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Transit for Surrey (part 2): The False Choice of the Surrey Transit Debate: Inaction versus Corruption

The Skytrain for Surrey movement has done a superb job of framing the debate over the city’s rapid transit future. That is because they can constantly switch what, precisely, is being compared to what. For instance, the claim is made that constructing a Surrey Skytrain extension would cost only 10% more than constructing an LRT system. That is because of a study by Translink that found it would cost 10% more to construct one Skytrain line than it would to construct three LRT lines to serve the city. Whereas the study shows that LRT costs about 60% less per mile kilometre than Skytrain, the Skytrain for Surrey movement can, disingenuously, argue that the costs are actually the same.

But, as framing goes, there is a much bigger problem with the “LRT versus Skytrain” debate. And that is because “LRT” is descriptive of literally hundreds of different systems using a wide variety of different technologies, from the Eglinton subway being bored under Yonge Street in Toronto, to the Sugarhouse neighbourhood streetcar in South Salt Lake City. “Light rail” refers to the vast majority of mass transit on tracks, powered by everything from diesel fuel to an electrified rail, running on everything from a dedicated subway tunnel to a shared lane on a busy commercial street, with cars ranging in length from a city bus to half a block of continuous train cars, with frequencies varying from every three minutes to every thirty.

In contrast, “Skytrain” refers to one, highly specific technology with which Lower Mainland riders are highly familiar. In this way the “LRT versus Skytrain” debate might be compared, in private vehicle terms, to “‘a used car’ versus ‘this 2012 BMW M3.’” Think this BMW is too expensive? Check out this used 2014 Mercedes; it costs way more! Think this BMW is too small for a family? Check out this this SmartCar; it’s half the size! Think this BMW is too old? Check out this 1976 Volkswagon bug! Etcetera.

We see this in spades with discussions of LRT. When the slowness of LRT needs to be emphasized, Toronto’s King Street Car rears its head, moving through congested traffic on a busy commercial strip with no special signals or dedicated lane. But when it comes time to discuss how much roadway private cars will lose, the King Car is quickly forgotten and, in its place, Toronto’s Spadina Car appears in its place, with its dedicated lanes, special signals and wide medians on either side of the line. And, of course, those opposing Surrey LRT do not stop looking for some LRT system somewhere that is, in some way, inferior to Skytrain when they reach the Eastern Time Zone. Glitches, design failures and overstressed systems the world over are offered as examples. Surely no driver would want the kind of invasive temporary rail gating that they tolerate in Istanbul!

Those defending LRT for Surrey end up not defending any specific LRT system but, rather, the worst feature every conceivable individual LRT system.

But surely, Surrey is considering a highly specific LRT system that can be compared to Skytrain. Not really. The Translink study of at-grade LRT is pretty vague about precisely what kind of vehicle and what kind of guideway might be built. And neither Translink, the province, the municipal government nor the feds is, in any way, beholden to follow the few vague things the study does suggest about the right kind of LRT. And the Surrey municipal government’s commissioned study is absurdly amateurish and vague, rivaled only by the putative Broadway Subway study that KPMG appears to have asked one of its summer interns to produce for the City of Vancouver.

Indeed, the failure of both Surrey City Hall and Translink to put forward more precise, detailed, incrementally feasible plans has contributed directly to Skytrain for Surrey’s success in hiding a pro-car, anti-transit, climate change denying agenda behind what appears to be a demand for better transit.

So, given the enthusiasm of both Translink brass and the Surrey First council for affordable rapid transit that eschews the tunneling and elevated guideways required in more densely-populated centres with narrower thoroughfares, why the vagueness?

My theory is that the reason lives in the only kind of LRT that I do not support for Surrey: one financed using a public-private partnership or “P3,” as the cool kids say. Both the BC Liberal-appointed Translink and BC Liberal-allied Surrey First party area eager to sign off on another dodgy public transit financing scheme. And BC Liberal and Surrey First friends and insiders cannot engage in the kind of profiteering P3s enable if too many details and specifics are ironed-out before public money is committed to the project.

Once upon a time, when Ronald Reagan led the free world and the NDP was selling socialism on your doorstep, P3s were an exciting, innovative new way of trying to build public infrastructure. Thatcherism was not yet a word and the Chicago School economists were the Young Turks of economic theory. And it had been a hundred years since the last round of corruption, graft and failure associated with P3s during the national railway booms of the 1870s and 80s.

Back then, one could credibly claim that “big government” and “union bosses” were out of touch with how to make a buck and innovate and that, therefore, government departments, especially unionized ones, were somehow inherently inefficient compared to the private sector. Maybe, the proponents of Canada’s second round of P3s argued, government should just pay private companies to do things it was used to doing for itself, like building highways or managing facilities. Just by virtue of not being the government, these companies would be so intrinsically efficient, by their very nature, they would be able to pay for everything a government could and still take a bunch of that money and return it to their shareholders in the form of profits.

It has been nearly forty years since we had those naïve thoughts, when we innocently decided to re-stage the financial boondoggles that brought down the governments of John A. MacDonald and Ulysses S. Grant but with fancier tech.

Now, we know better: P3s can sometimes create savings but not by being more efficient, exactly.

  1. Depressing Wages

As we saw with the Canada Line P3, transnational infrastructure companies can employ low wage workers at a rate far below what any self-respecting government could get away with giving its direct employees. While unionized and government construction jobs might pay a decent, family-supporting wage, P3 infrastructure firms typically replace those workers with non-union employees and, increasingly, temporary foreign workers (TFWs) who can be paid significantly less than the minimum Canadian wage. And TFWs have the added benefit of being rightless; if a TFW complains about inadequate or unsafe working conditions, they can be repatriated by their employer before they can ever make it before a Canadian court or labour relations board. P3s can save a lot of money that might otherwise find its way into the pockets of Canadians or into the coffers of the local businesses Canadian workers support with their consumer spending.

  1. Avoiding Canadian Law

Beginning with the Canada-US Free Trade Agreement, Conservative governments in Canada have, over the past generation signed agreement after agreement conferring special rights upon foreign corporations. Today, corporations from most countries in the world can sue Canada’s federal, provincial and municipal governments to be compensated for any financial losses resulting from environmental, labour, safety and health legislation that increases their costs of doing business. This means that corporations that do P3 projects can either skirt laws designed to protect the health and environment of Canadians or be compensated by governments for the increased cost of compliance. And because that’s a whole other branch of government usually, this compensation is never included in the cost of a P3.

  1. Profitable Exit Strategies

As we saw with the building and alleged maintenance of Ontario’s 407 toll highway, P3s can save money by kicking costs down the road. The firm contracted by Mike Harris’s Tories to build and maintain this new expressway began with a reasonable maintenance schedule but, as the years of its contract counted down, maintenance was delayed or done cheaply with the knowledge that the run-down highway and its significant structural remediation would be the responsibility of the government that ended up owning the road. And news that the maintenance costs of the road had suddenly skyrocketed upon its return to government hands just seemed to validate the market fundamentalists preaching the gospel of P3s.

But the reality is that P3s are actually far more expensive than publicly-financed, publicly-build infrastructure. And that once a project becomes the subject of a P3, its costs typically balloon out of control. This is for a few reasons:

  1. Project Vagueness and Inflationary Demands

Governments that want to give their friends and campaign contributors piles of money through P3s follow the course of the proponents of the Canada Line: make a deal with the private company before the details of the project have become too concrete or fixed. Ideally, a P3 deal should be a combination of vague and unpopular elements. Where a project is vague, the process of inking it in more clearly will reveal hidden costs that will require an increase in the sum paid to the private contractor. It should also include unpopular measures like cutting down the Cambie Street Boulevard or Green Timbers Park trees that will enrage high-income, politically-connected people, requiring some vastly more expensive alternative that will, again drive up the amount of money that must be paid to the private firm. During the Canada Line process an initial sum of $300 million for the private partner ballooned to $435 million, nearly a 50% increase, while the overall project cost gradually crept from $1.35 billion to $2.5 billion.

And it is not beneath private partners to actively manipulate public debate to inflate project costs once the original business deal is approved. Such spending on public and government relations firms is, for them, a good investment.

  1. Closed and Secret Procurement

Whereas government procurement from subcontractors must take place in the full light of public scrutiny, P3 agreements typically include provisions that procurement must be secret, non-competitive and administered by the private partner. That way, not just the investors in the private partner but various local and international construction, real estate and manufacturing firms can be vastly overpaid, often based on alleged rush orders, for goods they would never be able to charge as much for through an open, government tender system. And any private partner who wants a return engagement knows which firms are aligned with the governing party’s campaign contributors.

  1. High Interest Rates

The private sector companies with the best credit in North America still typically have way lower credit ratings than the most disreputable state and provincial governments. States and provinces never go bankrupt; they have a captive group of taxpayers who can be forced to make payments in ways that no board or shareholders can. For this reason, private partners who borrow money pay higher interest rates than if the government had just borrowed the money themselves; or, in the case of money extracted from investors, much higher returns are promised than a government would need to promise on bonds issued for the same purpose. In this way, P3s don’t just subsidize investors and private contractors; they typically constitute a direct subsidy to the financial industry.

  1. Guaranteed Profits

The Canada Line is not unique in its provisions to guarantee the private partner an annual profit for every year it operates the infrastructure it has built. Any time Canada Line ridership dips below a figure that would guarantee private profits, Translink is required to provide direct cash transfers from taxpayers and bus riders to the private partner. In this way, your average P3 falls into the Thatcherite slogan “nationalize the risk; privatize the profit!”

  1. Free Ad-Ons

When governments choose to add spurs, stations, lanes, floors and other extensions or expansions to P3 infrastructure, these typically increase the profitability of the infrastructure without costing the private partner a cent. This will be the situation with the Ravco, the corporation that owns the Canada Line, a $2.5 billion public asset that it purchased for $435 million whose planned 57th Avenue and Capstan Way stations it will receive as free, taxpayer-financed additions to its already-lucrative, asset which delivers guaranteed profits every year at taxpayer expense.

It is in this context that we must understand the recent BC government announcement that it would provide funding for a Surrey LRT, in cooperation with the City of Surrey, on the condition that it find a private partner. Provincial and local politicians are being deliberately vague about the scale, technology and route of the LRT not out of incompetence but as part of the game of P3s, which requires manipulating and confusing the public and obfuscating the actual planning and purchasing decisions. A clear, honest, specific LRT plan might serve Surrey taxpayers and Translink fare-payers but such specificity and detail will not serve the hitherto-unannounced private partner.

Our city and our region are ill-served by the false debate that is now underway: between an unaffordable plan paid-for with magic beans and a premeditated agenda of inefficiency and corruption. We can and must do better.

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