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CBoC reports on provincial impact, potential job growth if Marine Atlantic ferry fees are lowered

The MV Highlanders pulling into Port aux Basques harbour. A report by the Conference Board of Canada sheds new light on the provincial impact, and what gains might be had if the ferry service were to reduce its fees. – © File photo

By Jaymie L. White

Special to Wreckhouse Press

PORT AUX BASQUES – A report completed by the Conference Board of Canada (CBoC) and presented to Gerry Byrne, Minister of Immigration, Population Growth and Skills, has not only shed light on the importance of the Marine Atlantic ferry service to the province, but also the potential economic impact of rate increases and decreases.

Byrne said Marine Atlantic is the single most important gateway to Newfoundland and Labrador because 90 per cent of perishable goods that both enter and exit the province come via the ferry service.

“We have a constitutional right attached to the Marine Atlantic ferry which creates a whole new dimension to its analysis, not only from the point of view of is the transportation system working efficiently and effectively for us all, but is it working within the context of its constitutional obligations? And so, with that as a backdrop, I felt it important to have work done on an examination of its significance to the province, and I will say up front, I do not believe this province, its businesses, and its people, truly understand and appreciate the incredible contribution and impact that the Marine Atlantic ferry service has on our entire province – not only on the economics, but the social wellbeing of our province.”

Byrne said he asked CBoC to prepare an economic analysis and investigate Marine Atlantic’s impact on the economy of NL in regard to their services and their place as an independent standalone corporation.

“I contracted them back in 2015 to do this study when I was a Member of Parliament. That was the first edition, and what I wanted when I became minister responsible for fisheries, forestry and agriculture, I wanted to get an update on that original work, just to see from a time-series point of view, were the results and was the economy of Newfoundland and Labrador changing. Both reports were very much in tandem or parallel to each other. There were subtle differences, but the core findings were consistent with each other,” said Byrne. “What we found is that Marine Atlantic is no small player within the economy of Newfoundland and Labrador as a standalone corporation. As a single corporation it contributes 0.16 per cent of the entire GDP production of our entire province.”

Byrne said the contribution has been steadily increasing by 0.7 per cent over the last five years, and when also considering the amount of jobs and taxation the company provides, it should not be dismissed as a major contributor and factor on the provincial economy.

“While it’s somewhat out of sight out of mind for the majority of the population that reside on the Northeast Avalon, it should not be undervalued as to the contribution that it provides to each and every one of us and that’s one of the core reasons I asked the Conference Board of Canada to unwrap that particular information.”

CBoC looked at three scenarios in the report and what the impacts would be for Newfoundland and Labrador. One of the scenarios was based on the fare limitations put on operators of the Confederation Bridge from the federal government.

The question they posed was, ‘what would happen if you were to take the same fare structure that was granted to the users of the Confederation Bridge, and duplicate it and institute it on the Gulf ferry service?’

The fare structure stated that when the Confederation Bridge was opened in 1997, that operators were only allowed to charge the equivalent of 1992 Marine Atlantic ferry rates between New Brunswick and Prince Edward Island, and only allowed to charge 75 per cent of the actual amount of inflation, not just the estimated inflation rate.

“What that means, over the course of time, considering the time value of money, the cost of using the Confederation Bridge has constantly been going down because, if you are only allowed to charge 75 per cent of the current rate of inflation, in terms of the real time value of money, rates are actually decreasing,” said Byrne. “In contrast, the Marine Atlantic Gulf ferry service has not only been increasing by an inflationary index, but has been increasing above and beyond the inflationary index. Ottawa takes the estimate of inflation on an annual basis. Before the year occurs they ask the question ‘what is inflation predicted to go to this year,’ and the estimates may come in at, for example, anywhere from 2.5 per cent to 4 per cent as the estimate for the coming year, and what does Marine Atlantic and the government do? They say, ‘okay, we are increasing our rates by four per cent,’ which is the upper limit of the inflationary estimate.”

Byrne explained that Marine Atlantic has always done it this way, where they have increased their rates according to the maximum estimate.

“Inflation actually never comes in at four per cent. It actually comes in much lower. So Marine Atlantic has not only been charging inflationary costs, but they’ve exceeded inflationary costs.”

The findings of the report showed a significant difference, not only surrounding out-of-pocket expenditure, but also what it does to the economy.

For example, if the charges imposed in 1992 to gain access to the Cabot ferry service were used and started in the year 1997, going up by the same inflation adjustments allowed through the Confederation Bridge formula, Marine Atlantic ferry rates would essentially be cut in half.

“They created a rule of thumb, for every five per cent increase in rates, Newfoundland and Labrador loses 100 jobs because the economy becomes less competitive. It’s an awful lot because they regularly increase fees. They haven’t in the last couple of years admittedly, but they have been increasing it regularly for the last 25 years, so it is a lot. The report actually spells out that if you were to bring back the rate to the equivalent of the PEI rates, the GDP of Newfoundland and Labrador would immediately grow by $150 million per year and immediately 1,200 jobs would be created in our province by increased business competitiveness.”

Byrne said that as long as there are fares being charged by Marine Atlantic, the cost of living in the province will be higher than in other parts of the country. However the real question is how much higher can they realistically be and what is fair and reasonable.

“Let’s make it fair. Why should Newfoundland and Labrador pay any different rate imposed by the federal government than the rate granted by the federal government to the people of PEI?”

Byrne said that because Marine Atlantic is a federal crown corporation, the responsibility falls on the federal government to pay the subsidy to make up for the revenue lost by Marine Atlantic with a fare decrease.

“What people may not be aware of is Ottawa still subsidizes the highly optional routes of Digby, Nova Scotia, to Saint John, New Brunswick. It gives about $5 million to a seasonal service. The Confederation Bridge is still in operation under federal regulation. They still subsidize a secondary ferry service between Woods Island and Nova Scotia. They also subsidize the ferry service between PEI and Quebec.”

Port Aux Basques Mayor, Brian Button said that he and previous administrations have been constantly saying that the costs to travel to and from NL are outrageous.

“It’s not a Port Aux Basques issue, this is province wide. Nowhere else in Canada would you be expected to pay such rates to use what we would call the Trans Canada Highway. This is our Trans Canada Highway. It is our link to and from the mainland, and if we did this in other jurisdictions and implemented these types of fees through bridges and other ferry services like we have with Marine Atlantic and what is expected of Newfoundlanders and Labradorians, it’s not even comparable.”

Button said that before he was Prime Minister, Justin Trudeau as the leader of the opposition, said the 60 per cent cost recovery fee Marine Atlantic is expected to pay back each year to the federal government was outrageous and yet there has still been no change made to the system.

“Marine Atlantic has taken steps this year where they had a reduction of 22 per cent for the months of May up to the end of June. Well that’s great that the company was able to try to do that, but our tourism doesn’t start until July and August. That’s when it comes into full swing in this province and unfortunately, with what they’re expected to return, unless that is changed, unless the federal government lowers it on the demand that is expected back, or come up with a different scenario, we are still going to be paying the high rates to and from this province. I think it’s ridiculous. It’s time for a change. It’s our main link.”

Button said Port Aux Basques councils and other councils across the province have reached out to MNL (Municipalities Newfoundland and Labrador) raising concerns and hoping to make headway regarding these high costs.

“The ferry comes and goes into Port Aux Basques and yes, we are the gateway to the province, but when it comes to what we pay on the ferries, this is a federal government issue and it’s an issue that affects the entire province. It affects it from a tourism perspective, it affects it from a goods and services perspective, and it also affects it in our everyday living on when we want to travel and how we want to travel. We pay high rates when travelling by air, and when we just want to travel the main roadways, pick up a ferry and travel the main highways, we pay at that. If we were traveling on the highways in other provinces and this is what we would have to pay to use and to travel to and from other provinces, there would be total outrage right across this country. It’s time to make that stand, it’s time to make the change, and it’s time to make the fare rates reasonable and fair to all that travel.”

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