to our commitment to providing outstanding customer service, educating our children, protecting our citizens, and growing the economy and creating jobs, " he said.


The President and CEO of the Toronto Port Authority, Lisa Raitt, meantime, issued the following statement:

"Naturally, the Toronto Port Authority is disappointed by the decision of Mayor Duffy and Rochester City Council to discontinue the high speed ferry service between our two cities.

"It is unfortunate that the vessel suffered startup challenges in its first two seasons and was never able to realize its full potential, despite having handled over 250,000 passengers, 38,000 vehicles and achieving high levels of customer satisfaction.

"The International Marine Passenger Terminal will continue to host Great Lakes cruise ships and we will pursue alternative tenants and uses for the facility.

"We are proud that we were able to open Canada's first new border crossing in the past 40 years. This is a first class facility with state of the art customs service. It is regrettable that the ferry was cancelled before it could achieve commercial success."