Limiting the hikes lessens the chances of a rider mutiny but will mean more years of grinding cost-cutting

Limiting B.C. Ferry fare hikes to 1.9 per cent a year for the next four years will likely dampen the chances of a full-fledged passenger mutiny, but there are more years of grinding cost-cutting ahead to make the numbers work.

The interim ruling from the independent ferry commission on Wednesday holds B.C. Ferries to 1.9 per cent maximum average overall fare hikes each year.

That will come as a relief to many tollbooth-shocked passengers, given what’s gone before. Transportation Minister Todd Stone said the ruling shows they’ve “turned the corner.” But it’s still a 7.6 per cent fare increase over four years at a time when Stone himself acknowledges fares are at a tipping point and hikes are hurting ridership.

The last exercise in setting the price cap four years ago was conducted as the ferry fleet was sailing into a financial crisis, brought on partly by steadily declining ridership that many blamed on continual fare increases.

The initial cap was set then at 4.1 per cent a year on the major routes and 8.2 per cent on the minors. B.C. Ferries challenged that as being too low and a recalculation raised the possibility of 16 to 43 per cent annual hikes, and an 81 per cent hike on the northern routes.

Those kind of outlandish numbers prompted a protracted argument, a rewrite of the legislation governing the system, an emergency infusion of $86 million from the government and a wide range of cost-cutting moves. The result, as far as fares were concerned, was four years of hikes in the four per cent range (The last one in that term — 3.9 per cent — will kick in April 1.)

Even that pushed ferry users to the brink of revolt and prompted the Union of B.C. Municipalities to conclude ferry fares were becoming a huge drag on the provincial economy.

So by contrast, assuming hikes are held to that level, 1.9 per cent looks bearable. It takes a degree of optimism on the commission’s part to set it that low, given that ridership is still depressed and the ferry corporation has a list of must-do capital projects that amount to $3.1 billion worth of work over the next 12 years.

Ferry commissioner Gordon Macatee listed the reasons for optimism. There’s been a slight, short-term increase in ridership lately. The fuel price drop has left consumers with more disposable income, which can lead to more travel.

The U.S. economic rebound and the drop in the Canadian dollar can boost tourism. Stricter U.S. passport requirements are now four years old, so the drop-off in U.S. visitors when they were first imposed has eased.

As for the ferry system’s fuel costs, the commission has picked a medium estimate that means it expects fuel costs will be lower than they have been, but will rise over time.

As well, routes have been slashed, more than $54 million has been trimmed from the corporation and assorted savings are anticipated in other areas.

The lengthy rationale for arriving at the 1.9 per cent figure gives B.C. Ferries credit for being efficient, cutting executive costs, maximizing revenue and being innovative in responding to the crisis. It’s going to take a lot more performances like that over the long haul to hold fare hikes down.

Among the challenges: • Even after all the trauma associated with the cuts in the past few years, Macatee is demanding another $27.6 million in productivity improvements (without reducing service levels) in the next four years. • A major part of the capital plan involves spending at the Horseshoe Bay terminal on projects that Macatee suggested need a second look. Avoiding some of those costs would have a positive effect on the books, but involves a number of adjustments that could affect the Nanaimo-Vancouver route and others that run out of Horseshoe Bay. Stone promised again there will no terminal cuts at Nanaimo. • Macatee wants a hard look at whether Salt Spring Island needs three ferry terminals.

Holding the hike to the level of inflation is presumed to be acceptable to riders. But they need a lot of breaks to keep it there over the long haul.