Clap Your Hands-If you Believe in City Ferries

John Koenig had finally gotten in the game. With two new ferryboats making regular departures from Keyport, N.J., to Pier 11 at the foot of East 34th Street, Mr. Koenig’s ferry company, pumped up by the snarl in PATH train service to lower Manhattan since Sept. 11, had doubled in size. The rising tide, it seemed, was lifting all boats.

But earlier this year, Mr. Koenig realized he had a problem. He was leasing the two vessels from private owners and would have to return both in May, leaving him only one small backup boat to cover the service. Another boat is scheduled to arrive in July, but whether his business will survive the interruption in service remains to be seen; he’s cut ticket prices, and his ridership has dropped from 700 to 300.

So Mr. Koenig did what any ferryman who wants to survive in New York harbor does: He started talking to Arthur Imperatore Jr., now president of NY Waterways, the ferry empire built by his father, Arthur Imperatore Sr., to try to work out a deal to keep his business afloat.

“There are a limited number of … boats available in the country, and it’s a very small universe-and when, all of a sudden, an event happens that creates a demand like this, everyone’s talking to the same people,” Mr. Koenig said. “NY Waterways, because they’re getting all this federal money after Sept. 11, they just expanded what they were doing and sucked up all the available boats.”

While it wasn’t clear what arrangements were on the table between Mr. Koenig and Mr. Imperatore, the talks demonstrate the level of control Mr. Imperatore has over ferry service in and around New York harbor.

So firm is his grip on ferry service that competitors who may yet find themselves asking him for help are reluctant to speak ill of him on the record. They use words like “impressive” and “powerful” to describe his ferry empire, which has virtually taken over the business in New York and New Jersey. But off the record, words like “aggressive” and “ruthless” are used to describe the Imperatores, junior and senior alike.

And as the political will to expand ferry service throughout the region grows stronger, with more city-, state- and federally subsidized contracts certain to be handed out, Mr. Imperatore is reaping the rewards of what people once called “Arthur’s Folly”: the dream of ferries drifting past the Manhattan skyline, full of fare-paying passengers eager to escape the subways, bridges and tunnels connecting Manhattan with the rest of the known world.

“People have freedom to join the market, and freedom to fail if they get it wrong,” Mr. Imperatore told The Observer when asked about his firm’s competition. “We took the biggest risk, we invested the most capital, and frankly, we worked the hardest.”

Nobody-not even his competitors-disputes the point, least of all the city’s elected officials, who were mightily impressed with Mr. Imperatore on Sept. 11. The way he tells the story, he was aboard one of his boats on the Hudson River when the attack took place. Sensing that downtown would have to be evacuated, he sent all eight of his ferryboats to embarkation points near the World Financial Center, and they eventually evacuated thousands from lower Manhattan.

It stands to reason, then, that six months later, it was Mr. Imperatore who took the podium alongside Mayor Michael Bloomberg, Governor George Pataki, New Jersey Governor James E. McGreevey, Port Authority chairman Jack Sinagra and Federal Emergency Management Agency acting regional director Joe Picciano to announce a plan to dramatically expand the ferry service using federal relief dollars. The new service, it was announced, would include a free water shuttle to carry commuters between the World Financial Center on the Hudson River and Pier 11 on the East River, as well as more frequent service from the Hoboken Rail Terminal to the World Financial Center, and a new route between the Hoboken Rail Terminal and Pier 11 on the East River-all operated by Mr. Imperatore.

The announcement stunned Tom Fox. Proprietor of his own infant ferry company, New York Water Taxi, he had gone to the Port Authority in December to suggest that the small boats he was developing be used to shuttle passengers among a series of ferry embarkation points in lower Manhattan, connecting a larger network of commuters to the 250-seat ferries the Imperatores were running to New Jersey. He asked the Port Authority to help fund the construction of small barges alongside city piers that would allow his smaller boats to dock in their slips. Months passed, and nothing came of it. Mr. Imperatore, it turned out, had gotten federal money to run such a service himself.

Not long after the ferry expansions were announced, Mr. Fox got a call from Mr. Imperatore, asking him to come to a meeting in New Jersey.

Mr. Imperatore had only a small fleet of “otter-class” boats-the smaller vessels he would need to make short loops around several piers in lower Manhattan and hook up to his West 38th Street terminal on the Hudson River. Mr. Fox, using money from an investment by the Durst Organization, was having three such ships built at the Derecktor Shipyards in Mamaroneck. Would he sell them to Mr. Imperatore? No thanks, came the response.

As it turned out, Mr. Imperatore’s short-hop service in lower Manhattan failed to attract enough riders to justify keeping it going, and so the service was stopped-and with it, the flow of FEMA money to fund such a service. If Mr. Fox wants to revive it, he’ll have to make his case to the Port Authority all over again.

Before Sept. 11, Mr. Imperatore seemed poised to become the main player in the leisure-cruise market in New York harbor as well. It’s a market that Circle Line, now owned by a Swedish consortium, has had tied up for 50 years, with its most famous tourist-ferry route circumnavigating Manhattan. When Arthur Imperatore Sr. started his own ferry route between Weehawken and Manhattan’s West Side about 15 years ago, it was only natural that he went to see Circle Line president August Ceradini for help in working out the myriad business issues involved in putting a ship in the water and docking it in Manhattan.

“He said he was just doing ferries, they were just doing excursions; and so [Circle Line] opened their doors for him, helped him any way they could,” said one person familiar with the talks. But a few years later, Mr. Imperatore began operating several sightseeing tours in direct competition with Circle Line. By last summer, Circle Line was in talks to sell out to Mr. Imperatore. According to Mr. Imperatore, those talks fell apart after Sept. 11. He has been telling reporters that he’s not interested in developing leisure routes as a mainstay of his business-but sources watching the deal say he’s still the only buyer considering Circle Line.

Mr. Ceradini did not return The Observer’s calls for comment.

‘The Monopolist’

Mr. Imperatore has been a tireless advocate of ferry service in general, especially since Sept. 11. On May 10, he took City Planning Commissioner Amanda Burden on a tour of the harbor on one of his vessels to demonstrate the feasibility of various new routes. “The monopolist,” Ms. Burden called him in a wry aside to one of Mr. Imperatore’s competitors, who was inquiring about taking her on a tour of his own. Indeed, just as Mr. Imperatore’s business seems synonymous with ferry service, the expansion of such services has become synonymous with helping Mr. Imperatore expand his franchise.

City and state agencies-some with federal emergency-relief dollars burning holes in their pockets-are completing more than $300 million worth of work on several area ferry terminals, many of them planned long before Sept. 11. Among the projects are a revamped St. George Ferry Terminal on Staten Island, a completely reconstructed Whitehall Ferry Terminal, a new floating World Financial Center Terminal in lower Manhattan, a new West Midtown Ferry Terminal at West 39th Street (on land owned by Mr. Imperatore) and a new Port Imperial Intermodal Ferry Terminal in Weehawken (also on land owned by Mr. Imperatore). Smaller terminals and landings are also planned, as is a restoration of the historic ferry slips at Hoboken Terminal. Meanwhile, the younger Mr. Imperatore announced last July that his company had bought more than a dozen new vessels for $20 million with loans backed by the federal government.

Accompanying all this expansion will be a slew of requests for proposals for new ferry rides, issued by a variety of city and state agencies and authorities. Contracts to operate the terminals will also be handed out.

For example, proposals are due on a new, subsidized ferry route between Sunset Park and lower Manhattan-a route that until last July was navigated by SeaStreak, a high-speed ferry service operated by Sea Container Ltd., an international shipping and commuter-ferry operator with extensive runs in Europe and Australia. It has been harder for SeaStreak to break into the New York market.

“We used to operate in Brooklyn,” said the company’s president, David Stafford. “And we were unsubsidized. And at the end of the day, because of the low numbers-there were 100 [passengers] out in the morning, and 100 back in the afternoon, and that didn’t change for a long period of time-we decided to say, ‘This ain’t working.'”

Last summer, Mr. Stafford approached the city’s Department of Transportation about a partial subsidy for the route. “At that time, there was no money on the table to keep us there, and so we moved out in July of last year,” he said. “Then, of course, after 9/11 the city put the Staten Island ferry on that route …Êfor free, and they’ve been carrying 1,800 to 1,900 passengers.”

Now Mr. Stafford and others, including Mr. Imperatore, can bid anew to run the route. But Mr. Stafford won’t be able to get the boats together to operate the service, and the contract only lasts for six-month periods.

“The time doesn’t seem long enough for anyone to get the right equipment for that kind of service,” said Mr. Stafford. “We’ll look at it, but it makes you wonder.”

Iris Weinshall, the city’s transportation commissioner, doesn’t buy this line.

“I would argue with the people who say there are no boats,” Ms. Weinshall told The Observer. “There’s a whole market for used boats out there. As a matter of fact, we got notification that the City of Seattle was prepared to sell two of their fast ferries; they wanted $1.7 million for the two ferries. So I would beg to differ with them. You can buy used boats; there is a market out there.”

But in the ferry industry, if not in the halls of city government, $1.7 million is a lot of money. According to Dun & Bradstreet, the entire net worth of Mr. Imperatore’s NY Waterway company is $30 million. Most of his competitors run much smaller operations. Without government assistance, getting in the game can seem close to impossible.

“I think they realize that the injection of public money into a market like this is going to change the nature of that market,” Mr. Koenig said. “If you start subsidizing, you’re going to end up with a wholly subsidized industry. Pretty soon it’s going to be difficult for the privates to compete. I’m sure they’re aware of it, and I don’t know if there’s a policy to deal with it.”

It’s a point Mr. Imperatore concedes, to some extent.

“I think that after Sept. 11, there has developed a kind of gold-rush mentality in the water-transport business,” he said. “It’s a mixed picture. It’s a difficult, labor-intensive, capital-intensive business. Before, we had to have a large group of [passengers] at relatively low profit margins, because you’re competing with heavily subsidized transit systems. Now, almost without exception, they’ve become wards of the state, so we at NY Waterway are very cognizant of that and working to be a profitable business.

“I think a lot of people envy our success,” Mr. Imperatore continued. “And we have been very successful-because we took the biggest risk, and we worked the hardest to get it right.” Clap Your Hands-If you Believe in City Ferries