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.