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Posted December 8 2011

Light Rail Transit

TriTAG will not support LRT operated by a private-sector monopoly

WATERLOO REGION – In light of the release of preliminary Waterloo Region plans for LRT procurement, the Tri-Cities Transport Action Group (TriTAG) made clear yesterday that it will not support a privately-operated LRT system for Waterloo Region. While TriTAG has been one of the key supporters for Light Rail Transit (LRT) for Waterloo Region, it will not stand for a 30-year private sector monopoly on LRT operations.

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 .

“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.”

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