Subsidies in General and a Foot Ferry Subsidy in Particular
Daniel Appell: Sept. 26, 2011
Let’s assume that subsidies by municipalities are to be avoided. They encourage inefficiency, require skilled administrators, and expose the municipality to a number of liabilities. These are valid arguments, but they don’t altogether rule out the need for subsidies.
Subsidies tend to have a political component that can promote the agenda of either a corrupt and/or incompetent administration. But I do believe there is an argument for subsidies at the planning level, and I think this argument can be applied to the establishment of a permanent ferry service between downtown Nanaimo and downtown Vancouver.
To justify a subsidy three questions must be answered:
Does the community benefit from the service, or what is the value of the service?
Could the service be provided without subsidy?
Does the community have the resources to subsidize the service, or what is the cost of the service?
To answer the first question we have to admit that a dollar figure in terms of benefit is almost impossible to calculate. I certainly don’t have the resources to do it. The best I can do is point out that when we have had this service our economic indicators generally trended to the positive. This is entirely anecdotal and could easily be the result of some other factors. However, we would be making the connection to Vancouver and greater Vancouver easier. This is the financial and intellectual capital of our province, third largest urban economy in Canada, one of the top twenty economic and cultural centres in North America and one of the top one hundred urban centres on the planet. Connections like that, do tend to help.
Who would benefit from such a connection, is another part of the same question. By using very simple planning tools we can make some predictions as to the breadth and depth of the benefits. In general, the breadth of a benefit (how many people benefit from a service) is determined by the efficiency. The more efficient the mode of service, the more people are likely to benefit. The depth of a benefit is determined by comparing the cost of the service and the carrying capacity.
For example, let’s compare two modes of transportation: walking versus travel by car. Walking is an extremely efficient mode of transportation. When we compare distance traveled over resources consumed walking exceeds car travel by far. We find that everyone benefits when someone chooses to walk instead of drive. People who only drive benefit from other people walking. They get less road congestion, they pay less for gas, the air they breath is slightly cleaner and so on. However, the cost associated with walking is almost nothing. The walker might have to pay a little more for footwear and that’s all. So the depth of benefit is shallow.
Cars have a very deep benefit. This is evidenced by the extremely high cost to buy, service and drive a car, and yet almost everybody has a car. The efficiency of a car, however, is so low that the breadth of benefit is limited to the car driver and perhaps the passengers.
So based on these principles, we can predict, to some extent, the breadth and depth of benefits of a foot passenger ferry. We know that this type of transportation is the most efficient mode of ferry service. It is safe to say the number of people benefitting from this service is going to be as high as is possible.
Predicting the depth of the benefit is trickier, but we have had this service before and we know from experience that around $25 a trip generates enough ridership to support the service. This is a little less then twice the value of the same service on BC Ferries and a little less then half the value of the float plane service.
It’s interesting to note that in this instance, subsidies can be used to disperse the benefit. If subsidies where applied to lower the cost of a ride and increase ridership more people benefit. However, the depth of benefit is decreased. If subsidies where adjusted to increase the costs, then the traveler would be less inclined to make frivolous trips that waste capacity and reduce productivity.
Could this service be provided without subsidy? Based on the number of instances the user-pay system failed we can predict that a repeat of this model will fail as well. But based on passed experience, we know we don’t have to fully subsidize the service, and we have a pretty good idea of the cost of this subsidy. We can use subsidies to insure that service encourages productive uses, while maximizing capacity, and guaranteeing steady, continuous service. Beyond that there is a margin that sustains the service provider.
Do we have the resources to subsidize the service? At the moment, I would have to say, ‘no.’ We are facing the prospect of increased costs of all services provided by the city, plus increased utilities costs by other providers. As well, our present council has allocated extra funds for more frivolous uses. So I don’t think we will have the resources to apply an extra subsidy. However, if we took the subsidy we currently apply to the conference centre and applied a portion of that to support the foot ferry I believe the benefit to the community would be far broader and far deeper then the rumoured benefits of a conference centre.
Whereas the conference centre will continually cost the city, I suspect that the foot-passenger service would result in enough of a boost to our economy so as to provide more tax revenue then what we spend on the service.
While this last statement might be a tad difficult to prove, I make it to point out that occasionally there are monetary dividends associated with subsidies. I believe there is the potential for a small dividend to be reaped here. Good planning and clever administration could make that happen. A subsidy for a foot-ferry is very much worth considering.
Posts and Comments on Nanaimo Governance 
People who travel to and from Vancouver are already managing the commute with existing transport. So having these people move from using BC Ferry or seaplane is likely not a benefit to the city at large. It certainly wouldn’t help BC Ferries or the seaplane business.
Any financial benefit would have to result from future travel to and from Vancouver. If that benefit can not be calculated in some measurable way how can we say if the community can afford it?
We have already underfunded water, sewer and roads by millions, and that chicken has not come home to roost, so saying the taxpayer can afford to subsidize another project with no quantifiable benefits is a non starter right now, IMHO.
You could also argue, that this is just one more example of local government taking on responsibility for something senior governments should be dealing with. For example, why not make a case for BC Ferry providing such a service, since they are already being subsidized considerably by taxpayers.
Any project of this type, would also require considerable more competence at city hall. The example of how the VICC construction project was mismanaged and the idea that building $12.5 million offices without going to tender are two glaring examples of why this city staff would have to be changed before embarking on yet another area of commerce.
In agreement here. The city is not in the ferry busy and they should stay out of it. I for one have not heard one person say they need a foot ferry to get to the main land. Go as a foot passenger on the regular ferry.
Or better yet use the AAP to approve the foot ferry paid for by the taxpayors of the City of Nanaimo.
I think the point of using the extra capacity on the regular ferry is a good one. I will return to it.
If there is a system that is significantly more efficient then the one we are using, then the problem becomes how do we adopt this new system. Its not a question of should we this, its a matter of when and how.
In urban planning, as in any planning, the only arguments that have any significance are ones that argue for increased efficiency. This is because these are the only arguments that can inform rational decisions based on enlightened self-interest.
The other point I was trying to make; as efficiencies are increased, the benefits are spread throughout the community. These benefits, by the way, are also spread over generations, and the costs are more fairly directed towards those that receive the benefit.
This argument can be reversed. The cost of inefficiency is born by the greatest number of people, for generations, and the benefits are directed to the fewest number of people. An example of this would be the conference centre.
Subsidizing cars is a cost born by everybody and it benefits only people who own cars. Subsidizing a bus system benefits people who take the bus and people who only use their cars. But, in truth the subsidy is unfair to those who only walk. An even more efficient system would find a way to compensate those who only walk.
Now, let’s get to the matter of extra capacity:
Suppose we did have a foot passenger service to rival the car passenger service. At a certain point this more efficient service could reduce the number of cars on the other line. Thus reducing the need for capacity. This would reduce the impulse for BC ferries to buy new ferries at our expense, and expand their terminals at our expense.
If BC ferries would have adopted Jim’s suggestion and invested in a foot passenger service instead of the more inefficient car passenger service the corporation would have saved billions of dollars in capital and operation costs, and everyone who uses a ferry system would have benefited from the improved service. Even those who only drive their cars would have benefitted.
One could argue that we already paid for the extra capacity, and it would be a shame to waste it. But truthfully all we done is paid for the extra capacity, without receiving the full benefit. Even though we have this extra capacity we are still wasting it. So the sooner we start a more efficient system the sooner we start to receive the full benefit of the improved service.
Finally, and this is so important, when we start to implement efficiencies, urban life improves for the greatest number of people in the community. There is no more egalitarian way to improve life in the city, then to make the city more efficient.
Let’s stop this ineffective, unintelligent planning based on uninformed opinions or a narrow range of self-interests, and let’s start planning to make this city easier to live in. Its not a question of should we do this; its just a problem of when and how.
Time is money for me. $14 one way on the ferry as a walk on plus car parking, transit and the rest is a pain. Driving on is another issue, waiting (or paying for ALT) is $$$.
I take the sea plane and go from there. a foot ferry would be good.