We Are the Chairs of 12 Ferry Advisory Committees Representing Communities Served by BC

Introductory presentation to the Ministry of Transportation

From the Chairs of the Ferry Advisory Committees

November 2006

Presented by:

Alison Morse -Chair, Bowen, FAC

Tony Law – Chair, Denman / Hornby FAC

Andre Lemieux – Chair, Gabriola FAC

Joyce Clegg – Chair, Gambier / Keats FAC

Steve Smith – Co-Chair, NorthCoast FAC

Aivazoff – Chair, North Sunshine Coast FAC

Sprungman – Chair, Quadra / Cortes FAC

Jones – Chair, SaltSpringIsland FAC

Dave Dryer – Chair, Southern GulfIslands FAC

Ed Steeves – Chair, Southern Sunshine Coast FAC

Ian Ralston and Sharon Cross – Co-Chairs, Thetis / Kuper FAC

Jo Mrozewski – Chair, Tri-Island FAC

Contents:

Summary2

Ferry Advisory Committees2

Principles 3

Key concerns- Coastal Ferry Act4

- Coastal Ferry Services Contract5

Issues for discussion- Review of the Legislation6

- Revisions to the Contract7

- Consultation7

Appendix- List of FAC members8

Contacts:

John

Tony

Introductory presentation to the Ministry of Transportation

From the Chairs of the Ferry Advisory Committees

Summary

The Chairs speak for committees established to represent communities served by BC Ferries. Reliable and affordable ferry service is critical to these communities, which have reached their present level of development on the basis of such service being provided. The Province must adequately support this service.

While the Coastal Ferry Act has brought significant benefits with respect to delivering and regulating ferry service, the legislation does not adequately address the dependence of communities upon this service and the need for impacts upon them to be considered

Tariff increases during the first performance term of the contract will have exceeded 50% in some instances. Continuing increases during the second performance term cannot be sustained without undue harm to the affected communities and their economic vitality.

The Chairs wish to meet with the Ministry of Transportation in order to discuss information provided by BC Ferries, route specific issues and the report to be issued by the Commissioner in advance of a revised contract being drafted for the next performance term. They also wish to meet with the Minister to discuss the legislative framework for ferry service.

Ferry Advisory Committees

The 12 Ferry Advisory Committees represent communities served by BC Ferries routes throughout the Coast.

The Ferry Advisory Committees are:

Route group 6:

BowenIsland
Denman / Hornby
Gabriola
NorthSunshineCoast
Quadra / Cortes
SaltSpringIsland
Southern GulfIslands
Thetis / Kuper
Tri –Island

Route group 2:

Southern SunshineCoast

Route groups 3 and 4:

NorthCoast

(also Queen Charlotte Islands)

Route group 7:

Gambier / Keats

Members of the Ferry Advisory Committees are nominated by local governments and areappointed by BC Ferries. A formal consultation process has been in place since 1993.

Principles

Although we represent a diversity of communities served by different ferry routes, we are united in supporting two fundamental principles:-

1) Reliable and Affordable Ferry Service is Critical to Coastal Communities

The Province established ferry service to coastal communities to ensure theirdevelopment and vitality. Both the provincial and federal governments provided financial support because they understood that on the coast, ferry service is the equivalent of a road system.

Over the years, residents have invested in businesses, homes and community infrastructure on the basis that reliable and affordable ferry service was in place. At the same time, a significant tourism sector has developed based upon the globally-recognized natural and cultural assets of the coast. This tourism not only fuels local economies and contributes revenue to the provincial treasury, but also provides spin-off benefits to the region and beyond.

For our communities, ferries are a life-line upon which we all depend.All our goods and services come in by ferry. Our products have to be shipped to markets by ferry. Ferry travel is essential in pursuing employment and carrying out business and accessing core services not available in our communities.

The continuing vitality of coastal communities and our ability to contribute to the economy of the province is linked to accessible ferry service. Increases in the cost of the sole transportation system serving a community affect every aspect of community living. The heaviest impact is upon those of relatively modest means who provide services to visitors, manpower for businesses, customers for stores and who keep our communities functioning through providing a range of volunteer services.

2) The government must adequately support this public transportation system

Our communities have reached their present levels of development and economic activity as a result of this principle of support being applied. Any movement away from this principle leaves our communities vulnerable.

Residents in our communities note that the Province ensures that remote and mountain communities are adequately served through road transportation even though keeping these communities connected to the rest of the Province involves significant costs in building and maintaining highways, bridges and tunnels. A “user-pay” principle is not being applied to these communities. Coastal communities expect no more and no less. We do not expect a free ride. We do expect to pay fair fares based upon an appropriate level of provincial support.

Key concerns

Coastal Ferry Act

While our present focus is upon the second performance term, we do want you to be aware of our concerns about aspects of the Coastal Ferry Act and our interest in seeing this legislation amended.Many of us have been involved in ferry issues for several years andwe welcomed some of the provisions of the Coastal Ferry Act.

We value the clarity it provides with respect to the roles and responsibilities of each entity and the framework it puts in place to enable long-term planning. We appreciate the establishment of an independent Commissioner to monitor efficiency, pricing, information and other aspects of ferry service.

But from the perspective of our communitiesthere are significant detriments in the Act. The Actdoes increase the level of certainty in almost every aspect of ferry service and purports to eliminate “political” decisions from the picture. However, for our communities the uncertainty is as great as ever and we are still dependent upon political decisions.

1. The elimination of cross-subsidization leaves our routes, and thus the viability of our communities, vulnerable to the amount of support a particular government chooses to provide.

2. Moving towards greater reliance upon a user-pay system to in order to reduce contributions by the government increases the vulnerability of our communities.

3. The lack of any requirement for any entity (government, ferry operator or commissioner) to consider the impact of service and tariff changes upon our communities exacerbates this vulnerability.

The decision to segregate the routes that are expected to make a profit(and which can help support an integrated transportation system)places a responsibility upon the province to adequately support the non-profit-making routes which cannot stand alone and upon which our communities depend. Rather than assuming this responsibility, the Province haslegislated a decreasing commitment. We believe this approach is short-sighted and unrealistic. It does not take into account that rapidly increasing tariffs, boosted by fuel surcharges and the cost of replacing ships and terminals, can lead to decreasing utilization of ferries (and thus revenue). It does not consider the broader economic and social costs resulting from the declining vitality of coastal communities.

The public interest has been defined solely in terms of ensuring the financial sustainability of ferry operators, efficiency of service, competitiveness and a continuing reduction in cost to the province. We support sustainability and efficiency, but competition on our routes is unlikely to be forthcoming. We remain dependent upon a publicly-supported publicly-owned transportation service. The Act provides no way to secure the required support other than through an uncertain political process every four years. We understood that the concept of an independent ferry system was to eliminate politically-based decision-making.

Coastal Ferry Services Contract

- First Performance Term

The Coastal Ferry Services Contract states that:

“For the traveling public, fares and schedules should be predictable and consumer choice should be expanded significantly, when financially viable.”

As it turns out, fares have been far from predictable and increases have been excessive. As noted above, there is little potential for “consumer choice” to be “expanded significantly” for our routes; BC Ferries is our only choice.

The “predictable” annual 4.4% increase is far in excess of inflation and its cumulative effect over the period of the term is hitting users hard. The fuel surcharges on top of these increases were not predicted. The Contract provided an opportunity to ensure that these increases were shared between the service fees and the tariff box, but the Province declined to take that opportunity. Consequently, there are some fares that will have increased by more than 50% over the period of the First Performance Term.

It should be noted that most transportation to and from our communities (whether of goods or people) involve the use of highways as well as ferries to get from point of origin to final destination. So we, like other British Columbians, are also paying the increased costs of road travel.

- Second Performance Term

It is difficult to see how our communities can bear a continued increase in tariffs over and above what we have experienced over the past five years.

BC Ferries is looking at a hefty capital program to replace aging vessels and terminals.There is also the question of how to address the present and possible future surcharges.

These factors are over and above inflationary costs related to operations over the performance term.

This presents a totally unviable situation unless the Province significantly absorbs capital costs and excessive fuel surcharges through increased service fees.

In addition, there will likely be issues with respect to service levels to be addressed for specific routes. Ferry Advisory Committees have yet to meet with BC Ferries to explore these.

Issues for discussion

Review of the Legislation

The Coastal Ferry Act was established without any consultation with ferry-dependent communities. We support many of its key provisions. The First Performance Term has provided an opportunity to identify the Act’s strengths and weaknesses. We believe that a review is now timely to fine tune the legislation.

1. Provincial responsibility for supporting transportation infrastructure and essential service should be required by legislation

The Coastal Ferry Act spells out the responsibilities of the ferry operators and the commissioner and this provides a degree of certainty and stability that did not exist prior to the legislation. However, the communities that depend upon ferry service continue to face uncertainty because the legislation does not define the responsibility of the province to support an essential transportation system in a way that provides stability for coastal communities. Without this stability, it is difficult for communities, businesses and households to engage in long-term planning. In particular, the legislation should spell out a provincial commitment to support capital expenditures, including amortization and financing charges, with respect to our routes.

2. Consideration of potential impacts of price caps upon communities, economic activity and ferry utilization should be required in the legislation

We would like to see Section 38 (1) include a provision requiring the Commissioner to consider the impact of ferry service levels and tariffs upon the communities served by ferries and upon the regional and provincial economy. This section should also require the commissioner to consider price elasticity when establishing price caps.

3. Internal cross-subsidization should not be prohibited in legislation

We believe that Section 38 (1) (e) should be deleted. This section prevents BC Ferries from operating as the single transportation system that it is. Routes that have been artificially segregated by the legislation can share the same customers and in some cases share the same terminals.

4. Reducing government contributions should not be a legislated requirement

We believe Section 38 (1) (f) should be deleted as far as it applies to our route groups which are not financially sustainable through a user pay system.This provision creates economic and social uncertainty for communities.

5. The legislation should require meaningful community consultation

Section 40 and 41 should require community consultation in establishing price caps for subsequent performance terms for the routes that serve communities.There should be a legislated opportunity for community concerns to be considered in the process of revising the contract. In addition, Sections 42-43 should require public consultation on the part of the commissioner and Section 44 should require a public hearing (rather than enabling it as an option).

Revisions to the Contract – Second Performance Term

1. User-pay has gone far enough

We believe that there has been sufficient movement towards user-pay in the first performance term to satisfy this provision of the Act. Any further movement will have undue impact upon communities and the tourism sector. It could also impact tariff revenues as the price burden falls more heavily upon ferry users resulting in a reduction in travel.

2. The Province should fund capital improvements

We believe that the province has a responsibility to fund capital replacement projects (as it would with other transportation infrastructure such as roads, bridges and tunnels).

3. Fares should be predictable

We believe that the existing fuel surcharges should not be incorporated into the future tariff structure. We would like to see the Province commit to contributing towards any future surcharges in order to meet the “predictability” objective of the Contract.

Consultation

We appreciate this initial opportunity to meet with representatives of the Ministry of Transportation. However at this point, we do not have the informationnecessary to discussissues in any detail. We see the need for further meetings to discuss four key items:

1. Information provided by BC Ferries

On September 30, BC Ferries provided to the commissioner the information required by Section 40 (1) of the Act. The FAC Chairs will need time to fully consider this information before meeting with the Ministry to discuss it.

2. Route specific issues

Over the next few months, BC Ferries will be meeting with each Ferry Advisory Committee to examine service level issues for each route. Once these meetings are concluded we would like to meet -discuss route-specific issues.

3. The Commissioner’s report

Before the end of March the Commissioner will be providing the report required by Section 40 (2) (c) of the Act. We would like an opportunity to discuss this report before the next version of the Contract is drafted.

4. The Coastal Ferry Act

As noted above, we believe that fine-tuning of the legislative framework is required. We would like an opportunity to discuss this with the Minister.

November 2006