SSA Board Settles Bothersome Issue Of Cost Allocation
By JULIA WELLS
At a meeting marked by general good humor and a series of brisk business decisions, Steamship Authority governors voted without dissent yesterday to adopt a modified cost allocation policy that puts to bed an internal accounting issue that has been at the center of a simmering political feud for the last year.
"I feel we should vote on this and get it done," said Nantucket governor Grace Grossman, who surprised her Vineyard critics by leading a move to vote for the policy.
Presented by boat line chief executive officer Fred C. Raskin at the monthly boat line meeting in Woods Hole yesterday, the modified policy sets in place a method to "recapture" some $5 million in revenues for the Vineyard from a period when the revenues from the Nantucket route did not cover the cost of service.
The policy has become an ongoing bone of contention between the Vineyard and Nantucket since last year, when the board voted to change the policy because it would have led to steep fare increases on the Nantucket run.
The issue was whipped into a storm by a small group of Vineyard residents who are political foes of Nantucket.
Yesterday Mr. Raskin quieted the critics, presenting a brief and dispassionate explanation of cost allocation in general and the boat line policy in particular.
At the outset Mr. Raskin reiterated that cost allocation is not an exact science. "Allocation is intended to ensure that different business within the same holding company pay their fair share," he said.
The recapture issue centers on a period in the late 1990s when service was expanded on the Nantucket run, and the end result was a surplus on the Vineyard route and a loss on the Nantucket route.
Boat line managers were asked to devise a system to recapture the income disparities from that period when considering future rate increases.
In 1998 the board adopted a policy to recapture the revenue over a five-year period, but a revised policy was adopted last year that increased the recapture period from five to 10 years and set a threshold of $5 million, within which no recapture adjustment would be required.
Yesterday Mr. Raskin recommended modifying the policy again. His changes included adding bond interest to the cost allocation program, extending the recapture period from 10 to 20 years and reducing the threshold amount from $5 to $3 million.
The end result would be an annual assessment of about $100,000 against the Nantucket route.
"We are really just wrestling with the past, and there is no right decision here," Mr. Raskin said.
Mrs. Grossman moved to approve the policy with one change: Keep the threshold amount at $5 million. But Vineyard governor Kathryn A. Roessel moved to table the issue, calling for broader discussion.
"It's important that everyone in the Island communities feel happy about this. This issue has been a negative force and it has threatened to destroy the good relationship between the two Islands," Ms. Roessel said.
She suggested a joint meeting between the county commissions on the two Islands to discuss the cost allocation proposal.
Mrs. Grossman called it unnecessary.
"I agree the Islands should stand together, however this is not a big issue. I did not understand it adequately until Fred explained it, and he explained it very well," said Mrs. Grossman.
Turning to Ms. Roessel, she said: "You have said we should rely on the CEO and you are making a big deal of something that isn't a big deal. I don't believe this is a big issue and it doesn't require another committee. We are appointed by our county commissions to make decisions and this is not a big decision. I feel we should vote on it and get it done."
The rest of the board agreed and in the end the vote was unanimous after Ms. Roessel said she would vote for the policy in the name of Island unity.
"This is an issue I want to vote with you on," she told Mrs. Grossman. Ms. Roessel also found a way to cast the allocation debate in more understandable terms. "Nantucket has always covered 99 per cent of its costs - isn't that a fair statement?" she asked boat line treasurer Wayne Lamson.
"Yes," Mr. Lamson replied.