Wednesday, February 5, 2014

BC Ferries - what is the best way forward?

BC Ferries is the biggest non-commuter ferry service in the western hemisphere.

This is not a small operation:
  • 36 ships (one BC Ferry owned ship, the MV Nicola, is operated by a First Nation on a non-BC Ferry route from Prince Rupert to Port Simpson)
  • 48 terminals
  • 24 routes (there is one passenger only route operated by a private company Kona Winds Charter for BC Ferries, the Langdale - Keats Island - Gambier Island route)
  • 20,000,000 passengers per year
  • 7,800,000 vehicles per year
  • $786 million in revenue
  • $1.8 billion in assets
For 800,000 people on Vancouver Island and the other coastal locations served by BC Ferries, this is one of the most important government services for the public.   BC Ferries are the crucial link to the rest of the world.  As an example, in the Gulf Islands kids ride the ferries everyday to get to school.   In many of the smallest coastal communities BC Ferries is the single biggest government employer.  Vancouver Island is the largest ferry dependent population in North America.

BC Ferries can not cover the costs of the services without support of the government, in total $181.6 million had to come from the Provincial or Federal governments to subsidize the operations of BC Ferries. Another $17.3 million came from the provincial government paying for the ferry fees for people through various social programs such as travel to Children's Hospital in Vancouver.

People say that the ferries are part of the highways and therefore be free like the highways are, but this ignores the fact the provincial government takes in taxes on fuel that are more than enough to cover all the costs of the highways in BC.   The fuel taxes are a reasonably fair user pay system for the highways. the more you use them the more you pay.   When it comes to ferries you do not need to use any fuel while on the ferry so you are not paying any of the cost through fuel taxes.  It means there has to be some sort of fare charged to reflect the cost of the operations of the ferries.

I know people will raise the issue of the inland ferries in BC and the fact there is no charge to use them.   I think it would only be right to have these ferries all taken over by BC Ferries and have some form of fare charged on them.   It is fair to do so because coastal ferry users have to pay.  Furthermore is it fair to subsidize these inland ferry destinations from fuel taxes?

Ferries are much more expensive to operate than a stretch of road.   The only BC Ferry service that pays for itself are the major routes between the Lower Mainland and Vancouver Island.  It will always be hard to not to subsidize the ferry service to small communities but what is the right level of subsidy?  How do we choose who gets ferry service and who does not?

As it is, there are various coastal communities that do not get ferry service, places like Kyuquot, Hartley Bay, or Kitkatla.  None of them have large populations but the lack of a government subsidized ferries likely keeps populations lower.  In Clayoqout Sound there are three communities without ferry services - Ahousat with about 700 people, Opisat on Meares Island with 130 people and Refuge Cove with 125 people.  Each of the locations has major tourism draws.     In comparison there is a service from Chemainus to Kuper Island, 440 people, and Thetis Island, 350 people.  Alert Bay with 1,000 people and Malcolm Island with about 800 are served by a ferry from Port McNeill.

A ferry service to Ahousat and Opisat would allow more people to live on Flores and Meares Islands again.   It would make it possible for more economic opportunities.   It is only 2 kilometers to Meares from Tofino, Ahousat is a further 15 kilometers away.    This is on par with the total distance of the Port McNeill - Alert Bay - Malcolm Island ferry route.

So what is the standard we should apply to decide who gets ferry service, how much service, and at what cost?   This is not a trivial question but it is not one that has ever been properly asked.  As an example, is it justified to operate the Mill Bay ferry when it costs BC Ferries $1.35 million to $1.75 million more per year to operate than it brings in when there communities with no ferry service or access the rest of the province?   It is interesting to note that the largest communities on the BC coast without BC Ferry service are all First Nations.

The next question is how much should government subsidize BC Ferries?  Taking data from the 2012/13 annual report, right now the major routes account for 2/3s of the passengers and 59% of the vehicles but 82% of the direct revenues for the company.    These routes only get 1.9% of the government subsidies.

The rest of the service brings in $106 million direct revenues but collects $178 million in government subsidies.    The northern routes only bring in $20 million in direct revenues but needs $79 million in subsidies.   The southern minor routes are better but still not great with $83.5 million in direct revenues and $92 million in subsidies.   It is the services to the smaller communities that are the big cost for BC Ferries.

The four northern routes moved about 168,000 people with a subsidy of $79 million, which is just about $470 per passenger.   Should we be doing this?  There needs to be clear defense of why this is worth doing.   For Haida Gwaii I can see a clear case, but for the route from Port Hardy to Prince Rupert I am not not at all convinced there is a good case for it needing to be subsidized to the degree it is at the moment.

A number of the routes to the small islands on the south coast need subsidies of three to four times what is collected in direct revenues.   The question becomes how high should the fares be?  Are they high enough?  Is it justified for people in places like Penticton or Houston to pay to make the cost of travel to the islands cheaper for the people that live there?   No one has made a good case for what sort of subsidy is reasonable and why it is reasonable.  Should we be subsidizing residents of Hornby Island to the tune of $4,000 a year each to provide them with a ferry link to Denman Island?

I am not saying we should not subsidize the ferries, but I want us to have a clear and fair process to decide who we subsidize, why we subsidize them and how much we subsidize them.  This is something we are missing and until we do this we will continue to have issues and problems with how people see BC Ferries.

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