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Our AMH system faces some serious challenges in the years ahead. All nine vessels, with the exception of the recently delivered Kennicott, will reach regulatory obsolescence by 2010. The cost of modifying these vessels with required upgrades in some cases nearly equals the replacement cost of the vessel. The system builds ships and terminals with federal transportation dollars but the costs of operations must be born by state subsidy and revenues the system generates. Proposed fare increases would raise the cost of a passenger ticket 30 percent by 2007, but in that year the system projects needing an annual subsidy of approximately $40 million to operate under current operating scenarios.

As a region we have been fortunate in having very able representation in the legislative budget process, but in these times of declining state revenue it is anyone's guess if we will be able to maintain this level of support.

To address the concerns of legislators we need to demonstrate our resolve to change the system to one that is managed to provide the greatest amount of service for the least amount of subsidy while employing local residents. Our new governor will have the power to impanel a group to do this the day after the election if he or she wishes. Such a panel could be expected, among other things, to make recommendations based on our efforts to study potential changes to the system.

Once funding is identified, we plan to do an in-depth look at how the system is managed and address many of the questions that have not been answered by the Southeast Alaska Transportation Plan (SATP).

If we want a marine transportation system in the future we need to eventually replace the existing fleet with more efficient vessels that provide a higher level of service at lower operating cost. The SATP calls for a fleet of smaller port-to-port vessels operating on a dayboat basis. It also recognizes the need for traditional through service out of Bellingham and Prince Rupert.

Hard decisions about vessel types, employment levels, and route selections are all very contentious and political in nature. This will call for a fundamental change in how the system is managed and operated. We all need to work together to prove that we have the maturity as a region to take responsibility for the evolution of our transportation system. To do anything less could be disastrous for our regional economy, already on the ropes. We look forward to working closely with the next administration and Legislature to address the long-term viability of our marine transportation system.

Loren Gerhard is the executive director of the Southeast Conference, an Alaska Regional Development Organization.