N.S. signs 10-year deal for Yarmouth ferry with initial costs of $32.7 million

HALIFAX -- Nova Scotia taxpayers will pay at least $32.7 million over the next two years to refloat the ferry service from Yarmouth to Maine under a 10-year deal that will mean millions more in provincial subsidies.

The province announced the agreement Thursday, mere hours after Bay Ferries Ltd. inked a lease agreement with the U.S. military's Sealift Command for a high speed vessel that had previously been part of a ferry service in the Hawaiian Islands.

The deal comes five months after the government dumped the previous operator, Nova Star Cruises, after it failed to meet passenger targets and soaked up $39.5 million in provincial subsidies in its two years of running the service.

Transportation Minister Geoff MacLellan said he realized the new agreement was a rich one for a province facing significant budgetary pressures.

"But our goal, which I believe we have achieved, was to put a stable, long-term agreement in place," said MacLellan.

"The financial risk is largely that of the province," he said. "This is the investment that's required to make this operation stable."

The ferry will get $23.3 million in the first year, including $9 million for a vessel refit to be carried out at a U.S. shipyard. There is also $4.1 million for startup costs and for terminal upgrades needed in Yarmouth.

The funding in the second year will be $9.4 million, with terms for future years negotiated based on performance.

Provincial officials estimated an ongoing annual subsidy of around $10 million on a financial model projecting 60,000 passengers a year. A clause in the contract would also see any cash deficiencies fall to the province.

Progressive Conservative finance critic Tim Houston panned the deal as "stupid," saying the province is carrying too much risk and Bay Ferries too little.

"If you're going to sign a deal like this you're going to sign it with an operator that has some skin in the game," said Houston.

The vessel will be named the Cat, reviving the name carried by the ferry operated by Bay Ferries when the former NDP government axed the service in 2009. The service was remounted in 2014 by Nova Star.

Bay Ferries CEO Mark MacDonald said keeping the old name would help with marketing efforts in New England, which is the ferry's core market.

"Is it a name that's known and is it a name that people treat affectionately? We really think that's the case," said MacDonald.

He conceded the late date in acquiring the vessel would present marketing challenges, but said that could perhaps be offset by an industry trend that sees a growing number of people book trips on short notice.

MacDonald said the company would spend $2 million on marketing, with about 85 per cent going to online advertising.

The new service is expected to run from June 15 to Sept. 30 with daily departures from Yarmouth and Portland, Maine, at 8 a.m. and 2:30 p.m. respectively and returning to Yarmouth at 9 p.m.

The ferry can carry 282 cars and 866 passengers and while MacDonald said it has the capacity to handle commercial trucks it won't, because officials in Portland don't want truck traffic in the city's downtown core.