Thursday, July 29, 2004

Notes: new subsidy for New Skeena; doctors' peace; and battling the U.S.

VICTORIA - Random notes on more taxpayers' money for the old Skeena Cellulose, a successful deal with the doctors and the risks of an environmental battle with the U.S..

Taxpayers - both local and provincial - appear to be on the hook for some $20 million in subsidies for the latest effort to revive New Skeena, the reincarnation of Skeena Cellulose.
The Liberals lasted the NDP's bailout of Skeena, which wound up costing taxpayers more than $400 million. And they've promised to end business subsidies.
But while the the details are still to come, cabinet has quietly changed the rules so northwest towns can write off taxes owed them by Skeena. The Terrace Standard reports that the towns are ready to write off more than half the $30 million they're owed in unpaid property taxes, with Prince Rupert taking the biggest hit. The province is also prepared to write off $5 million in school property taxes, the Standard reports.
Thats sounds remarkably like a subsidy. But New Skeena hasn't operated since the Liberals pulled the plug on the old company in 2001, and sold it for $8 million. It now apparently stands a good chance of negotiating a $70-million investment by The Woodbridge Company, the holding company for billionaire Ken Thomson and his family. That's about half the capital needed to restart the business.
But paying the back taxes would have gobbled up much of the investment, and Woodbridge apparently wanted a break. And now it will get it.
The move will play well in the region.
But it's tough to square with the Liberals' promise of no more business subsidies. Skeena gets a a tax break, while other forest companies - some in tough shape - have to make good on their debts.
Next date to watch is Aug. 9, when New Skeena, currently under bankruptcy protection, is back in court.

Good news for the government, and the public, in the new deal with the province's doctors. Doctors and government bashed each other when talks began last year, but this week Health Minister Colin Hansen and BCMA head Jack Burak announced a three-year deal. Doctors get no overall increase in the first two years, but about $100 million within the annual budget - about four per cent - will be moved around to meet their needs and improve care. About $60 million of the money comes from reduced payments for lab services; the other $40 million will come from unused money apparently sloshing around in the health care system.
Doctors also win binding arbitration in year three, although Hansen was quick to note that the government reserves the right to reject the deal, making it at best semi-binding.
The government made much of the fact that doctors accepted the no-wage-increase policy, like others in the public sector.
But the real win was in getting any kind of deal without a bitter dispute. Doctors, health authorities and the province are going to have to work together to make the health care system work better, and this is a good step.

Who would have thought that the toughest opposition to coalbed methane development in B.C. would come from across the U.S. border?
The province is auctioning off some leases in the Kootenays for development of coalbed methane reserves, but it's facing a fierce fight from Montana politicians and environmentalists, including the state's governor and powerful Senator Max Baucus, a frequent foe of Canada.
The reserves are near the border and an U.S. national park, and the Americans say B.C. hasn't done enough planning and investigation of environmental risks. Energy Minister Richard Neufeld says B.C. has a strong regulatory system and detailed studies aren't needed until the companies are ready to start work.
The issue of coalbed methane rates a separate column.
But the government, which is counting heavily on coalbed methane development across B.C., should be very alarmed at the U.S. opposition and the likely support it will garner in some corners of the province.

Footnote: Government can't stop fires. It can reduce the economic fallout. For the second year, tourism businesses are reporting cancelled trips by people from Europe and the U.S., who are convinced the province is on fire. An emergency fund of $2 million would be enough to counter the misinformation with some targeted messages aimed a our best markets.

Monday, July 26, 2004

B.C. shipyards deserve chance to compete for ferry contracts

VICTORIA - BC Ferries should buy new ships where ever they can get the best deal.
But it's irresponsible to bar B.C. shipyards from even trying to win construction contracts for new ferries that could be worth $500 million - 25 per cent of BC Ferries' capital budget for the next decade.
I'm not one of those who would argue that it's worth paying more to build the ships in B.C.
But this decision, in the words of Liberal MLA Dan Jarvis, looks "blatantly stupid."
BC Ferries needs two or three new mid-size ships, and hopes to award the contracts this fall.
But the government-owned business has already decided B.C. shipbuilders won't be allowed to bid. BC Ferries looked at the province's shipyards, and decided they were so hopelessly out of the picture that they couldn't even make the three-firm shortlist.
The work and the jobs will go to a European company, and B.C. shipbuilders won't even get a chance to try and win the contract.
Why? The answers from BC Ferries and Transportation Minister Kevin Falcon have been unconvincing. BC Ferries says they looked at the infrastructure available to B.C. shipbuilders - the cranes and the drydocks - and decided they just weren't adequate. Falcon says building the ferries here would cost $60 million more.
But how does Falcon know, if B.C. companies aren't allowed to bid? How does BC Ferries know the companies don't have an innovative solution, or whether they are prepared to invest?
I'm not saying that B.C. shipbuilders should get preferential treatment, or that BC Ferries should pay more to have the ships built here.
That would mean someone would be subsidizing the shipyards and their employees.
The money has to come from somewhere. If it's from taxpayers, a single mother in Nelson would have to pay more to subsidize a big U.S.-owned corporation.
If it's through fare increases, then every ferry trip would cost more than it needed to, and that also has economic implications - for tourism, for businesses dependent on the ferries and for individuals.
B.C. shipyards shouldn't be guaranteed the work. They should have to win it, in a fair an open competition.
But they deserve a chance to compete
It's hard to BC Ferries management and the Liberals are thinking. There's no obvious risk to allowing B.C. companies to bid. BC Ferries says these will be fixed price contracts, so if there are cost over-runs the shipbuilder will take the hit. And all the bids will be assessed to make sure the companies can deliver. Giving B.C. shipbuilders a fair chance would cost nothing.
Unless BC Ferries needs to discredit the capacity of the B.C. and Canadian industry in order to win a tax break. Canada imposes a 25-per-cent duty on ships built outside the country, because so many foreign governments subsidize their shipbuilders. BC Ferries plans to apply for an exemption, arguing that no Canadian shipyard could build the ships. (Federal Liberal MP Keith Martin says BC Ferries is wrong and opposes the exemption.)
The plan to slam the door on the B.C. industry before the competition even begins has come in for a quick attack from Jarvis, whose North Vancouver riding includes shipyards.
Building the ships overseas - Finland and Germany are the likely choices - would be "blatantly stupid," he says. B.C. companies have built the much bigger Spirit class ships an all the rest of the ferry fleet, he notes. "We're losing too many jobs everywhere and we certainly don't need to have it when I know we've got a pretty healthy shipbuilding industry."
There's an odd political irony here. The Liberals have constantly used the fast ferry disaster - rightly - as a symbol of NDP mismanagement. Now they've created their own political mess over ferry construction.
B.C. shipyards aren't entitled to handouts.
But they surely deserve a chance to compete.
Footnote: So much for the Liberals' hope that shifting BC Ferries from a Crown corporation to a semi-independent authority would protect the government from these kind of controversies. Government owns BC Ferries; taxpayers' subsidize it; and it's critical to the economy. This isn't just another decision by a private company.