Tight economy keeps sale of old ferries in limbo

By Larry Lange
PostGlobe transportation reporter

Having trouble selling your house in this lousy economy?

Try selling four 82-year-old state ferries that you’ve decided you don’t need any more.

One of the two offers that Washington State Ferries has received for the boats since the so-called steel-electric ferries were permanently beached has fallen through, the victim of plummeting steel prices that don’t make scrapping them worthwhile.

Another problem: Where do you park an old ferry?

The four ferries – the Illahee, Klickitat, Nisqually and Quinault – were beached in late 2007 after inspections showed extensive corrosion in their hulls and the state concluded they were no longer worth repairing.

One option was to scrap them, but “the economy dropped so quickly, and steel prices dropped that much quicker,” said G. Dennis Vaughan, managing partner of Environmental Recycling Systems, which backed out of an attempt it made to buy the vessels and sell the metal. “Everybody just stopped buying scrap steel.”

ERS said last fall that it would buy the four ferries for $500,000, intending to tow them to Mexico and scrap them. Vaughan said that’s no longer feasible because of the 80 percent drop in scrap-steel prices.

Vaughan said there’s a “slim chance” his company might try again to buy the old boats if steel prices go up enough. But not at the moment.

The other possible sale – for floating developments of some kind – also has foundered because the real estate firm that wanted them for that purpose hasn’t yet found a place to moore the 1927-vintage boats, which are each 256 feet long and 73 feet wide.

Managing Green, a Tacoma real estate development firm, has moorage brokers trying to locate tie-up space for the old ferries, ferry system spokeswoman Marta Coursey said. The firm has told the ferry system it wants to convert the old vessels into usable business space.

Washington State Ferries “continues to work with potential buyers and moorage brokers to negotiate a contract,” said Coursey, who added that the state is still talking with ERS about a possible sale. She said the state is not searching for other buyers and isn’t advertising them again.

“We’re not saying any more that (a sale) will be immiment,” she said, chuckling. “There’s just not a lot of interest out there. It still costs a lot of money to move them, and then you’ve got to make them operational. It’s not an easy endeavor, but I can assure you everybody’s still working on it.”

The ferry system hoped to sell the four vessels for $350,000 apiece but couldn’t get any bids at that price. Managing Green offered $650,000 and put down a $30,000 deposit. ERS bid $500,000 plus a percentage of the revenue from scrapping them, but ERS didn’t put down a deposit. Neither company has signed a purchase agreement that obligates the buyer to move the boats, which are currently docked at the ferry system’s Eagle Harbor maintenance facility on Bainbridge Island. So with the ferry system searching for more cash, it’s finding that selling old boats is by no means a sure-fire way to do it.

The four boats were bulit in the late 1920s for the Southern Pacific Railroad for service in the San Francisco Bay Area. They were moved to Puget Sound in the early 1940s after the bay highway bridge made them obsolete. Coursey said the boats incur "minimal" costs for insurance and the electricity to run their fire and flooding alarm systems while at the maintenance facility.

The ferry system may have to pay the holders of depreciation rights on the Klickitat about $21,000 as of the end of this month if that boat is sold. Depreciation rights were purchased during the 1980s and early 1990s by private companies that invested money in the ferries and received tax writeoffs in exchange. The depreciation rights on the other three ferries have been transferred to the Kittitas, a ferry built in the 1980s; Coursey said that move will allow the state to avoid having to pay the holders of those rights about $3 million if the Illahee, Nisqually and Quinault are sold. She said the ferry system was unable to transfer the depreciation right on the Klickitat to any other ferry because of qualification requirements.

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