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BC Ferries vessel Spirit of Vancouver Island passes between Galiano Island and Mayne Island while traveling from Swartz Bay to Tsawwassen, B.C., on Friday August 26, 2011.

Darryl Dyck/ The Canadian Press/Darryl Dyck/ The Canadian Press

An independent review of troubled BC Ferries has challenged the provincial Liberal government to cap fare hikes at the rate of inflation to ease public concerns over the rising cost.

The May, 2013, election creates a deadline on the issue for the Liberals, who have promised to keep the costs of various government services down.

Transportation Minister Blair Lekstrom said Premier Christy Clark's families-first approach will guide the government response. "As I look through this report and I move into discussions with my cabinet colleagues and caucus, the issue of affordability, in my mind, is one that is front and centre," he said after the review's release on Tuesday.

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The province appointed Gordon Macatee in May, 2011, to the review ferry prices in response to public outrage over proposed increases. Mr. Macatee said affordability dominated consultations in 27 ferry-dependent communities and hearings attended by about 2,000 people.

"Current ferry fares and the proposed increases have reached the tipping point of affordability and are imposing significant hardship on ferry-dependent communities and the ability of people to visit family members and friends as frequently as they would like," he wrote in his report.

He warned that every one per cent decrease in ridership costs BC Ferries $5-million. "We think [the consumer price index]is a reasonable proxy for affordability and are recommending that B.C.'s goal for future price cap increases be CPI."

He said BC Ferries has had a $58-million gap between total revenue and expenses in each of the past three years that is expected to increase to $143-million within six years if no action is taken.

"Achieving the goal of holding price caps to CPI is going to be a tremendous challenge," he warned. He did not suggest ways for the government to achieve this goal.

Mike Corrigan, president and CEO of BC Ferries, said the CPI proposal is the "most reasonable" approach to ferry-fare pricing, but it would mean the B.C. government would either have to increase its $150-million subsidy to his company or consider cutting routes and reducing the number of sailings.

The ferry commissioner declined to detail an overall figure he thought the government should inject into the ferry system. "I am not going to try and pin the government with a specific number."

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Mr. Macatee noted that fares have gone up 47 per cent on major routes in the past nine years compared to a 15 per cent increase in the provincial consumer price index, or inflation.

Mr. Macatee said BC Ferries' ridership is "trending in the wrong direction" just as the company has invested $1.9-billion in new vessels and terminal upgrades and plans to invest another $2.5-billion over the coming dozen years.

"The cost of servicing all this debt does not go down when ridership drops and, as a result of declines in the last couple of years, the company is presently in a loss situation," he warned.

In exchange for the inflation limit on fare hikes, Mr. Macatee called on ferry users to accept "some reasonable reductions" in service levels in the area of four per cent on the major and most minor routes.

Mr. Lekstrom said he supported the idea of trying to reach a consensus on service adjustments in coastal communities.

Mr. Macatee said vehicle users who do not make reservations should be charged a premium, suggesting routine reservations could be a valuable tool for better managing the system.

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