Media, and the BCFMWU

It is little surprise to anyone, that the both print and television media pay little attention to alarm bells sounded by organized labour groups in this province, especially government employees. In some instances, this is tolerable. In this instance, indifference may give tacit public endorsement to the destruction of the ferry system as we know it. Herein, lies the problem. The BC Ferry and Marine Workers Union opposes Bill 18, but has been unsuccessful at raising public awareness.

Our efforts to awaken the public continue to go unheeded, as the government continues to roll out the authority model they wish to use to manage the ferry system, and dispose of another section of the publicly owned transportation infrastructure.

 The current Liberal government has demonstrated that it is indeed powerful, yet not entirely foolish. Events such as their backtracking on the Coquihalla privatization, indicate that they can be lobbied into reversing aspects of their agenda in the face of strong, organized public opposition to policy decisions.

 

 

Bill C-18  The Coastal Ferry Act

The following document was written to provide the public an interpretation of the impact resulting from the full implementation of clauses contained within Bill C-18, The Coastal Ferry Act. It is written to encourage individuals and advocacy groups to further explore the potential ramifications of "the Act" and lobby to repeal sections of the Act that do not reflect the public interest.

 

Part 1    Interpretation

Section 1 identifies support services that are considered Ancillary. These include:

1. parking
2. catering and retail concessions
3. reservations
4. vessel maintenance
5. terminal maintenance
6. other services not directly related to the provision of core ferry services

all of the above services are without regulation.

While this may not seem particularly striking , the deregulation of ancillary or “support” vessel services, is troublesome. Together, they provide a network that ensures that the service is delivered in a safe, efficient manner and form part of a reliable network of ferry, as well as traveler support services. Do most people take their cars to a different mechanic every time they need repairs, or do they develop a relationship based on prior experience and reliability? The answer is obvious: while cost is an important consideration, value is what really matters.

Consider parking for a moment. BCFS contracted out parking lot services to companies such as Impark, who stand to make a tidy profit operating the lots, with automated ticketing in most cases.

Enter free enterprise. The result: increased cost, decreased service. Before privatization, these jobs were often used as work return jobs for injured and disabled employees. Does it matter that this opportunity is lost? I believe that it does. One of the roles that Government serves should be to strive to set standards, not degrade them. Standards which embrace the values of our Society, not that of business interests.  Don't forget...the ultimate goal of the Commissioner, is to deregulate ferry routes altogether, not just the services, when sufficient competition exists.

 

Part 2
Division 1 Corporate restructuring First Directors of Authority

Section 4-6 the initial directors for the authority are the directors of BC Ferry Services. One of their duties is to create the selection criteria for the future directors of the Ferry Authority, which will govern the BCFS and the ferry system. There will be nine directors selected by the original directors of the authority, after meeting their specific selection criteria.

The board will be heavily slanted towards the government’s agenda:

1. two will be appointed by government
2. two will be appointed by the Authority as members at large.
3. one will be appointed from nominees submitted by the Union
4. four will be appointed from nominees submitted by the 13 coastal regional districts.

It is the Authority directors, some who are actually presently the directors of BCFS, who will deem who is a qualified applicant. For example The Unions nominees, must not be members of the BCFMWU. Similar conditions apply to other candidates. The nominees from the Coastal districts must not have a vested interest in the coastal community. The Authority states that “the (future appointed) directors owe a fiduciary duty to the Authority itself, and are not appointed in order to be delegates to the Authority of the Union, a particular region, stakeholder or constituent group.” Simply put, advocacy has no place in the governance of the ferry system. Where exactly is public pressure to be applied then? BCFS announced in one of its first set of stakeholder meetings as a new company, that they would only be meeting at their convenience, to discuss issues of their choice. So now we have a relatively bleak picture of an authority, which is not obligated to seek public input, governing a company that has all but torpedoed the stakeholder process. Couple this with Section 75 of the Act, which states that the Ombudsman’s act does not apply, and you have a process where public input into decision-making is severely limited. Nowhere in the Coastal Ferry Act, is the role of the public advocate defined, or protected. This must change. One might think this was part of the Commissioners role, but this is not the case. Mr. Martin Crilly, Ferries Commissioner, has said that he feels his role is the technical interpretation of the Act itself.

 

Section 25  
Essential Service Designation and other Labour relations code matters

“In the event of a conflict between this Act and the Labour Relations Code, this act prevails.”

The British Columbia Labour Code states, and I paraphrase:

1. Duties under this Code

The board and other persons who exercise powers and perform duties under this code, must exercise the powers and perform the duties in a manner that

1. recognizes the rights and obligations of employees, employers and trade unions
2. encourages the practice and procedures of collective bargaining between employers and trade unions as the freely selected representatives of employees.
3. encourages cooperative participation between employers and trade unions in resolving workplace issues, adapting to changes in the economy, developing workplace skills and developing a workplace that promotes productivity.
4. promotes conditions favorable to the orderly, constructive and expeditious settlement of disputes.
5. minimizes the effects of labour disputes on persons who are not involved in those disputes.
6. ensures that the public interest is protected during labour disputes
7. encourages the use of mediation as a dispute resolution mechanism.

 

It is distasteful the government has chosen to undermine the principles of the BC Labour Code by placing the Act above it. It puts the Act, and the Ferry Commissioner, in a position of being beyond the reach of the Code.

Section 26 
This part prevails over collective agreements

 "A collective agreement that conflicts or is inconsistent with this Act, is void to the extent of conflict or inconsistency"

 “If a provision of a collective agreement requires the British Columbia Ferry Corporation to negotiate with a trade union to replace provisions of the agreement that are null and void or materially altered as a result of this legislation, that provision is deemed not to apply in respect of this Act."

This clause, allows government to trash any negotiated term of an agreement that is inconsistent with the application of the Act. As an example, it was used to remove union representation on the BCFS board of directors, from two directors down to one. While this may not immediately disturb the general public, it is another example of how advocacy and participation in the governance of the ferry service is being choked off. It is also an affront to the rights of the citizens of this province, when the government feels that it is acceptable to impose legislation that nullifies workers rights built up over decades. This can be taken another step further if you consider the soon to be passed Bill 75, "Significant Projects Streamlining Act" which is designed to fast track “significant projects” regardless of regional governance opposition or public opinion.

Again we see the government's contempt for the public review process, in favor of advancing their agenda. And last but not least, the "Working Forest Initiative " which will be enabled by Bill 75. the BC Liberals have already solicited public input on the Working Forest Initiative, which came back 97% opposed among the 2692 submissions made to government last spring, yet it will be enacted in the face of massive public opposition.

Part 3 Establishment of Ferry System

Division 2   Land Transactions

Section 32  
Rights powers and obligations of minister and ferry operator

 This section provides for the transfer of any powers the minister sees fit, to a lessee of ferry terminal parties, therefore, a private operator may be entitled to exercise ministerial powers that the minister sees fit to delegate to the operator. Refer to section 33 for relevance

Section 33 
Minister may take action for ferry operator

33 1)  "If for the purposes of providing core ferry services, a ferry operator considers it necessary to

1. acquire, enter on, pass over or use any land,
2. alter any feature of land,
3. construct, relocate, remove or use roads on, to or from land or,
4. place on, alter or remove from land any substance or structure,

and is unable to obtain the agreement of the owner of the land within a reasonable time and on reasonable terms, the ferry operator may refer the matter to the minister.”

33 2)  If the minister is satisfied that the action under subsection 1) proposed by the ferry operator is reasonable and necessary for the provision of core ferry services, the minister may

1. take the proposed action, or
2. take any other action mutually agreed between the minister and the ferry operator, that the minister has the power to take under one or both of the  Highway Act, and the Ministry of Transportation and Highways Act.

 

33 3)  For the purpose of this section, the minister may acquire or expropriate any land, stream, water, watercourse, fence or wall, the appropriation of which the minister believes reasonable and necessary for the provision of core ferry services.

Section 34
Liability

Under section 34, the government is attempting to exclude itself from responsibility, or liability regarding the operation of ferries and terminal properties. They even go so far as to quote case law, citing the British high court ruling of Rylands vs. Fletcher (1865), where a contractor was engaged in dangerous activities on the landowner’s property, which resulted in damage to an adjacent property. The landowner was successfully sued for damages from the contractor's negligence, even though the landowner did not cause the damage personally.

Section 38 
Regulation of Ferry operators by the Commissioner

Role of the Commissioner

1c) “ Ferry operators are to be encouraged to seek additional or alternative service providers on designated ferry routes through fair and open competitive processes.”

To say encourage is mild. Section 69 of the Act outlines penalties for failing to attempt to further contract out.

1d) “ferry operators are encouraged to minimize expenses without adversely affecting their safe compliance with core ferry services.”

The Act goes even further to compel an operator to sub contract further. In section 40, operators are compelled to provide a record of their attempts, and even unsolicited proposals, to sub contract service delivery, for use by the commissioner, in formulating rates for the coming term.

1e) "cross subsidization from major routes is to be eliminated within the first performance term and before its elimination, to be minimized"

1f)   “the designated ferry routes are to move towards a greater reliance on a user pay system so as to reduce over time, the service fee contributions by government”

The previous two articles disregard any concept of ferries being considered a part of the provincial transportation infrastructure. Cross subsidy is the transfer of revenue from profitable, to unprofitable routes, in the interest of enabling the level and quality of service the public demands from this public service, and extension of the highway system. The service fee, is the subsidy paid by government to the ferry operator for provision of the service. The government would like to see the ferry system move towards "user pay".

3) “the commissioner must not regulate ferry operators in relation to ancillary services. 
(See part 1, section 1)

4) “Despite subsection 1, the commissioner may remove a designated ferry route from regulation under this Act if the commissioner considers that sufficient competition is present on that designated ferry route, so that regulation is no longer necessary.”

Personally, I am not comforted by the prospect of business interests defending public interest. This is unacceptable.

 

Section 40
Establishment of price caps for subsequent performance terms

Operators must provide to the commissioner, information regarding:

40 1) f)  “the requests for proposals issued, or other actions taken, in the performance term by the ferry operator, in accordance with section 69, the responses received by the ferry operator to those requests or actions, any unsolicited proposals received in the performance term by the ferry operator by additional or alternative service providers on the designated ferry route, and the results of those requests, actions, responses, and proposals.”

The cheapest way is far from being the most reliable and safest way of providing a service, especially when the service is transporting people. Is the overriding priority of the Act safety, or price? By compelling operators to constantly revisit contracting out, pressure is applied to service providers to ensure they are competitive in the extreme. As alternative service providers emerge, pressure to trim costs further will increase. This is obviously good for the consumer, provided that the savings are passed along to the consumer, but what happens when the parties concerned are trimmed to the bone? Does competition end? Hardly. Costs begin to be trimmed in areas that should not suffer from financial constraint, areas critical to the safe delivery of service. As the new company vision encourages the dismantling and disbanding of the integrated structure of the organization through continual and repeated contracting out, it will become increasingly difficult to ensure that operational and safety standards will be adhered to. They will be applied by an ever increasing and changing number of operators and contractors, each with differing interpretations of what the standards mean. The requirement that compels operators to subcontract further or face penalties must be removed , in the interest of enabling system stability and effective delivery of service.

What does this all mean? These are the principles that guide the commissioners’ governance. They force contractors of service to continually attempt to subcontract further, and dismantle the integrated delivery of ferry service, as well as support services, resulting in an inherently less stable system. These principles disregard the concept of a “whole” system by eliminating the transfer of capitol from profitable to unprofitable routes, preferring instead to move toward a user pay system and reduced government subsidy.

 

Section 41 
Principles applicable to price cap review

It is simplest, to paraphrase this section. Section 41 guarantees a return on investment to the operator.

Section 41 2) b)(The price cap must enable the operator to receive a pre tax return on equity)…which should be at least the sum of the 30 year bond rate, plus the “equity risk premium” or simply put a higher profit margin, to allow for market risk.
This “rate” is not clearly defined in the document as there are no examples of  businesses with “similar risk characteristics” The price cap is also expected to be reflective of expected “productivity gains” from employees, in the coming performance term. In section 6, reference is made to reviewing the price cap annually, and that it be adjusted equal to the consumer price index, minus expected productivity gains by employees…

Operators are entitled to increases reflective of increased costs, while workers are not. In fact operators are expected to profit from “anticipated productivity gain(s)”. This environment encourages the employer to constantly press for ever increasing productivity, as part of their profit margin is comprised of future yet to be realized efficiency gains.  This must be removed.

Section 42
No extraordinary price cap increases without authorization.

Increases in excess of the annual price cap are permitted in “extraordinary” situations such as:

1. deployment of a new capitol asset such as a vessel.
2. increased costs of inputs such as fuel
3. unanticipated changes in traffic( revenue) patterns
4. increased costs associated with regulations

Section 42 goes on to state, and I paraphrase “…changes in labour costs do not constitute an extraordinary situation that would justify an extraordinary price cap increase…”

Several things are happening here. The government is acknowledging that the operator should be compensated if costs rise unexpectedly. The government will also allow prices to exceed the cap if a new vessel is purchased. Since the median age of the ferry fleet is 32 years, we can expect new vessels, and subsequent extraordinary increases. When the Minister of Transportation stands in parliament or speaks to the media and says “The vessels we rely on for this service are aging, terminals need upgrading, and service overall needs to be improved.  This major capital investment must be achieved without a huge burden on the taxpayers of British Columbia”, what she is really saying is that the cost of rebuilding the ferry system will be borne by ferry patrons as it moves towards a user pay system.  The government is also insuring the operator a profit by means of a rate increase, if revenue (traffic) declines. The government is also clearly stating that it will not grant extraordinary increases to compensate employees, and in section 41, indicates that a portion of the operators profits are based on anticipated productivity gains from employees.

Section 44 
No discontinuance without authorization

This section allows the ferry operator to apply to discontinue a ferry service on a particular route, after first applying to the commissioner, and stating an economic case why the route is not economically viable and self-sustaining. While the commissioner is compelled to consider factors such as reductions in service levels or increased route subsidy, if “the commissioner is satisfied that increasing tariffs on the route would not, because of a reduction in user demand, or otherwise, result in designated ferry route revenues increasing to the extent necessary to enable economic operation of the designated ferry route” Discontinuance of a route may be approved, and service terminated, within 18 months of the application for discontinuance.

The Commissioner is NOT obligated to hold public forums regarding a discontinuance of service The word used is “may” Section 44 7 ) a) The commissioner may also authorize termination of service if   “another  form of affordable transportation exists or is likely to be established to link the locations served by the designated ferry route.” This would appear to provide for the termination of service by BCFS, and its resumption by another company, in an effort to bypass successorship rights of employees. It is also consistent with the inland McLure Lake ferry situation, where service was terminated, in favour of a long and dangerous drive around the lake. It could just as easily be used to terminate money losing SGI runs with multiple terminals, and or vessels. These problems can of course be solved by accepting route cross subsidy, and accepting the fact that public services are not always viable businesses, nor should they be. Public infrastructure should be the structure that encourages and enables business.

Section 62
Dispute resolution process

 This section provides for a dispute resolution process for the operator, if they feel the commissioner's budget, which they fund, is too high.
While we are not involved with this process, it is notable, as there is no equivalent process for dispute resolution regarding issues of public concern. There must be a defined process for consideration of public issues.

Section 69
Additional or alternate service providers

In this section, the Act compels ferry operators to on an ongoing basis, “seek additional or alternate service providers to provide under contract, franchise agreement or otherwise, ferry services on the designated ferry routes serviced by the ferry operator in an effort to reduce the costs of providing those services on those designated ferry routes.”

These plans must be submitted to the commissioner in advance of each “performance term”, in this case, five years.
Sounds very rosy for the consumer, and so it would if savings were to be passed on to the consumer but again the government has a different plan:

“the designated ferry routes are to move towards a greater reliance on a user pay system so as to reduce over time, the service fee contributions by government ”

To achieve this goal, service fees paid by the government to BCFS for the provision of service, will fall as costs are trimmed.