Newfoundland 3Ait Service a Cost Re Over Alternative
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Summary Report NEWFOUNDLAND 3AIT SERVICE A COST RE OVER ALTERNATIVE SH 344.8 E. Gordon RodgErs B3 Atlantic Development Programs Branch R6 Draft 1 — Jury 31, 1980 209097 (SUMMARY REPORT NEWFOUNDLAND BAIT SERVICE A COST RECOVERY ALTERNATIVE E. Gordon Rodgers, A/Director Atlantic Development Programs Branch July 31, 1980 Draft 1 CONTENTS PAGE INTRODUCTION 1 GENERAL HISTORY 3 NEWFOUNDLAND BAIT SERVICE 5 Management and Organization 5 Facilities 6 Operations - Bait Supply and Uses 7 Bait Costs - Purchases and Sales 9 Maritimes - Bait Supply 11 Bait Facilities Operating Costs 11 NEED FOR THE NEWFOUNDLAND BAIT SERVICE 13 RECOMMENDATIONS FOR COST RECOVERY 14 CONCLUSIONS 16 APPENDICES Map 1 Distribution of Bait Depots 1949 18 Map 2 Distribution of Depots and Units 1979 19 Map 3 Distribution of Fish Landings and Values 1978 20 Map 4 Distribution of Crustacean Landings and Values 1978 21 Map 5 Distribution of Registered Fishermen 22 Table 1 Summary Historical Changes in Number of Facilities 23 Table 2 Depot History - List of Facilities (1949-1979) 24 Table 3 Unit History - List of Facilities (1949-1979) 25 Table 4 Indeterminate Positions 1979 26 Table 5 Person Year Allotments 27 Table 6 Depot Capacity and Age - 1979 28 Table 7 Unit Capacity and Age - 1979 29 Table 8 Depot - Opening and Closing Dates 1979-1980 30 Table 9 Unit - Opening and Closing Dates 1979-1980 31 Table 10 Depot Accessibility and Adjacent Plants 1979 32 Table 11 Unit Accessibility and Adjacent Plants 1979 33 Table 12 Landings and Values of Catches on Baited Gear 1978 34 Table 13 Bait Service Sales and Purchases 1966-1978 35 Table 14 Bait Service Expenditures by Year by Vote 1973-80 36 Table 15 Bait Service Allocations and Expenditures 1977-80 37 Table 16 Depot Sales and Operating Costs 1976-80 38 Table 17 Unit Sales and Operating Costs 1976-80 39 Table 18 Depot Utilization Rates and Operating Costs 40 Table 19 Unit Utilization Rates and Operating Costs 41 Table 20 Suggested Depots and Units to be Withdrawn 42 Table 21 Current and Projected Breakeven Costs 43 INTRODUCTION The Newfoundland Bait Service (or Program) as it is known by some parties, has been supported financially by the Federal Government since 1949, as Canada's commitment in accordance with the 1949 Terms of Union. Since that time there have been many changes in infrastructure and continuous cost recoverable difficulties. Over the years Government has attempted to make changes toward making the Service more viable and cost recoverable and this is evident throughout correspondence between the Newfoundland region and Ottawa from the late 1960's to date and by the consultant study on the Service by T.R. Wingate in April, 1971. Despite the many recommendations, Government has actually done very little to date to make the Service more effective to the needs of the fishery and more efficient in terms of costs, so the service may become more viable. Very few recommendations of the Wingate Study were adopted in 1971 and costs more than doubled from 1971 to 1979. The purpose of this report is to address the question of making the Newfoundland Bait Service cost recoverable. This has been a request by Treasury Board to the Department of Fisheries and Oceans, as a result of a continuous annual requirement for further funding. More specifically, Treasury Board has requested that a proposal be developed for increases in bait selling prices to make the Bait Service self-financing over a five-year time frame. Of course, a simple answer to this problem, is to raise the price of bait to the level required, so that all costs are recoverable. However, to deal with the problem properly, such a simple solution is not desirable as areas of inefficiencies and ineffectiveness which have developed over many years should be addressed so that in essence, overall costs are reduced. Therefore, increases in the price of bait can be minimized and the level of service provided can be increased. This report will attempt to deal with these complex issues briefly but the one week allotted to the author to visit any sample facilities and complete the report is inadequate for the level of detail required. Many of the areas discussed or touched upon in the report should be investigated and analysed in depth. This would likely require several months of full time initiative by a capable individual. Ideally, all facilities should be visited and the physical condition of the facilities as well as the extent of use and importance of the facilities to the people and communities serviced, should be considered as part of the study. After the preparation of a detailed report or based on this summary- report it will be important that a capable person, preferably in the --- Newfoundland region, be assigned the responsibility of program manager. The program manager for the Newfoundland Bait Service would be primarily responsible for implementing the desired recommendations and ensuring that not only are the facilities eliminated where required, but they become more effective and efficient and cost recoverable through increases in price over a period of — time. The program manager's responsibility would also extend to carrying out the necessary development of plans and negotiations required to pass over a cost recoverable Bait Service to the appropriate agency or government, as decided in the overall strategy. No doubt as part of such negotiations, the program 2 manager would have to be prepared not only to defend any reductions in facilities but justify any such reductions if required and actually sell the revised cost recoverable Service to the intended recipient as part of the negotiation process. The program manager will require the delegated responsibility to carry out the task and departmental support will be essential when required. Clear goals and objectives will be necessary from the beginning and program manager accountability will be important if any initiatives are to be undertaken to make the Service cost recoverable or negotiation of its takeover. 3 GENERAL HISTORY The Newfoundland Bait Service as it now stands had its inception in 1934 and was based mainly on a paper presented by Mr. L.C. Outerbridge at a meeting of the Codfish Exporters Association in November, 1933. At the turn of the century the pressing fishery problem was to supply a large fleet of dory schooners with sufficient bait to last the duration of their trips to the Grand Banks. By the late 1920's, several private operators installed artificial refrigeration in order to hold bait but it proved to be very expensive. In the early 30's private companies approached the Newfoundland Government for financial assistance. Aware of the need for an assurance of bait supply, the Newfoundland Government built four bait depots at Quirpon, Bonavista, Bay de Verde and Ramea. In 1934, a Commission replaced the government and during its reign (1934-1949) constructed twenty-two depots to serve the banking fleet and the inshore fishermen so they could carry on fishing activities before and after the trap fishery. Initially, the bait program operated under a system known as "halves". This meant that one-half of the bait that a fisherman had frozen and stored in the depot was retained by the depot as payment for the cost of freezing and storing. This system proved to be cumbersome because fishermen could control the depot stocks of bait during the early season by buying bait from the depot and retaining their own stocks until later in the season. At this time, they could then sell their bait to other fishermen at higher prices. A new system was introduced under which depot operators would buy fresh bait from fishermen, freeze and store it and then re-sell the bait to fishermen as need dictated. Under this system the depot operators controlled all bait going through the depot. The prices set under this system were done arbitrarily and did not relate to the actual costs of buying, freezing and storing bait. When Newfoundland became a Province of Canada in 1949, the Federal Government of Canada agreed to assume responsibility for certain services in accordance with Term 31, of the Terms of Union. Term 31(g) states that Canada will take over the service and relieve the Province of Newfoundland of the public costs incurred in respect of the protection and encouragement of fisheries and operation of bait services. Term 33(e) states that bait depots and the motor vessel Malakoff shall become the property of Canada when the service concerned is taken over by Canada. Subsequently, the Federal Government of Canada, in a White Paper made the following declaration of policy regarding the administration of the bait service in Newfoundland. "The Canadian Government will seek legislation to take such other steps as may be necessary to provide that the Newfoundland bait service will be taken over and operated without fundamental change by the Department of Fisheries. If, after the date of Union, changes are made for the benefit of Canada as a whole, the question of payment will be discussed between federal and provincial authorities." 4 In the Terms of Union with Newfoundland, it is quite clear in terms 31(g) and 33(e) stated previously that reference is made to bait depots and not bait units. Map 1, shows the location of the twenty bait depots in existence in 1949. Map 2 shows the location of facilities today. Table 1 shows that in 1949, in addition to the twenty bait depots there were two vessels the M/V Malakoff and the M/V E. Explorer. The latter assisted the Malakoff which was the only vessel referenced in Term 33(e).