By Jordan Bateman, BC CTF. Some things in B.C. politics are as cliché as Lululemon-wearing Vancouverites sipping lattes in a rainstorm.
For example, opposition parties always rail against massive dividend payments flowing from ICBC and BC Hydro into government coffers. Then those parties form government and continue to tap those crown corporations for as much dough as possible.
This year, BC Hydro is set to hand over $545 million to the B.C. government; ICBC will contribute another $257 million. At the same time, both corporations expect to raise rates, causing B.C. residents hardship as they try to make ends meet.
Whether BC Liberal or NDP, governments have grown reliant on the cash flowing from ICBC and BC Hydro ratepayers. Any suggestion of reduction is met with ministerial shrugs and the talking point: “How would we fund health and other services without that money? Should we raise taxes?”
Yet, the ignored solution can be found in another cliché: How do you eat an elephant? One bite at a time.
The provincial government, with a bit of planning, could be off the ICBC dole in eight years. The province’s three-year financial plan already anticipates a drop in ICBC dividends to $222 million next year.
That 13.6 per cent decline is a perfect opportunity for the B.C. government to begin to wean itself off ICBC. Making that drop an annual occurrence would mean the dividends would be gone within eight years.
Finding that money within the provincial budget is extremely possible. The province’s financial plan already takes into account dividend drops over the next two years while projecting an increasing overall budget surplus. Grinding down the ICBC dividend by $25 million a year could be covered by revenue generated from the province’s economic growth.
Leaving this money with ICBC should come with a string attached – the corporation’s board should be ordered to freeze, or lower, its rates. This would be welcome across B.C., but especially in the Lower Mainland, where drivers pay 49 cents per litre in gas taxes – second highest on the continent. Car owners have been an ATM machine for government for too long.
Eliminating BC Hydro’s dividends would take longer, as the numbers are bigger – and, in a head-scratching accounting choice, government is budgeting them to grow, despite Hydro’s debt load and infrastructure needs.
While the government is taking $545 million out of Hydro this year, they expect to pull $618 million next year and a whopping $692 million in 2015-16. This seems incredibly unrealistic – and is a big reason why BC Hydro is floating the possibility of a 26 per cent rate hike.
To get BC Hydro’s debt, rates and infrastructure under control, government needs to reduce its take. To eat this half-billion dollar elephant may take the next 20 years, but it can be done.
To cut its dividend from BC Hydro by 5 per cent next year, government would take the most substantial hit immediately. Instead of pulling in $618 million from BC Hydro ratepayers, a 5 per cent drop would mean $517 million flowing into general revenue.
This will take some belt tightening to manage, but efficiencies found through the ongoing core review could cover it. More importantly, it puts $100 million extra back into Hydro to control its rates, whittle down its debt and invest in infrastructure.
Very quickly, BC Hydro could be returned to good fiscal health. As the dividend drops, year after year, more and more money would be available to retire debt, build new power generation plants and stabilize rates.
One final cliché: every politician claims to care about families. Protecting them from BC Hydro and ICBC rate shock by getting government’s hand out of the till would be a good way to help families deal with B.C.’s ever-growing cost of living.
Jordan Bateman is the British Columbia Director of the Canadian Taxpayers Federation.
He can be reached at: 1-604-608-6770 (office) or 1-800-699-2282 (toll free).