Les Leyne: Ferry arguments raise doubts about plans

There’s a certain amount of friction behind the scenes among B.C. Ferries, the NDP government and the independent ferries commissioner.

It leaves the impression B.C. Ferries will have to trim its sails considerably to avoid sliding back into red ink over the next few years.

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The three entities have been exchanging views for the past several months on the service contract that will set the course for the next four years, starting in April. There are some big disagreements about the price cap on fares over that period.

Also, correspondence between the corporation and Transportation and Infrastructure Minister Claire Trevena, obtained via FOI request, shows there was a running argument over who covered the fare cuts on minor routes and the restoration of free mid-week rides for seniors.

Those measures and a fare freeze were costed at $114 million in foregone revenue in a two-year deal that expires this March.

Trevena met with the ferry brass last summer and expressed the view that those measures were paid for by government. B.C. Ferries CEO Mark Collins wrote to her later to say the government only paid about half those costs. He said the company absorbed the rest.

The government put in $32.5 million more to continue those affordability measures in the coming fiscal year. But Collins’ letter says that’s $22.3 million short of covering the full cost.

There was also a disagreement in 2018. Trevena expressed surprise and “extreme” disappointment when B.C. Ferries removed a temporary fuel rebate that at the time was in effect. It came while her fare freeze was in force, which had the effect of negating it.

As well, last summer Trevena warned B.C. Ferries not to start any major projects until a provincial “vision” for the system is completed.

B.C. Ferries had taken an preliminary look at a passenger-only ferry from Royal Bay to downtown Victoria. Trevena told the company: “Until the provincial vision is complete, it would be appreciated if B.C. Ferries would put on hold projects such as the Royal Bay passenger-only service.”

The much bigger difference is over the terms of the next four-year contract between the government and the ferry service.

It was completed last fall. The government will provide $194 million a year to the company to run coastal ferries. Ferries commissioner Sheldon Stoilen, charged with regulating fares independent of the government or the company, set a maximum fare increase of 2.3 per cent a year.

B.C. Ferries objected to the price cap. It said general cost increases, including things like the carbon tax, will add about $73 million a year in expenses. But the contract only covers about $41 million of them.

The company said the fare cap isn’t big enough and will force “significant” increases in the years following the term. The main reason for the objections is the $3.9 billion worth of capital spending needed to renew its aging fleet and terminals.

When the commissioner capped fare hikes at 2.3 per cent, the corporation appealed, saying: “Eroding the ferry system’s financial health at a time when substantial capital investments are needed does not serve the public interest.”

The price-cap plan anticipates a net-earnings drop from $52 million to just $2 million over four years, leaving no margin for unanticipated events, it said.

“If traffic were to decline, even slightly … the ferry system will be forced to take cost-cutting measures. This will inevitably involve service reductions or a reduction of capital expenditures. Both steps would have a negative impact on communities.”

The ministry then wrote to the commissioner asking him to ignore the appeal. It disputed the idea the government wasn’t providing enough money. It said B.C. Ferries made $225 million in “windfall profits” over the last five years from unanticipated traffic growth.

The commissioner dismissed the appeal and stuck with the 2.3 per cent maximum.

B.C. Ferries’ quarterly fiscal report on Friday looked healthy. It will take a lot of scrimping over the next few years to keep it that way.

Just So You Know: Disclosure: I am on the volunteer board of a group that runs a charity golf tournament of which B.C. Ferries is the title sponsor.

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