Comment: Government paints murky picture of ferry costs

In Sunday’s Times Colonist, Transportation Minister Todd Stone and Infrastructure Minister Naomi Yamamoto paint a misleading picture about the announced changes to the northern coast ferry service.

The ministers state that the route lost $7.35 million in 2012-13. B.C. Ferries’ annual report to the ferries commissioner (the source of all figures in this article) shows the route lost $1.71 million after government subsidies and fees were factored in.

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Loss is defined as the gap between income and outgo, and income includes contribution from both levels of government. Government people are fond of expressing legitimate contributions as losses when it comes to ferries. It doesn’t work that way, even if it sounds more dramatic.

The $7.35 million consists of $4.24 million in operating loss and $3.12 million in capital costs. Shutting the route down won’t make the capital costs go away, as the Chilliwack will be around for at least two more years, backstopping Routes 7 and 17 to Powell River. Capital costs associated with the vessel will presumably now attach to the Powell River routes.

Capital costs associated with any terminal upgrades will remain, insofar as the Nimpkish will now be using them.

Fiscal year 2013 was a huge anomaly, as the usual combined costs amounted to about $4 million up to this past year. The huge capital-cost increase has to have resulted from a major refit aimed at extending the life of the vessel.

As well, the substantial increase in the operating loss reflects the fact that many of the costs involved in refits are attributed to maintenance (operating costs), rather than to capital.

A major investment has been undertaken to extend the life of the vessel on the eve of taking it off the route, and $7.35 million is a gross overstatement of what that vessel usually costs, and reference to it as the basis for killing the route is misleading.

The ministers say “the taxpayer subsidy works out to more than $2,500 per vehicle.”

For reasons unexplained, the service fee last year jumped to $5.3 million, whereas up to fiscal year 2011, it had been under $2 million, and just barely over $1 million from FY2009 to FY2011. Whatever the reason, it’s certainly not typical and requires explanation. If it was to cover an extraordinary investment in vessel or terminal facilities, the capital has been spent, and the maintenance costs should come back down in the absence of the expensed refit cost.

Assuming that the extraordinary service fee could all be applied to the vehicles carried, it would amount to $5.3 million for 2,643 vehicles, or $2,005 per vehicle, not $2,500.

However, there were passengers on those trips, and presumably some of that contribution would apply to them. Given the passenger revenue is about the same as vehicle revenue, it would be reasonable to split the $5.3 million evenly, or $2.65 million each. That would amount to $2.65 million for 2,643 vehicles, or $1,003 per vehicle, and $2.65 million for 6,949 passengers, or $381 per passenger.

The $5.3-million service fee was a one-time anomaly that is not likely to be needed, at least over this year and next.

The stated $2,500 cost per vehicle should be more accurately stated as $1,000 per vehicle and $380 per passenger.

The minister refers to the Chilliwack needing to be retired in the next couple of years, notwithstanding the recent life-extending refit. That is possibly the case, but that has nothing to do with not extending the service until the vessel does need to be retired and then making the decision around the retirement date. The refit money is already spent.

The ministers state that “B.C. Ferries is exploring the possibility of making some refurbishments to the Nimpkish to improve the comfort of passengers, including food and refreshments.”

It would have been good to hear what these are: hot meals for the nine-hour trip? Cold snack bar? Vending machines? That service is to commence in about three months, and presumably the Nimpkish is currently in service. Will the enhanced services be in place this summer?

The fundamental reason this whole issue is a problem is that the skyrocketing fares have been progressively killing off the traffic. So, now the route has to be killed off. The traffic was growing nicely until FY2007, when the combination of steep fare increases and 20 per cent fuel surcharges became too much to bear, with traffic dropping 43 per cent since that peak year.

Exorbitant fares have progressively killed traffic on what could have been a profitable route providing a vital element for coastal tourism opportunities.

Isolated numbers can paint a misleading picture, one which most, unfortunately, will take at face value.

 

Brian Hollingshead is chairman of the ferry advisory committee for the southern Gulf Islands.

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