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Revision of Tolls – Sandbanks Ferry

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Revision of Tolls – Sandbanks Ferry Item 10 Council Meeting – 20 March 2018 Revision of tolls – Sandbanks Ferry 1. Purpose of report To obtain approval for the Leader of the Council to write to the Secretary of State regarding the proposed increases to the tolls for the Sandbanks Ferry. 2. Key issues 2.1 The ferry between Studland and Poole (known as the Sandbanks Ferry) is operated by the Bournemouth – Swanage Motor Road and Ferry Company. They have advertised on their website and in local newspapers their application to the Secretary of State for Transport to increase the ferry tolls. 2.2 Appendix 1 contains a copy of the notification and the proposed tolls. It should be noted that the advertised current schedule is not the current toll, but the toll from the 1 April 2018, which is misleading. It is the company’s intention to phase the proposed increases up to April 2021. A breakdown of how the proposed phased increases would be applied can be found on the last page of Appendix 1. The current and proposed tolls are reproduced in section 5 below. 2.3 In the accompanying paperwork found in Appendices 2 and 3 to support the application the Ferry Company state; “In order to maintain the high standards of service achieved under the present ownership, the Directors are advised that it will be necessary to be in a position to replace the ferry in approximately 9 years.” It goes on to say “it is projected that the replacement cost of the ferry in 2026 will be £10.669m”. 2.4 The application also advises; “The ferry replacement reserve at 31 March 2017 was £1.931m. Therefore, to be in a position to bring the ferry replacement reserve to the projected amount of £10.669m to replace the ferry in 2026, total transfers per annum will need to average £970,841. This will not be possible in some of the years if a reasonable level of dividend is also to be paid. The shortfall in the ferry replacement reserve would have to be found by seeking additional funding at the time the ferry is replaced.” 2.5 In their application the company advise that the Ferry Act 1986 recognises that the operation of the ferry should provide a ‘reasonable return’ to the Company’s owners and Appendix 3 contains forecasted profit and loss as well as forecast dividends assuming no toll increase and proposed toll increases. The anticipated dividends represent 5% return for the shareholders, which may be considered to be on the high side in the light of prevailing interest rates. 2.6 While it is accepted that some level of fare increase is needed in order to fund the replacement ferry and maintain this important transport link while trying to pay shareholders a dividend, it should be noted all the proposed fare increases are substantially above the current rate of inflation with pedestrian charges set to double and some vehicle charges set to increase by over one third, in three years. 1 Item 10 3. Recommendation Council approve that the Leader of the Council write to the Secretary of State for Transport objecting to the proposed toll increases for the Sandbank Ferry and requesting the increases are closer to inflation with some of the cost of the new ferry financed by reduced dividends. 4. Policy issues 4.1 How will this affect the environment, social issues and the local economy? The Sandbanks Ferry provides an important transport link between south Purbeck and the Poole/Bournemouth conurbation for employment and for visitors to the area. The loss of the ferry would have a significant adverse impact on employment opportunities and the local economy generally. The amount of the toll charged affects the level of ferry use and the number of journeys made on the A351 road – a low charge is likely to increase use of the ferry and reduce road congestion, whereas a high charge will encourage use of the road. 4.2 Implications 4.2.1 Resources There are no immediate resource implications for the Council arising from the proposals to increase the tolls. 4.2.2 Equalities There are no equality issues arising from the proposals. 5. Further information 5.1 Consultations are normally considered by Policy Group before Council, however in this particular case there was insufficient time for this to happen before the closing date for responses, which is 2 April 2018. 5.2 The table below breaks down the current toll and proposed tolls. Proposed Toll Maximum Toll Chargeable (not Chargeable (to Current toll implemented CLASS OF TRAFFIC be implemented £ until FYE 31 1 April 2018) March 2022) £ £ Pedestrian (Sandbanks to 1.00 1.00 2.00 Shell Bay) Pedestrian (Shell Bay to Nil Nil Nil Sandbanks) Pedal or motor cycle 1.00 1.00 2.00 Passenger vehicle 17 4.30 4.50 6.00 persons (car) 2 Item 10 Passenger vehicles > 17 8.60 9.00 12.00 persons (coach) Goods vehicles 3,500kg 8.60 9.00 12.00 (cars) Goods vehicles > 3,500kg & 8.60 9.00 12.00 20,000kg (trucks) 5.3 The table in Appendix 3 page 27 shows the traffic volumes using the ferry. It can been seen even in the winter months car passengers still equate to around 40,000 transactions a month suggesting the ferry is used by local residents travelling to and from work. 5.4 The ferry company sell books of tickets in multiples of 10 and 50 that gives just over a 20% discount on a the main toll. These are normally used by local residents who use the ferry frequently, normally to travel to work in Poole and Bournemouth. While the proposed increase for cars in 2018 is below inflation the next few years see an increase of 11% to 17%. Businesses in Studland and Swanage particularly those of a seasonal nature are reliant on workers from Poole and Bournemouth to travel into the area to fill positons. The proposed increases may present them with additional difficulties in recruiting staff. 5.5 The UK current rate of inflation as of December 2018 was 3%. All of the proposed increases with the exception of books of tickets from April 2018 are all above 3%. In April 2018 the proposed increase for a passenger vehicle is 20%. A full breakdown of the percentage increases can be found on the final page of Appendix 1. 5.6 Appendix 4 is the Annual Report and Financial Statements for the year ended 31 March 2017. This explains the company’s current financial position. Appendices: 1 - Notification and application to the Secretary of State 2 - Business case to support application to increase toll charges 3 - Financial forecasts to support business case 4 - The Bournemouth-Motor Road and Ferry Company Annual Report and Financial Statements for the year ended 31 March 2017 Background papers: There are none. For further information contact: Rebecca Kirk – General Manager Public Health and Housing 3 Item 10, Appendix 1 (CM - 20.03.18) 1 Item 10, Appendix 1 (CM - 20.03.18) 2 Item 10, Appendix 1 (CM - 20.03.18) 3 Item 10, Appendix 1 (CM - 20.03.18) 4 Item 10, Appendix 2 (CM - 20.03.18) The Bournemouth-Swanage Motor Road and Ferry Company (Incorporated by Act of Parliament 31 July 1923) Application to Increase Certain Toll Charges January 2018 Item 10, Appendix 2 (CM - 20.03.18) Contents PAGE NO 1 Background and History of the Company 3 - 4 2 General Notes Regarding This Application 5 - 6 3 Reasons for the Application 7 - 8 4 Conclusion 9 APPENDICES 1 Assumptions Within the Forecasts 10 - 12 2 Forecast Profit and Loss Accounts for the 9 years to 31 March 2026 2.1 Assuming no proposed increase in toll charges 13 2.2 Assuming an increase in toll charges 14 3 Forecast Year End Balance Sheets for the 9 years to 31 March 2026 3.1 Assuming no proposed increase in toll charges 15 3.2 Assuming an increase in toll charges 16 4 Forecast Dividends and Return On Investment 4.1 Assuming no proposed increase in toll charges 17 4.2 Assuming an increase in toll charges 18 5 Comparisons With Industry Averages 5.1 Data Table 19 5.2 Graph of PBT/Shareholders' Funds vs. SIC 6120 Averages 20 5.3 Graph of PBT/Shareholders' Funds vs. SIC 6110 Averages 21 5.4 Graph of trends: 2013 to 2017 actuals and 2018 to 2026 forecast assuming no proposed increase in toll charges 22 5.5 Graph of Trends: 2013 to 2017 actuals and 2018 to 2026 forecast assuming an increase in toll charges 23 6 Summary of Costs for the 6 Years from April 2011 to March 2017: 24 7 Monthly Traffic Volumes for the 6 Years from April 2011 to March 2017: 7.1 By Category 25 7.2 Averages 26 7.3 Graphical Representation 27 8 Income Workings for the 9 Years to 31 March 2026 assuming toll increases 28 9 Forecast Cash Flow Analysis for the 9 years to 31 March 2026 9.1 Assuming no proposed increase in toll charges 29 9.2 Assuming an increase in toll charges 30 10 Financial Statements for the year ended 31 March 2017 31 11 Acts of Parliament 52 2 Item 10, Appendix 2 (CM - 20.03.18) 1 BACKGROUND AND HISTORY OF THE COMPANY 1.1 The Company was set up under the provisions of The Bournemouth-Swanage Motor Road And Ferry Act 1923. This Act established a legal obligation to provide and maintain a more direct means of transport between Swanage and Bournemouth than had existed before that time.
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