North Carolina Ferry Division leaders say more than $92 million in new state funding is needed to maintain service, modernize key infrastructure, and prevent breakdowns across the nation’s second-largest state-run ferry system.
Director Jed Dixon told members of the General Assembly’s Joint Legislative Transportation Oversight Committee at November 6 hearing that years of deferred maintenance, aging vessels, and strained shipyard capacity have pushed the system to a critical point.
“We’re at the place where the fleet is aging faster than we can service it,” Dixon said. “If we don’t get ahead of these needs now, we’ll see more breakdowns, more interruptions, and higher long-term costs.”
The division operates 23 ferries and 11 support vessels on eight routes carrying about 1.47 million passengers per year. A 2020 analysis found the system supports roughly $735 million in statewide economic activity.
A fleet past its lifespan
Dixon said 70 percent of the fleet is over 20 years old, and vessels now require up to 15,000 hours of Coast Guard-required dry dock work. The Manns Harbor Shipyard, the division’s primary maintenance facility, has only four usable work platforms and needs at least six.
“Our shipyard is stretched to its limits,” Dixon said. “We cannot maintain the current fleet with the capacity we have.”
The funding request includes $23.5 million in recurring operations and maintenance and another $69 million in one-time capital needs, including modernization of the Manns Harbor Shipyard, shoreline stabilization projects, dredging, and vessel propulsion and electrical upgrades.
Senators push back on cost and subsidies
Several senators on the committee questioned the scale of the funding proposal and the state’s long-standing subsidies for ferry operations.
Sen. Vickie Sawyer, a Republican from Iredell County, said ferry riders are receiving far more support from taxpayers than drivers in her district in the Charlotte suburbs pay tolls on I-77 express lanes to reach the downtown area of the state’s largest city.
“We’re subsidizing out-of-state visitors at $230 per vehicle to ride Cedar Island–Ocracoke,” Sawyer said. “Meanwhile, people in my district are paying $20 every time they get on the interstate. It’s not sustainable.”
Sen. Bill Rabon, a Republican from Brunswick County, argued that ferry subsidies for Ocracoke residents have reached an excessive level.
“We’re spending about $25,000 per person, per year to support 700 people on Ocracoke,” Rabon said. “These numbers don’t add up, and we cannot ignore them.”
Toll divide between House and Senate
The Senate budget proposal includes new tolls on the Hatteras–Ocracoke and Currituck Sound ferries, and doubles existing tolls for the Ocracoke–Cedar Island and Ocracoke–Swan Quarter routes and the Ocracoke Express passenger ferry.
Senators argue tolls would generate about $6.4 million annually for vessel replacement.
The House budget contains no new tolls.
Committee members noted that the General Assembly has still not passed a full budget for the fiscal year that began July 1, leaving agencies to operate with last year’s spending plan.
Recent “mini-budget” avoided deep service cuts
Last month, lawmakers passed a $7 million stopgap measure that prevented a proposed 60 percent reduction of ferry runs statewide. That package included $3 million for maintenance and $4 million for Coast Guard-required dry dock work, including repairs to the M/V Sea Level.
Dixon thanked lawmakers for the interim funding but warned it only postpones deeper problems.
“That funding bought us stability for a moment, but the underlying needs remain,” he said. “We cannot operate this system long-term on patchwork budgets.”
Infrastructure needs continue to grow
The division’s one-time funding request includes:
• $23.6 million to modernize the Manns Harbor Shipyard
• $37.8 million for operations reliability projects, including shoreline protection in Hatteras and Cherry Branch and dredging in Currituck and Aurora
• $7.6 million for safety and environmental compliance
Fuel price volatility and personnel shortages remain ongoing challenges, Dixon said, with fuel and labor accounting for about 80 percent of annual costs.
“We’ve borrowed from the Highway Fund in multiple recent years just to cover basic operating expenses,” he said.
Long-term funding ideas under review
The division is working to propose statutory changes that would give managers more flexibility in using state and federal dollars, which are currently restricted largely to vessel replacement.
“We need the ability to use our money more efficiently,” Dixon said. “Some of our biggest maintenance challenges don’t fit neatly into existing funding categories.”
Rep. Frank Iler (R-Bruswick), the committee’s House co-chair, said lawmakers understand the system’s importance.
“For a lot of coastal communities, ferries aren’t a luxury — they’re their highway,” Iler said. “We have to keep them reliable.”
But Sawyer reiterated that new funding must come with new revenue sources.
“We have tough choices to make,” she said. “We can’t pretend that the current model is sustainable.”
Route reserves fall far short of vessel costs
Dixon told lawmakers that vessel replacement costs far exceed the dedicated reserves currently held for each route. According to the presentation:
• Ocracoke–mainland routes: $13.3 million
• Hatteras–Ocracoke: $5.7 million
• Currituck–Knotts Island: $2.65 million
“A new Sound Class vessel is approaching $20 million,” Dixon said. “These reserves cannot come close to covering replacements.”
He told lawmakers the division will continue refining its funding proposals ahead of the next legislative session.
“We’ll be working closely with fiscal staff to find the best path forward,” Dixon said. “But without new investment, the system will become less reliable — and the impacts of that will be felt across our coastal communities.”
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