President and CEO of B.C. Ferries David Hahn aboard the Coastal Celebration. Photograph by: Adrian Lam, Times Colonist

BC Ferry rates are going up again on April 1, by $1.75 more between the Lower mainland and Vancouver, and by $3.30 more on the roundtrip from Horseshoe Bay to the Sunshine Coast. To bring a car and driver in one direction from the mainland to Vancouver Island will rise to $46.75.

BC Ferries made the announcement on Tuesday without giving any specific reason for the increase, referring to it as an “annual fare adjustment.” This comes after fare increases last April by 3.74% on routes between the mainland and Vancouver Island, and by 7.25% on other routes. At the time, BC Ferries blamed it on “the rising cost of operating and capital expenditures.”

Well, it’s true that the expenses of BC Ferries went through the roof in the summer of 2008 when fuel prices brought the per barrel price of oil to $147 US. But according to the current financial news, the price of oil per barrel is $78.17, nearly half the cost at the peak.

So what could be driving this “rising cost” of operations for BC Ferries? Could it be the salaries of the workers? If you look at the quarterly reports, I’m not so sure that’s it. In it’s first quarter report from August of 2009, it lists accrued employee costs as falling from $51.9 million on March 31, 2009, to $50.5 million by June 30, 2009. Then the second quarter report shows that by September, 2009, it lists the costs as falling to $48.6 million.

As for rising costs, the 2nd quarter report summary lists net earnings of $64.2 million for the three months after September, 2009, an increase of $10.5 million from the same period in 2008. Actual expenses only grew $4.4 million from 2008 to 2009, as revenue grew $19.7 million, while interest and amortization rose only $4.8 million from 2008 to 2009.

No, the elephant in the room isn’t employee costs or expenses, but large CEO salaries, a story which broke last July in the media. The top five executives at BC Ferries earned a combined total of more than $3 million in 2008, with President and CEO David Hahn earning just over $1 million, including salary, pension contributions and performance-based incentives. Nearly half of Mr.Hahn’s total compensation, $494,923, was salary. That means that over 2% of the total payroll for BC Ferries is accounted for in Mr.Hahn’s salary and bonuses.

Four other top BC Ferries executives were paid between $485,000 and $562,000 each, including wages, pensions and incentives.

The office of the Comptroller General, headed by Cheryl Wenezenki-Yolland, rebuked BC Ferries in October of 2009 for the executive salaries, finding the remuneration of the Chair and Directors to be “excessive”.

For 2008/09, the Chair’s remuneration was approximately $154,000, and the other Directors who were involved for the full year received remuneration that ranged approximately from $67,000 to $91,000. The remuneration consists of retainer fees of $140,000 for the Chair and $48,000 for Directors, additional smaller retainers for committee Chairs and committee members, and per diem meeting fees. The CEO does not receive any additional compensation for acting as a Board Director beyond what he receives as President and CEO.

The Board’s compensation was higher than was paid the Boards of comparable public sector organizations: BC Hydro, ICBC, WorkSafe BC, Port Metro Vancouver and the Vancouver International Airport Authority. The retainer fees are also three to five times the amounts set out in a provincial Treasury Board directive to Crowns. While that directive does not apply to BCFS, we would not expect BCFS to vary so much from the levels the directive specifies.

The comptroller called the BC Ferries Board and the BC Ferries Authority to be in a conflict of interest, since the Board establishes its own compensation without any accountability. And since all Authority members are directors of the Board, the members are accountable to themselves. The way they set their pay in 2007 was by comparing themselves to 17 much larger corporations, and then compensated themselves at levels that were excessive.

David Hahn, who sits on the board himself, despite being CEO, called the report “nonsense” at the time. Mr.Hahn also rejected the report’s call for increased accountability and greater separation between the B.C. Ferry Authority and BC Ferries’ board of directors.

Since BC Ferries refused to acknowledge the recommendations made in the comptrollers report, this fare hike should come as no surprise. If there are rising costs that British Columbians should know about, beyond the salaries of the executive board, then that should be explained to the public. Significantly, nothing in the last quarterly report can explain what these rising costs are attributed to.