Taxpayers across Washington state have had a rough go as of late. New gas taxes, increased capital gains income taxes, and higher B&O taxes are hitting the wallets of many across the Evergreen State. That’s why it was overall good news when state officials recently announced they used the new open-bidding system established in 2015 to get ferries in the water more economically.
Due to the new open system, taxpayers will save an estimated $357 million throughout the program.
Washington Policy Center (WPC) wrote about the opportunity for open bid savings back in 2015 (Ending ‘Build in Washington’ rule would cut new ferry construction costs by 30%). At the time, the state had an uncompetitive landscape when it came to receiving bids: only one company met the requirements. As such, taxpayers paid a higher tax premium due to the restricted bidding process.
While the recent savings news was mostly seen as a “win” for taxpayers, some saw the out-of-state contract as a “loss” for the Washington shipbuilding industry.
To start, the Washington-based boatyard got a +13% credit to their bid, meaning they could be more expensive, yet still score better. Despite that advantage, they were still massively underbid by the winning Florida-based company.
To many, the shock of a 33% savings ($714 million vs $1.07 billion) from open bidding revealed the burden Washington state places on businesses, rendering them uncompetitive in ferry construction. This led some lawmakers to call for reducing barriers and easing regulations to increase competitiveness.
After all, even under protectionism, shipbuilding in Washington state was shrinking under the “Build in Washington” rule. Employment in shipbuilding in the state fell 77% from its peak of 13,946 employees in 1982 to 3,268 by 2014, per a WSSIP report.
The other concern, even with the one-third savings, is the sheer cost of the electrification of the ferries. WPC noted in the 2015 report that WSDOT purchased diesel ferries at $131 million per ship while BC Ferries in Canada was getting hybrid diesel/LNG ferries at $79 million ($USD). Despite the potential for even more savings, leaders opted instead for electric ferries and their associated infrastructure.
It should be noted that a $79 million LNG BC ferry would cost $109 million in today’s dollars, while the winning electric hybrid equates to $238 million per ferry, more than double. This shows how focusing on electric propulsion is a major factor in the inflated cost. This is confirmed by the fact that BC Ferries can retrofit a vessel to LNG for $10-50 million ($USD, inflation-adjusted), while Washington officials say it costs $96 million to convert a ferry to electric.
Washington companies should be able to compete in their own backyard, just like they want to compete in other states. The open competition drove costs down 33%, saving taxpayers hundreds of millions of tax dollars. Yet the fact that shipbuilding in Washington is still so uncompetitive should signal an urgent S.O.S. to lawmakers that they need to right the state’s tax and regulatory ship.
Bob Pishue is a policy analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.
