Time for Fiscal Fairness for Coastal Communities served by BC Ferries

Public controversy over the fiscally-challenged British Columbia Ferry Corporation emerged as one of the top news stories in 2013. Signs that the former crown corporation was in an unsustainable financial position prompted Honourable Todd Stone, the Minister of Transportation and Infrastructure to announce several cuts and changes to the BC Ferry service in November. These included service reductions on some routes, cuts to seniors’ discounts and the potential addition of slot machines on major routes.

The public responded with widespread criticism and concern regarding the proposed policy changes. The media feasted on the news, letters from concerned citizens flooded the editorial pages of local newspapers and radio talk shows were inundated with callers.

But here’s what makes this story so interesting. In January 2013, Maradadi Pacific, co-owned by former BC Liberal Leader Gordon Wilson, produced a comprehensive 26-page report highlighting significant challenges facing the BC Ferries.

The report, British Columbia Ferry Corporation and Fiscal Fairness for Ferry-Dependent Communities, provides a compelling case supporting what many British Columbians in coastal communities have been saying for the past decade: BC Ferries are an extension of the provincial highway infrastructure and therefore should be funded according to the principle of fiscal fairness.

Fiscal fairness is a longstanding tradition in Canada. As Maradadi Pacific points out, the Constitution Act (1982) states,

“Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.”

In other words, governments provide certain services to its citizens, usually through crown corporations, in order to maintain a level of uniformity of service and taxation.

Canadians and British Columbians expect to be treated equally by their governments; the Maradadi Pacific report highlights precisely how the principle of fiscal fairness has all but been abandoned in recent years when it comes to BC Ferries.

BC Ferries came into existence in recognition of the potential economic opportunities they offered previously disconnected regions. Premier W.A.C Bennett understood that connecting communities with transportation networks was good for the economy. Unfortunately, the importance of this fundamental link between the economy of British Columbia and the availability of adequate coastal transportation systems seems to have been forgotten.

Nearly 20% of British Columbians live on the coast, generating over 35% of the revenue to the provincial coffers. Yet when compared to the billions of dollars of investments the provincial government has made in the Lower Mainland alone in recent years, BC Ferries are woefully underfunded. As a consequence, people, businesses and economies that rely on the ferry service suffer.

In 2003, the BC Ferries Corporation was transformed from a crown corporation into an independent, commercial organization, with the BC government as its sole shareholder, a move that destroyed any remaining connection to the principle of fiscal fairness. At the same time the government lent BC Ferries nearly half a billion dollars, which the corporation had to pay back with interest.

While the rest of British Columbians benefit from a transportation network that receives significant annual capital investments and maintenance revenue from the government, this is not the case for coastal communities.

These communities are indebted to a ferry corporation that must find a way to pay the BC government back at the same time as it makes capital improvements. And BC Ferry’s solution is to continually increase ridership fares, and cut services. The ironic consequence is this drives down usage, thereby requiring further increases in fares to sustain services.

In essence, the burden of BC Ferry’s debt is being foisted upon the people in the communities it serves. So while BC Ferries springs a leak and begins to sink into a deep fiscal abyss, it takes down and drowns the economies of those communities dependent on its service.

The result has been disastrous for the people, communities and local economies that rely on BC’s marine-based highways. As the Maradadi Pacific report highlights over the past twenty-five years fares have increased 200-500% in some cases; the impacts are devastating. Economic activity is limited or severely depressed and populations decrease, further straining other government services such as education and health care.

The BC Green Party believes the case for returning the BC Ferries to a crown corporation under the purview of the British Columbia Transportation and Finance Authority is both compelling and urgent. The BC government simply cannot abandon the people and economies of coastal communities that provide over one third of BC’s annual tax revenue. These coastal communities deserve representation and fiscal fairness.

The challenge for all of us is to find a creative way to resolve BC Ferries financial crisis.

It was easy for the government of the day to turn BC Ferries into a private corporation a decade ago. And on the surface it seems easy for them to bring it back into government. Of course, there is a major problem as the report so poignantly points out: the BC Ferry Corporation is burdened with over $1.3 billion worth of debt.

The BC Liberals, through their core review, are digging around in the sofa looking for $50 million in spare change. The BC Green Party understands that the government would be reluctant to bring the additional $1.3 billion of debt back into the transportation budget, it would make balancing the budget just that much more difficult. But there are possible solutions — solutions that all British Columbians can help work towards.

Let’s work across party lines to see if we can identify a consortium of BC-based investors willing to purchase the $1.3 billion of debt from BC Ferries. If appropriate financing can be arranged, servicing the debt would simply be an ongoing cost of doing business.

It was a colossal mistake to let the Ferries drift as a rudderless private entity, not just from the perspective of fiscal fairness to coastal communities but also from the perspective of economic prosperity. But the rudder can be repaired and the corporation steered back on track, it just requires the political will to do it.

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