Monday, September 29, 2014

Reporters as stenographers

Two years ago, the corporate media published headlines about ferry subsidies.

This report, which came during fiscal year 2013, was enough to stir the Canadian Taxpayers' Federation into action. They warned that subsidies to business might have to be cut if government wasted more money on citizens. CTF did not need to worry, the BC Liberals' largesse to ferry users was less than it seemed. Rob Shaw repeated the $80 million claim again in December 2012, after a year-end interview with Premier Clark. In fact, that fiscal year showed a provincial subsidy increase of $23.8 M, which is less than 30% of the promise.

There has been no growth in provincial ferry subsidies for more than two years. Government contributions were $2 million less in the 12 months ended March 31, 2014 than in the year before. In Quarter 1 of the 2015 fiscal year, federal and provincial support to BC Ferries is 1.9% higher than in Quarter 1 of the preceding year but 2.1% less than in Quarter 1 of FY 2012.

The following is from the 2014 Annual Report.

Something that is seldom mentioned in discussions of ferry subsidies is that they are mostly something else. Most of the payments to BC Ferries by the provincial and federal governments are "Transportation Fees" by which governments ensure service to lightly populated coastal regions. Prince Rupert, for example, is attached to more than $50 million in annual transportation fees. Two thirds of BC Ferries traffic is on four unsubsidized routes out of Tsawwassen and Horseshoe Bay.

In fact, many Vancouver Island and Sunshine Coast residents may pay too much because their main routes to the lower mainland are also subsidizing north coast and Gulf Island traffic. The choice to subsidize ferries to underpopulated areas is a political choice - a good one, too - but the entire economy should pay for the subsidy, not people using ferries in and out of Horseshoe Bay and Tsawwassen.

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Sunday, September 28, 2014

Profits first, charities second

Not what it seems.
I've kept an eye on finances of the CKNW Orphans' Fund. My attention began after the Corus radio station dropped its long time policy - under Griffiths family ownership - of paying overhead costs of the charity. They were entitled to make the change; they weren't entitled to remain silent about it. After my first report, CKNW stopped making the claim that it paid all administrative costs for the charity but others, including Pledge Day guests, made it for them on air, without correction.

I was told by a couple of insiders that junior NW staff were surprised by the extent of charges levied against the Orphans Fund when they were being asked to donate time for events. Overheads have cost the charity about $2.5 million since the policy shift.

The numbers shown below are drawn from annual reports to Canada Revenue Agency. Details filed are scant but they certainly leave me with questions. For example, why did advertising expense rise from $803 for 2010 and 2011 to $656,763 for 2012 and 2013? Does the Orphans' Fund now pay CKNW for air time on Pledge Day or other times? What other payments flow into the accounts of CKNW, Corus Entertainment or associates? What is the nature of $743,706 in professional & consulting fees? Why not make public reports of how the charity spends its money each year? CKNW Orphans’ Fund website identifies only six organizations that received funding in 2013 and 2014 amounting to a total of $133,000. That identifies 4% of charitable payments for the two years.

Clearly, the CKNW Orphans' Fund has a significant lack of transparency and is accountable only to a small self-perpetuating board that votes for its own replacement.

I forwarded an email to the charity,
"Financial reports to CRA show advertising expense in 2012 and 2013 amounts to $656,762. That leads me to ask if that or a part is paid to CKNW for advertising and/or air time on CKNW Pledge Day?

"If in fact, the Orphans' Fund pays to sponsor Pledge Day, in whole or in part, is that revealed on air, as would seem to be required under the Canadian Code of Advertising Standards, which prohibits disguised advertising?"
I will soon be posting another story about the clouding of merged corporate and charitable interests. This will examine finances of the Vancouver Sun Fun Run. The newspaper does not hold it out specifically as a charitable operation but they certainly imply that to be an important element. A tipster told me that registration and sponsorship revenues are over $1.5 million and The Sun advises readers that from registration fees,
"$50,000 is donated annually to The Vancouver Sun Raise-a-Reader campaign and $80,000 is given in support of BC's amateur athletes via the Achilles Track Society and The Vancouver Sun International Jerome Track Classic."
The following information is drawn from CKNW Orphans' Fund annual reports to CRA:

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Thursday, September 25, 2014

Nature has inviolate principles, Christy Clark does not

A comment left by Lew on an earlier article deserves to be featured.
Here is Christy Clark, the premier of our province, speaking as a radio show host just before leaving to run for leadership of the BC Liberals:
“Ferry fares go up on Friday. It will be the eighth fare hike over the past five years, and this time BC Ferries says it needs to do it to find the money for rising fuel costs, and since the provincial government refuses to chip in, they’re dumping almost all of those new costs on users.

The impact of the new fare increases? Well, according to BC Ferries latest annual report, these unprecedented fares, as they say, could result in a decline in ferry traffic, and that’s a quote. No kidding! And I’m guessing that the fares have finally gotten so high that for every dollar they raise it will actually garner less in revenue. Higher fares mean fewer passengers, so the accountants will have to subtract paying customers from every new dollar they add to ticket prices, and at this rate how long will it be before they abandon the routes where they don’t make any money? How long before the provincial government abandons their responsibility to provide a public service to many of the people who depend on the ferries to travel and ship their goods?

Our transportation minister seems to have an insatiable appetite for funding highways if they require blacktop, and he seems perfectly at peace with providing free ferries on inland lakes in BC, but he doesn’t seem to have the same affection for our maritime highway on the coast.”
The audio clip can be found in the CKNW audio vault for September 24th, 2014 starting at 2:26 pm.

Contrast her comments then with what her transportation minister is now telling the UBCM in the face of their report demonstrating that what radio host Clark said was valid and quite prescient.
“Our government has no plans to roll back any service adjustments that were made,” said Stone. “We have no plans to interfere in the independent process respecting rates, certainly for the rate increase that the B.C. ferry commissioner has set for next year.”
All that I wish to add is an audio clip of Clark's remarks. It is from Mike Eckford's show on CKNW, September 24.

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Puffery, misrepresentation or outright lies?

Puffery is an exaggeration or overstatement expressed in broad, vague, and commendatory language. According to Law for Business (Barnes et al., 1991),
"The elements of misrepresentation are ordinarily given as: Misrepresentation of a material fact justifiably relied upon to the detriment (causing harm to) to the person relying."

As I noted a few days ago, Andrew Carnegie, a 19th century robber baron and 20th century philanthropist, once said,
"As I grow older, I pay less attention to what men say. I just watch what they do."
Tuesday, Elizabeth Denham, British Columbia's Information and Privacy Commissioner gave us opportunity to compare what Premier Clark does, compared to what she said. Denham issued this special report:
From the report:
  • A fundamental element of democracy is that citizens have a right to access government records. Exercising this right promotes openness, transparency and accountability of government activities. Eroding this right diminishes the ability of citizens to hold their government accountable.

    The Supreme Court of Canada stated that “access to information legislation embodies values that are fundamental to our democracy.” Many jurisdictions around the world have enacted legislation, as British Columbia did in 1993 with the Freedom of Information and Protection of Privacy Act (“FIPPA”). FIPPA creates a statutory right to request records from public bodies, including government ministries. An essential element of this process is the right of an individual under FIPPA to receive a response from public bodies within 30 business days of making a request.
  • Since the publication of our last timeliness report in 2011, the average on-time response across all Ministries has dropped from 93% to 74%, average processing times have increased from 22 business days to 44 business days, and the average number of business days overdue rose from 17 to 47.
  • In fiscal year 2012/13, the Office of the Premier’s no responsive records rate dropped slightly [from 45%] to 42%, but was still the highest of any government ministry. ...In the course of reviewing the reasons for this trend we discovered that, in some instances, individuals were deleting received and sent items in bulk from email accounts.
  • I do have concerns with the Office of the Premier’s records management practices...
  • My investigators’ review of files and subsequent discussions with the Office of the Premier only highlights my concern that government has made little meaningful progress regarding a duty to document.

Notice that ministries ranking among the worst are involved in highly contentious activities, including spending or proposals to spend money outside the common daily functions of government. Those involve natural gas development, gaming grants, energy and mines, justice, tourism, job creation, training and child and family development, a ministry where the Liberal government has had an uninterrupted record of failures.

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Tuesday, September 23, 2014

BC Ferries costly but not innovative

A report by CBC News says that BC Ferries will equip two Spirit Class vessels to run on LNG. With minor hull improvements, annual fuel savings for the 20-year-old ships are estimated at $9.2 million. The conversion is scheduled for completion by 2018.

That will be seven years after I first complained in Northern Insight about the ferry company exercising zero innovation in developing alternative fuels for its fleet. I drew attention to Norwegian operator Fjord1, the largest operator of natural gas powered ferries in the world. In a recent update to Ferry innovation? Wazzat?, I noted that Norway is now turning to battery powered ferries for crossings under 30 minutes. They will save fuel costs and make a major reduction in GHG emissions since 99% of Norway's electricity is hydro-power.

The senior officers of BC Ferries, along with directors, commissioners and government ministers who were supposed to provide direction and supervision, may have failed at managing this vital transportation service, but they succeeded in lining private pockets with public cash removed from dependent coastal communities. The numbers shown below demonstrate that BC Ferries was floating in a pool of patronage.

The following was first published October 25, 2011.
* * * * *

I have been reviewing amounts paid senior officers of BC Ferry Services Inc. and also the amounts paid to directors. In 2009, the Comptroller General of British Columbia reviewed governance of the organization and made strong observations. The response of BCFS leaders was a collective thumb in the eye of British Columbians. In 2010, not only was the grab for cash by senior executives higher, so was the take of directors:
"BCFS executive compensation was significantly higher than that paid by several larger public sector entities. For example, the Chief Executive Officer‟s (CEO) total 2008/09 compensation was more than double that of the larger public sector comparators. We also found that the performance measures and targets used to determine the incentive bonuses for executives made the bonuses easier to attain than we would have expected.

"The BCFS Board Directors' remuneration was also higher than public sector organizations we compared against, and the retainer fee portion, which was most of the remuneration, was three to five times higher than permitted under a Treasury Board (TB) directive...

"Our concerns regarding BCFS‟ compensation are compounded by the fact the BCFS Board sets its own compensation and approves the executive compensation without accountability..."
David Hahn received supplemental pension benefits that cost BCFS $450,000 each year, in addition to the approximately $1 million a year of other earnings. (The chief of Washington State Ferries earns $148,000 a year, one tenth Hahn's level.) Totals shown below include that extra pension cost. The generosity with public funds did not stop with Hahn, the directors were rewarding themselves handsomely too, for rather little work and almost no responsibility.

Despite being the most expensively managed ferry operation in the world, BC Ferry Services has been anything but the most innovative, except for the ground breaking payments to those who should have been exercising fiduciary responsibility. Former Chair Elizabeth Harrison in particular ought to be returning a pile of money for her oversight failures.

Norwegian operator Fjord1 is already the world's largest user of natural gas powered ferries and is building a 242-car gas-electric system ship with a service speed of 20 knots. Payback on the system compared to conventional diesel is a short few years but the major advantage is clean and reliable operations.

BCFS has had a preference for doing its capital spending overseas but the company should already be working with one of the world's leaders in natural gas engine technology, here in this province. Westport Innovations has existing capabilities along with related technical contacts throughout the world. With British Columbia's abundant natural gas and its large ferry fleet, it is a serious error for BC Ferry Services to have pioneered no work in this field.

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Monday, September 22, 2014

Comforted by false reality

A New York Times article, The Surprisingly Large Cost of Telling Small Lies, quotes a successful English business person about the need to confront truths, even uncomfortable ones,
"...telling lies is the No. 1 reason entrepreneurs fail. Not because telling lies makes you a bad person but because the act of lying plucks you from the present, preventing you from facing what is really going on in your world. Every time you over-report a metric, under-report a cost, are less than honest with a client or a member of your team, you create a false reality and you start living in it."
Troy Reeb, VP of Global News and Station Operations, prefers living in false reality because today, he said on Global's BC1,
"As viewership has fragmented across multiple specialty channels, and across online viewing, the ability of advertising alone to support local news has been really challenged. It doesn't mean that local news isn't still really popular; we still have as big a audiences for the BC Newshour as we ever have."
Shall we explore the numbers?

In the seventies, CBC had been the TV news leader in Vancouver. However, in 1977, BCTV made assignment editor Keith Bradbury assistant to news director Cameron Bell and, leading an extraordinary team, the two men remade Vancouver's news scene. When Bell left BCTV a dozen years later, ratings showed 625,000 - about one in five British Columbians - watched BCTV's daily News Hour. In 1989, The Province newspaper wrote,
"No newscast in Canada - including Ontario's populous golden triangle - gets the viewers like Newshour. Extrapolating the numbers nationally, Newshour ratings would demolish even The National."
If 20% of BC residents watched BCTV's successor today, Global's News Hour would have more than 900,000 viewers. Instead, the steadily declining viewer count is now closer to 300,000, less than half the peak per capita rate.

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Saturday, September 20, 2014

Tax evasion at the heart of global economy

The Globe and Mail reported September 19, 2014, after Elizabeth Thompson's September 18 story at ipolitics,
"Internal Canada Revenue Agency documents confirm the agency is cutting some of its most highly-trained staff and folding international tax evasion units...

"The shakeup is raising concern both inside and outside the agency that the government is backing away from its promised crackdown on offshore tax cheats. Both the 2013 and 2014 federal budgets contained extensive pledges to increase enforcement in this area. There is also concern that veteran staff who know the ins and outs of offshore tax schemes will lose their jobs, leading some to take jobs in the private sector using that same knowledge to help clients reduce their tax bill..."
Andrew Carnegie, a 19th century robber baron and 20th century philanthropist, once said,
"As I grow older, I pay less attention to what men say. I just watch what they do."
That turns out to be good advice when considering Canada's Conservative Party. It claimed that it would take aggressive action against tax evasion which, by extrapolation of American data, could be costing Canada $10 billion per year in tax revenue. In fact, the Canadian government has limited the ability of tax collectors to look behind complicated schemes of evasion and avoidance.

Once again, Conservatives are proven to be servants of the rich and powerful. We should not be surprised because prominent Conservatives have played professional roles is setting up offshore arrangements to avoid income taxes. Andrew Saxton, my own MP and a former Credit Suisse officer, is one of those.

In 2014, Credit Suisse plead guilty in the U.S. to criminal charges and paid $2.6 billion in penalties for assisting Americans evade tax. Numerous other professional companies, including the giant KPMG and Swiss bank UBS, were held to account for involvement in tax frauds. By comparison, Canadian tax recovery efforts have been muted and will now be further crippled.

The following item was published in April 2011.

 * * * * * 
In my riding of North Vancouver, the incumbent MP is Andrew Saxton. I did not vote for him in 2008 but my friend did because he liked Saxton's local connections. Robert hates carpetbaggers and is still angry about Montreal born, Toronto based Liberal staffer Warren Kinsella running here in 1997.

By the way, Palmer Jarvis Communications gave $10,000 to Kinsella's campaign, a fact more interesting when we learned AdScam inquiry head Justice John Gomery found important correspondence of Kinsella, then Executive Assistant to the Minister of Public Works, was “highly inappropriate." Adscam, you may recall, had much to do with government money being spread around through advertising agencies in scams that resulted in jail time and much embarrassment to ethically challenged Liberals. We can only speculate about why Palmer Jarvis passed along a substantial donation to the former Chretien assistant running in North Vancouver.

Friend Robert heard Andrew Saxton was the Tory candidate in 2008 and his support was assured because according to Saxton's official bio,
"Andrew spent his early childhood living on the North Shore where his father built the Grouse Mountain skyride and headed up the mountain resort."
Actually, Andrew Saxton Sr. has been involved in much more than Grouse Mountain Resorts. He was a founder or senior executive of Laurentide Financial Corporation Ltd., Elite Insurance Company, BC Television Broadcasting System Ltd., Granville Island Hotel and Marina Ltd., King George Development Corporation and has been involved with numerous other corporations, including Impark and Northwest Sports, one time owner of the NHL Canucks. Another directorship is with Canadian Commercial Corporation, a crown trade accommodation agency that specializes in that right-wing habit of socializing risks and losses and privatizing profits. Anyway, I'm sure father and son appreciate the ability to get together in Ottawa without having to worry about paying their own travel expenses.

Unlike Robert, I was not so keen on Saxton, despite the candidate's claimed roots in our North Shore community. Junior may have been born here but he did his schooling at Ontario's vainglorious Upper Canada College. That's the all-grades English style boy's school where annual costs for boarding students is now over $50,000. James FitzGerald, an old boy, wrote a very non-official history of UCC. He says about the school,
"Since opening its doors in 1829, Upper Canada College has stood at the very centre of the Canadian Establishment, turning out generations of Eatons and Bassetts, Masseys and Thomsons, Conachers and Airds."
Saxton went on to the University of Western Ontario then worked for Credit Suisse in Switzerland and New York. That is the international bank caught in the glare of a major IRS investigation of tax evasion that resulted in the indictment of a number of Credit Suisse executives. The bank is under scrutiny of tax authorities in Brazil, France and other nations. It is involved in a major German investigation after eleven hundred affluent citizens stashed more than a billion untaxed dollars in Swiss accounts.

Andrew Saxton Jr. has connection to an international tax investigation arising from his career with the bank. CNews Parliamentary Bureau reported,
"Saxton's name appears in Federal Court documents showing he approved a couple's request to transfer close to $200,000 to a bank account in Lausanne, Switzerland.

"Opposition parties say Saxton, the parliamentary secretary to the Treasury Board, should be dismissed from his position or at least step aside to allow an investigation to clear his name.

" 'The parliamentary secretary authorized these transfers and, as an experienced banker, he knew exactly what he was doing and why,' said NDP finance critic Thomas Mulcair, adding Saxton has no choice but to step down."

" 'It is shocking to see that this government will tolerate an individual who would have authorized the transfer of funds to Switzerland so that a couple could avoid paying Canadian taxes,' said Bloc Quebecois MP Serge Cardin."
I am reading a fascinating book by Nicholas Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens. It is no surprise to anyone with more than a tiny bit of knowledge of international finance that tax avoidance and outright tax evasion are rampant in the international economy. Keep in mind that Canada has the weakest laws among developed nations against corporate crime, although the Republican Congress is aiming to have the USA catch up, or drop down, depending on your view.

Prem Sikka, professor of the University of Essex had this to say about the book,
"An absolute gem that deserves to be read by anyone interested in the way contemporary globalization is undermining social justice. This masterpiece illuminates the dark places and shows the visible hand of governments, corporations, banks, accountants, lawyers and other pirates in creating fictitious offshore transactions and structures and picking our pockets.

"This financial engineering has enabled companies and the wealthy elites to dodge taxes. The result is poverty, erosion of social infrastructure and hard won welfare rights and higher taxes for ordinary people. Nicholas Shaxson has done a wonderful job in lifting the lid off the inbuilt corruption that has become so naturalised in the western world."
I remind you of how media trolls like the Vancouver Sun's think-tank alumni and the stars of talk radio, Bill Good and the Michaels, Campbell and Levy, regularly report that no one wants to pay more taxes. Therefore, healthcare Canadians enjoy must be slashed. Of course you won't hear those boys talking about schemes of our wealthiest citizens to hide assets and income from taxation. And, we are not talking small sums. Extrapolation of American data suggests that Canada is losing over $10 billion a year in tax revenue, BC more than a $1 billion annually.

U.S. Senator Carl Levin is a longtime fighter against offshore tax abuse. He is working to stop U.S. tax cheats from using foreign havens and to stop the U.S. being a tax haven for foreign tax cheats. Last week, he spoke at the U.S. introduction of Treasure Island,
"Nick Shaxson admirably lays out the history of how tax havens have become such an insidious feature of the global economy. Today, folks around the globe know to go offshore to hide money. They know tax havens can be used to hide funds not only from tax authorities, but from law enforcement, courts and creditors.

"Enron had over 400 offshore subsidiaries. A single building in the Cayman Islands, called the Ugland House, serves as the mail drop for nearly 19,000 companies incorporated there for tax-dodging purposes. Hedge funds whose employees live right here in the U.S. pretend to be based in tax havens to dodge U.S. taxes, and some companies keep their money offshore so they don’t have to pay one thin dime to support this country – in fact, they get tax refunds instead.

"The Senate Permanent Subcommittee on Investigations, which I chair, has spent more than a decade exploring how offshore tax havens conceal wealth, distort commerce, and abet crime, money laundering and corruption. The truth is that tax havens have declared economic war on honest countries, including the United States by helping U.S. taxpayers dodge U.S. taxes and rob the U.S. Treasury of needed funds.

"The ongoing drain on the U.S. Treasury is massive – and it bears directly on the budget and deficit debate. In 2006, our Subcommittee estimated that offshore tax abuses cost our Treasury about $100 billion a year in lost revenues."
Democracy Now! interviewed Shaxson and you can hear it by podcast or video. This is their promo:
Offshore Banking and Tax Havens Have Become Heart of Global Economy
we look at how corporations and the wealthy use offshore banks and tax havens to avoid paying taxes and other governmental regulations. "Tax havens have grown so fast in the era of globalization, since the 1970s, that they are now right at the heart of the global economy and are absolutely huge," says our guest, British journalist Nicholas Shaxson.

"There are anywhere between $10 and $20 trillion sitting offshore at the moment. Half of world trade is processed in one way or another through tax havens." Shaxson is the author of the new book, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens.

I suggest that when you decide how you will mark your ballot, put weight on the actions of politicians, not on their words.

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Vapourtax - UPDATED

Nineteen months and one general election have passed since Premier Clark announced "establishment of a new British Columbia Prosperity Fund." However, we still have no word on exactly how LNG is going to make BC cash rich and debt free. At least $278 million a month should be flowing into the provincial treasury for 30 years so we're already billions behind.

The following was published in May 2014.

A few tech companies are noted for vapourware, which are products announced with much fanfare that never materialize. In my view, BC Liberal assurances of more than $100 billion new money from 30 years of LNG production is nothing more than vapourtax. These were promises issued solely for marketing purposes, not to be realized but to be replaced with updated political scams.

Jim Quail is the Executive Director of the B.C. Public Interest Advocacy Centre in Vancouver. BCPIAC is a non-profit law office in the field of social justice law. Jim Quail's Blog has an important post about the difficulty of collecting tax revenues from liquid natural gas. I suggest you visit his site for the full article, BC’s Elusive LNG Tax.

We remember Premier Christy Clark's pre-election promise,
"Liquefied natural gas is the industry that will make British Columbia debt free. ...Development in natural gas can stimulate $1 trillion in new economic activity across the province — 100,000 new jobs, $100 billion in 30 years."
With that debt soon to rise beyond $70 Billion and future gas markets uncertain, the promises were extravagant. Credible observers say Clark's words, at best, represent wishful thinking. I believe they were fantasy and Clark knew it. My recent work demonstrates the Liberal government has had no eagerness to collect more than a tiny share of value from BC's resource production. Their inability, more than a year after Clark's announcement, to state an LNG taxation scheme demonstrates commitment to change is absent.

Quail raises a separate issue. If Liberals were willing to tax an expanded gas industry, how would they do it?
"Because figuring out how to extract significant provincial revenue out of LNG exports is a very difficult problem – and this is on top of the uncertain prospects for the LNG industry to happen at all, or on the kind of scale the Premier heralded on the campaign trail.

"There is no obvious point in the process for a provincial government to insert itself and extract a share of the money..."
Update, May 14, 2014:

Before the May 2013 election, BC Liberals talked of LNG paying off provincial debt (which approaches $70B or $130B, depending on whether BC Hydro contingencies are included or not), funding a $100B 'Prosperity Fund' and creating a secure economic future for the province. Pre-election puffery though seems to be just that. In reality, the first concrete move of the Clark government was to grant another $116M in subsidies to gas producers.

Last October, the Vancouver Sun reported words from the Minister of Gas,
"Coleman told reporters the province has been negotiating with global energy firms 'on a very confidential and detailed basis' to determine a taxation 'sweet spot' that will work for the industry and the province.

" 'We’re very close to that sweet spot and very close to having a situation where we can probably announce what it is,' Coleman said. 'We think that will come sometime in November.'
Eight months has passed, those behind-closed-doors negotiations may be complete, they may be continuing. The public is not entitled to that information, nor is the Vancouver Sun interested in examining this supposedly vital subject. Here's a Twitter exchange I had with the newspaper's [(correction) former] business editor,

Penner was defensive and he might have reason to be. Previously, I engaged him on what I believed to be the Sun's innaccurate and incomplete reporting on resource revenue issues. I might have suggested they were more interested in rewriting government talking points than doing independent examinations. In this week's exchange, I asked Penner to point to any analysis of gas revenues done by the newspaper in the past 15 month. He did not respond.


May 14, Derrick Penner advises through comment here that he is not and has not recently been the Vancouver Sun's Business Editor. I apologize for the error. Apparently my source was not trustworthy. I should have known better than to rely on a Postmedia website.

Screen capture from Vancouver Sun website, May 14, 2014

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Friday, September 19, 2014

Managers justify generous treatment of managers

In 2013, the consulting firm Ernst & Young was hired to review trends in compensation across the BC Public Sector. It is now available through the Legislature's public documents.

Reports of this kind are almost worthless documents of political propaganda. The only important question asked of the executives who commissioned it was the one aimed at determining what the report should say. Inevitably, consultants who hope for more assignments, pander to the interests of the senior managers who hire them. That leads to recommendations like this:
"Based on the market reviews, it is possible that some of the lower levels (e.g. administrative positions) may be above market and could require “adjustment down” over time. This is an assumption not based on analysis of BC data but on a literature review of typical public/ private benchmarking in Canada, and comments from stakeholders in BC...

"It is believed that the Strategic Leadership group and other key management roles are compensated at a lower level than Canadian and Federal peers, and it is therefore anticipated that bands would need to be adjusted up..."
I will translate the bureaucratese:
"Most public service workers are paid too much and deserve less. We can't demonstrate that to be true but it is regularly stated by groups like the Fraser Institute, Business Council of BC (BCBC), Canadian Federation of Independent Business (CFIB), The Independent Contractors and Businesses Association (ICBA), the Canadian Taxpayers Federation (CTF), the BC Chamber of Commerce, the Coalition of BC Businesses and other "stakeholders" that we admire.

"BC's top managers, the people who arranged for this report, are paid too little for their loyal and dedicated service and deserve significantly more money. We can't demonstrate that to be true either but it feels right and they sign our cheques."
The report echoes assertions of the rabid Fraser Institute (6 mentions), BCBC (6), ICBA (4), CFIB (17) and CTF (8). It is based largely on the opinions and one-sided research of deconstructionist organizations who might believe that equality and democratic government are failed experiments but certainly hold that fair wages and organized labour are the bane of any economy. Here is a sample:
"The vast majority of Regional and Local Government workers are part of large and sophisticated unions. Even local Government unions, for example, are local chapters of the Canadian Union of Public Employees, which is a member of the Canadian Labour Congress. CUPE provides even small local unions with sophisticated assistance for bargaining and contract negotiations. (See Appendix C-15).

"Without a coordinated response to organized labour, there is a real risk, that unions can divide and conquer..."
Yes, that ought to appeal to the BC Liberal base. A union worker is the bogeyman, backed by the wealth of fellow members who unfairly pool resources by kicking two or three hours of wages each month into union coffers. From that, they've been known to coordinate with others who share objectives and fund research staffs and create advertising and economic research that treats the labour movement fairly. (It's OK though if business groups make efforts for themselves and use funding from billionaires in China.)

Not that government would ever try sophisticated efforts to manipulate opinion, except for the almost 300 "communications" people working for the BC Liberal government, the numerous PR agencies with budgets of millions, reports of consultants like Ernst & Young, the army of "social influencers" and the captured corporate media that has come to rely on preferential treatment and handouts of packaged stories, leaks, hospitality and financial rewards. Nor would the well funded astroturfers and big business groups aim to divide and conquer the proponents of equal opportunity and protection of the environment.

Northern Insight has previously spotlighted the generous treatment of senior public servants. For example, the top five executives at BC Investment Management Corporation went from $1.9 million in 2007 to $5.8 million in 2014, an increase of 310% for people already earning in the high 6-figures. Compare that to a "greedy" school teacher earning in the mid 5-figures who, after three years of 0%, gains 0% in the first year of a six-year agreement that totals 7.25%, certainly less than the rate of inflation.

While the thrust of this report from Ernst & Young is more for the big guys and less for the little guys, they did note the potential for political embarrassment when word spreads about overly rich compensation in government agencies that thumb their noses at restraint in executive suites. They note one that Northern Insight revealed,
"In 2013, it was made public that BC Ferries CEO Mike Corrigan made more than the top three Washington State Ferries executives combined."
By the way, Corrigan made about double the combined earnings of the three highest paid WSF executives. Apparently, there is no possible solution to that situation because, as the consultants report,
"Under its legislation, BC Ferry Authority is only required to align executive compensation in BC Ferries to peers in Canada which thereby excludes Washington state ferries."

A Pulitzer Prize winning article by the Wall Street Journal in 2002 demonstrates that runaway compensation for executives has been a fact of life for many years. Fuzzy disclosure rules and incomplete public information enable business leaders to focus their best creative energy on their own pay packages.

Other good reads:

Fatter Cats: Executive Pay and American Inequality

Top 10 highest paid hedge fund managers

Ten Highest Paid CEOs

Executive compensation: Canada's 100 top-paid CEOs
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Tuesday, September 16, 2014

#bced in my twitterverse

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Monday, September 15, 2014

The real news gets ignored - REPLAY

I wrote the following article 3½ years ago. It demonstrates how little has changed.

On the day George Abbott became the first Education Minister to speak at a convention of the teachers' union since Gordon Campbell's election in 2001, BC Liberal media focused less on the warm response from educators than on what they say is a coming confrontation.

TC columnist Les Leyne headlines, "a battle is looming." The Globe and Mail says "strike looms", Global TV News leads "Strike by school teachers in this province seems unavoidable." CTV's Jim Beatty led with "A teachers' strike is a good possibility."

Instead of aiming to be inflammatory, CBC offered a balanced report. The Canadian Press did as well, for example:
"Abbott told the teachers he will always listen to their views, even if they do not agree on the many difficult issues facing the two sides as they prepare to sit down and hash out a new contract for the 41,000-strong federation.

" 'We will have lots of things that will divide us in the weeks and months ahead there is no question about that,' he said. 'Labour relations alone will be an area that will be fraught with many challenges I'm sure on both sides of the table.' "
Leyne says that after his speech, Abbott was "peppered with" observations from two people,
"about how unsupported teachers are in dealing with special needs kids, sometimes violent, semiliterate, emotionally fragile, suffering from fetal alcohol syndrome problem children who populate many classes in increasing numbers.

About all he could do was nod in sympathy."
That should have provided the headline derived from Abbott's visit. Special needs children are there today, lacking resources. Instead, we get speculation of strike or job action that can not occur until the next school year and which everyone knows will result at worst in another imposed contract if mediation and conciliation fail.

Highlighting potential job actions might seem more dramatic but they are far-off and rather meaningless. In doing so, media downplays substantive issues that should be at the forefront of discussions. Do we want our education to be effective and accessible or, ultimately, do we want to turn our schools into American style guarded camps that worry more about protecting students from gun and knife violence than preparing them to be contributing citizens.

I disclose a bias in this discussion. Among my children and their partners, we proudly number three school teachers. These young people are well educated professionals (six degrees between them) who focus their lives on improving educational experiences of children in their care. Our relatives occasionally miss family events because out-of-school duties such as preparation, marking, writing reports, doing extracurricular activities and professional development consume time that is unseen by students and parents. Teachers spend their own money for supplies, field trips, computer programs and equipment and even for necessities and rewards to needy or deserving students.

I do not know the present salary levels of these three people. I did know the entry salary my son earned when he started teaching after two degrees and a number of years working as a scientific researcher. It was an appallingly low annual salary that started with the number three. I suspect some of our MLAs receive more in expenses. These young teachers, while not talking about salaries to us, do talk about the difficulties faced from crowded classrooms and about special needs students, about poverty and drug addiction and deficient parenting skills, etc.

I think media focuses entirely too much on the wrong issues in today's education. Much goes right with our schools as well. A few years ago, I had the honor of presenting scholarships to graduating high school students on behalf of the Pacific Coast Amateur Hockey Association. At awards nights of secondary schools, boys and girls of outstanding achievements are recognized, not just in academics and sports but in an amazingly broad series of community and personal activities. Those teenagers accomplished more in a few years of maturity than others do in a lifetime. All deserve the best education we can provide.

Society benefits in the long run. The richest nations also have the best systems of education. That is not coincidence; one leads to the other.
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Sunday, September 14, 2014

Beat reporters left the building

In 2010, the small city of Bell, CA was front page news nationwide. Over 17 years, the city manager and other municipal officials bilked tax payers out of millions of dollars. The LA Times won a Pulitzer for reporting on this story but it had paid no routine attention to this "cesspool of corruption" during the many years the fraud was active.

Deadbeats, the September 12 episode of WNYC's series ON THE MEDIA (available by podcast) examines the failure of journalists to hold the powerful accountable.

The entire program is worthy of your time because the same decline in beat reporting has occurred here. If, as some of us suspect, high level political and commercial corruption exists in British Columbia, it is a safe bet that the corporate media has no ability or interest in reporting the stories.

 The following is an introduction to the ON THE MEDIA report.

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Ferry innovation? Wazzat? (Updated)

Eighteen years after Norway committed to using LNG and CNG powered ferries, BC's highly paid fleet commanders are dipping toes into alternative fuels. Three ferries to be constructed in Poland will have duel fuel capacity: LNG and diesel.

However, innovators in Norway have moved beyond natural gas. Sustainability expert Bjørn K. Haugland believes that within a few years, most Norwegian ferries will be battery powered. Siemens, a multinational engineering and electronics giant, provides detail about a new vessel that is only a little smaller than those coming from Poland in BC Ferries' $252 million purchase.
"Together with the Norwegian shipyard Fjellstrand, Siemens has developed the world's first electrically powered car ferry. The 80-meter vessel can carry 120 cars and 360 passengers. The vessel currently serving the route uses approx one million liters of diesel a year and emits 2680 metric tons of carbon dioxide and 37 metric tons of nitrogen oxides.

"The ferry has been specially designed to accommodate the requirements of an electric drive system. As a catamaran with two slim hulls, it offers less resistance in the water than a conventional vessel. Furthermore, the hulls are made of aluminum instead of steel, which is conventionally used. Rather than a diesel engine, the ferry is equipped with electric motors to drive the ship's two screws. The new vessel weighs only half as much as a ferry of conventional design.

"The crucial feature of the new ferry is that it only takes 10 minutes to recharge the batteries. Hundreds of ferries link Norway's mainland to the islands off its coast and provide routes across its many fjords. Using today's battery and recharging technology, all crossings of up to 30 minutes in duration could be served by electrically powered vessels."
The following was published here in November of 2013 and it describes another vessel that was proposed for use in Norway:

With 20 directors on two boards and two well compensated ferry commissioners overseeing by far the highest priced ferry managers in the world, BC Ferries should be world leaders in innovation.

Not quite. Norwegian ferry operator Fjord1 has a dozen LNG ferries in service or on order, with the largest equipped to carry more than 250 vehicles. Now, they've announced the next generation vessel:
"Multi Maritime has, in close cooperation with the ferry operator Fjord1, launched a new green ferry concept. The ferry is a “plug-in” LNG hybrid, which incorporates several features to reduce the ferry’s environmental footprint. The concept has been developed as a part of Fjord1′s bid for operating the Lavik-Oppedal ferry link in western Norway.

The most eye catching feature is the two Flettner rotors which acts as sails. For the Lavik-Oppedal link, which has wind conditions suitable for the Flettner rotors, it has been calculated that the rotors contribute with minimum 12% of the ferry’s total energy consumption. The theoretical potential is significantly bigger..."

Click on label below for more ferry news.
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Saturday, September 13, 2014

Next we sell off naming rights for schools - REPLAY

This article first published September 2011 remains timely.

Private business promoters aim to eliminate public enterprises through privatization, contracting out and outsourcing. They promote the myth that delivery of services by private, often multinational, companies gains cost and service efficiencies. Thus, BC Liberals, obedient clients to business masters, degrade public agencies and support quasi-public mongrels such as Community Living BC, author of the Ridge Meadows recycling fiasco.

Accountability is unclear so politicians believe they are shielded from blame for failures. Agencies serve another political purpose because loyal party supporters can be rewarded at public expense with untendered contracts and lucrative sinecures outside the professional civil service.

Preference for services to be delivered to the public by private corporations is a matter of bias, often founded on selective evidence. There is no intrinsic reason why a global business with foreign headquarters and a shady history, Accenture for example, should be more efficient and effective than a crown corporation or public agency, provided the latter is not crippled by people or policies imposed for non-business reasons.

Private enterprises, perhaps because of their focus on maximizing profits, have been associated with wrongdoing in delivering essential social services. For example, ProPublica reported on:
"how two [Pennsylvania] judges there carried out a scheme in which they took $2.8 million in kickbacks from a private juvenile prison company in exchange for lengthy sentences."
The Economist examined the operation of private prisons in the USA and found:
"that firms in the prison business reap profits by billing government for rather more than their initial lowball estimates while scrimping in ways that may make prisons less secure."
A generation ago, public education was intended to provide universal access, allowing roughly equal prospects for betterment to citizens. Now, according to Christy Clark, the government's focus will not be on delivering the best possible education to learners, instead it will promote a market driven, for-profit education industry, recruiting wealthy students from overseas.

We already have substantial private initiatives in secondary level schooling. For example, West Vancouver School Board offers academic and sports programs to international students. Regular students may be subsidizing this effort through foregone services and attention. There is so little transparency that taxpayers can not be certain whether the focus on fees paying foreign students is hurtful to resident children. It is clear though that ancillary social costs for policing, transit, healthcare and other public services are excluded from WVSB's financial analysis, the burden simply left for taxpayers at provincial and federal levels to shoulder. Other school districts pursue similar commercial objectives.

This week Premier Clark announced that more BC students will be elbowed aside in a campaign to further commercialize our schools. She aims:
"to increase the number of post-secondary students from other countries studying in B.C."
The intended commercialization of schools is not a considered program of educators, it is a wedge, created for the future benefit of private entrepreneurs. It is the dream of some to covert British Columbia's public school system into an agency to educate only the poor and disadvantaged, the children of little commercial value, while the remaining children take taxpayer provided payment vouchers to private schools of choice.

Last year, Donald Gutstein, wrote in his Georgia Straight article War on public schools rages:
"Supporters of public education need to realize they’re in the middle of a war for its future, and they’re losing.

"The Fraser Institute’s school report-card program is merely the opening salvo in a campaign to strip public education of its funding and direct the resources to the private and nonprofit sectors.

"...Lost in the debate are the goals of universally accessible, publicly funded education, such as preparing children for citizenship, cultivating a skilled work force, and developing critical-thinking skills."
The next step in the BC Liberal plan may be to sell naming rights to school buildings and school programs. You won't send your child to grade one at Adams Road Elementary School. It will be to the McDonalds Introduction to School Program at the Walmart Family Education Center of North Cloverdale.
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The price we pay

Trailer - THE PRICE WE PAY - a feature documentary by Harold Crooks from Filmoption International on Vimeo.

Playing in Vancouver as part of the VIFF, International Village #9, October 4 - 1:00 pm and October 5 - 8:45 pm.

Nobles did not pay taxes, and apparently some people would like to keep it that way! In his latest incendiary investigative documentary, Harold Crooks (Surviving Progress) examines the sordid history of offshore tax havens and the dire contemporary ramifications of such malfeasance. It’s not just oligarchs (our new ‘nobles’?) that are the problem, but our shiniest corporations (Apple, Google, Amazon, etc.). The dollars involved are staggering and could go a long way to solving the world’s problems.

Originally created by City of London bankers in the 1950s, the worldwide web of tax havens now puts over half the world’s stock of money beyond the reach of public treasuries. Nation states are being reshaped by this offshoring of the world’s wealth into "competition" zones that battle for investment and jobs. By shifting the tax burden from big corporations and the wealthy—citizens of nowhere for tax purposes—to the middle class and poor, they are paving the way to historic levels of inequality. This story is told by crusading journalists, tax-justice campaigners and former finance and technology industry insiders now free to speak frankly.

Remedies proposed in Harold Crook’s (Surviving Progress) documentary include adapting tax rules to the novel ways Internet companies create wealth by exploiting their users, and financial transaction ("Robin Hood") taxes on the trillions of dollars churning through global financial markets—in what former Wall Street and UK financial insiders say is in large measure “socially useless” investment. The takeaway for viewers is this: in a world where corporate and financial wealth no longer has a fixed address, democracy can only be preserved by acting cooperatively beyond borders.

Variety review: Toronto Film Review: ‘The Price We Pay’

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Government serves insiders and elites

It is clear that BC Liberal strategy is to reward insiders and elites. That's been shown in countless ways, particularly since Christy Clark took office as Premier in 2011. Shortly after her return to Victoria, a handful of senior civil servants departed with millions in severance rewards, paid even if the ex-employees crossed the street and immediately gained equally rewarding work elsewhere, as all did. More millions of dollars were paid as severance to senior Liberals following the 2013 election, including almost half a million to the manager who steered BC Place to a steady run of losses.

However, people outside the Liberal orbit do not get the same generous treatment. Beverley Maxwell had been director of certification for the B.C. College of Teachers and was terminated in 2012 when the province eliminated the College. Her contract required payment of severance but government chose not to pay. Ms. Maxwell went to Supreme Court and was awarded $312,545. Again, Government chose not to pay. Despite a very weak case, Government filed an appeal, which they lost earlier this month.

Beverley Maxwell was not a Liberal insider; she was a professional educator who had worked 16 years for the College of Teachers. Therefore, to get the payment she was due, Ms. Maxwell had to wait two years and spend tens of thousand of dollars on lawyers and court fees.

Of course, the main issue in recent days has been government's refusal to negotiate or arbitrate with public school teachers, people who are clearly not insiders or elites. A Premier who sends her own child to an upscale private school seems not bothered that hundreds of thousands of children are out of class. The government that has twice had its efforts to legislate teachers' working conditions declared unconstitutional is now threatening to try a third time, even though numerous legal opinions state they are offending the Canada Charter of Rights and Freedoms.

The official Liberal position is that educators are greedy and government has no additional money for schools. However, during recent years, budgets for post secondary institutions have kept ahead of inflation while budgets for elementary and secondary public schools have fallen behind, despite a greater load of special needs and ESL students. Instead of providing funds to deal with unique challenges, this government withholds assessment resources and pretends special needs students exist in fewer numbers than they do.

However, the Premier and her ministers have not had the same tight-fisted messages for private schools. Those operations have benefited from increased public funding. Here is a comparison of funding changes, showing public schools and select private schools.

Obviously, the individual schools here are ones that serve the province's economic elites. Perhaps that explains the unequal treatment.

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Thursday, September 11, 2014

How the Legislature works, or does not work

Sean Holman, after 9 years investigative reporting on provincial politics, became a full time faculty member of Mount Royal University's Communications department. Losing Sean and Public Eye Online was unfortunate for British Columbians but a material gain to Calgary journalism students.

I discovered today that Sean's fine documentary, Whipped: The Secret World of Party Discipline, is available now for online viewing.

I urge you to put aside 45 minutes, click on the link above and view this work. Encourage others to do the same.

By the way, depending on your point of view, Sean can be either blamed or credited with inspiring me to maintain this blog.

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The Explainer explains

Surveying corporate media coverage of the education dispute, I noted a column by Vaughn Palmer that displays his particular usefulness when BC Liberals want information distributed. More about education later but here is an excerpt from A balanced budget, but it’s not exactly ‘happy days’ in B.C. finance land:
"B.C. Liberals were forced to rein in spending by several hundred million dollars as well. Much of that was achieved by slowing the rate of growth in the health ministry, including some $100 million reaped in the Pharmacare budget from the continuing shift to generic drugs."
Obviously, what he should have said is not that Liberals were "forced to rein in spending" but that they "chose to rein in spending."

But, that's a minor complaint. When he wrote government saved $100 million by PharmaCare shifting to generic drugs, The Explainer had not spoken to users of prescription medications, he was reading from Liberal talking points. In fact, PharmaCare saved money but they gained most of it by shifting costs onto users. This has been accelerated recently.
  1. PharmaCare sets a maximum price it will recognize for each drug and patients pay the extra. Often, PharmaCare prices are lower than actual prices in the market place.
  2. PharmaCare has a Low Cost Alternative (LCA) program and will accept only amounts established for the cheapest drug in a category. If doctors prefers to prescribe drugs different than the LCA, the patients pay extra.
  3. Under the Reference Drug Program, PharmaCare provides full coverage for only the most "cost effective" drugs in the category. Coverage for other drugs may be will be denied without special authority.
  4. The Limited Coverage program dictates that certain medications will not be covered unless health care providers apply for special authority. The list of drugs not covered has expanded. Special authorities are often declined and physicians may ask patients to pay fees for applications. This encourages patients to abandon claims.
These policies not only save the BC Government large amounts but they profit private insurers, such as Pacific Blue Cross, who apply me-too rules and follow the PharmaCare model. So, government and business saved money, but that came out of the pockets of patients.

I can understand government not wanting to admit the fact but they should not be helped by misinformed reporters.

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Food for thought

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Wednesday, September 10, 2014

More Liberal devastation

A report released today shows that B.C. Liberal hikes to ferry fares are causing economic damage across the province, say the New Democrats.

“This new report does the work the government should have done years ago. It connects the dots between fare hikes, falling ridership numbers, and the loss of economic activity and tax dollars,” said New Democrat ferries spokesperson Claire Trevena.

“The conclusion that it reaches is that the B.C. Liberal policy for ferries is a complete and utter failure. And that means a failure for the whole of the province, not just coastal communities and those dependent on ferries.”

The report, Boatswains to the Bollards: A Socioeconomic Impact Analysis of BC Ferries, was commissioned by the Union of B.C. Municipalities and the Association of Vancouver Island and Coastal Communities. The report found that due to skyrocketing fares between 2003 and 2013, B.C. Ferries lost out on a 19 per cent growth in passenger volume, which would have added $2.3 billion to the provincial GDP, and $609 million to federal, provincial and local government tax revenues.

“The report shows that these policies have been hurting the province for years, and as time goes on, it will be increasingly challenging to get our ferry service back on track. Transportation Minister Todd Stone needs to have a serious look at these findings before he continues to defend his reckless cuts to services and hikes to rates,” said Trevena.

“Thousands of British Columbians have told this government that ferry services have become increasingly unaffordable and unsustainable. Now, after this report, I hope they will finally listen. It’s time to move away from policies that are devastating communities and costing our province money, and towards an approach that finally recognizes our ferry routes as integral parts of our highway system.”

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