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Toll credits from Alaska ferries to fund Tustumena Replacement Vessel and other marine highway projects

M/V Tustumena at Kodiak dock. Photo by Gordon Leggett via
M/V Tustumena at Kodiak dock. Photo by Gordon Leggett via

For the first time, money from ticket sales and revenue coming in from passengers using the Alaska Marine Highway System, known as toll credits, will fund ferry and marine highway projects across the state. That’s in part due to recent eligibility changes within a Federal Highway Administration program.

Last week on April 4, the Alaska Department of Transportation and Public Facilities announced it was approved to utilize toll credits, as state matching funds for critical transportation projects.

Shannon McCarthy, the communications director for the Alaska DOT&PF, explained how a toll credit can be used in lieu of the state spending more money on Alaska Marine Highway System projects.

“The toll credits aren’t actually money; they just allow us [DOT] to meet the requirements that the state doesn’t have to put in additional state dollars,” McCarthy said. “So then we can use the federal funds that we normally get, we apply the toll credit, and then we could use other funding; for example like the ferry boat money, or the Surface Transportation Block Grant funding.”

The ferry boat formula funds are a separate source of federal funding that go towards construction or improvements to ferryboats or ferry terminal facilities around the U.S.
According to McCarthy, Alaska receives roughly $20 million to $35 million in ferry boat funds each year.

McCarthy said this is the first time the state has been able to use the toll credit program for Alaska Marine Highway System projects. Mainly because the federal program had strict requirements but the law was recently changed so that Alaska could qualify.

Towards the end of March, the DOT incorrectly included millions of dollars from ferry ticket sales within the Statewide Transportation Improvement Plan [STIP], which was rejected by the Federal Highway Administration [FHWA]. McCarthy noted this was due to a miscommunication between FHWA and DOT, which led to the state mistakenly creating a separate STIP project for the toll credits. The state is now approved to use $19.8 million from ferry ticket sales or toll credits as Alaska’s 10% portion needed to match other federal funds coming in for improvements to the AMHS.

McCarthy says this allows DOT to fund a dozen Alaska projects that have been approved by the Federal Highway Administration to use toll credits for the state match requirements. That includes the Tustumena Replacement Vessel, with the vast majority of the money coming from federal sources. The Federal Transit Administration awarded $92,786,400 towards the TRV project back in 2023 through the administration’s Rural Ferry Program.

“[The toll credit program is] going to be an incredible benefit to the Alaska Marine Highway System,” McCarthy said. “It gives the State of Alaska, Alaska DOT, a lot of flexibility when it comes to funding these really important capital upgrades that have been sorely needed.”

Other approved projects include ferry terminal rehabilitation in communities like Kake and Angoon, as well as upgrades on several ferries such as the M/V Matanuska, and the complete replacement of the M/V Tustumena.

It is unclear when construction on the Tustumena Replacement Vessel will begin but an estimated timeline plans for the new ferry to be finished in 2027. The Tusty is currently dry docked for its annual winter overhaul through April 30, before it is scheduled to resume sailings to Kodiak Island communities of Port Lions, Ouzinkie, and Kodiak.