Aggressive ferry pricing is damaging the economy of a region of British Columbia that is larger or equal in population to six of Canada’s provinces and territories and contributes an estimated $50 billion to annual provincial GDP. Numbers are difficult to come by because nobody — including the province — has done a comprehensive analysis of the regional economic impact of the series of steep fare hikes, combined with fuel surcharges and service cuts, that Transport Minister Todd Stone confirmed this week will continue until 2016. But some grim predictions have come from local and sectoral studies: • Almost half the businesses surveyed by the Tourism Industry Association of B.C. in the Coast-Chilcotin region, which is served by a summer ferry connector to Bella Coola, say they expect to close their doors as a consequence ferry price increases and service cuts. • A local economic impact study in Port Hardy estimates an 80 per cent loss to businesses dependent upon North Vancouver Island ferry traffic. • Gulf Islands residential properties have lost more than $1.6 billion in assessed value since BC Ferries started raising rates in 2006. To put this in perspective, the Gulf Islands loss in assessed value from 2010 to 2013 exceeds by 25 per cent the $1.2 billion in tax revenue the provincial government would gain over 30 years from a proposed Enbridge Northern Gateway pipeline. • Some of this may be fallout from the recession. “It can be difficult to separate out the impacts of fare increases from external economic conditions like the recession and the value of the Canadian dollar,” acknowledges Saltspring Island MLA Gary Holman, who is an economist. But he says there’s little doubt soaring ferry fares reduce disposable income for residents and visitors and lead to reduced consumer spending and related employment. “Much higher fares also mean higher costs for local businesses which means they will spend less, hire fewer employees, and for businesses that are already marginal, threaten their viability,” Holman says. Harold Swierenga, who runs a bed and breakfast on Saltspring Island, where tourism ranks second as an employer, agrees. “On balance, given the relative slowdown in much of the coastal economy and the anecdotal information we have had, there is no question ferry fares have been a factor,” said Swierenga, who sits on a ferry advisory committee. Statistical evidence corroborates their concerns. Economic growth across this huge region now lags growth on the adjacent mainland by a substantial margin — and the gap is widening. A recent study by the Institute of Chartered Accountants reports that population growth in ferry-dependent areas has plummeted to the lowest in a decade and housing starts have dropped 40 per cent over the last five years. The study found the tourism-sensitive accommodation and food sector shrank in ferry-dependent areas by almost four per cent in the five years after 2006, while in Vancouver the sector grew 4.5 per cent. Local governments, business associations and concerned individuals across Vancouver Island, the Gulf Islands, the north and central coasts and parts of the Chilcotin all say steep fare increases and service cuts since 2006 have already hurts businesses. And they warn that the next round of increases and service cuts will make economic conditions far worse.

In 2008, before the recession, the provincial government conducted an exit survey of tourists who had visited Vancouver Island. Those who said they would not consider returning to Vancouver Island blamed their own advancing age or travel distance, not the cost. In 2012, a survey asked the same questions. This time most who said they would not return said it was because the trip was too expensive. By comparison, a 2012 survey found cost was not cited as a factor by 90 per cent of visitors to the Kootenays/Rockies and Okanagan regions who said they would not likely return. And BC Stats reports that tourism businesses in the Vancouver Island/Coast region have shed almost 18 per cent of its jobs since 2006. That’s a worrying trend for a sector that was identified 10 years ago by the Institute of Chartered Accountants as offering the greatest potential for growth in that region. The cost to the province’s economy from declining tourism and associated loss of consumption taxes in the region could top $100 million a year. • Woody Hayes, past president of the Institute of Chartered Accountants, says Victoria’s economy is stabilized by the presence of government, but other parts of the regional economy suffer. “The entire economy has certainly lagged behind Vancouver.” Greater Victoria alone contributes almost eight per cent of B.C.’s real GDP, which puts the Vancouver Island/Coast economic region in the same general size envelope as Nova Scotia or New Brunswick. The Vancouver Island/Coast tourism sector represents close to 15 per cent of an industry in B.C. that paid $2.8 billion in direct taxes in 2012 and generated another $1.5 billion in consumption taxes on gasoline, travel, meals, etc. This means the province extracts more than $450 million a year in revenue from the region’s tourism alone. The Vancouver Island/Coast zone is also a big economic contributor in forestry, mining, fishing and aquaculture and all depend on ferries. BC Ferries pricing has become “a deterrent to many of British Columbia’s most important sectors and a disincentive for local economic development,” warns the Greater Victoria chamber of commerce. • Provincial tourism associations say the cuts to ferry service starting this summer will be “disastrous” in regions where 30 per cent of local business relies on visitors who come by ferry. “For us it’s a huge hit,” says Gordie Graham, who 35 years ago bought a derelict logging camp, the last of the boardwalk towns built on pilings that used to dot the coast, and remade it as the first destination tourist resort on the north end of Vancouver Island. Telegraph Cove attracted tourists from all over the world both for the unique experience and the superb salmon fishing. Now it’s struggling — along with the rest of northern Vancouver Island. “We used to get busloads of people. We got lots of Europeans. People used to come from the Lower Mainland and Washington to fish for salmon. Now they don’t come. The number that does come is less than half. Every tourist facility on the island is down,” Graham says. “There’s nothing that’s positive about this situation.

“This whole thing is bizarre. In this equation, nobody’s looking at how much less money is coming to Vancouver Island and how much damage it’s doing to the province. It’s costing the province a huge amount of money. I’m far from a socialist but it’s time the ferries were taken back under the government and run as an extension of the highways. That’s the only solution I can see.” One recent study found that seven of 10 coastal businesses expect significant losses due to reduced ferry service. One in three workers expects to lose hours — one in five expects to lose his or her job — as a result of proposed reductions in ferry service on routes without alternatives. A study of the economic impact of cancelling summer ferry service from Port Hardy to Bella Coola found that 47 per cent of tourist-dependent businesses between Bella Coola and Williams Lake think they’ll have to close as a result. Furthermore, the analysis by the Tourism Industry Association of B.C. found that when provincial tax revenues from those businesses were applied to the operating losses incurred by the ferry service, the province came out in a surplus position. Perhaps, counterintuitively, cancelling that ferry service will actually cost the province more in foregone tax revenue than it would cost to run the service at a loss. • The 2006 shift to a user-pay model for BC Ferries wasn’t only a sudden, unexpected blow to coastal communities, but the burden is distributed unequally. Former Liberal leader and later NDP cabinet minister Gordon Wilson, who did one analysis of the effect, noted that the area serviced by BC Ferries provides about 36 per cent of the province’s annual revenue while benefiting from only about six per cent of the province’s capital spending on transportation infrastructure including highways and ferries. The fare policy “fails the test of fiscal fairness and discriminates against rural coastal communities,” says a coalition of 16 coastal municipalities and chambers of commerce. Studies show the ferry service recovers a disproportionate share of its operating costs from users on small routes that will see the deepest service cuts while major routes that sustain massive losses suffer fewer cuts. The Tsawwassen to Duke Point run, for example, maintained as one of the essential big three services, loses more money every year than the entire amount BC Ferries is trying to claw back from minor routes. Examine the ratios of service area populations to number of passengers; the number of person-trips per capita and the ferry revenue per capita and “user pay” turns out to be a highly relative concept. The Tsawwassen to Swartz Bay run generates about $600 in ferry revenue per capita for the roughly 5.6 million passengers who travel that route. But the Chemainus to Penelakut Island (that’s an impoverished Indian Reserve with high unemployment and no grocery store or gas station) generates $2,080 in ferry revenue per capita. Passengers travelling from Swartz Bay to the southern Gulf Islands generate about $2,900 in ferry revenue per capita. Travellers between Horsehoe Bay and Bowen Island generate about $2,800.