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Background

Chebeague Transportation Company (CTC) was founded in 1970, and although the islands of Casco Bay have been served by the ferries of Casco Bay Lines for over 150 years, CTC filled a market gap for islanders and visitors alike. The trip from the Portland Casco Bay Lines ferry terminal to Chebeague is over an hour long, and for most trips, Chebeague is the fourth stop. Meanwhile, the trip from CTC’s Yarmouth terminal to the island terminal is a 15-minute direct trip. Casco Bay Lines transports freight and delivers the mail to the island, but for passengers, CTC’s trip from Yarmouth is generally more convenient. CTC operates with two vessels, the Islander and the Independence. When both boats are in service, it provides the necessary flexibility for charter trips.

CTC operates as a nonprofit and is managed by a board of directors which includes residents and commuters, ensuring that community members are considered when decisions are made. The organization, however, was not always a nonprofit. Until 2014, it operated as a private company with shares owned by stockholders (to become a nonprofit, those stocks needed to be bought back by the company). CTC’s emergency transportation services contribute to its ability to claim nonprofit status (more on that in the Q and A section).

The fifty years of service that CTC has provided the community of Chebeague has not come without challenges. General Manager, Carol Sabasteanski and Assistant General Manager, Matthew Ridgway shared some of the details of what it takes to run a successful ferry operation to a Maine island.

Carol Sabasteanski and Matt Ridgway


Q & A with Carol Sabasteanski and Matt Ridgway

How did CTC come into being? Would starting such a ferry be something that is more or less difficult today than it was in 1970?

Carol: CTC really came into being because they built the bridge from the mainland to Cousin’s Island in the late 1950s. The bridge basically turned Cousins Island into part of the mainland, so a local started a water taxi. Then he ended up renting some land on Cousins which is now the parking area. It developed over the years, and when the original founder retired, the company bought the business.

In terms of how easy it would be to do this today, a lot of that depends on the corporate structure of the ferry business. From a regulation standpoint, today's world is very different when you compare it to the time when CTC was started. However, today everyone is held to the same standards regardless of whether you’re a nonprofit, private business, etc.

Matt: A big challenge when it comes to starting a company like this is the mainland side waterfront access. The value of waterfront property would make it difficult to establish that side of the business.

Note: CTC attained access to their critical access point on Cousins Island decades ago by renting it from a landowner. They later acquired it through eminent domain.

There are multiple models in which one can run a ferry business … CTC used to be a private company, but now it’s a 501(c)(3) nonprofit. What inspired the switch?

Carol: CTC has always operated as if it were a nonprofit. The intent was never to make money. When it was originally created as a for-profit, people on Chebeague bought stock in the company. They never expected a dividend. CTC didn’t make money a lot of years, so taxes weren’t an issue. Years before I arrived, there was a discussion about why we weren’t an official nonprofit. That was one of the first things I worked on when I started in 2010—becoming a 501(c)(3). The main benefit is that there’s no income tax.

We did look at becoming a transit district. While there are laws and processes that regulate becoming a land-based transit district (like a bus on the mainland), creating a ferry transit district requires special legislation. For example, when Casco Bay Lines became a transit district, there was a special act in the legislature. We explored the process to become a transit district, but due to apprehensions from some of the mainland residents, we decided to settle on becoming a nonprofit. Unfortunately, as a nonprofit, we aren’t eligible for as many grants as we would have been as a transit district. (See Ferry System Governance Model Review, an excerpt from a study prepared for CTC which compares the pros and cons of several ferry ownership models.)

One of the primary reasons we were able to switch to a 501(c)(3) nonprofit is because of a very unique service that we do. We provide rescue services to the town of Chebeague 24 hours a day, 365 days a year at no cost to the town or to the patient. That means that our boat crew has a radio when they go to bed at night. They get calls in the middle of the night and have to transport patients. They may have to do this between 50-80 times a year.

An important note regarding operating like an ambulance: when it came to the purchase of our new boat, the Independence, we got our local legislators to work with us and go to Augusta. We spoke before the taxation committee and got our sales tax waived because we essentially act as an ambulance. We saved $63,000 from not having to pay sales tax.

Chebeague Transportation Company's two vessels, Islander and Independence.

How does CTC take in money? How does it lose money?

Carol: In terms of seasonality, without July and August, we’d be hurting. We run year-round, the same schedule, but we lose money all winter because it’s for half the passengers. Starting in May we start making money again. We have about 8 or 9,000 riders in January or February and 15-16,000 in July or August. (as of June 2020)

Primarily, we take in money through fares. Regarding the fare structure, people who buy annual parking permits get a reduced fare. $39 for ten rides. It's usually $60 for ten rides. Commuters can get ten ride tickets that expire in a week, and that’s $30. That's the lowest adult fare.

Another source of income is the barge operation. We barge from the Cousins Island lot from April to November. (The barge is for commercial freight and vehicles and is 43 feet long) It’s very restricted by a court order issued back in the 1970s. We operate under restrictions, but it’s a big part of the operation. Additionally, we have charters and cruises when we have two boats. We do Navy charters... anything we can do to use our assets. However, we don’t have regularly scheduled cruises.

Some of the costs are predictable. Fuel, payroll… We run a consistent schedule, so the biggest variable is repairs and maintenance. It isn’t just the ferry either, we have buses that shuttle passengers to and from our satellite lot. We try to plan for all that. The biggest threat is the economy. In ’08 when we had that recession, this company got hit really badly. People don’t travel when they can’t afford it. When people are building houses, doing construction, we benefit from that. That doesn’t happen in a bad economy.

What does it take to exist harmoniously in two separate towns?

Carol: I’d say in a situation where you have one town who is connected to the mainland by a terminal in another town, it’s typical that the mainland town is not going to be entirely pleased with the existence of the ferry operation. We do have agreements between the towns of Yarmouth and Chebeague which basically restrict the ferry operation in terms of what hours we can operate, how big our boats can be, and how many trips we’re allowed to make. There’s also a joint standing committee between the two towns that can meet and talk about any issues we have and try to resolve them, so there are mechanisms in place to deal with any conflicts that do come up.

That’s one of the big issues when it comes to starting a company like this. You have to work those details out between the towns.

Matt: The majority of the town of Yarmouth is supportive of Chebeague Island. And they understand that the communities are linked. Our kids go to Yarmouth school after 5th grade. They participate in Yarmouth rec center programs… my son plays hockey with kids from Yarmouth. We all go over and buy groceries there. People from Yarmouth come out on their bikes in the summer… the majority of the relationship between the towns is positive.

Where is your workforce coming from?

Carol: We’ve got a combination of mainland and island employees, but the crew has to be on island if they’re on duty in case there’s an emergency call in the middle of the night. We’ve got a small population here, 350 people. Trying to draw licensed individuals, captains, deckhands from a pool of 350 people is a challenge. Having the company be island-based is something that provides obstacles. There’s a bigger labor pool on the mainland. We’ve been adding benefits to try and attract island people to work for CTC. These are just drawbacks inherent to the nature of running a business on an island.

Resources

Chebeague Transportation Company's website

Ferry System Governance Model Review — An excerpt from a study prepared for CTC which reveals pros and cons of different ownership models

Published June 2020

BACKGROUND

Like most ferry operations, Isle au Haut Boat Services was created out of necessity. Prior to the 1970s, it was operated by a local captain with the time and resources to ferry islanders back and forth from Isle au Haut to Stonington. It was then purchased by a seasonal family on Isle au Haut as a private company and the business’s losses were covered by that family and others. In 2002, Isle au Haut Boat Services was converted to nonprofit status and is governed by a board of directors made up of seasonal and full-time island residents.

Isle au Haut Boat Services has two boats: the Mink, built in 1982, a slow but strong and resilient Maine-built craft that handles much of the island’s freight; and the Otter, built in 2016, a faster, sleeker craft that is very desirable for charters and cruises. The ferries primarily travel from Stonington to two destinations on Isle au Haut: the Isle au Haut town landing and Duck Harbor, part of Acadia National park and the access point for trails and camp sites. It typically takes about 45 minutes to get from Stonington to the island.

Mink, docked at the Isle au Haut town landing, prepares to disembark.

Isle au Haut Boat Services earns its income from a variety of sources: fares from ridership, a mail contract, and charters and cruises. An added benefit of its nonprofit status allows the ferry operation is to expand its income sources to include private donations, municipal contributions, and funds from the State. According to its website, in 2018, Isle au Haut Boat Services covered about 84% of its operating expenses from passenger, mail and freight income. The remainder was funded by the Town of Isle au Haut, by the Maine Department of Transportation (through funding from the U.S. Department of Transportation), by the National Park Service and by tax deductible contributions from private donors.

George Cole, President of Isle au Haut Boat Services and seasonal resident of the island, describes the ferry operation’s structural transitions, its innovative solutions, and other features that allow it to provide reliable transportation to and from Isle au Haut.

Q & A WITH GEORGE COLE, PRESIDENT OF ISLE AU HAUT BOAT SERVICES

The following interview has been edited for length and clarity.

Isle au Haut Boat Services has overcome hurdles while going through its transitions. Can you discuss how the operation has changed over the years and the challenges associated with those changes?

Before the 70s, it was a local service, a local man with a boat and a mail contract. It was formalized by a long-time seasonal family who bought the resources from the original owner. This was a for-profit company, though the service never made a profit, it never even broke even. The seasonal family who owned it and operated it simply supported it with some other small contributions. Over time, the family that owned the company wanted to move it on to a more stable future and guarantee continuity of the island service. The owners proposed to sell the operation to a new island group, but the main concern was to find a sustainable source of funding the operation for year round service. The conclusion was that there was no way to have it achieve financial stability unless it was turned into a nonprofit. There was considerable discussion, but in November 2002, we formed the nonprofit.

The moment you’re incorporated in a state as not-for-profit, you can then act like a 501(c)(3) pending IRS approval. After five years, if you don’t get approval from the IRS, then you have to reverse all of your donations. Isle au Haut Boat Services, as a nonprofit, acquired enough commitments from seasonal residents to operate for five years. After that, we promised to get it organized and we’d no longer need such large donations. The first thing to do was to get 501(c)(3) approval from the IRS. Unfortunately, we were turned down. If you want to become a nonprofit, you must have an approved charitable purpose. “Sustaining a year-round community” is not on the IRS’s approved list. The charitable purpose that we stated was “relieving the burdens of government” in other words, if you do something the government is supposed to do, you can get a not-for-profit status. Eventually, the IRS responded that Isle au Haut Boat Services was denied because there was no burden of government to provide transportation to Isle au Haut. I read the legislation that established the Maine State Ferry Service. It calls out six islands to be provided service, but it leaves off the rest. There is no legislation that says the government has to provide service to a year-round occupied island in Maine.

That was when Isle au Haut Boat Service went into emergency mode. There were two weeks to reply to the IRS. We made several connections to Maine's Congressional delegation and acquired meaningful letters written to the IRS. These connections helped us achieve the goal of becoming a nonprofit. Finally in 2008 the 501(c)(3) acquired all of the assets of the private boat company and became the operation it is today.

What are the primary revenue sources for Isle au Haut Boat Services, and how has becoming a nonprofit opened up new opportunities?

First is fare. Year-round residents travel for half fare. You are considered a year-round resident if you have Isle au Haut on your driver’s license, you’re registered to vote on Isle au Haut, you’re employed for more than six months by an Isle au Haut business (for example, a sternman who needs to work with a fisherman on the island), or if management claims you are valuable to the island. There are only two examples of the last option: the summer minister who comes out to Isle au Haut and a doctor from Augusta who comes out to see patients.

During a typical year, there are also cruises that generate income. Having two boats allows for flexibilities with cruises and charters. Charters are a growth area for the ferry operation because the newer boat, the Otter, is faster and cleaner, and it’s an attractive boat. Charters and excursions are much easier with the Otter. Our charters trips are weddings, memorial services, and scheduled outings as far away as North Haven, Rockland, or Allen Island.

Otter traverses through the Isle au Haut thoroughfare

The mail contract is another way revenue is generated by Isle au Haut Boat Services. We carry the mail six days a week. It’s a competitive bid contract, and it has to be renewed every four years.

The other funding sources are available due to our status as a nonprofit. After a lot of work and support from state politicians, we were able to get included in a Maine Department of Transportation program which funds rural transportation. This is the “Section 53 11” program (named after the section in the federal law that effectuated the funding). The source for those funds is federal—a federal program that supports both rural and urban transportation. Funds go to state in proportion to each state’s population among other criteria, and then the state manages the funds. The people who manage these funds at the state level are exceptional. Isle au Haut Boat Services qualified for that program after becoming a nonprofit. The program mostly supports things like buses. Private ferry companies can’t get on the program, only town governments, nonprofits, and transit districts. For us, the 5311 funding will cover 50% of operating losses for scheduled routes, up to a cap assigned by Maine DOT. Operating costs not associated with scheduled public transportation are not covered by the 5311 program. The other 50% has to be matched with local funding.

We needed to figure out how to match that 50%, so I stood up at a town meeting and stated that we needed money. The town had given money to other nonprofits before—small grants, but this was a larger ask. I stated that we were coming up with the 5311 funding, but we had to come up with the match for it. There was initially a long discussion at that town meeting, but over the years, the town came to understand the importance of allocating that money. Now there isn’t so much discussion surrounding it, and the town supports the match. Because of this, we try to have a representative from Isle au Haut Boat Services at the town meetings. If you’re asking the town for money, you need to show up!

I also still do an annual fundraising appeal. This, of course, does not support all expenses but it does help with the local match. I mail appeals to people connected to the island, and I can expect a decent percentage of donations varying greatly in amount.

What’s it like operating within a National Park?

It’s a benefit that we get to operate within a national park because that increases our ridership. We have a very good relationship with the park, and the park management is very sensitive to the town of Isle au Haut’s concerns. Campers and hikers make up a considerable portion of our passenger count. We have an agreement with the park regarding a few things we do provide for them. For example, park rangers in uniform get to travel without a fare. There’s a parking place for park rangers at our dock. There’s poster space at our dock that explains the park experience. Isle au Haut Boat Services provides transportation to Stonington for injured campers. The cooperative agreement includes an annual grant from the National Park Service for the benefits that Isle au Haut Boat Services provides them.

What unique attributes does Isle au Haut Boat Services have that give it an advantage?

The smartest thing that the original family who purchased Isle au Haut Boat Services did was buying the current operating facility in Stonington. It was originally a fish processing plant that was built in the early 1900s, but when it entered bankruptcy in the 1990s, the boat company bought it. It was an incredibly smart and valuable thing that they did because within ten miles either way of Stonington, there just isn’t any other proper place to operate a ferry. Before that, the boat operated from a public facility nearby. It was not a very good operating location because you couldn’t get into the wharf at all tides and handling freight was a challenge. Now we have a wharf that is usable at all tides, has outdoor and indoor parking, and has a place for an office and a workshop. Without it, we’d be out of business because the former landing isn’t public anymore. The Mailboat Company and the island owe a tremendous debt of gratitude to the family who operated the company for over thirty years, and who passed on to us a reliable working service with proper infrastructure.

Our full-time employees are another unique asset. Our three year-round captains have local connections and valuable certifications. They’re stable long-term employees. In the past, we’ve paid for the expenses it takes for an employee to become a licensed boat captain. If they choose to work for us for a year, then the cost to the employee is free. Our employees are the most important part of operating the service. You’ve got to have a boat of course. It has to be a good boat, and it has to be well maintained, but the people who run it are the ones who make it happen.

What does good leadership look like when operating a ferry service?

A good ferry service is responsive. I view our board as the ears and eyes in various parts of the community. The board consists of 50% year-round residents and 50% long term seasonal residents. The board meetings are based on hearing how different parts of the community are responding to different issues. We do our best to take all residents’ opinions into consideration. For example, in the winter time there used to be two trips a day, six days a week. One leaving the island in the morning, one leaving the island in the late afternoon. At a town meeting, a resident suggested that there be an occasional midday boat so a contractor could come off the island midday or if someone had an appointment in the morning, they could come back at lunch time that day. Since it was a logical idea, the next week, we changed the schedule to include a midday boat three days a week. It pays off when you listen to the local needs.

RESOURCES

Isle au Haut Boat Services Website

Federal Transit Administration - Section 53 11 Funding Information

Federal Transit Administration - Section 5311 Fact Sheet

 

Published June 2020.

Examples:

BACKGROUND

Monhegan Boat Line operates out of Port Clyde and has been serving the small island of Monhegan in one form or another since 1914. In addition to serving the needs of the year-round community, Monhegan Boat Line carries a large number of “day trippers” and other visitors to the island, as well as offers charters and cruises. As a private corporation, its business model is extremely reliant on consistent summer traffic as opposed to the sources of support available to non-profit operators.

The Elizabeth Ann arrives on Monhegan.

In 1914, when the seasonal population of Monhegan was growing, Captain I.E. Archibald and his new steamship, May Archer began providing service to the small Midcoast island. At that time, his stops that included Rockland and Thomaston. In 1942, when Captain Earl Field Sr. was in charge of the operation, the run was simplified: Port Clyde to Monhegan; the same trip associated with Monhegan Boat Line today. The trip is made several times a day in the summer and several times a week in the winter. Although ridership drops drastically in the winter, Monhegan Boat Line maintains service year-round, mostly due to the company’s mail contract which it has had since the days of Captain Archibald. Currently, Monhegan Boat Line has two boats, the Laura B and the Elizabeth Ann. The Laura B is a slower wooden vessel that carried troops and supplies in World War II, and it now transports passengers and freight to and from Monhegan. The Elizabeth Ann was built in 1995 and is a more traditional ferry boat with a larger capacity for passengers including a sightseeing deck.

Monhegan Boat Line is now run by a second-generation owner, Andy Barstow and his wife, Amy. Amy speaks about the seasonal shifts of the operation, the challenge of generating consistent income, and what makes Monhegan Boat Line work.

Amy and Andy Barstow on the Monhegan Boat Line dock in Port Clyde.


Q & A WITH AMY BARSTOW

The following interview has been edited for length and clarity.

Monhegan Boat Line’s income generation is perhaps even more seasonal than other Maine ferries, how does it stay operational all year long?

There are perks with being open year-round: we get to keep key employees, we get to have a strong relationship with the island because they know that we’re the ones that are coming even when we aren’t making a profit. However, operating in the winter does have to be subsidized by both the mail contract and tourists coming in the summer months. The mail contract doesn’t cover the winter runs on its own, but it wouldn’t make sense to operate year-round without the contract because we’d be losing too much money all winter.

The cruises that Monhegan Boat Line holds are another source of income in the summer months. They started those in the 90s to generate more income. All sources of income are intertwined. Each part of it supports the rest, sometimes one part of the business makes more, sometimes others make less. Andy also does work on boats, does moorings and floats. It takes a lot to make ends meet.

What is the fare structure like for riders? How does that change depending on the type of passenger?

We do offer discounted fare for year-round residents. The tricky part is clarifying who is a year-round resident and who isn’t. We’ve clarified that as being someone who is on the island for ten months or more out of the year. Those people can buy a book of tickets for a reduced rate.

What’s it like being a private entity as opposed to a nonprofit or transit district?

We’ve looked into different funding with the Maine Department of Transportation, but we have never been able to get that. Being a private company and not being ADA (American Disabilities Act) compliant restricts access to certain funding sources. Once our renovations in Port Clyde are done (construction began in September 2019 and phase one is complete as of Summer 2020), the mainland side of the operation will be ADA compliant.

Are there any challenges that come with running a tourist business in a fishing village like Port Clyde?

We’re a tourist business, and I think that we all have separate priorities. Port Clyde is a genuine fishing village, and we bring a lot of traffic into town. It’s not ideal for those who come to live nearby and wish to have the spot for themselves. Local folk who work in town are appreciative of the fact that we are a hard-working group. We try to be a positive influence on the community. We provide in terms of paying taxes and providing jobs. Also, there are businesses around us that are supported by the fact that people are going out to visit Monhegan.

What are some major expenses and unexpected hurdles that come with operating a ferry service?

For us, we have huge overhead costs. We’re still paying for the initial purchase of the company. You have the boat maintenance and you have the taxes. We own the property as well as the boat. We recently had to do a major dock repair. Until we had an engineer come and assess, we did not foresee having to do such a big project. We raised the dock, and addressed infrastructure concerns, and we also built a new building.

We were working in the business before we bought the business in 2010, and 2008 was horrible. Because there’s so much overhead and maintenance, there’s not a huge difference between our income and our expenses. When the economy drops, it’s tough for a ferry operation. Even just this spring with the pandemic, the ridership numbers have been kept down, we haven’t had a huge call to bring people out to the island. We’re feeling it, and we are trying to figure out how to deal with it. You have to hope for the best but plan for the worst. You have to have a backup plan—a line of credit is helpful, but it’s hard to plan for a whole season of losses. I’ve been told that a small business has to plan for a rainy day, but there’s a difference between a rainy day and a tsunami. A tourist business in Maine only has a few months in which they get enough business to last them the rest of the year. If you lose that whole season… I don’t know how many small businesses are able to survive that.

What challenges do you see with starting private ferry system today?

Any coastal business would run into challenges. We’re lucky that we were able to buy this company already set up from my in-laws. How many families can start a business like this today? You need a huge amount of money for the initial investment: a piece of property on the coast and money for the boat and equipment. Long ago, the community might have gotten together and agreed that they needed a boat to get back and forth. And then they would have made money as they built their resources. That whole working waterfront dynamic is regrettably almost antique. It’s an old way of life that is lost because people cannot afford the price of the being on the water. You lose a lot when that’s gone.

Left: Summer visitors prepare to board the Elizabeth Ann at the dock in Port Clyde. Right: Laura B arrives at the Monhegan landing on a choppy autumn afternoon.

I have to give Andy credit for being such a key role in the business. When the tourism economy was weak in 2008, he was out working on peoples’ boats and engines. He’s willing to do whatever he needs to do in order to support his employees and the company. Hard work goes a long way.

RESOURCES

Monhegan Boat Line's Website

Published June 2020