Ferry Tales – Chapter Four

Posted October 24, 2014

The Liberal government has chosen to dole out another $5 million to STM Quest to keep the Yarmouth Ferry alive. They have been commendably transparent about events as they happen. What they think about the future is much less clear.

The $5 million is just to clean-up the bills from the year just ended. It has been provided before government has a chance to inspect the accounts. It is not clear yet whether more will be needed to get the boat through the winter, let alone begin the next season.

Minister Samson contends that the province “is not in the ferry business.” That is questionable. He is sending in KPMG to validate the accounting and provide advice on the business plan for next year. He will be negotiating directly with the boat owner STM on the cost of the lease. He has “directed Nova Star to pursue every possible lead for winter work.” He is prescribing management compensation and requiring weekly cash-flow projections. He is working directly with the governor of Maine to seek financial support. 

And, he has been making up 100% of the shortfall. Nova Scotian taxpayers have every reason to feel that he is up to his neck in the ferry business, on their behalf. Like rebuilding the Bluenose, this is not one of government’s core competencies.

All three political parties were energetic supporters of renewing the ferry in the 2013 election campaign. The minister points out that the nature of the arrangement that the NDP had negotiated was not evident until after the election, and that he had to stick with it if service was to begin this year. 

Nevertheless, it should have been immediately obvious that STM Quest had no operating experience and no financial capacity to absorb losses, and that the touted $5 million of support from Maine might not happen. Accordingly, the province’s current steps to provide more intense oversight and involvement should have begun not later than the first unscheduled request for extra money.

The ferry is not a piece of crucial transportation infrastructure like the MacDonald Bridge or Englishtown Ferry. Its purpose is not to make it easier for Nova Scotians to visit New England instead of vacationing closer to home. Rather, supporters of the ferry base their argument on the economic benefits of increased tourism. These have been meager.

Through August, the ferry brought 18,000 visitors. Visitors to Nova Scotia from New England were up 5,000, suggesting that the $4.2 million Nova Scotia tourism marketing campaign there had some impact. But most New Englanders drove through New Brunswick or flew rather than taking the ferry. 

On the other hand, entries through Amherst were down 40,000. Most of this is attributable to visitors from the rest of Canada using planes more often, but some appears to be American traffic that diverted to the ferry.

Room nights in June-August were up 10,000 in Yarmouth and Acadian Shores, but down by about the same amount in the rest of the province outside of Halifax. Even if we pretended that the province will have gained 10,000 room nights as a result of the ferry season, the province’s payments to STM Quest would amount to a subsidy of $2,600 per room night. 

If the ferry resulted in 150 extra seasonal jobs, the subsidy would amount to more than $170,000 per job. This would make some of the NDP’s more wretched choices look pretty good.

Of course the minister points out that the NDP own this one, and he is partly correct—he either had to accept the poor deal they made, or miss the 2014 season. 

But now all of the choices are his to defend. How much is a reasonable level of subsidy going forward? 

The 2012 report on the ferry calculated benefits if there were 95,000 passengers in the first year, growing to 135,000 in year 10. The more optimistic of two earlier studies forecasted $6.8 million of incremental employment income. The seasonal jobs would produce $1.0 million of additional federal tax and $1.4 million for the province.

Let’s compare with some other economic development initiatives this year:

  1. DSM, the Dutch company that bought Ocean Nutrition, will receive $1.2 million in payroll rebates over five years if it creates 50 new jobs in Mulgrave, in addition to the 145 already there. Average salary is targeted at $72,000, which would mean $3.6 million in payroll for the added employees.
  2. Innovatia Inc., an IT company, will receive payroll rebates of $9,600 per job for up to 100 full-time jobs that it adds over 5 years.
  3. CGI, an IT firm with 400 employees, can earn $24,000 per employee added for up to 450 positions, producing $126 million of income over 7 years. These typically pay $60,000.
  4. Acadian Seaplants expects to add 27 jobs as a result of a $4 million capital investment. The province is contributing just under $20,000 per job.

All of these are one-time payments for creation of permanent full-time positions. The payroll rebates are only paid for positions actually created.

It is against these examples that the minister’s choices for further spending on the ferry should be tested. He has just spent $5 million to keep the future possibilities for the ferry afloat. 

That, and whatever follows for both advertising and future ferry subsidies, must be weighed against the jobs and employment income generated. They should, like every other economic development investment, be evaluated by an independent third party.

The ferry has already been an ugly exception to the minister’s generally disciplined approach to economic development spending. It is hard to see how a case can be made for the kind of further spending that will be required.  

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  • Your article does an excellent job contextualizing and framing the issues, however isn’t it about time we look at the broader issue of Tourism? We have a world class resource that requires a regional (Maritime) approach that pools the budget, marketing and branding of the 3 provinces to focus on the 100 million Americans within driving distance. We need a concept. I suggest “The Privateers Trail” up the I-95 in Maine, through NB across confederation bridge, back to NS on the Pictou Ferry, around the Cabot trail- Louisbourg then back through NS to Halifax and ferry through Yarmouth back to New England. Every tourist provider along the trail would have to be approved, so they provide an excellent product. We develop a Maritime Code of Conduct:Give our visitors a good fair deal, treat them like valued guests, Ask what they want to see. Know what your region has to offer in many different areas. Offer them local experiences. Say thank you for their business.

    We target the writers of journals that cater to motorcycle clubs, fly fisherman,RV magazines, Eco tourist with bird watching and whale watching, Scuba magazines with all our wrecks and sea coast and history to explore, target long gun shooters for woodcock grouse quail Highlight the united empire loyalist and the black migration from the US to the Maritimes No where north of the Carolina’s do they have so many warm water beaches, campgrounds, and surfing. Highlight our music festivals Celtic, Acadian blues Ann Murray and Hank Snow, Our historical sites like Louisburg, Port Royal, Halifax, Parrsboro fossils world heritage site, the Bay of Fundy tides & rafting Winery tours, Highland games, music festivals like Keltic colors.
    If we promoted the region consistently with a unifying theme and a trail- our tourism industry worth billions could double. However the reality presently is that tourism traffic from NE has eroded steadily over the past 15years.
    In 1999 over 130,000 visitors came from NE. By 2012 it was down to 55,900- a 57% decline. In 2013 it fell another 7%- again. We can do better then this. We have allot to offer, just not the confidence or imagination to make it happen. Tourism is an industry where you don’t need a “social license” to promote and grow. Too bad we do such a lousy job when we have so much to offer.

    Ron Chisholm | October 27, 2014

  • The NDP government displayed their incompetence many times including this “deal”. We will be paying for that incompetence for years to come.
    Yes the Liberal government was dealt a bad hand. You do not become a winner by continuing to play those same cards. The Liberal government had plenty of time to reshuffle the deck and minimize the taxpayers losses. They have chosen to do nothing different; they have accepted the status quo. Not good enough! Maybe their competence levels are not much better than the NDP.
    Is there any wonder we are drowning under the weight of our debt levels. $27 M FOR A “CRUISE” ship, $15 million for the teachers pension plan. . . . Thses things get a life of there own in NS. Remember our steel plant.

    Barry H | October 26, 2014

  • Thanks for your article today, I really enjoyed the points made.
    The idea of “tourist” in Nova Scotia could use some polish. I moved back to N.S. seven years ago after living from coast-to-coast over twenty years due to my employment in Airport Management. My wife and I have made a point of “touring” old haunts and parts of the province we haven’t seen in years. We also take great pleasure in bragging up our province and being knowledgeable tour guides to many friends from across Canada who have made the point to visit. Many of our neighbours are surprised at these “vacations” and see vacations as only trips to Toronto or Disney World. Nova Scotia has a lot to offer in tourism… even to Nova Scotians and we’ve enjoyed all our “journeys”.
    On our touring adventures, I am sometimes surprised at the hospitality industry and the general public who view me as a “local” and treat me differently (sometimes better, sometimes worse) than “tourists from away”. They look at my NS license plate and I’m automatically not a tourist.
    We all have a lot of work to do but at least articles like yours open eyes sometimes
    Thanks

    David | October 26, 2014

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