This just in ... I regret to inform you that our decision remains unchanged and we will be proceeding with the proposed changes to the ferry component of the Discovery Coast Circle Tour. This is war, says groups defending Route 40. A delegation from the Discovery Coast met with Ministers Stone, Bond and Yamamoto in Victoria, March 4th. Theyve been STONEWALLED. Shock, dismay and disbelief from the communities relying on the Circle Route. Heres Minister Todd Stones response to the delegation; Dear Amy Thacker: Thank you for the opportunity to meet with you this week, along with my colleagues, the Honourable Shirley Bond, Minister of Jobs, Tourism and Skills Training, the Honourable Naomi Yamamoto, Minister of State for Tourism and Small Business, and Donna Barnett, MLA for Cariboo-Chilcotin, to discuss Route 40. MLA Barnett has shared with me your follow up e-mail of March 4, in which you pose several questions. I am pleased to provide the following in response. Operating and Amortization Costs The increases in the operating and amortization costs associated with Route 40 are mostly related to the $17 million cost of the refit to extend the life of the Queen of Chilliwack to 2017. These refit costs are amortized over 6 years beginning in 2011/12, and under the International Financial Reporting System accounting rules, part of the costs of the refit are expensed and impact operating costs, and part are applied to the amortization and financing categories. While the Province is not involved in developing the financial statements for each route, I understand that the incremental increase between 2011/12 and 2012/13 related to the refit of the Queen of Chilliwack was over $2 million. The remaining increases in the operating expenses for that year pertain to other costs, such as fuel and maintenance expenses. The route statements are reviewed by the BC Ferry Commissioner, as they are part of the annual report to the Commissioner. These statements are based on information contained in BC Ferries’ financial statements, which are audited by KPMG. The increase in the cost of Route 40 is not an anomaly, as it reflects the costs of maintaining a service with a vessel that is coming to the end of its operational life. Higher maintenance and refit costs would be expected until the vessel is retired. A replacement vessel would involve even higher amortization and interest costs, increasing the shortfall associated with the service. Federal Subsidy It should be noted that the federal subsidy is provided to the Province in order to maintain a ferry service connecting the northern part of Vancouver Island to the northern coast; Port Hardy to Prince Rupert; and to connect southern Vancouver Island to the Lower Mainland. There is no requirement to provide a service connecting Port Hardy to Bella Coola. Route 40 began in the mid-1990s, well after the 1977 agreement was in place. When the current model began in 2003/04 the provincial service fee and federal subsidy were assigned to each route in order to bring each route to break even status. Since that time increases have been allocated on a pro-rated basis to ensure that the price caps for the three subsidized route groups were the same. To be clear, the provincial and federal funding assigned to each route does not impact the fares charged on that route, rather it is the total provincial/federal funding provided to the company that determines the maximum average fares charged. While the Province and BC Ferries could assign more of the provincial service fee or the federal subsidy to support the Route 40 service, it would not change the fact that the service lost over $7.3 million in 2012/13 before any provincial or federal contribution. Regardless of whether that shortfall is recovered through the provincial service fee, the federal subsidy or the cross-subsidies from fares paid by ferry users on other routes, that loss is considerable for a service that runs only 13 weeks per year. This shortfall would grow if the Queen of Chilliwack was replaced with a new vessel. Historical Capacity In 2012/13, Route 40 carried 2,138 vehicles and 6,949 passengers. However, not all those travelling on Route 40 are doing a circle tour. The 2012/2013 numbers refer to vehicles travelling Route 40, not auto equivalents (AEQs) as raised in your question. AEQs are used to measure the capacity utilization of the vessel, whereas the number of vehicles represents the volume of traffic. As has been publicly indicated, 503 vehicles (1,379 passengers) departed Port Hardy, disembarking in Bella Coola in 2012/13. A further 627 vehicles (1,934 passengers) departed Bella Coola disembarking at Port Hardy that year. The remainder of the traffic would not be characterized as circle route traffic, as it is of a local nature. Approximately 750 vehicles travel between Bella Bella or Klemtu and Port Hardy and will continue to be able to do so using Route 10 service between Prince Rupert and Port Hardy. There is a modest amount of inter-terminal traffic of a local nature that is non-circle tour related, such as residents going from Port Hardy to Ocean Falls. While it is correct there was utilization of 2,643 AEQs on Route 40 in 2012/13, that number does not reflect the actual circle tour vehicle traffic, which is a much smaller number. Your Proposed Alternative Direct Sailings The proposed alternative to provide two direct round trips between Port Hardy and Bella Coola from mid-May to mid-October would not result in savings, and would likely substantially increase the shortfall associated with the operation of the route. The proposal would increase costs by extending the season by six to seven weeks. Costs would also rise due to the need to provide service using the Nimpkish to connect Bella Bella to Shearwater and Ocean Falls during the summer season. While it is correct that the one direct sailing between Bella Coola and Port Hardy has utilization levels of 70 per cent, utilization on the direct sailing from Port Hardy to Bella Coola is much lower at 40 per cent. Adding an additional round-trip each week may reduce utilization as traffic is split between the two sailings. New Vessel As is well known, BC Ferries currently has an RFP out to build three new vessels. Two vessels will be capable of carrying 145 vehicles and up to 600 passengers plus crew to replace the Queen of Burnaby, which sails between Comox and Powell River, and to replace the Queen of Nanaimo, which services the Tsawwassen – Southern Gulf Islands route. A third vessel capable of carrying 125 vehicles and up to 600 passengers and crew will also be built to augment peak and shoulder season service on the Southern Gulf Islands route, as well as provide refit relief around the fleet during the off-peak season. As all three vessels will be in use during the peak season, none of them will be available to provide service on Route 40. It is also important to note that a vessel used on the mid-coast would be more expensive to build, as it would need to meet different design standards in order to operate in rougher waters, compared to the vessels being built for the southern routes. Finally, all three of these vessels will be too large (even larger than the Queen of Chilliwack) with respect to the historical utilization on Route 40. Adequate Marketing BC Ferries promotes all their northern services, including the circle tour, and will continue to do so. Destination British Columbia will enhance its marketing strategy for the province’s circle tours to draw visitors to our Central Coast and Central Interior. I encourage you to work with BC Ferries and Destination BC directly on this matter. Conclusion I want to assure you we will continue to work with the tourism industry and coastal communities to ensure the long-term success of the tourism industry on the coast and in the interior. In light of the information detailed above, I regret to inform you that our decision remains unchanged and we will be proceeding with the proposed changes to the ferry component of the Discovery Coast Circle Tour. Moving forward, we are committed to work with you to promote tourism in the region. The Minister of State for Tourism and Small Business has committed to visiting your communities to further discuss a tourism strategy going forward. Destination BC has also committed an additional $100,000 to promote the Cariboo-Chilcotin. We are looking for your input and I encourage you to share your ideas on how to best market the region and generate tourist traffic going forward. Also, as discussed in our meeting earlier this week, we remain committed to do right by the tourists who have made bookings for the 2014 season. We look to you to help identify those specific bookings so we can match them to the best coastal Cariboo-Chilcotin experience possible. We will be vigilant in holding BC Ferries to their commitments of route schedule synchronization, a reservation system that ensures limited layovers between sailings, amenity improvements aboard the M.V. Nimpkish, additional capacity to support special events in the coastal communities and better promotion. Should you have additional questions or concerns, please do not hesitate to contact Assistant Deputy Minister Kevin Richter, Infrastructure Department, by telephone at 250 387-6742 or e-mail at [email protected]. Thank you for taking the time to write. Sincerely, Todd G. Stone Minister Copy to: Honourable Shirley Bond Minister of Jobs, Tourism and Skills Training and Minister Responsible for Labour MLA, Prince George-Valemount Honourable Naomi Yamamoto Minister of State for Tourism and Small Business MLA, North Vancouver-Lonsdale Donna Barnett MLA, Cariboo-Chilcotin Kevin Richter, Assistant Deputy Minister Infrastructure Department
Posted on: Fri, 07 Mar 2014 06:24:00 +0000
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