BC Ferries fare hikes have cost the province $2.3 billion in lost economic activity over the past decade, according to a new policy paper commissioned by the Union of BC Municipalities.

Those staggering losses are the result of declines in ferry ridership on nearly every route, something that is strongly related to fare increases that have outpaced inflation, according to the report, prepared by Larose Research & Strategy.

The report, titled Boatswains to the Bollards: A Socioeconomic Impact Analysis of BC Ferries, comes after a provincial announcement in November 2013 that BC Ferry fares would continue to rise at the same time as services to some communities would be trimmed back.

Municipal leaders and residents across the B.C. coast claimed increased fares and route cuts would hurt local businesses, spark job losses, and cause property values to decline, an argument taken up in numerous columns by The Vancouver Sun’s Stephen Hume in the months following the provincial announcement.

Among the key findings of the report was that BC Ferries is among the global leaders in operating cost recovery, on-time performance, labour cost ratios, safety, customer satisfaction and other areas.

“Despite common criticism ... BC Ferries compares favourably with its competitors in nearly all categories of operational performance,” stated the report.

But in the category of “value for money,” it is weak and worsening, a trend that comes while passengers are price sensitive, and increasingly so, according to the report.

Ferry ridership declined 6.8 per cent overall from 2003 to 2013, while most other modes of transportation in the province experienced jumps in volume, according to the report.

Ridership declined across the province, with the exception of just a few routes, the report found, but northern routes in particular saw the largest drops (between 20 and 40 per cent) from 2003 to 2013. In comparison, ridership dropped 10 to 20 per cent on minor routes and five to eight per cent on major routes.

During that time, average fees increased the most for minor routes, followed by northern and major routes.

The economic losses the report attributes to a decline in ridership over the past decade include $203 million in finance, insurance and real estate, $161 million in manufacturing, and $67 million in the construction industry.

In coastal regions, the damage caused by high ferry fares include lower rates of business formation and stunted housing starts relative to other regions in the province.

But the impact of a decline in ridership is felt far beyond the ferry dependant communities served by the ferry system — even as far away as Ottawa, according to the report.

It noted that provincial, federal and municipal coffers suffered from a combined $609 million in lost tax revenues on the back of B.C.’s stunted gross domestic product.

The province spends some $150 million annually on the system and receives nearly the same amount back in tax revenues, according to the report.

In contrast, the federal government rakes in about $210 million in annual tax revenues, while it invests just $27 million per year in the system.

The UBCM executive prepared a memorandum including a list of recommendations stemming from the report’s findings. It requested the province reconsider its 2013 decision, restore service levels and ferry fares to 2013 levels, take a pause to consider the socioeconomic impacts raised in the report, and recognize coastal ferries as an extension of the highway system.

But the executive also took aim at Ottawa, which appears not to be hurting from BC Ferries policy, noting that the province could turn to the federal government for more help funding the system.

In the meantime, customers are paying more for ferry service, which, according to the report, puts the Crown corporation well ahead of other ferry systems and other modes of transit when it comes to fare box recovery — a measure of the proportion of operating expenses recovered from users themselves.

BC Ferries ranks far ahead of similar systems, with a 92 per cent fare box recovery rate. That is compared to 66 per cent for Washington State Ferries and 51 per cent for TransLink.

BC Ferries often delivered those paying customers on time, according the report. The Crown corporation completed 99.8 per cent of its scheduled sailings last year, and 92.3 per cent of them arrived on time. That’s compared to the 94 per cent success rate of the Washington ferry system.

BC Ferries also scored well on customer satisfaction, with a score of 88 per cent. That’s in comparison to a typical satisfaction range of 70-80 per cent in travel-related industries.

The report was commissioned by the UBCM and the Association of Vancouver Island & Coastal Communities.

Larose Research & Strategy, the company that prepared the report, lists itself as an “economic development consultancy that brings together expertise in areas of economic research, sector & community development, strategic planning, and policy/government relations.”

Peter Larose, its principle consultant and CEO, has served as an executive member on a range of business councils, committees and boards, according to the company website.

The company has prepared reports related to BC Ferries, the mountain pine beetle and the HST, among other topics.

The report cautions that because BC Ferries’ reporting and fare structures have changed over time, historical comparisons were difficult, and it notes that the information should be validated using information held by government agencies and BC Ferries.

mrobinson@vancouversun.com

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