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Les Leyne: More financial bailouts are likely for B.C. Ferries

A requirement in the contract for receiving $500 million: B.C. Ferries needs to say thank you.
The B.C. legislature in downtown Victoria. THE CANADIAN PRESS/Chad Hipolito

B.C. Ferries CEO Nicolas Jiminez graciously recognized how the NDP government got the fleet out of a financial jam, while commenting on the 3.2 per cent limit on fare hikes for the next four years that was announced Tuesday.

“B.C. Ferries gratefully acknowledges the province’s $500 million contribution as integral,” he said.

Nice touch. Always good to see politeness and good manners.

But it’s worth noting that he was contractually obligated to say that, and is obliged to repeat the phrase every time he talks about ferry finances. It’s written into the contract under which the half-billion ­dollars in ­additional funding is to be disbursed.

Clause 4.02: “B.C. Ferries will acknowledge the Contribution in statements about this agreement with the following statement: ‘We gratefully acknowledge the financial support of the Province …”

Expectations of acknowledgements are a standard requirement when money is bestowed on outside agencies. But dictating the exact wording in this context, right down to “gratefully,” shows how remarkably needy the NDP is in making sure they get all the credit. It also suggests a degree of suspicion toward the ferry corporation, even after the government installed New Democrat Joy MacPhail as chair of the board and retooled the executive ranks more to their liking.

The bigger point about the $500 million grant, though, is how desperately needed the bailout is, and how likely it is to become a permanent feature. Ever since the former B.C. Liberal government tried to sever ferries from government and made it a publicly owned but privately run outfit, it has run with a fixed-price subsidy every year (about $200 million most recently.)

Then it got an emergency bailout of $300 million during the pandemic. That covered the immediate financial crisis, but the lingering fallout got worse. The additional $500 million — two-and-a-half times the annual subsidy — was poured in last spring after projections showed customers were facing nine per cent hikes every year for the next four years.

It was welcome news to ferry users, but there are zero reasons to think this is a permanent fix. It’s entirely likely that the taxpayer subsidy needed to keep the ferries sailing will have to increase by comparable amounts for years to come.

The independent commissioner who oversees fare-setting — Eva Hage — approved the 3.2 per cent but flagged a number of worries.

She expressed concern about the steep increase in operating costs. They are forecast to rise a staggering 40 per cent from the 2022 level by 2025. Much of it is labour costs, and much of that is overtime costs, which the corporation has been trying to tackle since the pandemic.

There is also pressure on the separate capital budget, which has to cope with the need for six major vessel replacements and one additional new one in the next four years. B.C. Ferries is expecting its long-term debt to double, to $3 billion, in four years.

“The cost of servicing that debt … in the absence of any dedicated future funding, may mean fare increases in the double digits (percentages) for the corporation to remain financially sustainable.”

As well, the emission reductions projects and extensive consultations needed on terminal improvements will raise costs even if labour costs are brought under control.

Hage took special note of increasing demand for additional sailings, saying: “Adding capacity in peak periods will result in more idle capacity in the off-peak and further increase the cost of the system.”

She urged a long-term view of how to provide affordable service and said a more balanced approach, beyond just curbing fare hikes, is needed.

It adds up to a series of ­gaping holes in the corporation’s books that are so big the only place from which to fill them is the provincial treasury.

Just So You Know: Part of the government’s response to the price cap was a warning that it is going to start penalizing the ­corporation for sailings ­cancelled due to crew shortages. They are “working with B.C. Ferries” over the winter on how to inflict the punishment, which is a bit like Captain Bligh consulting with crew on how to use the lash.

The NDP just gifted the corporation a half-billion dollars. Now it wants to ding it $7,000 every time a major route sailing is cancelled, in order to create the optics of a government getting tough on behalf of irate passengers. No prize for guessing where the fine payment will come from.

The idea sounds like a mash-up of Catch 22 and Alice in Wonderland. If they divvy up the cash amongst the stranded passengers, they’ll likely have to “gratefully acknowledge” the contribution.

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