Light rail project is ‘like a vicious circle,’ critic says
Quebec’s pension fund intends to charge the new regional public transit body a fee per passenger to operate its proposed electric light rail network at a profit.
That will amount to a public body paying for a private company to run a transit service and reap a profit, an idea that doesn’t sit well with at least one observer.
“This will add a huge deficit to the government, and that deficit is going to (be paid) by my taxes and your taxes, and the taxes of our children so the Caisse de dépôt can then pay people to retire,” said Ahmed M. ElGeneidy, an associate professor for McGill’s School of Urban Planning.
“It’s like a vicious circle.”
The proposed $5.9-billion Réseau électrique métropolitain project would see the Caisse de dépôt et placement du Québec take over the existing Deux-Montagnes line and build new dedicated tracks to the Trudeau airport, Ste-Anne-deBellevue and Brossard.
El-Geneidy explained most public transit services in the world are not profitable and depend on government subsidies to cover their costs.
The Deux-Montagnes line, for example — which would be rolled into the Caisse project — cost $39.8 million to run in 2015, but fares made up only 55 per cent of that cost.
However, in the case of the REM train, the government subsidy will cover both operating costs, and a return on the Caisse’s initial $3.1 billion investment to build the project.
From the outset, Caisse CEO Michael Sabia has insisted that the electric light rail project will earn a market-competitive return on its investment with the bulk of the profits coming from fares to ride the system. The plan calls for federal and provincial governments to contribute $2.9 billion, which would buy them some equity into the system — presumably allowing them to share in the profit.
Sabia has repeatedly refused to disclose how much it would cost to ride the train, saying only it will be in line with other fares in the region.
However, at recent open houses held in the region, officials from the Caisse have told the public they intend to collect a fee per passenger from the governmentfunded body covering public transit, the Autorité régional de transport métropolitain. When up and running by June of next year, the ARTM will be in charge of regional transit planning, and will outline a simplified fare structure for all forms of public transit. The ARTM will be funded mostly by the regional governments and the province.
On Friday, Jean-Vincent Lacroix, a spokesperson for the Caisse explained that to make the fare system user friendly, the Caisse will allow the ARTM to determine a single fare system for people to ride the REM train system with the same transit pass they would use to take the métro or bus. Lacroix said the Caisse is in discussion with the ARTM’s transition committee to work out the modalities of payment.
“The key word is ‘integrated’ so that it’s the same fee to take any form of public transit,” Lacroix said. “Afterwards, we will charge the ARTM an operating fee per kilometre travelled per passenger.”
Lacroix said it’s too soon to say whether the fee per rider per kilometre would include a profit margin, but the Caisse’s own documents say the objective of the project is for the pension fun to earn a market competitive return.
“In other words, they are putting in $3.1 billion now, and they are going to collect the money with profit down the road from our children and from us through tickets, but the tickets won’t cover the cost of operations,” El- Geneidy said. “So the (ARTM) will have a huge deficit for the next 20 years to pay back this $3 billion. It will be just like the Olympics, where we wasted a lot of money and got a lot of loans, and because of that we couldn’t make any big projects because we were in such a big debt.”
Last week, Lacroix said fares are only one of the ways the REM will earn a profit. Other sources of revenue include real estate development and revenue from advertisements and publicity placed in trains and at stations.
“The Caisse is also taking the risk on ridership,” Lacroix explained, adding that if few people take the train, the project won’t be profitable. He added that because the trains will be fully automated, the operating cost will be low.
“Our analysis has shown that our business model will attain its objectives,” he said. “Our work with the ARTM in the coming months will allow us to assure that the future fares will be simple, comparable and integrated.”