The REM profit will come from government
I was going to append this one to the REM post from earlier, but it would tend to get lost. The Journal’s Michel Girard points out here that the profitability of the REM is projected to come from government subventions, not from users. Passengers are not meant to prop it up – government is. The last two paragraphs ask the cromulent questions.
David635 23:48 on 2020-12-24 Permalink
It’s a big surprise that the fare box recovery doesn’t sustain the system, and that the government has to make up the difference? Did we think that the STM just made it all up?
With how much this blog has exposed just how awful the STM arrive is, we’re really going to say that another agency could do it worse?
Do we even yet know how much less the REM will cost the government than the STM?
Dhomas 08:36 on 2020-12-25 Permalink
@David∞ The STM is NOT run for profit, though. The REM is. So, it’s not enough for the REM to break even and provide a public service, they need to pay for the system to be profitable to investors with year over year growth. This would be fine if it was a private endeavour, but it’s funded by the public. It’s literally siphoning money from the pubic purse to private coffers.
ant6n 08:59 on 2020-12-25 Permalink
I don’t get it, this has been known since 2017, that the ARTM will pay CDPQInfra 72c per passenger-km, and that the fare usually brings in around 20c. The Deux Montagnes line did cost about 30c to operate, and and another 10c for capital costs, for a total cost of about 40c (basically half the REM).
I wasn’t the only one who had repated over and over and over again that the REM will only be profitable from their contract with the ARTM. But the ARTM can’t cover the expenses of that contract with fares. The fares are still up to the ARTM, but the ARTM has to cover the 50-60c shortfall for every passenger-km (indefinitely). A lot of the shortfall will be paid by the province directly to the ARTM – effectively Quebec is paying money into the CDPQ using transit spending as a detour.
See articles here
http://www.cat-bus.com/2017/07/is-the-montreal-metro-profitable/
http://www.cat-bus.com/2017/12/privatization-of-the-deux-montagnes-linehow-to-value-a-transit-line/
Ephraim 09:49 on 2020-12-25 Permalink
@Dhomas – Well, yeah… it’s our pensions. But the REM itself doesn’t need to make a profit to be profitable. The rent on the station space, the buildings around that they are building, there are other ways to turn a profit… and they aren’t really going to appear as part of the REM. If you have land around that you develop into apartments, stores, etc, it’s not going to be marked as income for Infra, is it? If the value of the warehouses, office space and other properties that are owned by CDPQ go up in value… that’s not Infra’s income.
su 12:35 on 2020-12-25 Permalink
That makes sense in theory Ephraim, but it seems that the more development we have had since 2008, the more in the hole all 3 levels of government become. Should they not be swimming in dough given the scale of development? Clearly something is not adding up.
DeWolf 15:47 on 2020-12-25 Permalink
Dhomas, the investors in the CDPQ are all public agencies: the civil servant retirement plan, the Quebec pension plan, the Ministry of Finance, the construction industry pension plan, the CSST and the SAAQ. So any profits go to the public purse.
Which doesn’t justify the situation, of course. It’s public money in, public money out, so why play weird financial games by having the CDPQ serve as a middleman?
Ant6n 16:21 on 2020-12-25 Permalink
Are we starting these discussions again? The teachers’ private employee pensions aren’t public money. Here’s some discussion on that back from 2016:
http://www.cat-bus.com/2016/08/how-the-caisses-public-public-partnership-is-privatization-in-disguise/
Oh and get a quick chart from that article above about the privatization of the dm line, showing how the structure of the REM puts the infrastructure outside of the control of the public:
http://www.cat-bus.com/wp-content/uploads/2017/12/deux-montagnes-ownership-chart.png
(Actually there was a change at some point, the cdpq assets somehow purchased the Mount Royal tunnel directly, so is not owned by the REM)
Ephraim 23:31 on 2020-12-25 Permalink
Su, under 25% of the money in the CDPQ is actually the Quebec Pension Plan. The government pensions, and teacher’s pensions are essentially their own pensions, part of their salary and benefit package. For example, if you are in REGOP, you can withdraw the money and put it into your RRSP, if you prefer.
The reason this was done with the CDPQ is that they aren’t tried down to hire Quebec companies and Quebec supplies that are often overinflated.
But they need a profit, because they need to turn a profit on the funds. Yes, some of the funds are the SAAQ and CNESST and of course the Generations Fund. But these are hands off funds. A way to keep the government from dipping it’s hands into it.
su 09:00 on 2020-12-26 Permalink
I was referring not only to CDPQ . Questioning more why all the infrastructure and other forms of development are always touted as benefitting all of us and our government coffers. It seems to me that in fact our City is still low on dough after the major explosion in building going on since the 2008 crash. Maybe off topic-not CDPQ specific.