The hard place is Premier Christy Clark, who followed that up by ruling out any more rate increases.
鈥淔rankly, I think fares are about as high as they can get,鈥� she told the sa国际传媒 Business Council.
Let鈥檚 move quickly past the obvious point 鈥� that any shred of corporate independence is long since gone from this 鈥渃orporation.鈥� The question is, what comes next?
If major cost-cutting is prohibited and rate hikes are verboten, how does the ferry service pay its way?
One option is to keep whistling past the graveyard. The company is good at that.
Vehicle traffic on major routes declined 5.4 per cent over the past three years, and passenger traffic 4.5 per cent. On the smaller routes (excluding the north), vehicle traffic dropped 6.9 per cent and passengers 6.2 per cent.
Yet the most recent annual report blamed ridership drop-offs on 鈥渟tormy weather,鈥� 鈥渢iming of the Easter holiday鈥� and other misfortunes. Nothing to do with the fact that ticket prices have increased 50 to 80 per cent over the past decade.
A better choice would be to stop fooling around and fix this problem once and for all. But how?
Let鈥檚 start with a surprising fact. sa国际传媒 Ferries stands to make an operating profit of $86 million in 2014. It made $85 million last year.
How can that be? It鈥檚 because those figures count only the cost of providing the service. They do not include interest charges on the whopping heap of debt.
Add in those interest charges 鈥� $67 million a year 鈥� and the surplus drops to $19 million. That might appear healthy enough, but it鈥檚 not.
Over the next 12 years, the company must replace 18 vessels, upgrade the two Spirit-class ships and carry out extensive terminal repairs. It was to avoid much of the latter expense that management wanted to close one of the Nanaimo terminals.
The price tag for this work is $3.1 billion. With limited cash in hand, about 40 per cent must be borrowed. That will significantly increase the debt load and add millions to the interest bill. How can the company survive a hit like this without another round of rate hikes?
Yet what these figures also make clear is that on a strictly day-to-day basis, our ferries more than pay their way. Indeed, there is room for a fare reduction. That $86-million profit would support a rate cut of 15 per cent, with a safety margin. Remove the debt burden and there is clear sailing ahead.
Easier said than done, of course. But there are two ways it can be accomplished.
The government could take sa国际传媒 Ferries鈥� red ink onto its own books. That would mean shouldering the interest charges. Alternatively, the government could pay down the debt from its revenue base. That would extinguish interest charges completely.
Financially speaking, either option is feasible. The province is on target to rack up surpluses for the foreseeable future.
In addition, the government, for all practical purposes, already backstops the company. That suggests there should be no impact on the province鈥檚 credit rating.
Lastly, there is this to consider. What does Clark want for her legacy? A liquefied natural gas scheme that looks increasingly doubtful? Trade overtures to Asian countries already entering a slowdown?
Or will she be the premier who finally rescues our ferry service, and in doing so, keeps faith with the million British Columbians who depend on it?
