42. FERRY SERVICE CONTRIBUTION PROGRAM

FUNDING FOR THE FERRY SERVICE CONTRIBUTION PROGRAM

Transport Canada (TC) is seeking access to $2.0M in grants and contributions (Vote 10) funding that was re-profiled from 2019-20 to 2020-21 for priority vessel repair projects and to cover an increased operating deficit due to the COVID-19 pandemic.

Key Messages:

• Budget 2017 provided approximately $278 million over five years to support three ferry services in Atlantic Canada and Eastern Quebec through to March 31, 2022.
• Memorandum of Understanding (MOU) between TC, New Brunswick, and Nova Scotia provides contributions of $2M annually for the Saint John –Digby service.
• A total of $2.0M is being sought in 2020-21 through Supplementary Estimates B.

• Through the Ferry Services Contribution Program, TC supports three inter-provincial ferry services in Eastern Canada, including service between: (i) Îles-de-la-Madeleine, Quebec and Souris, Prince Edward Island; (ii) Saint John, New Brunswick and Digby, Nova Scotia; and (iii) Wood Islands, Prince Edward Island and Caribou, Nova Scotia. TC owns the six terminals and four ferry vessels used to provide the services.

• Under the MOU between TC, New Brunswick, and Nova Scotia, each province contributes $1M annually for the Saint John – Digby ferry service (total provincial contributions of $2M per year). The MOU was first signed on April 1, 2014 and is renewed regularly. On March 23, 2020, the MOU was renewed for the fiscal years 2019-20 and 2020-21.

• These ferry services provide essential services to residents, link communities and support the regional economies through the transportation of goods and other economic activities, such as tourism.
• Funding is provided to private operators to cover operating deficits, including loss of revenue, and to maintain TC’s terminals and vessels.
• Maintenance costs have increased significantly in recent years due to the age of the TC-owned assets. While the Government recently announced that it will acquire an interim replacement vessel for the MV Madeleine (i.e., the MV Villa de Teror), TC requires funding to ensure the MV Madeleine continues to meet Classification requirements in order to provide safe and reliable ferry services until the replacement vessel enters into service.
• The COVID-19 pandemic has had a significant impact on ferry service revenues. The ferry services are currently operating on reduced sailing schedules and passenger capacities to allow for social distancing to help ensure the health and safety of passengers and employees.

• TC is seeking to re-profile $2.0M in contribution funding in 2019-20 to 2020-21, to be used in 2020-21 to invest in:
  • repairs to the MV Madeleine to ensure the vessel continues to meet Classification Society standards in order for the vessel to remain reliable and safe to carry passengers; and
  • to offset the operating deficit on all routes due to the loss of revenue because of the COVID-19 pandemic.   

• The funding will help ensure service continuity and safe operations for users of the ferry services.
• The ferry services provide essential services to residents, and help to support the regional economies through the transportation of goods and other economic activities such as tourism. 

If pressed:

• The funding will be used to invest in essential repairs on the MV Madeleine to ensure safe operations and service continuity on the Iles-de-le-Madeleine – Souris route until the new interim replacement vessel enters into service in summer 2021.
• Ferry revenues for 2020-21 are expected to be significantly lower than normal given the lower ridership as a result of COVID-19 and provincial restrictions limiting ferry capacity to approximately 50%.

Background

• Through the Ferry Services Contribution Program, contribution funding is provided to ferry operators to cover: 1) operating deficits (revenues minus operating costs) and 2) expenditures made to maintain and repair Transport Canada’s assets (vessels and terminals) for the safe operation of the ferry services.

• Budget 2019 announced that the Ferry Services Contribution Program would be extended until 2022 with existing service levels and fleet size. It was also announced in the budget that the Government would procure two new vessels from a Canadian shipyard to replace the MV Madeleine and the MV Holiday Island as both ferries are at the end of their useful lives. The new vessels are expected to be in service by 2026-27.  
• Due to the age and condition of the vessels, maintenance costs have significantly increased in recent years. In accordance with Classification Society requirements, passenger vessels must be drydocked twice within every five year period.  
• On July 2, 2020, the Government announced that it is purchasing a temporary replacement for the MV Madeleine providing ferry services between Iles-de-la-Madeleine and Souris, Prince Edward Island. Officials from Transport Canada and Public Services and Procurement Canada are currently negotiating the final contract with the existing owner of the vessel. The vessel is expected to enter into service by summer 2021.