WATERLOO REGION – In light of the release of preliminary Waterloo Region plans for LRT procurement, the Tri-Cities Transport Action Group (TriTAG) made clear today that it cannot support a 30-year private operating contract for Waterloo Region’s LRT system. While TriTAG has been one of the key supporters for Light Rail Transit (LRT) for Waterloo Region, it believes that such a contract could lock our community into terms and performance metrics not relevant 30 years from today.
The Region’s report indicates a “preliminary preferred procurement option” of a Design-Build-Finance-Operate-Maintain (DBFOM) Public-Private Partnership (P3), procured through the Infrastructure Ontario crown corporation. Waterloo Region has never completed public infrastructure using a P3 model, and Infrastructure Ontario has no complete implementations of a DBFOM urban transit project. Having just released the preliminary option, Waterloo Region nevertheless intends to finalize procurement plans by January, with no apparent plans to engage the community on this subject.
“Whether or not to hand over the Region’s single most important, and single most expensive, piece of municipal infrastructure to a private business for 30 years should be a major community conversation”, said Michael Druker, a founding member of TriTAG. “however, how this is being handled suggests that this crucial issue is meant to fly under the radar, and we do not believe this is appropriate.”
In expressing its view on private operation, TriTAG hopes to launch the community conversation that the Region appears intent on avoiding. The community can engage their regional councillors in this conversation by visiting http://tritag.ca/m/lrt.
“We understand the need to incentivize the private sector to deliver high-quality infrastructure in a timely manner,” said Tim Mollison, a founding member of TriTAG, “but granting a 30-year operating monopoly to corporate interests who have no political accountability to the community is not the kind of solution that benefits Waterloo Region in the long term.”
TriTAG does not object to design-build-finance-maintain P3’s with public consultation, as bids are driven down by private sector competition and maintenance requirements ensure quality control standards are met. This, however, does not extend to a 30-year operations contract. After such a contract is awarded, there is no longer any competition for the private operator.
“Awarding a so-called ‘Operating P3’ to the private sector would endow this private company $818 million to build this LRT line and then reward the same company a monopoly to profit from its operation,” said Duncan Clemens, a founding member of TriTAG. “The focus of the private sector is usually on maximizing profit, and not public benefit. The community support that LRT has received over the past several years will be right out the window, as a privately-operated LRT line would be less a public good and more a publically-funded private cookie jar.”
Privatization of this kind often results in poor private sector performance, with later public demands for expensive buy-backs by the municipality. Examples can be found in Auckland, New Zealand, and the London Underground P3 disaster. In Melbourne, as was strikingly explained in Toronto, privatization let to enormous increases in costs. Closer to home, Highway 407 is a familiar example – what should be a public good is instead used to gouge the public to maximize profits for private shareholders.
“These are untested waters for Waterloo Region, and the risk is absolutely huge,” said Mollison. “The point of private operation is usually to shift risk to the private company, but that’s only on paper. In practice, this can backfire – the company can walk away, and leave the public on the hook for much more than it bargained for. This kind of P3 would be a ticking time-bomb for the taxpayers of Waterloo Region.”
York Region’s bus system may be cited as an example of effective private delivery of transit, but Veolia Transport, the multinational corporation with 60% of York’s service contract, has such a focus on its profits over the public interest that it has refused to negotiate with the drivers’ union, leaving many York Region commuters without service for over 6 weeks and counting. Another example of private-sector transit service delivery in Canada is Vancouver’s Canada line, but that line operates without drivers and thus without front-line labour concerns, and corners were cut on the project that have limited opportunities for future expansion.
“Under a private operating contract, we can kiss LRT in Cambridge goodbye,” said Mollison. “Waterloo Region will not have gained any in-house experience to apply to extend the existing line or building new ones. There will simply be no mechanism to improve rapid transit beyond this phase within the next 30 years.”
Practice in other municipalities suggests that GRT will likely have an adversarial relationship with the LRT operator and could include contractual requirements for GRT to operate the same transit service as it does today, however unsuited to the future those routes could be.
“The public believed that a successful first phase would mean LRT extension to Cambridge could start immediately afterwards,” said Clemens. “But with private operation of LRT, leaving Cambridge with buses could be part of the contract.”
Regional Council has been described as supporting LRT as a legacy project. TriTAG believes that this is a good thing, that planning for the future is proper and leaving a legacy to be proud of should be every politician’s goal.
“It’s not enough for Regional Council to build LRT – it needs to build LRT right,” said Mollison. “If it goes down the path of an operating P3, Regional Council will have a rude awakening to a legacy of squandering the Region’s most forward-thinking project in favour of short-term thinking, and corporate profits at public expense.”
“Regional Council should take a step back and really consider whether or not a DBFM approach is all that bad a deal.”
—
The Tri-Cities Transport Action Group is a community organization with the goal of promoting transit and active transportation (walking and cycling) within Waterloo Region. TriTAG is composed entirely of volunteers, and is exclusively donation-funded by members of the Waterloo Region community. For more information on this issue and other transportation issues in Waterloo Region, please visit http://tritag.ca
For media inquiries, please contact Tim Mollison at (226) 476-1313, x 801.
Thanks for making it so easy for us to contact the relevant regional councillors!! I really appreciate all the work you put into gathering this information for us. Message sent!
Absolutely agree with TriTAG on the issue of LRT ownership! The private sector is ideal for building and maintaining a light rail transit system. The problem is if politicians think that risk can be transfered to the private sector in exchange for profit.
Yes the private sector is willing to accept risks of ownership that politicians are unwilling to hold–but are they more competent to bear the risk? The private sector is notoriously bad at risk management! Additionally the private sector in the past has been shown to be unwilling or unable to micromanage multiple competing objective criterion (i.e. maximizing ridership, maintaining quality of service and minimizing cost).
I think it’s unfortunate that TriTAG are choosing to reject PPP operation sight unseen rather than evaluate the RFP the Region and Infrastructure Ontario will eventually produce. Resorting to statements like “endow this private company $818 million to build this LRT line” is disingenous. Who are the public sector providers of rail, sleepers, signals and vehicles? The vast majority of the sum stated will go to the same companies irrespective of whether it is a public or private project manager orders the relevant materials.
This is not a counter argument that PPPs are good, simply that they can work well in the right circumstances (such as Dublin’s LUAS system) and should be rejected in others. The templates for successful (and unsuccessful) protection of taxpayers are there and if consortia don’t want to bid on the basis of a cost-controlled and price-controlled operation then it can be re-tendered as a purely municipal project. By dismissing an operating P3 while appearing to do so ideologically TriTAG risks being treated as an interested party rather than an honest broker trying to get Waterloo the best transit it can.
We should also recall who the backers of PPPs often are – pension funds like OMERS, CPP, Ontario Teachers. Teachers are about to get bought out of the Leafs by Rogers and Bell. Do we want that cash to be invested in an infrastructure P3 overseas or one right here in Ontario?
Mark, this may seem like splitting hairs to you, but what your comment doesn’t seem to understand is that we’re completely okay with P3s, just not operating P3s. Those have a track record of overruns and defaults.
Believe me, we understand that competition in the private sector is effective at keeping costs down and performance high, but in an environment with one LRT line and one LRT operator, that’s not private sector competition, that’s a private-sector monopoly. And in a market where barriers to entry are too high for a market entrant to build and operate a second, competing line, that’s usually not a politically tolerable situation.
People from all ends of the political spectrum should be concerned about such a proposal.
Tim,
thank you for your reply. I guess it depends on your definition of “operate” which is clearly different from mine. If you are declaring your opposition to the LRV line being a separate agency to GRT then I think you have a point, but if GRT remains the directing agency, essentially buying capacity from a P3 operator, then competition is an irrelevance. As I said, I see P3s as a way of getting private sector dollars, many of them from private and municipal pension funds, into the municipal investment area so city dollars can be spent on things which don’t lend themselves as readily to private partnership. TriTAG’s release makes no such distinction – it simply declares operation of the Kitchener-Waterloo LRT by the private sector to be unacceptable, end of story.
In Dublin, Veolia is the “P3 Operator”, responsible for maintaining the vehicles and crewing them etc., but the Railway Procurement Agency (a state body) retains ownership.
http://www.rpa.ie/Documents/Corporate%20RPA/Annual%20Report%202010/RPA_Annual_Report_2010_English.pdf
The GO trains pulling into Kitchener are operated under a Fleet Operating Agreement with Bombardier using that company’s personnel, and Metrolinx doesn’t even own the tracks.
Again – I’m not going to gloss over the fact that some cities did get it wrong, but one of the things P3s force is a more long range consideration of the impact of decisions made now because of the realities of multi-decade operating agreements. In fully municipal ownership these problems are sometimes left to the next guy – and we’re seeing that in the sclerotic state of Toronto’s transit system which lurches between completely divergent priorities from election to election as councillors play at being transit controllers simply because their powers allow them to without the filter of a private sector partner who can say “wait a minute, this makes no sense and we won’t pay for the losses when it goes wrong”.
Hello everyone!
Don’t forget your history, many of the transit systems of the past were privately built and owned:
The Grand River Railway system was a privately owned railway for its entire history (ending in 1955)
And the former Streetcar system of Kitchener, Waterloo , and Bridgeport was privately owned and built for its first 30 or so years, after which the local cities took it over and became an integral part of public transit until it’s demise in 1947.
Also, it may be a monopoly once a private sector operator gets in, but it will be a bidding process to select the private sector builder and operator. If you want true competition you have to have two transit systems competing, which in a way did exist when the KW Railways and Grand River Railway operated at the same time, to a point.
Of course there would be a bidding process. But then we would be stuck for 30 years at the whims of the winning bidder’s shareholders, and what corporate thinks will be best for profits. All keeping in mind that, unlike in the 19th and early 20th century, transit is not generally profitable here and now, thanks mostly to free public roads and cheap oil.
Competition is pretty tough to do with infrastructure, and frankly can be wasteful. Which is why we’d like to see competition for who builds, designs, and maintains the LRT system, but operation of this public transport infrastructure to be firmly in public hands.