“The issue of affordability in my mind is one that is front and centre,” Transportation Minister Blair Lekstrom says after release of an independent review of BC Ferries.
BC Ferries commissioner Gord Macatee has called for a major overhaul in a review of ferry operations released earlier this week. He urged the B.C. government to abandon its commitment to a user pay system and drop its opposition to major routes subsidizing the less-travelled ones. He recommended that fares be capped at the rate of inflation over the next three years.
His proposals would require a significant shift in ideology for the B.C. Liberal government. Accepting the recommendations could lead to substantial government subsidies. The Liberals would be reversing what they have done over the past decade.
B.C. Transportation Minister Blair Lekstrom has not yet shown his cards. In carefully measured comments, he identified affordability as a top item for him. But so far, he has avoided a firm position. New rates are expected to come into effect in September.
Mr. Macatee’s report shows that former ferries chief David Hahn clearly achieved what he was hired to do before he retired from the corporation after controversy over his $1-million compensation package and generous pension.
BC Ferries had been a Crown corporation dependent on government subsidies and subject to political interference by those who sent the cheques. However, as Mr. Macatee noted, the ferry system now covers 100 per cent of its operating costs from fares and ancillary revenues.
It’s no secret how the ferry corporation accomplished that, especially to the passengers who take the ferries each year. Fares since 2003 have gone up 47 per cent on the major routes, 78 per cent in the north and 80 per cent on minor routes.
However, while fares were rising, traffic volumes were dropping. Mr. Macatee found that current fares impose “significant hardship” on ferry-dependent communities and were affecting the ability of people to visit family members and friends as frequently as they would like.
Lindsay Meredith, a marketing professor at Simon Fraser University, said the Liberal government “ran into Economics 101.
“It’s basic, fundamental, down-and-dirty, easy-as-it-gets demand and supply. … Jack up your price and watch your demand plummet,” he said in an interview.
Confronted by cranky islanders opposed to the recent hefty fare hikes, the Liberals face a fundamental dilemma: Does the government continue to consider BC Ferries a private corporation subject to the full laws of market demand and supply, or is it prepared to regard the ferries as an extension of the highway system.
“It’s a tough decision,” Prof. Meredith said, adding that the right-wing-oriented government has always voiced the mantra that the business sector and private capital markets can do it best. But if the Liberals start increasing subsidies to keep fares down, they will be saying, “No, they can’t,” Prof. Meredith said.
North Coast MLA Gary Coons, the NDP critic for issues related to BC Ferries, said an NDP government would bring the ferries corporation back under the provincial highways department. “Everybody that lives on a route always considers [the ferries]as part and parcel of the highway system,” he said.
He endorsed a recommendation to shuffle the priorities of the BC Ferry commissioner, who is required to set ferry prices once every four years. Protecting the interest of ferry users should take priority over ensuring the financial sustainability of a company that has a monopoly, he said.
If the government’s decision is based solely on affordability for ferry users, the verdict is obvious. The tougher question for Mr. Lekstrom and his colleagues may be whether the Liberals can afford to undo what they have created at BC Ferries.