How much is Bay Ferries being paid to operate the Yarmouth-Maine ferry service on behalf of the province and taxpayers? How much profit does it make?
Those are the questions the Progressive Conservatives have been asking since filing a Freedom of Information request back in May 2016. Yes, 2016. Yesterday, Progressive Conservative leader Tim Houston and the Tory Caucus finally got their day in court — after nearly two years after tactical maneuvering on the part of Bay Ferries to try and have the question thrown out.
Nova Scotia Supreme Court Justice Richard Coughlan will be the first to see an unredacted copy of the 10-year contract between Bay Ferries and the Department of Transportation, Infrastructure and Renewal (TIR).
The total cost to operate the Yarmouth-Maine ferry service is published annually in Public Accounts. In the first couple of years it ran between $13-$14 million a year. However Public Accounts doesn’t break out how much the operator, Bay Ferries, takes home as a management fee. In 2019, the total bill was closer to $24 million — even though the ship never sailed — because of a move from Portland to Bar Harbor.
Back in December 2018, the province’s Privacy Commissioner Catherine Tully recommended the McNeil government disclose what it paid Bay Ferries to manage the service.
The McNeil government rejected the recommendation. In February of 2019, the PC caucus filed the paperwork asking for a court order to disclose the amount being paid directly to Bay Ferries.
“As a result of the Liberal government’s refusal to comply by disclosing the dollar amount, our only recourse was to take the province to court to get the information that Nova Scotians are entitled to know: how much we are paying a company to manage a ferry that hasn’t run in two years?,” said PC leader Tim Houston after the hearing yesterday.
“This government is not transparent; it’s not open. This is just another example of it. We have been pushing this one to try and break that cycle where they think they don’t owe it to Nova Scotians to tell them where their money is going.”
“Commercially Sensitive Information”
A testy Justice Coughlan heard arguments that revolved around whether taxpayers should be allowed to know how much they are paying a company and if that amount being public would compromise the company’s ability to compete fairly for work in the future. It’s a sticky bit of business and the consequences could be far-reaching.
The term “management fee” actually turns out to be a misnomer. According to Bay Ferries’ lawyer Scott Campbell “the management fee is essentially the profit margin or the rate of return the company earns. Bay Ferries Limited supplies it to government on the understanding it is going to remain confidential.”
Bay Ferries’ Campbell argued that although taxpayers have a right to know the total or global amount spent to run the ferry service, the sub-amount that Bay Ferries majority shareholder and CEO Mark MacDonald takes home in profit is nobody else’s business.
“The management fee represents the profit margin on the company and is therefore commercially sensitive,” pleaded Campbell. “In the hands of knowledgeable competitor, this information would provide considerable insight to that company on how Bay Ferries structures is affairs and submits bids to the procurement process.”
In other words, Bay Ferries is afraid it might lose the 10-year contract when it comes up for re-negotiation in a few years time. It’s a position not dissimilar to one taken by lawyers for Shannex Inc when that company successfully fought off a request to disclose how it calculates the daily rate it charges the Department of Health for a nursing home bed.
Mark MacDonald took the witness stand and repeated another point in his affidavit.
“I am also concerned that public disclosure of the management fee will prejudice the ability of Bay Ferries to negotiate the lowest possible price for goods and services from third party suppliers in a competitive marketplace,” states the affidavit. MacDonald suggested the cost of fuel, catering services, and other commodities could become more expensive not just for Bay Ferries but the taxpayer footing the final bill.
Department of Transportation onboard
The Department of Transportation, Infrastructure, and Renewal supports Bay Ferries’ position that how much it makes from running the Yarmouth ferry service is a type of “trade secret” or “commercially sensitive information” that gives it a pass under the Province’s Freedom of Information and Protection of Privacy (FOIPOP) legislation.
The information originally did qualify for an exemption before undergoing a more thorough review by the Privacy Commissioner who reversed the ruling. Diane Saurette is the executive director of strategic capital and infrastructure planning at the Department of Transportation, Infrastructure and Renewal. She was in the room when the 10-year contract with Bay Ferries was being negotiated.
“This contract is different from others in the department,” Saurette testified. “The majority of the contracts that we have in the department, we are not aware of the profit margin, they are built into the contract. This contract was a different structure — the margin was separated so we considered that confidential information.”
Saurette is an accountant by training (so is Tim Houston) who has spent several years managing public procurement contracts. Here are the concerns she lists to back up the government’s opposition to releasing the amount.
“Release of Bay Ferries’ management fee or profit margin may send a message to other companies that the province could release their confidential business information, dissuading them from doing business with the province.”
Further, she states, “if businesses are not willing to do business with the province because of the risk of disclosure of their commercially sensitive information, it will result in a less competitive environment which in turn will likely drive costs higher for the province.”
Those are the rather reedy arguments before Justice Coughlan. One of things he says he will have to decide is: “would knowing the fee give a competitor knowledge of what it would cost to operate the ferry service?” The judge also asked questions about “what significant harm” Bay Ferries would suffer if its profit margins were released. There was lots of legal hair-splitting about the difference between “possible” harm and “probable” harm.
(Very little information was provided to the court about how Bay Ferries’ margins are calculated although it is understood they may increase if revenues from The Cat do.)
The lawyer for the Progressive Conservative caucus, Nicole LaFosse Parker, takes the position neither the company nor government produced outside evidence to support its claims the public will be poorer if this transaction is disclosed.
Coughlan adjourned the hearing until November 19, when it is expected to wrap up.
Houston says he supports a transportation link between Yarmouth and Maine “but one with the right boat at the right price.” This fight is not over.