City Hall’s $369 million riverboat gamble on ferries

April 3, 2019 Rosa Goldensohn, THE CITY

An NYC ferry docks in DUMBO, March 13, 2019. Photo: Ben Fractenberg/THE CITY

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This story was originally published on April 2 by THE CITY.

The boats for Mayor Bill de Blasio’s signature ferry program could soak taxpayers for up to $369 million — a cost that might have been avoided under another operator, which offered to use its own vessels, bidding documents show.

In 2016, the New York City Economic Development Corporation announced it had picked San Francisco-based Hornblower Cruises’ $168.4 million low bid to run the expanding ferry system for at least five years.

The losing team — made up of locals New York Waterway, Billybey and New York Water Taxi — wanted $31.5 million more, but it was a BYOB deal, as in Bring Your Own Boats.

Hornblower’s seemingly cheaper but boatless bid now has taxpayers on the hook for $232 million to purchase 38 vessels. And another $137 million is allocated in the city’s capital plan for future ferry boat purchases.

“For me, it’s scandalous that the city knowingly chose a proposal that was more expensive on the level of hundreds of millions of dollars,” said City Councilmember Ritchie Torres (D-Bronx), who chairs the Council’s Committee on Oversight and Investigation. “That’s astonishing.”

A happy day today with @BilldeBlasio @DMAliciaGlen @NYCEDC @jbpatchett @CamJClark as we christened our first ferry! pic.twitter.com/2OKFLAOSpC

— NYC Ferry (@NYCferry) April 18, 2017

THE CITY’s examination of the bidding documents came as city Comptroller Scott Stringer recently returned the purchase plan for 19 of the new boats to the EDC with a list of questions. It also came as the Citizens Budget Commission issued a report called “Swimming in Subsidies” that portrayed the city’s ferry expansion as an inefficient and expensive undertaking.

The EDC defended its choice of Hornblower, arguing that a city-owned fleet would be optimal. Yet in its 2015 request for proposals, the EDC said the ferry operator would be expected to provide the vessels.

An FAQ on the EDC’s website also seemed to answer the question of whether the city planned to buy its own boats: “No. The private ferry operator(s) selected through the RFP [Request for Proposals] process will own, maintain and operate their own vessels.”

But the EDC said this week that the website entry was a mistake.

A screenshot of the EDC’s purportedly wrong FAQ. Image via THE CITY

Agency staff said that even though the RFP required operators to obtain the vessels, they made clear in conversations with bidders that the agency was open to ultimately paying for boats.

“We chose the bid that allowed the ferry system to get up and running quicker, with the option to own the boats in the long term – the fiscally smart choice,” EDC spokesperson Stephanie Báez said in a written statement to THE CITY. “Other bids couldn’t have achieved that. We made the right choice for riders and for taxpayers.”

In the deal, the city agreed to a provision that would allow Hornblower to force the EDC to buy the full fleet.

Bidding price difference ‘mattered’

That provision, called the “Vessel Purchase Put,” effectively guaranteed that Hornblower would not have to shoulder the cost of the boats.

But the other bidders were not aware that the city would make such a commitment, according to sources familiar with the negotiations. It could have changed the losing bidders’ proposal, the sources said.

City evaluators tasked with weighing the competing offers gave Hornblower perfect 20 out of 20 scores for proposed fee and cost schedules. The competing bid scored 16.85.

Hornblower also beat out the Waterway team on various other aspects of the scoring, such as quality of proposal and demonstrated quality of service.

At the March 2016 announcement of the selection, then-Deputy Mayor Alicia Glen said that the price difference between Hornblower and the joint proposal was “enough — enough that it mattered.”

The payments for the boats will not come out of the EDC’s coffers, however, but rather from the city’s capital fund, noted Sean Campion of the Citizens Budget Commission.

“It’s effectively shifting those financing costs off of EDC and the public-private partnership and on to the city’s budget as a whole,” Campion told THE CITY.

While the city’s Department of Transportation has long operated the Staten Island Ferry, the EDC oversees the network of six routes known as NYC Ferry.

The CBC cited “several drawbacks” in putting EDC in charge of the new ferry system rather than the transit experts at DOT.

“The decision to place NYC Ferry under EDC has created redundancies within city government,” the commission wrote in its report — which also noted that the Economic Development Corporation is not held to the same public transparency standards as regular city agencies.

This story was originally published by THE CITY, an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.