Ridley Terminals a lesson for market-interfering governments
Last week, the federal government announced that it was putting up for sale Ridley Terminals Inc., a coal and bulk commodity terminal in Prince Rupert, B.C.
Many readers may not have heard of Ridley, and may be wondering why the government of Canada owned a coal terminal in the first place. The idea goes back to the days when mandarins in Ottawa concocted “regional economic development” plans that bore little resemblance to economic and market facts of life.
In my last annual report as chairman of RTI, I wrote that this was the “field of dreams” approach to public policy making: Build it, and they shall come. (During that same era, Montreal’s Olympic Stadium and Mirabel International Airport were conceived.)
By the time Ridley was completed in 1984, Ottawa had paid $250-million for the facility. The problem was that it had no customers, and the board was packed with political appointees who were well-meaning, but had no understanding of the enterprise for which they now had a fiduciary responsibility.
So long as it was government-owned, none of that mattered, of course. The thinking – if you can call it that – was that this investment would facilitate the development of British Columbia’s mining industry. Well, it didn’t. For 25 years, the terminal ran at no more than 30 per cent of capacity. A deep sense of complacency and entitlement set in and no one seemed to have a problem with Ridley’s perennial money-losing ways.
But when Paul Martin’s Liberals had enough, the company was put up for sale. There were no takers, except for a small company with an even smaller pocketbook. So anxious was Mr. Martin to dump RTI, Ottawa agreed to sell it for $3-million in cash and a $17-million balance of sale to be paid out of profitable cash flow over 10 years.
Wisely, Stephen Harper cancelled that fire sale and eventually appointed a new board, which I chaired. We took it upon ourselves to fix the appalling mess we found. But that didn’t sit well with those who got used to RTI as their own taxpayer-financed sandbox. These companies, some of which were profitable multinationals, hired expensive Ottawa lobbyists and complained to regional ministers. Their gripe? We were insisting that they pay fair market rates, not the taxpayer-subsidized ones they by now felt was their entitlement. On behalf of my board, I told them to get lost. So they went back to Ottawa and demanded my head on a stick. That’s what they got.
But because they had complained so loudly about something that made little sense, my sacking gave them little comfort, and provided all the political cover the RTI board and management needed to stay the course. That’s exactly what happened, and today, instead of selling RTI for $3-million, it will fetch well over $700-million.
Some Crown corporations play a vital and strategic public policy role. Ridley Terminals was never one of them. Companies such as these do nothing but distort the marketplace and obstruct economic growth and investment.
Ottawa should be applauded for this decision.
Daniel Veniez is a Vancouver-based entrepreneur, a former political aide in the Mulroney government and a former candidate for the Liberal Party of Canada.