Government Subsidies for BC Ferries

[Scott]

This topic has been mentioned in other threads before, but I'd like some opinions on it. What got me thinking about it was reading a little excerpt in a book that claimed the Balfour ferry was "the longest free ferry trip in the world" (35 minutes).

Why do we have such a double standard in our province? Why is the 35 minute ferry ride across Kootenay Lake free (there are alterate routes) but the 35 minute trip to Saltspring Island with a driver and car would cost over 30 dollars plus a fuel surcharge. Granted, most of the inland ferry routes are only between 5-10 minutes, but a lot of the coastal minor routes are only twice that long. And it's these minor routes that are really feeling the effect of recent fare increases.

This just seems like such a blatant double standard that is hardly fair to coastal communities. I'm not arguing that BC Ferries should be free, that would cause a whole new set of problems, but why is the government so happy to help out the interior ferries and their rising fuel costs, while at the same time forcing coastal residents to pay a greater and greater share of their transportation costs.

Another funny comparison could be made between the Albion ferries and the Seabus. The car ferry is free, the passenger ferry is not. These just seem to be differences that can't be rationally reconciled in my mind. Any thougths?

[WettCoast]

At some point in the past someone decided that there should be one rule for fresh water and another for salt - i.e. salt you pay; fresh you don't. Why, because highways generally cross fresh water bodies with bridges, and where the distance is too far there will be a ferry and the cost will be met entirely with tax dollars. For trips on salt water routes you have always had to pay.

Up here in the north if you want to go from Moresby Island to Graham Island to shop in Queen Charlotte City you pay. If, however, you live at Ootsa Lake and want to go shopping at Burns Lake via the Francois Lake ferry you pay nothing. Further more, you can take an alternate route to get to Burns Lake. On Graham Island I suppose you could take your own boat. This is a huge inequity and it is time for government to take a fresh look at this.

On another front, why is the new bridge over Okanogan Lake free, while the new Golden Ears bridge will be tolled?

[Kahloke]

There's one salt water route where you don't have to pay as a walk-on passenger - the inter-island ferry in the San Juan Islands. For those who may not know, that's the one that just goes between the islands, and not to Anacortes on the mainland. If you are driving on, you have to pay going in the westbound direction (ie. Lopez>Shaw>Orcas>Friday Harbor, in that order). They essentially charge you the equivalent of a round-trip fare, similar to boarding a ferry at Anacortes, but inter-island walk ons still go for free.

[kerryssi]

The inland ferry's were owned and operated by the highways dept and as such were considered part of the highway system, the same as a bridge, so no fare. The coastal ferries, depending on who you talk to, are not part of the highways. So there is a fare.
One anomaly is that the Trans Canada Highway starts in Victoria and goes up to Nanaimo then to Vancouver. To my mind that makes the ferry just as much a part of the highways as the inland ferries. The ferries were originally intended to be at least partly subsidized according to a formula which costed out the expense of an equivalent length of highway.
Lately the politician's, Campbell in particular, have been using the ferry system as a whipping boy. It goes back to the old "Give them someone/something to hate and they will forget all else" you are then free to do pretty much as you wish. The money spent on the conference center and the sea to sky highway would pay for many ferries and so long as they can keep attacking the ferry system then there is little mention of the costs for the conference center, sea to sky, rapid transit etc. As one person told me "All the votes are in the lower mainland, so long as we keep them happy we can scr*w the rest of the province"

[Retrovision]

Sept 5, 2008 18:23:50 GMT -8 Kahloke said:

There's one salt water route where you don't have to pay as a walk-on passenger - the inter-island ferry in the San Juan Islands. For those who may not know, that's the one that just goes between the islands, and not to Anacortes on the mainland. If you are driving on, you have to pay going in the westbound direction (ie. Lopez>Shaw>Orcas>Friday Harbor, in that order). They essentially charge you the equivalent of a round-trip fare, similar to boarding a ferry at Anacortes, but inter-island walk ons still go for free.

You make a good point, but I really think it's moot in this case considering the vast differences, particularly in transportation infrastructure spending, between our countries. For one example among many: Your country puts spending initiatives for things such as transportation infrastructure to a vote. But no, I'm not suggesting that we do the same, that, to me, would be like recalling a politician before an election thereby defeating the democratic principle of having to know who you're voting for before you decide to embed them in power for a set period of time (as varying as that period of time can be, it has set parameters; don't get me started on Harper defying his own law that he just wrote setting fixed election dates). You made your bed, now you have to lay in it.

Sept 6, 2008 14:18:55 GMT -8 kerryssi said:

The inland ferry's were owned and operated by the highways dept and as such were considered part of the highway system, the same as a bridge, so no fare. The coastal ferries, depending on who you talk to, are not part of the highways. So there is a fare.

Maybe this is why MoH Ferries' salt water division was handed over to BC Ferries so many years ago? Although even B.C. ferries were government owned back then and for a long time since, so maybe the 1985 handover was all in anticipation of 2003's privatization? I refuse to see the difference between 'private' and 'quasi-public', especially in a case of essential services such as ferries as roads, on salt water or fresh water, boiling water or tepid water. Are Vancouver Islanders lesser Canadian citizens than those of us on the mainland a stones throw away? I think maybe all Vancouver Islanders should start sporting novelty (or not so much if you're serious) hats like that of my uncle, a former military man who served our country for decades, that declare the "Republic of Vancouver Island"

Sept 6, 2008 14:18:55 GMT -8 kerryssi said:

Lately the politician's, Campbell in particular, have been using the ferry system as a whipping boy. It goes back to the old "Give them someone/something to hate and they will forget all else" you are then free to do pretty much as you wish.

Exactly, hence why they will never build a bridge to the island. The exception of course is on our country's opposite coast where a relative sized land mass gets its own bridge, the Confederation Bridge to P.E.I. of course. It seems that if you can't threaten the fabric of our nation and therefore won't get federal attention, you're treated as second class Canadians.

[Neil]

From Frank Clapp's little book on ferries operated by the Ministry of Transportation and Highways:

.... in 1864 a John Galbraith held a charter for a ferry across the Kootenay River near Fort Steele. For this he paid the Government $500 a year. In 1871 he was permitted to charge $1 for loaded animals, 50 cents for unloaded animals, foot passengers and cattle and 25 cents for sheep, hogs and goats. Government officers and their animals were carried for free.

That was apparently a common arrangement; as a ferry operator, you paid a fee to the government, and you then charged the public to make your money.

So, at one time, ferry service in the interior was not free. Unfortunately, Clapp does not address the question of why things changed.

From 1954 on, Highways began operating ferries on the coast as well, gradually taking over from private operators. The same government agency was operating free ferries in the interior, and pay ferries on the coast. I've never been able to understand the rationale behind this.

The Albion ferry was not free before 1972. For some reason, it came to be seen as a highway link at that time, worthy of free service, where before it was not. Beats me as to why.

[Scott]

I think the topic of subsidies is timely considering David Hahn's recent announcement that ferry fare will have to rise significantly in the coming years if there is no increase to the subsidies that BC Ferries receives from the provincial government. I know we've touched on the topic in a few different threads, but I have a few comments and lots of questions that I will place in this thread to avoid going off-topic in the news threads and others.

One of the key documents in a well-informed discussion on this is BC Ferries' Performance Term 3 Submission to the BC Ferries Commissioner (specifically the corporate and route-by-route financial statements)

BC Ferries receives $125,599,000 annually from the Province and $26,924,000 from the Federal Government. In addition, last year BC Ferries got a import-tax rebate of $119 million from the federal government, but that was a one time deal concerning the German-built vessels.

Of the subsidies BC Ferries receives from the provincial government, $47,590,000 goes to the Northern Routes, and $74,344,000 goes to the Minor Routes. Federal subsidies are divided: $6.660,000 to the North and $19,298,000 to the Minors.

We also know that the major routes (1,2, and 30) are not subsidized. All are profitable as far as operating costs are concerned. Only route 30 loses money, presumeably because of the cost of paying for the Coastal Inspiration. Unless BC Ferries uses profits from these routes to subsidize the smaller routes (as they do currently), fares should only rise on the major routes to pay for increased fuel and labour costs. (right?)

My first question was prompted by a comment in another thread and concerns the federal subsidy.

Feb 9, 2011 10:41:08 GMT -8 @4roads said:

What I would do is increase the federal apportion of the subsidy to BC Ferries along the same lines as what is given out to Marine Atlantic's Newfoundland routes, and have the Province insist to BC Ferries to better manage its finances and service.

Do you know what Marine Atlantic and other eastern Ferries receive as a subsidy from the Federal Government?

[glasseye]

Marine Atlantic was expected to receive 108 million from the federal government in FY2010, of which 52 million was for operating costs and 55 million was for capital expenses.

Source: www.tbs-sct.gc.ca/est-pre/20102011/me-bpd/TC-CT-eng.asp#bm06

[WettCoast]

Marine Atlantic is operating an inter provincial service. BC Ferries is not. In general, the federal government supports inter provincial transportation systems such as Via Rail and Marine Atlantic. Transportation systems operating only within one province are supported by the province in which they operate. It is not quite this simple but that is the rationale of federal versus provincial subsidies to transportation systems, as I understand it.

[Scott]

According to the BC Budget, the 2010/11 estimated spending on inland ferries is $10,018,000.

I always get a bit annoyed when I hear people from Vancouver and the Interior of the province (mostly on the radio) ranting about how people living on the Island shouldn't have the ferries subsidized at all because island residents chose to live where they do and non-islanders shouldn't have to pay for their ferries. They always seem to forget that the highways, bridges, inland ferries (a small part) and transit systems are either 100% subsidized or in the case of transit and one bridge, very heavily subsidized. Road maintenance spending for the Ministry of Transportation is more than $425 million. I know some of those roads are on the Island, but generally Island communities are closer together than Interior cities. I don't really know how to do the math, and there are so many variables that it's probably impossible, but are ferry dependent coastal residents really that much more subsidized than anyone else?

[Low Light Mike]

Feb 9, 2011 20:33:06 GMT -8 Scott said:

We also know that the major routes (1,2, and 30) are not subsidized. All are profitable as far as operating costs are concerned. Only route 30 loses money, presumeably because of the cost of paying for the Coastal Inspiration. Unless BC Ferries uses profits from these routes to subsidize the smaller routes (as they do currently), fares should only rise on the major routes to pay for increased fuel and labour costs. (right?)

Actually, BC Ferries (in the post-2003 setup) has not been allowed to use mainline profits to subsidize the smaller routes.
- each of the smaller routes has its fare price-cap determined by route-specific costs and subsidy.

[gordon]

It seems to me that some level of cross -subsidization between the 3 profitable routes and the smaller unprofitable ones. some of the profits from the majors could help soften the blow from future fare increases on those routes.

Off topic ?

when is the new Klemtu Terminal complete so the NE can take over as the primary vessel?

[cobblehillian]

The elimination of cross subsidies (income from profitable routes subsidizing un- profitable routes) is part of neoconservative political philosophy. It's kind of an economic Darwinism; each route should, in the ideal world, pay for itself. When the BC Liberals re-cast the BCF in a different corporate form more in keeping with their own neocon philosophy they expressly eliminated cross subsidies. The other cornerstone of this approach is "user pay". Again the economic Darwinism comes into play. If everyone pays the full costs, and enough people use the service there isn't a need for a subsidy. If that doesn't work the service must be eliminated. Its pretty hard to make this stuff work in the real world. Telephone companies, cable companies, urban transit services all to some extent have internal cross subsidy mechanisms to provide services at or near the same costs to all users.

[mrdot]

;Deconomic darwinism=coastal ferry act=private model BC ferries! looking at EG"s posted old post card of the Saltspring Queen at old Swartz Bay, takes me back almost to the pre-subsidised days of Gaven Mowet and the real free enterprise gulf islands ferry service when old. Islanders did pay the fare, but then came wac Bennett and the beginning of massive subsidies, I think he spoiled some of these old time residents, and years later the chickens have come home to roost, because we will now face more realistic tolls. the same era that BC electric was a private co.! :-Xmrdot.

[cobblehillian]

Ah! If only for the good old days again. Without getting too far into economic theory I think that wages have become a far larger factor in the cost of doing business. That this happened was somewhat intentional. Market forces may have played a role too along with the added costs to conform to govt' regulation.

Our real wages (purchasing power) were moving up steadily from the early 1900's to the early 1980's. If this had not happened the mass consumer society wouldn't have been possible. The deckhand (now an Able Bodied Seaman with papers) in our society is seen as just as eligible as anyone else to own a fridge, a car, a house etc. In the good old days egalitarianism was not as strong as it is now. The deckhand was not credentialed and was not thought worthy of the material goods possessed by people of higher station.

The fares in the old days may very well have been high for their day. Also people traveled less frequently

[Neil]

Feb 11, 2011 11:28:28 GMT -8 mrdot said:

;Deconomic darwinism=coastal ferry act=private model BC ferries! looking at EG"s posted old post card of the Saltspring Queen at old Swartz Bay, takes me back almost to the pre-subsidised days of Gaven Mowet and the real free enterprise gulf islands ferry service when old. Islanders did pay the fare, but then came wac Bennett and the beginning of massive subsidies, I think he spoiled some of these old time residents, and years later the chickens have come home to roost, because we will now face more realistic tolls. the same era that BC electric was a private co.! :-Xmrdot.

Lets not forget, though, that when BC Ferries started up, they charged the same fares as the CPR to get to Vancouver Island. I believe the fares to Langdale and Saltery Bay were also similar to Black Ball's, and if we could see Mr Mouat's fares, we'd probably see a similarity to the Gulf Islands.

That tells me that the fares of the day were based on a somewhat realistic recoupment of costs, and a reflection of what people could reasonably afford to pay.

[mrdot]

:)you make very good points, and take me back to a time my dad and I were sitting here talking to mr. Gerald Rushton of the old Union steam which served the coast in years gone by, and they were talking about the wages and remunration of those days when even master mariners had to work into their old age because they received none of todays equivelant wages, even the male cleaners of today's crew are recompenced more equatably, but that is changing in the comming years as cost effecencies prevail and rite wing politicans refer to some of them as glorified toilet bowl cleaners! ;Dmrdot.

[Low Light Mike]

Here's a link to a PDF of the 1977 Federal subsidy agreement with Province of BC for ferry routes.
saveourferries.com/documents/20080131120216587.pdf

- this is from a link on the "Save Our Ferries" website.

There's no indication on the SOF website that this 1977 agreement is expired, or not.

[cobblehillian]

Yes, the pre BCF operators had to operate with an eye to costs and what people could reasonably pay for service. I think what has happened is that costs, especially labour costs have changed. I think as a percentage of total costs they have significantly increased. In other words labour has incrementally added to costs at a rate far greater than inflation or the cost of living. The retired CPR and CN marine employees that I have spoken to have all said that wages were very low, and the real employment inducement was a good pension after 35 or 40 years of service. You could make more on a tugboat.

Did BC ferries require a subsidy for operational costs from start up? Did CP claim to be loosing money in its last years of BC Coastal passenger operations? I remember being on the ships as a young teenager and saw nothing suggesting reduced service. However, since I was new to the ships I couldn't compare them to earlier years. The CP Great Lakes passenger operations continued into the late 60's. This was not a required or subsidized service so I assume it made a profit. I paid $7.50 for an outside bedroom on the SS Keewatin in 1965!.

[Scott]

Feb 11, 2011 8:22:30 GMT -8 Low Light Mike said:

Actually, BC Ferries (in the post-2003 setup) has not been allowed to use mainline profits to subsidize the smaller routes.
- each of the smaller routes has its fare price-cap determined by route-specific costs and subsidy.

OK, another question for the Numbers Guy then:) The 2009/10 numbers show that the Northern Routes lost $1,263,000 and the Minor Routes lost $950,000, but the Major Routes made money. If BC Ferries puts it all together at the end and comes out with a net profit of $3,422,000 doesn't that mean the Major's are subsidizing the others?

[Low Light Mike]

Feb 12, 2011 23:44:54 GMT -8 Scott said:

Feb 11, 2011 8:22:30 GMT -8 Low Light Mike said:

Actually, BC Ferries (in the post-2003 setup) has not been allowed to use mainline profits to subsidize the smaller routes.
- each of the smaller routes has its fare price-cap determined by route-specific costs and subsidy.

OK, another question for the Numbers Guy then:) The 2009/10 numbers show that the Northern Routes lost $1,263,000 and the Minor Routes lost $950,000, but the Major Routes made money. If BC Ferries puts it all together at the end and comes out with a net profit of $3,422,000 doesn't that mean the Major's are subsidizing the others?

The issue:
- Whether to view the BC Ferries net income(loss) on a route-by-route basis or on an aggregate basis?

The 2 main regulatory purposes of the BC Ferries financial statements are:
1) to have the Commissioner set the price-cap that impacts tariffs
2) to have the Gov't set the service-fee subsidy

For both those purposes, the key data is found in the route-by-route financial statements, and so any cross-subsidization upon aggregation (wow, that sounds wordy ;D) is irrelevant to these 2 main purposes.

However, the apparent cross-subsidization upon aggregation is likely relevant to the other main users of the financial statements, which is the banks and brokerages regarding BCFS' debt.
- they would look at overall aggregate net earnings (actually a focused earnings amount knowns as "EBITDA"), and would likely not concern themselves with route-by-route detail.
- the impact of this is that a stronger overall earnings will impact credit rating which will impact the interest rate that is set for BCFS bond debt.

[Low Light Mike]

Something interesting: an agreement between the Province and BCFS from last week.

- the Federal & Provincial subsidies for the Langdale-HSB route (Route 3) are now being reassigned to other northern & minor routes.

This means that Route-3 has now joined the ranks of the "Zero subsidy" routes.

from here:
www.bcferrycommission.com/Main_to_Hahn_CFSC_Amendment_24_March_2011.pdf