The state ferry system needs a business plan that includes a replacement schedule for aging ferries and terminals and a stable future funding source because ferry fares can’t keep increasing, Gov. Chris Gregoire said during a campaign stop Monday in Sequim.

The governor, who is running for re-election against 2004 opponent Dino Rossi, spoke Monday to the Clallam County Democratic Club at the John Wayne Marina on a two-day campaign swing that also took her to Port Townsend, Port Angeles, Coupeville and Anacortes.

“Raising ferry fares is not an option because that just reduces ridership which reduces revenue. You never can raise ferry fares enough to be a long-term funding source,” Gregoire said.

When the motor vehicle excise tax went away following the passage of Initiative 695, it “devastated” the state’s ferry system because that was a fundamental source of revenue, she said.

But the ferry system has not had a business plan for retiring old ferries and replacing them with new ones, Gregoire said.

So the state transportation commission is traveling the state talking to people to develop recommendations for long-term funding source for the ferry system, she said.

The commission’s report is due to the governor by Dec. 1.

In November 1999, state voters approved Initiative 695 that eliminated the 2.2 percent excise on motor vehicles that provided as much as $52 million, or 23 percent, of the system’s revenue.

Between 2001 and 2006, fares increased 62 percent while ridership dropped by 11 percent, or three million fewer vehicles and passengers.

Gregoire also said that despite a projected $15 million decrease in gas tax revenue, currently funded projects such as widening 2.5 miles of U.S. Highway 101 between Shore Road and Kitchen-Dick Road will get built.

The money for new ferries also is set aside as well as the money for the Hood Canal bridge replacement and retrofit, she said.

The only thing that might happen to funded projects if money comes up short is that they might be delayed to a future date, Gregoire said.

The state’s transportation system has been neglected for 30 years but she will not let anything such as the August 2007 collapse of the I-35W bridge in Minnesota happen here, Gregoire said.

The governor also touted the 11 “innovation partnership zones” — including Battelle, Sequim Marine Research Operations — being developed as a result of legislation she proposed. Substitute House Bill 1091 creating the zones was sponsored by Rep. Kevin Van De Wege, D-Sequim, during the 20007 legislative session. The zones are modeled on “research parks” such as such as the Research Triangle in North Carolina that bring together education, research and business.

Gregoire said she brought back the idea from her trade missions overseas, where she has seen the concept work. They allow a business and educational institution to join together and begin seeding new businesses and that becomes a magnet for other businesses, the governor said. But she didn’t want to take the same approach as California, which built just one or two big zones, Gregoire said.

This is an opportunity to build 11 zones, which provide the seeding to attract other businesses that support that core of initial businesses, she said.

Gregoire also discussed the Puget Sound Partnership which aims to make Puget Sound “fishable, diggable and swimmable” by 2020. It’s beautiful out today but in August there are parts of Hood Canal where you can see dead fish, she noted. “But solving the problem is more difficult because it’s not just industry that’s to blame but the actions of every single one of us,” Gregoire said.

The governor also said Washington is one of the fastest growing states for not just retirees but also veterans, many of whom return here after they finish their service. She acknowledged she’s acutely aware of the health care issue that creates and that Sequim will be at the forefront.

Gregoire said she doesn’t know what the state budget will look like in December when she develops her proposal to send to the Legislature.

There’s a projected $2 billion deficit but that’s just a projection, she said, adding that past projections said the state would have a $5 billion deficit instead of its current $800 million surplus.

“Raising ferry fares is not an option because that just reduces ridership which reduces revenue.”

— Gov. Christine Gregoire