There is a need for Transparency and Correct Budget Reporting

There is an ongoing misclassification of major Guemes Island Ferry projects — specifically, the engine replacement and electronic ticketing system — as Operations and Maintenance (O&M) rather than as capital improvements. This accounting practice, as reflected in recent county budget documents and the 2025 Draft Ferry Fare Target Report, raises serious concerns about transparency, accuracy, and compliance with state and federal reporting standards.

On page 23 of the 2025 Draft Ferry Fare Target Report, the “4910 – Miscellaneous” line shows $139,744 in actual 2024 expenditures, matching the reported budget of $139,902 — suggesting no variance. However, the 2025 Adopted Expense Budget lists the modified 2024 budget for that same line at only $62,902.

The difference — approximately $84,000 — corresponds to recurring monthly payments to Anchor Operating System for hardware, licensing, and implementation of the new electronic ticketing system. This is not a minor operational cost. The electronic ticketing project has long appeared in both the County’s 6-Year Transportation Improvement Program (TIP) and the 14-Year Ferry Capital Improvement Plan (CFCIP) as a capital improvement, eligible for federal funding under the Ferry Boat Program.

Reclassifying a long-planned capital project as O&M, and burying it under a “miscellaneous” category, misrepresents the nature of the expenditure and artificially inflates O&M totals. That has serious downstream effects:

• State Reporting: O&M figures are reported to WSDOT and used to determine the Ferry Deficit Distribution, directly influencing fare recovery targets and state funding allocations.
• Public Perception: When significant capital costs are misclassified, it erodes public trust and distorts the financial picture presented to ratepayers.
• Future Planning: It clouds the accuracy of both operating and capital budgets, making it harder to plan and justify future improvements.

These same concerns apply to the 2025 Guemes Ferry engine replacement project, which has been publicly described as “routine maintenance.” In reality, full engine replacement — including design, procurement, and installation — is a capital investment that extends the vessel’s lifespan and substantially alters its performance profile. Labeling such a project as “routine” is inaccurate and misleading.

We respectfully request that the County:

1. Reclassify the electronic ticketing system and engine replacement expenditures as capital projects in accordance with state and federal definitions.
2. Amend public budget documents and reports to reflect these corrections transparently.
3. Provide a clear written explanation for when and why these classification changes occurred, and who authorized them.
4. Establish a consistent policy defining the distinction between O&M and capital expenditures for all future ferry projects.

Taxpayers and ferry users deserve clear, accurate, and honest reporting. This isn’t about accounting semantics — it’s about accountability. If we cannot trust the categorization of core expenditures, then every fare adjustment and funding proposal becomes suspect.

The people of Skagit County are paying attention. We expect fiscal transparency, accurate reporting, and adherence to the standards that keep our ferry system financially sound and publicly trusted.