BC Ferries received a major course correction from former provincial premier Gordon Muir Campbell. Now, the vital West Coast marine service is shifting back more and more to its old heading.
What Mr. Campbell attempted was to insulate BC Ferries from political interference, which had an unhappy record, by transforming it from being a crown corporation into a private corporation.
What resulted was a hybrid, an ostensibly autonomous corporation charged with following best business practices, while the government retained sole ownership. Mr. Campbell’s action to try and elevate BC Ferries above politics was itself a supremely political act.
This action provided eight years in which politics was more or less in abeyance, largely because the opposition NDP had been chastened by its own miserable record in charge of BC Ferries, a period in which $466 was squandered on fast ferries that were failures and were sold off for essentially scrap value.
Then the NDP recovered its confidence and voice, and began targeting the CEO of BC Ferries and the directors who had awarded him a handsome increase in his pension benefit.
The CEO in question had joined BC Ferries upon its transformation into an independent corporation. He had proved himself competent in renewing a neglected fleet of conventional vessels. He remained cool in crises, the worst of which was the loss of a major ship and the drowning of two passengers.
One of my Montreal-based editors was incredulous that such a rumpus could have been raised over the pay and benefits of someone who appeared to be well worth his million-dollar pay packet. But this is ignoring the context of the political divide in B.C. and the irresistible target that the NDP found in a “fat cat” boss in times of widespread angst over income inequality.
The current Liberal government has contributed to the resurrection of political control over BC Ferries. First, it ordered a freeze on fares during the 2010 Winter Olympics. A subsequent haircut of directors’ fees, the early retirement of the CEO and the appointment of a successor at a much-reduced salary had some measure of political authorship.
Where does this leave us? BC Ferries is a former crown corporation that now behaves like a dutiful crown corporation. It has undergone a very necessary fleet renewal and its purchase of four major new ships from Europe is now a distant issue.
Still, problems remain, due to traffic declines and shrunken revenues. BC Ferries, faced with mounting losses and the lowest passenger traffic in two decades, has had to take corrective action. Reductions in sailings have been proposed (and denied); wages and salaries frozen and only replacements to essential personnel are still being hired.
Tourism is down, many U.S. owners of recreational properties on the B.C. coast have sold, or tried to, and a combination of high gas prices and steep ferry fares depress business. Further, an expected exodus of retirees from Vancouver, cashing in on property prices in the city that is Canada’s west and Asia’s east, hasn’t materialized in the numbers expected. Recent studies suggest there is unlikely to be a short-term increase in passenger traffic and that longer-term improvement depends on the state of the economy. In the meantime, testing pricing elasticity, so as not to depress demand, will remain a black art.
The former CEO of BC Ferries has said that a return to full government control will result in government interference. It appears to have happened already, and reversion will be completion when the NDP again takes office.
What government should be doing is preparing for the day when traffic numbers do rebound and losses really take off.
Ferry services are key to the economic health of Vancouver Island and to coastal communities not connected to the mainland highway network. Setting pricing levels that support the economy without encouraging fringe demand, such as from people who fancy a subsidized marine commute instead of sticking close to their jobs in Metro Vancouver, will be tricky. But the government can call on a regiment of academics to offer a menu of pricing approaches.
The NDP’s costly misstep over fast ferries further delayed BC Ferries’ overdue fleet renewal, and helps to explain why there has been $1.41 billion in catch-up capital spending in the past five years.
Provincial and federal governments cover 24 per cent of the costs of BC Ferries, and it made a loss of $20 million in the 12 months ending on March 31, 2011. Losses this fiscal year will be higher, as traffic has declined, in part because fare increases have consistently outpaced inflation since Mr. Campbell rejigged governance of the service.
BC Ferries was started by Premier W.A.C. Bennett, who announced a state-run marine operation in 1958 after strikes plagued private operators. Service with two new ships between terminals opened on the mainland and Vancouver Island commenced in the summer of 1960.
Premier Bennett, who held office for two decades, was a statist. He nationalized the power supply and threw up giant dams on the Columbia and Peace rivers. He built modern highways and expanded a small provincially-owned railway into the third-largest system in the country, but BC Ferries was his fondest work.
I arrived in Vancouver while Mr. Bennett was preparing for his final great battle with the federal government; forcing the development of a coal port south of Vancouver and getting Canadian Pacific Railway (CP Rail, as it was known at the time) to innovate and cut freight rates for moving coal 1,120 kilometres to tidewater, under threat that the haul would otherwise go to a U.S. carrier.
Mr. Bennett served as the province’s chief fiscal agent and had to be believed when he said he could raise money quickly for a provincial port development if the federal government balked at such an undertaking. How quickly? “In a morning, my friends, in a morning,” he said. It sounds like a line W.C. Fields might have delivered, except that Mr. Bennett was a teetotaler. He was also honest and, with his fondness for crown corporations, was admired by socialists. He renamed the Trans-Canada Highway west of the Great Divide “B.C. 1” and his secretary greeted telephone callers with, “The Prime Minister’s Office.” Behind this tomfoolery was steel.
Mr. Campbell would have certainly disappointed Mr. Bennett for allowing BC Ferries to abandon its former utilitarian model. Why pay for expensive advertising when it is a monopoly service provider? Why the staterooms, spa treatments and fancy eating? If high salaries and directors fees had to be reined in, why were they granted in the first place?
Mr. Bennett, who only brought in provincial budgets that topped $1 billion in the final years of his tenure, was frugal and famously declared the province debt free; this was true if you ignored the debt run up by crown corporations, though this was handily serviced from revenue streams.
Today, B.C.’s provincial debt is more than $47 billion, with another $53 billion in contractual obligations incurred through public-private-partnership involvements.
It is doubtful that Mr. Bennett would have approved of P3s or of the measly $1 billion Mr. Campbell’s government received from selling the assets and leasing the 1,441 miles of main line of BC Rail to Canadian National.
Mr. Campbell narrowly failed to win power in 1996, his defeat attributable in part to opposition to his plan to privatize BC Rail. He recanted and said the railway would remain in government hands. But once in office, he began grooming the property for sale, cancelling passenger services. CPR and others withdrew from the auction of the railway, claiming CN had been given favoured treatment.
The disposal of 24 miles of a key port access line to a U.S. shortline operator had to be cancelled because of corruption. There was a police raid on the Legislature to seize files and two government employees were charged with taking bribes.
A four-year corruption trial ended abruptly in October 2010, with the defendants pleading guilty to lesser charges and the government paying their legal costs of $6 million. Had the trial continued, high profile provincial Liberals, possibly including Mr. Campbell, were expected to be called upon to testify.
Mr. Campbell, had he taken the stand, would likely have been quizzed on his relationship with CN chairman David McLean, who raised money for Mr. Campbell’s Liberal leadership bid in 1993.
Mr. Bennett left office after possibly staying too long at the fair and having his last great infrastructure initiative, pushing rails into the northernmost corners of the province, undermined by softening demand for resources. But he departed with his honour intact.
History may deliver a different verdict on Mr. Campbell, now Canada’s envoy in London. At Canada House in Trafalgar Square he can gaze at Nelson’s Column and perhaps reflect that the Great Commander knew scandal too.
The opinions expressed above are the opinions of Mark Wilson, and do not necessarily reflect the opinions of Great White Publications Inc.
Mark Wilson has been a frequent contributor to Canadian Sailings for many years. This contribution represents his last, as he has recently retired from active journalism. We thank Mark for his contributions throughout the years, and wish him a long, happy and healthy retirement.