Montreal City Weblog

Kate 08:09 on 2019-09-11 Permalink Reply  

• Mr.Chinaski 08:26 on 2019-09-11 Permalink

  It’s pretty much the biggest part of how the REM will become a good investment for our CDPQ “bas de laine”. It’s why you will slowly start to see more dense construction around stations, creating hubs / TODs. Those bungalows will dissapear with time and be replaced by 4/6plex condos.

• Ant6n 09:03 on 2019-09-11 Permalink

  Let’s not repeat falsehoods about the cdpq. Less than a quarter of the winnings will go towards retraite Quebec, most of it goes to private employee pensions of public sector and para-public sector employees. But at the same time, cdpq doesn’t pay taxes (so a fully private entity paying a quarter their winnings in taxes would have a similar win for the public than the REM – but the would maybe be more scrutiny instead of this naive blind trust).

  Also, the biggest actual win for the cdpq, what already gives them the 8-10% ongoing(!) return-on-investment is the 72c per km charged for every passenger-km to the ARTM (that’s like 45$ pet day for st Anne commuters!). All these other schemes (like those developer taxes) to make money are tacked on and increasing the returns higher and higher. On an infrastructure project that could be done by the public at interest rates of around 2%.

  That an infrastructure project generates value is great, value-capture taxes make sense, but it should go towards the ability towards more infrastructure projects. The REM is doing the opposite: they’re sucking money out of the transit finding pots and actually completely away from public control altogether.

  It’s a neoliberal construct, that is already owning more cash than it knows what to do with, going to buy up everything, including all public assets, putting them outside of public control, then renting it back to the public sector at insane rates, while the public sector will become more and more indebted, unable to operate, and at most hope to rent access to resources (like infra) that it used to own.

• Mr.Chinaski 09:09 on 2019-09-11 Permalink

  Like I said, it’s the tipping point that makes it valuable. Everything else makes it an “ok” and logical investment, this puts it over the top and assures an acceptable ROI for our bas-de-laine. Not only that, but allowing densier residential units near a metro station can only be benefitial to many aspects of society, especially environmental.

  It’s only logical that if developpers will get rich from that, then we as citizens are allowed to get a part of the cake too.

• tim 10:02 on 2019-09-11 Permalink

  @ant6n: thank you for your unbelievably concise post that explains in clear terms a fundamental problem with how the REM is structured.

• SMD 10:08 on 2019-09-11 Permalink

  Amen, thank you @Ant6n!

• Francesco Fato 13:58 on 2019-09-11 Permalink

  I don’t disagree with anything Anton has said – here or elsewhere in the past – about this flawed project. But that said, I’d like to add the same note I’ve written elsewhere: without these major concessions to the CDPQ, the West Island would likely *never* get rapid transit or vastly more frequent and efficient service on the DM line. If it remained an MTQ-funded, STM-defined ideal, there would be another few decades of studies, hand-wringing, cancellations, more reports, changes of government, and on and on… exactly what we’ve seen with the Métro, a system that hasn’t kept pace. Look how long it’s taking for the functionaries to weigh in on possible *short* extensions to REM in Dorval and the Orange line in St-Laurent, with the usual opacity in the process. The rest of the world just *does* stuff, here we need years of studies and reports. So while again, I agree that REM is one huge real estate speculation project, and not the best deal for taxpayers, it is – at a rate never before seen in this province with too many in-ground pools – getting *done*.

  PS: Anton I hope the program in Berlin is going well, and look forward to more essays on your blog when you once again have time for it!

• ant6n 15:11 on 2019-09-11 Permalink

  Many infrastructure projects have been built around returns of 5% rather than 8-10%. The CDPQ keeps bragging about the returns (as if it was due to automation, which has very little influence), but it’s really an expression of the high subsidies the system will require: only about a quarter of the revenue will come from fares, the rest from subsidies and taxes — that’s double than the STM (which operates expensive buses besides the metro). At a 5% expected return, the system would require much less subsidies, and would be much less of a drain on the transit (and municipal budgets) as a whole.

  Even if you believe the neoliberal talking point that only a PPP project could get something built in the West Island — a perception constructed by politicians continuing to commission studies to make it appear like they did something, rather than actually investing in infrastructure — then the question is why it has to be partnership between government and cdpq. Usually, a financing partner is found in a bidding process, and with the competition for the big government contract, the idea is to find the actual fair market value for the deal.

  But this isn’t what happend with the CDPQ. It’s a direct negotiated partnership, with all the wrong incentives. The CDPQ’s incentive is to make as much money as possible, the government’s incentive is to get it build as quickly as possible, keep the investment out the government books (the neoliberal dictate), and back-load the costs as far back as possible (the ongoing costs, the rent, will only hit us 2 elections after the deal was made). Since actual transit planners where shut out, there’s no incentive for reasonable, long-term planning.

  To me, this should’ve been organized either as a real PPP, or as a proper public project (an in reality, there are actually kind of similar):

  1) In a real PPP, there would be a bidding process for the private financing partner. The competitive nature of the partnership would be celebrated, with lots of scrutiny by the public partner, and the requirement for more transit expertise to ensure a good deal and a good project. The competition among the private partners would result in a fair market valuation of the project, which would make all these extra ways the CDPQ is getting money (charging taxes, not paying taxes) unnecessary — a 5% or so return on investment should be enough.

  2) as a more public project, the public would create a fund and an entity like CDPQInfra. Note that CDPQInfra only planned the project, organized a bidding process for the actual companies that will build and run the REM, engaged in PR to to fool people and set up this crazy contract with the Quebec government that will result in them sucking all sorts of money from the public. If CDPQInfra was a public entity like the ARTM with the goal to advance transit, then all these money-making schemes would go towards more construction of transit — there would never be any profits, only more investments. And the planning horizon would increase, meaning that we would stop making short-sighted planning decisions that will affect the region of Montreal (like privatizing the Mount-Royal tunnel and Gare Centrale, and preventing access from the North for other rail lines and VIA).

  Either way, it would either be a cheaper project, or a similarly expensive project where profits would go to fund ongoing transit expansions, and in both cases there would be a requirement for more public oversight of the planning, which is really where the REM’s biggest faults are.

• Francesco 15:42 on 2019-09-11 Permalink

  Thanks again for the thoughtful and succinct reply. Again, not disagreeing with a single notion presented, simply basing my caveat on having lived (and experienced the corruption and bureaucracy) in this province since Expo ‘67. A simple truth is that frequent, rapid rail transit was *never* going to happen in the West Island by a Quebec government entity as long as they held the actual purse strings for transit. Even a rapid rail link to the airport was hemmed and hawed over for two decades, and in that time got no closer to fruition until the secret, direct-negotiated contract with CDPQ.

• Faiz Imam 18:53 on 2019-09-11 Permalink

  The answer to this question goes back to 2014.

  The government did not go out and ask for a public transit project. They were more than content to send dribs and drabs of money towards transit, ideally in politically useful areas. Many cheap studies, few major commitments.

  It was the CDPQ that went to the government with a huge bag of money. They were happy with the financial returns of Vancouver’s Canada line, and they had Billions in capital they need to park in safe investments.

  And so they straight up said we are willing to spend billions of dollars on major transit projects if you give us a guaranteed return and total, quazi-dictatorial control, without consultations or court challenges to worry about.

  Its a devils bargain, to be sure. But one the government is happy with. They spend half the money and get all the positive media attention for “biggest/longest//best/green/sustainable/etc” and still have the room in the budget for all the highways and road projects they’d much rather spend money on.

  Easy choice for any neo-liberal party to make (which, to remind everyone, the CAQ, Liberals, and in many ways the PQ are)

• Tim 18:55 on 2019-09-11 Permalink

  There are some real urban planning hawks on this site, so hopefully somebody can explain something to me. Why haven’t the three levels of govt gotten together to commit to building one km of underground metro a year? Why can’t building this infrastructure be done as a regularly occurring operational expense as opposed to a capital expenditure?

  After 20 years, we’d have 20 more km of metro network.

• Faiz Imam 19:28 on 2019-09-11 Permalink

  Construction is expensive. Building a km of tunnel is a few months max, but setting everything up costs much more money than the per/km cost.

  Its like renovating a house. if you are tearing down the kitchen, its usually better to tear down adjacent rooms at the same time. Making a mess once, cleaning it all up only to make another mess down the line is not as efficient.

  Also you need to have a strong plan and a willingness to follow to the T. That’s rare. there are many more proposals than dollars, and its politically easier to commit all the money at once than to break it up and risk the next government coming along and cancelling it.

  Also its not like there is one “best / right” plan out there. different groups have different ideas about what to spend money on. And it changes over the years and over political cycles.

  But what you propose absolutely does happen. For example the US army crops of engineers has avery well planned out list of priority projects, from bridges, damn, levees, roads. And as they get money, they tick off boxes.

  They are a special case though, being both political insulated as well as taking care of essential infrastructure

• Tim 20:37 on 2019-09-11 Permalink

  To me it seems like it would be more difficult for the next govt to just up and cancel a recurring, yearly expenditure that would widely be seen to the general population has doing “something”. People complain that govt does ” nothing” because they don’t see any tangible action. Putting tangible holes in the ground, would seem to minimize the ability for somebody to just dream up some new, ridiculous plan that has no hope of ever getting started, let alone completed.

• Faiz Imam 22:05 on 2019-09-11 Permalink

  I mean, what you suggest is mostly the case. That’s why we have “construction season” every summer. Those are hundreds of small projects that are very badly needed.

  But major transit investment is “major” for good reason. Its massively complicated to organize and execute, and if you leave things hanging, its very easy to end up with billion dollar boondoggles.

  That that’s something noone wants. So everything is overplanned and managed very precisely.

  Which reminds me of another point. Most major projects don’t have clean breaks where you can just stop and pick up a year later. Once you start, it really only makes sense to do it all.

• Ant6n 00:07 on 2019-09-12 Permalink

  I could imagine some of the major planning flaws of the REM could still be fixed at this point, if Terrasse es Tee political will. Projet had it on their platform, but when in power, Planted pulled a coderre and just said “I can’t go against a transit project”

• Raymond Lutz 09:24 on 2019-09-12 Permalink

  Too bad nowadays big projects have to be financed by private money (PPP, CDPQ Infra or Canada Infrastructure Bank = private investors).

  Remarkably, older projects like the St-Lawrence seaway, the Transcanadian highway were financed _directly_ by Bank Of Canada (near?) interest-free loans.

  https://www.cbc.ca/news/business/rocco-galati-challenges-bank-of-canada-to-offer-interest-free-loans-1.3065650

• ant6n 13:32 on 2019-09-12 Permalink

  Given how ridiculously low bond interest rates are, it’s possible for the government to borrow and invest directly. Germany’s long term bonds just turned to negative interest rates! They just need to figure out a way to not make investments appear like debt in the budget — a way which doesn’t involve getting a private partner that increases the cost of borrowing from 1-2% to 5-10%.