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Province lost out on $2.3 billion due to BC Ferries hikes

Ferry fare increases have resulted in a combined estimated loss of $609 million in tax revenues
The Powell River Queen departs Campbell River for Quadra Island.

Ferry fare increases have resulted in a combined estimated loss of $609 million in tax revenues, according to a new report on the economic impacts of BC Ferries.

The report, which was requested by a joint AVICC (Association of Vancouver Island and Coastal Communities) and UBCM (Union of B.C. Municipalities) special committee on BC Ferries, reveals that rising fares have contributed to a decrease in ridership which is hampering the provincial economy.

“Ferry passenger volumes are strongly (negatively) correlated with fares, and fare increases contributed to passenger volume declines from 2003-2013,” reads the report.

“Foregone economic activity resulting from ferry traveller declines from 2003-2013 represents a reduction in GDP of $2.3 billion over the ten year period.”

The report also found that had fare increases been limited to the rate of inflation from 2003 to 2013, it’s estimated that passenger volumes would have grown 19 per cent over the period, to 25.7 million in 2013 compared to the actual ridership of 19.9 million in 2013.

Jim Abram, Quadra Island director and a member of the special committee, said he was astounded by the findings.

“They’re shocking, just absolutely shocking,” Abram said. “What we were saying all along was validated. The entire provincial economy is affected, not just coastal communities. And here it is, finally validated by a third party consultant.”

Coun. Claire Moglove, who sits on the UBCM executive, said what surprised her was how much BC Ferries is trying to recover through user charges.

“What really struck me is, the report talks about (how) BC Ferries recovers 92 per cent of its operating costs through fares, which sounds great, but when compared to other transportation operations it becomes apparent where the problem is,” Moglove said. “Washington State ferries recover 66 per cent of their costs through fares, BC Transit 33 per cent, Calgary Transit 50 per cent, and let’s go international - Norway ferry system recovers 67 per cent. Those figures really stand out to me.”

Peter Larose of Larose Research and Strategy, who was contracted to do the report, met with more than 400 local governments, chambers of commerce, ferry advisory committees and other stakeholders in coming to his findings.

He found that BC Ferries stimulates $1.8 billion in expenditures in B.C. each year which produces $1.5 billion annually in total value-added (GDP) for the B.C. economy.

Of BC Ferries’ estimated $394 million in yearly taxation revenues, the federal government receives $210 million, the provincial government $150 million and local governments $34.2 million.

“For every $1 of tax revenues invested in BC Ferries, $8.40 of economic activity was generated – much of which is in communities that are not coastal or ferry dependent,” the report reads.

Larose also found that between 2003 and 2013, fare increases and subsequent ridership drops resulted in a cumulative loss of $609 million in tax revenues, including $325 million to the federal government, $231 million to the provincial government and $53 million to local governments.

Abram said that’s concerning.

“It’s a very serious issue because (local governments) don’t have anyplace else to collect taxes other than property taxes and we can’t keep increasing property taxes,” Abram said.

Larose’s report also found that between 2003 and 2013, other forms of transportation are seeing increasing user rates of between five and 68 per cent, while BC Ferries has recorded a decrease of 6.8 per cent.

“Ferry ridership declines run counter to the trend of transportation volume increases in most other modes of transport in B.C.,” the report reads, “including vehicles and air transport.”

Abram said the report sheds some light on “the real impact” BC Ferries is having on all B.C. communities and presents a clear picture of how one change can have a trickle down effect.

Abram said UBCM is asking the province to reconsider its decision on raising ferry fares and cutting service.

“We’re looking for some fairness, we’re asking for another look, we’re looking for some sane conversation. We’re willing to collaborate with the province on this,” Abram said.

Moglove said her hope is to work with the province to develop a long-term strategy for the coastal ferry system.

“To be clear, the report is not meant as an attack on the provincial government, but it’s meant to open a dialogue to start a discussion on where do we go from here,” Moglove said.

“The report goes a long way to show how important BC Ferries is to the economy and we’re losing out.”

Moglove said the system is running counterproductive to the province’s goal of a strong economy and sustainable jobs.

Delegates at the UBCM, which represents 184 local governments, will vote on the report Sept. 24 when the UBCM meets in Whistler.

The recommendations include asking the province to put BC Ferries back under the ministry of transportation and infrastructure.

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