ST. JOHN - The Senate Appropriations and Budget Committee considered a bill Monday to overhaul the way ferry rates are set but ultimately decided more work needs to be done on the proposal and it was held in committee.

The bill, sponsored by at-large Sen. Craig Barshinger, would mandate lower ticket prices for the St. Thomas-St. John ferry route to be offset by government subsidies.

Barshinger said the legislation deals only with the franchised ferry operations between St Thomas and St. John. The two franchisees - Varlack Ventures and Transportation Services of St. John - are authorized to make up to an 8 percent rate of return on their operations. In order for them to earn a fair rate of return and keep fares low for passengers, the difference must be made up with either federal or local governmental subsidies, Barshinger said.

After a ferry rate investigation conducted by the V.I. Public Services Commission was completed earlier this year, the board voted to hike the one-way fare for adults between Red Hook and Cruz Bay by $2 - from $5 to $7. The new rates also would decrease the one-way fare for adults between Charlotte Amalie and Cruz Bay by $2 - from $10 to $8.

The change was almost immediately put on hold after St. John-based Virgin Islands Unity Day Group filed a petition opposing the rate structure. The PSC is now reconsidering the rate increase, and a decision should be made Thursday.

Barshinger said ferry rates should be affordable for residents and $14 a day for commuters is not affordable.

"People are hurting and they don't want to pay that much money," Barshinger said.

While many residents said Monday that something must be done to reduce the cost of public transportation, they understood the criticisms offered by the ferry companies and other people who testified.

The bill as written would give authority to the Public Works Department Office's of Transportation to grant an annual subsidy of up to $500,000 to each franchised ferry company. The subsidy would be paid in installments.

The franchise holders would apply for the subsidy through Public Works, provide documentation that the ferryboat companies have applied for all available federal subsidies first and adhere to the set rate structure laid out in the bill.

The bill proposes one-way rates between Red Hook and Cruz Bay of: $2 for passengers 12 and older; $2 for commuters; $1 for children under 12; $1 for senior citizens; $1 for bulk tickets.

The proposed one-way rates between downtown Charlotte Amalie and Cruz Bay are: $10 for passengers 12 and older; $7 for commuters; $3.50 for children under 12; $3.50 for senior citizens.

The bill would require the franchisees to issue reports every six months to Public Works detailing number of passengers, luggage, gross earnings, expenses, and amounts of federal subsidies received.

Barshinger said the amount of the subsidy would change depending on the ferry companies' operating costs.

"All of these numbers are flexible," Barshinger said.

Attorney Claudette Ferron, representing the two ferry companies, said the bill as drafted would bankrupt the franchisees.

"I'm glad to hear that the proposal is a model and that the numbers are flexible, because without that the proposal is completely unworkable," Ferron said. "Under the legislation as proposed there would be insufficient revenues generated by the fares to operate the system."

PSC Chairman Joseph Boschulte said the bill is in direct conflict with the Public Services Commission statute.

"Ratemaking is a fluid mechanism that vests in a regulatory agency the power to respond to the dynamic nature of the territory's growing infrastructure. This language will take away that power and create an under-financed, rigid rate schedule that may lead to insolvency and ultimately undermine the stated legislative goal of encouraging mass-transit operations in the territory," Boschulte said.

He also questioned a provision in the bill to appropriate $30,000 from the General Fund to the V.I. Inspector General to perform an annual audit of the ferry companies. He said it is redundant at best to have Public Works, the Inspector General and the PSC charged with oversight of the ferry operations.

"The language of this bill as written appears vague, redundant, conflicting and dangerous to the future of the territory's mass marine transit system," Boschulte said.

The ferries have been entitled to subsidies from the V.I. government since a law was passed in 1987 giving the two companies an exclusive franchise. However, the two companies have received only $750,000 each over the course of the franchise agreement.

The ferry companies received an appropriation of $500,000 each in 2007 and $265,000 each in 2008 - although they received only $250,000 of that appropriation.

Sen. Sammuel Sanes questioned the need for new legislation, when there are existing laws mandating subsidies and a guaranteed rate of return for the ferry companies.

He said it costs $2 to travel on a ferry between Puerto Rico and Vieques and there is no reason why the Virgin Islands cannot have a similar system.

"Let us stop reinventing the wheel, we just need to enforce the law," he said.

The bill also prohibits the V.I. Port Authority from charging a fee to use the ferry terminals, mandates the Office of Transportation present an annual report to the Legislature about ferry operations and reduces the subsidy if ferry runs are missed by the franchisees.

The committee voted to hold the bill.

Sen. Carlton Dowe, Barshinger, Sen. Louis Hill, Sen. Wayne James, Sen. Terrence Nelson, Sanes and Sen. Patrick Simeon Sprauve attended Monday's meeting.

- Contact reporter Aldeth Lewin at 774-8772 ext. 311 or e-mail alewin@dailynews.vi.