BC Ferry Services Inc. (BC Ferries) operates one of the largest integrated marine transportation networks in the world. A recent global review by PricewaterhouseCoopers LLP also recognized B.C.'s service as comparable in efficiency with the world's best services, in North America and Europe.
That success notwithstanding, rising costs and declining ridership are creating a financial crunch. BC Ferries lost more than $16 million in the fiscal year ending March 31, 2012. The independent BC Ferry Commissioner noted in his recent report that, without changes, increasing operational costs and the ongoing need to replace aging vessels could drive funding shortfalls to $56 million a year within the next five years. These shortfalls would have to be recovered through one or more of the following mechanisms: operating efficiencies, additional fare increases, service adjustments (mostly reductions), increased contributions from taxpayers, or other forms of contributions from coastal communities.
Rising costs and declining ridership are ongoing issues which are placing a financial strain on the B.C. coastal ferry system. Four main factors are creating challenges for the system:
- Rising fuel and labour costs
- Declining ridership
- Underutilized routes
- Additional capital costs
The BC Ferry Commissioner's
Report: A Warning and a Call to Action
The BC Ferry Commissioner was empowered by the Coastal Ferry Act of 2003 to be an independent regulator of coastal ferry services in British Columbia, to establish caps on fare increases and to monitor performance and compliance.
In 2011, the Act was amended to enable the current Commissioner, Gord Macatee, to conduct a major review, which resulted in a report that he delivered earlier this year.
In his report, the Ferry Commissioner made a series of
recommendations, including two that were overarching:
- That the Commissioner should be given formal authority to balance the interests of ferry users, the ferry operator (BC Ferries) and taxpayers
- That the Provincial Government work with BC Ferries to develop a long-term vision for the delivery of a sustainable coastal ferry service, including a public consultation and engagement.
The Provincial Response
In response to the Ferry Commissioner's report, the Province began by amending the Coastal Ferry Act to implement recommendations that required a change in legislation. These amendments reduced the pressure for fare increases by lowering the financial targets used to set price caps. The Act was also changed to implement the Commissioner's recommendation to eliminate the prohibition against cross-subsidization. The larger routes connecting Vancouver Island to the Lower Mainland will be able to offset some of the pressures on the smaller routes with lower traffic volume. As the larger routes account for 73% of operating revenues (before provincial and federal taxpayer contributions), a small increase to fares on these routes provides greater support for the smaller routes.
The BC Ferry Commissioner concluded in his January 2012 report that the government, BC Ferries and ferry users need to share the costs to ensure the sustainability of the ferry system.
In response to the BC Ferry Commissioner's report:
- The Province is contributing an additional $79.5 million on behalf of taxpayers to 2016
- BC Ferries has committed to achieve $15 million in efficiency improvements
- Ferry users are being asked to make up the remaining $30 million through service adjustments
- $4 million has been found through service reductions on the major routes between Vancouver Island and the Lower Mainland
- There is a need to find $26 million in savings to 2016
Based on all of these measures, the Commissioner has set the price caps at 4.1% for 2013/14, 4.0% for 2014/15, and 3.9% for 2015/16. These caps are much lower than they would have been without the actions taken by the Province.