Rail: Ontario-Quebec High Speed Rail Study

[afransen]

Keith:

"Expressways can't compete on time but they do compete on price...cheaper for the government to build and free for the public to use"

We had a very long debate over this earlier. I believe when you say 'free', some people around here might object and say 'prepaid'.

"I'd support that. Except I don't think VIA would be able to pay it off."

Via operates on a subsidy basis anyway. The federal government provides the loan guarantee and either promises explicitly to cover the interest and capital costs over 25 years, or if that is somehow prohibited, make it implicit. Political considerations would make it difficult to cut Via's subsidy without negative service implications.

As far as spending the money now and recognizing the expense over a longer period of time, I am under the impression that the government is doing that now but in reverse with the recently concluded spectrum auction, which has the ~$4 billion in income spread over 10 years of revenue (AFAIK).

I guess I'll clarify and say that the amortization is only an accounting trick. Rather than run a deficit to pay for the infrastructure, borrow the funds and lend it to Via (no change in net debt position), Via spends the money (increases assets and liabilities), and recognizes the loss slowly over time through amortization, with the federal government covering that loss through increased annual subsidies.

Therefore, government gets the ribbon-cutting without the black mark of a deficit.

unimaginative:

"The problem is that its really hard to sell a 12 billion dollar project to the rest of Canada, that only benefits Ontario and Quebec. 2-3 billion for small upgrades is much easier....."

Simultaneously propose something for Calgary-Edmonton. Then the project will be serving 65% of Canada's population. Maybe long-term it'd make sense to extend the line from Quebec into Moncton/Halifax, but that probably wouldn't be justified.

 

[MisterF]

Expressways can't compete on time but they do compete on price...cheaper for the government to build and free for the public to use....for us anyway. What makes Europe different is that expressways are far more challenging to pull off, corridor land is more expensive and terrain is more challenging. At that point rail starts to look relatively better.

Your argument actually supports my point, not yours. High speed rail has much higher design standards than freeways, so all things being equal challenging terrain favours highways, not rail.

But Unimaginative is right. High speed rail takes passengers mostly from airlines, not highways. So the highways argument is moot.

And the big one is culture. They have a culture of transit use. We don't. So most travellers feel a need to have a car at the other end, whereas most Europeans or Asians will readily use public transit wherever they are.

Canadians won't keep flying when a superior rail options exist just because of culture. They'll take the better option. Now it's faster to fly and just as fast to drive, so that's what people do. When rail is superior people will take the train. Transit systems, both local and regional, are packed Toronto, Montreal, and even Ottawa. The systems will be completely tranformed in the next 20 years.

Given the state of VIA now and the lack of demand I am skeptical VIA would have enough demand to run two networks....

It won't be two networks, it'll be a hub and spoke system. And there's lots of demand for VIA Rail. Trains are frequently sold out and the cheapest seats are gone weeks in advance. The current state of VIA Rail has more to do with politics and cutbacks than demand.

That's not been the history in Canada. Passenger rail has not been very profitable at all. If it was, we would not be having this discussion.

Why bring up history? There's no history of high speed rail in Canada. I suggest you research the High Speed Rail Tripartite Feasibility Study from 1995. It found that for the Montreal-Toronto portion, governments would recoup their investment within 30 years. It will pay for itself.

Conventional rail is rarely profitable in any country. High speed rail is almost always profitable.

Oh BTW, your last two quotes were from other posters, not me. Just saying

 

[kEiThZ]

We had a very long debate over this earlier. I believe when you say 'free', some people around here might object and say 'prepaid'.

I agree but until highways are tolled, the public won't see it like that. Roads are relative cheaper for the public to use compared to a train ticket. I've noticed though that VIA is certainly busier these days with higher gas prices.

Via operates on a subsidy basis anyway. The federal government provides the loan guarantee and either promises explicitly to cover the interest and capital costs over 25 years, or if that is somehow prohibited, make it implicit. Political considerations would make it difficult to cut Via's subsidy without negative service implications.

Yet this is what governments of all stripes fear. VIA requires subsidies now. What happens if VIA requires subsidies with HSR? How large might those prove? Particularly if the amount of subsidies required to maintain conventional rail to smaller cities and towns proves rather onerous. If after spending 12 billion there will still be a need for subsidies the rest of Canada will be pissed.

I guess I'll clarify and say that the amortization is only an accounting trick. Rather than run a deficit to pay for the infrastructure, borrow the funds and lend it to Via (no change in net debt position), Via spends the money (increases assets and liabilities), and recognizes the loss slowly over time through amortization, with the federal government covering that loss through increased annual subsidies.

Therefore, government gets the ribbon-cutting without the black mark of a deficit.

I'd agree. The question is one of return on investment. Can we be sure that VIA will make enough money pay back the investment. It's not a trivial amount. Paying back 12 billion over 25 years at 5% interest is nearly 840 million a year. And that does not include the cost of operations and maintenance of that line. Even with a 30 year zero interest loan, VIA would be paying back 400 million a year. That's over a third greater than VIA's total revenues in 2007

With that kind of price tag, what's the cost of a ticket going to be? Most folks think the current price of the train is too much. How many will be taking the train if it starts approaching airfare in price?

unimaginative:

"The problem is that its really hard to sell a 12 billion dollar project to the rest of Canada, that only benefits Ontario and Quebec. 2-3 billion for small upgrades is much easier....."

Simultaneously propose something for Calgary-Edmonton. Then the project will be serving 65% of Canada's population. Maybe long-term it'd make sense to extend the line from Quebec into Moncton/Halifax, but that probably wouldn't be justified.

Easier said, than done. What about the East Coast or the West Coast? It's not that I don't support HSR, but this is the reality of Canada. The ROC won't support a project from which they don't derive any benefit. The only real way full HSR will be built is with limited federal involvement and heavy bilateral Ontario-Quebec investment. Two smiling Premiers asking the feds to pay for a project that exclusively benefits them is going to accomplish nothing.

Interestingly, out west, the Albertans are looking at financing the thing with their own funds or limited federal involvement....

Your argument actually supports my point, not yours. High speed rail has much higher design standards than freeways, so all things being equal challenging terrain favours highways, not rail.

In general construction costs are cheaper for highways than railways. What I said was that complex terrain can narrow the difference. Also, owing to Europe's more settled nature, it's much more challenging to expropriate land for freeways than here in Canada. That makes it more palatable for governments to build rail over there.

But Unimaginative is right. High speed rail takes passengers mostly from airlines, not highways. So the highways argument is moot.

That's only partially true. In Canada, many many folks choose to drive to Montreal and Ottawa from Toronto. And unlike Europe, most non-business travellers in Canada will drive. So HSR would have to be drawing passengers from airlines and cars. Wasn't that part of the premiers' pitch?

And this still does not address the issue, that quite a few travellers will prefer to have an auto on the other end of the trip. That's why they take their cars. If we want people to leave their cars at home, we are going to have to build good transit in the end markets. Ever get off at a stop other than Union in the GTA (Oakville, Oshawa, Guildwood, etc.)? Transit is rather sparse in those areas.

Lastly, see my cost argument above. If the fares for HSR start approaching airfare, who's gonna wanna take it?

It won't be two networks, it'll be a hub and spoke system. And there's lots of demand for VIA Rail.

That's ambitious. If it costs 12 billion just for the HSR. Imagine what a hub and spoke system is going to cost. Now try selling that to the rest of Canada.

Conventional rail is rarely profitable in any country. High speed rail is almost always profitable.

I just think that depends on the circumstances. Will HSR make enough to pay off its O&M? Yes. Will it make enough to pay off its construction costs? I am a bit more skeptical on this point.

In summary I see a number of challenges to HSR:

1) Sticker Shock - 12 Billion. That's a stunner, that's more than the budgets of half the provinces in this country.

2) Political acceptability in the ROC - None. Who the hell would want to pay that much for a project that's only going to benefit Ontario and Quebec.

3) Public support in smaller cities - If HSR is perceived as a threat to current VIA service than there will certainly be a backlash. This does not just mean cancellation of service. This would include reduced schedules or significantly increased fares.

4) Viability with the travelling public - Without better transit and better transit information (try getting a bus map at VIA Ottawa) at their destinations, it will be hard to persuade quite a few folks to give up their cars. And for most of the public it will come down to ticket price. If the ticket price of HSR is going to approach airfare, I am skeptical that the system will be very profitable.

My remedy for this would be the following

1) Incremental upgrades. Start small. 2 billion to simply enable VIA to sustain its current max speed of 160 kph along the whole corridor. More funds down the road to electrify the line later, etc.

2) Let the provinces lead. This should be largely a bilateral project between Ontario and Quebec with VIA merely being the service provider.

3) Ensure good transit links at the stations in urban/sub-urban areas.

 

[junctionist]

In terms of support, it could be part of a national HSR program. Vancouver, Calgary, and Edmonton could also be linked for another useful line.

 

[unimaginative2]

I agree but until highways are tolled, the public won't see it like that. Roads are relative cheaper for the public to use compared to a train ticket. I've noticed though that VIA is certainly busier these days with higher gas prices.

I completely agree. The family of five going on a family trip to Ottawa isn't the target market for high speed rail service, though some of the off-peak deals on the TGV in France would be very attractive to that market. The people who would take the train are the people who are taking the hundreds of flights per day in the corridor, and people who would be induced to take the trip because of the quality of the new service.

Yet this is what governments of all stripes fear. VIA requires subsidies now. What happens if VIA requires subsidies with HSR? How large might those prove? Particularly if the amount of subsidies required to maintain conventional rail to smaller cities and towns proves rather onerous. If after spending 12 billion there will still be a need for subsidies the rest of Canada will be pissed.

Every study of high speed rail in the corridor has shown that it could run at an operating profit. That said, I still think the environmental and overall economic benefits would more than call for a subsidy if one were required.

I'd agree. The question is one of return on investment. Can we be sure that VIA will make enough money pay back the investment. It's not a trivial amount. Paying back 12 billion over 25 years at 5% interest is nearly 840 million a year. And that does not include the cost of operations and maintenance of that line. Even with a 30 year zero interest loan, VIA would be paying back 400 million a year. That's over a third greater than VIA's total revenues in 2007

There is absolutely no relationship or comparison between today's VIA and a high speed rail service. There is absolutely no doubt that such a service would attract far, far more people than are riding VIA across the country today.

With that kind of price tag, what's the cost of a ticket going to be? Most folks think the current price of the train is too much. How many will be taking the train if it starts approaching airfare in price?

How many will be taking the train if it's faster than the plane? Fares should vary based on time of day and week. Have a look at what SNCF offers. Their vacation and youth specials are amazing. I went to Geneva from Paris for 15 Euro. Obviously at other times of the week, that ticket could be a hundred or more. I also think they should offer good values on commuter passes.

Easier said, than done. What about the East Coast or the West Coast? It's not that I don't support HSR, but this is the reality of Canada. The ROC won't support a project from which they don't derive any benefit. The only real way full HSR will be built is with limited federal involvement and heavy bilateral Ontario-Quebec investment. Two smiling Premiers asking the feds to pay for a project that exclusively benefits them is going to accomplish nothing.

Well the reality is that every infrastructure project is going to be regional in some way. We're paying for the Olympics and Pacific Gateway, because they're projects of national importance. High speed rail in the corridor is the same.

Interestingly, out west, the Albertans are looking at financing the thing with their own funds or limited federal involvement....

That's because the feds have been negligent. They should be pushing the Alberta project at the same time as Quebec City-Windsor.

In general construction costs are cheaper for highways than railways.

Where do you get that information?

That's only partially true. In Canada, many many folks choose to drive to Montreal and Ottawa from Toronto. And unlike Europe, most non-business travellers in Canada will drive. So HSR would have to be drawing passengers from airlines and cars. Wasn't that part of the premiers' pitch?

Most North Americans seem to labour under the misapprehension that Europeans never drive. In fact, Europeans drive for non-business trips all the time. A drive on any highway during la rentree would make that very clear. Many drive on the extensive superhighway network, but many also take the train.

And this still does not address the issue, that quite a few travellers will prefer to have an auto on the other end of the trip. That's why they take their cars. If we want people to leave their cars at home, we are going to have to build good transit in the end markets. Ever get off at a stop other than Union in the GTA (Oakville, Oshawa, Guildwood, etc.)? Transit is rather sparse in those areas.

Obviously there'd be suburban stops with large parking lots, as well as downtown stops. It's not going to take every car off the 401. Just many of them.

Lastly, see my cost argument above. If the fares for HSR start approaching airfare, who's gonna wanna take it?

People for whom it's faster than the plane, and far more reliable. As you said in another thread, if you have time to spare, fly. High speed trains are incredibly punctual and dependable, and there are no security or baggage issues. In European practice, high speed trains take over 90% of the air market on the routes they serve, for all those reasons.

1) Sticker Shock - 12 Billion. That's a stunner, that's more than the budgets of half the provinces in this country.

Like I said, we're spending $50 billion on transit just in the GTA. It's not that unbelievable. It's not like people are lining up to oppose Metrolinx.

2) Political acceptability in the ROC - None. Who the hell would want to pay that much for a project that's only going to benefit Ontario and Quebec.

I think you overestimate just how much people care. We're not going to see protesters in the streets of Vancouver just because Ontario and Quebec are getting a high speed train. Sure, the National Post will bitch, but so what?

3) Public support in smaller cities - If HSR is perceived as a threat to current VIA service than there will certainly be a backlash. This does not just mean cancellation of service. This would include reduced schedules or significantly increased fares.

That's a serious issue that has to be addressed. A few stops will likely lose their service, so that will have to be mitigated.

 

[kEiThZ]

Anyway, my alternative pitch is based on my belief that we need an incremental approach in Canada. I just don't see HSR as politically feasible in Canada at this time. That's not to say that it won't be more acceptable with rising fuel costs, or if climate change becomes enough of a priority. This will particularly be the case as long as there is an insistence for federal funding on this priority.

I don't dispute that real HSR would be very competitive with air travel in the corridor. And I can see the potential for HSR that achieves 2-3 hr travel times being economically feasible as it bleeds off air travelers.

What I despise right now is the either/or situation created by advocating for HSR. As long as we advocate for HSR there will be no significant investment in VIA for the present. Spending a few billion to improve service in the corridor now would draw off many drivers (and maybe some flyers). I'd like to think of it as a stepping stone to a future HSR.

That's my take on the situation.

 

[kEiThZ]

One other question....

If the business case is solid, why are we not seeing some kind of consortium offering to take HSR in the corridor on? The Chunnel was built by an Anglo-French consortium that sought to compete with shipping across the channel and that was for over 10 billion pounds. Surely, HSR in the VDQ-Windsor corridor presents less challenges and a better business opportunity?

 

[unimaginative2]

They have! A consortium of Bombardier, Lavalin, Amec and others did just that in the 1990s, but the government turned them down.

 

[kEiThZ]

They have! A consortium of Bombardier, Lavalin, Amec and others did just that in the 1990s, but the government turned them down.

They wanted to build it....not finance it...to my understanding. Eurotunnel did both. That's what made it feasible for the UK and French governments.

 

[afransen]

Keith, I honestly don't think people will be apoplectic over $12 billion for Ontario and Quebec. The federal government spent, what, a billion on the Confederation bridge which serves a few hundred thousand?

It is absolutely within the mandate of the federal government to provide interprovincial transportation infrastructure. Not to say there shouldn't be support from the provinces, but since it'd be operated by Via, it makes sense for the feds to cough up.

I don't think it's fair to require HSR to have positive NPV when highways and airports were heavily, heavily subsidized (mind-boggling amounts). That is, unless we spin off all the 400 series highways and airports into arms-length crown corps, assign debt according to public subsidies received (hell, even minus a portion of the gas tax) inflation adjusted plus historical rates of interest. Then slap user fees on a cost recovery basis. That would probably be enough to put Ontario in a net zero debt position (it has easily sunk $100 billion into highways).

 

[nfitz]

Probably not, but as I'm sure you're aware, GO plans to electrify the entire Lakeshore line (East and West) within the next couple of years.

Start electrifying. I'm sure this will take years to implement. They've been working on the extra capacity now for years already, and we are at least a year away from increased frequencies.

 

[MisterF]

I'd just like to point out that as the first post in this thread states, this study was initiated by the Ontario and Quebec governments. It's the provincial governments that are pushing this, not federal. Policial acceptance in other regions is irellevant if much of the funding comes from the provinces.

 

[unimaginative2]

They wanted to build it....not finance it...to my understanding. Eurotunnel did both. That's what made it feasible for the UK and French governments.

Build and operate. They wanted the federal government to fund the infrastructure, as is the practice in most of the world. Eurotunnel, it's worth noting, went bankrupt, as do most private sector companies that attempt to build major infrastructure projects without government support. It's not a model worth emulating.

 

[MisterF]

Interestingly, out west, the Albertans are looking at financing the thing with their own funds or limited federal involvement....

This is exactly what's happening in Ontario and Quebec - the provinces are getting the ball rolling, not the feds.

In general construction costs are cheaper for highways than railways. What I said was that complex terrain can narrow the difference. Also, owing to Europe's more settled nature, it's much more challenging to expropriate land for freeways than here in Canada. That makes it more palatable for governments to build rail over there.

Much of Europe isn't any "more settled" than Southern Ontario. But in the parts that are, why do you think highways are more prone to expropriation issues than high speed rail? Why would complex terrain narrow the difference? Highways can easily go around obstacles, high speed rail can't. Complex terrain favours highways, not HSR.

That's only partially true. In Canada, many many folks choose to drive to Montreal and Ottawa from Toronto. And unlike Europe, most non-business travellers in Canada will drive. So HSR would have to be drawing passengers from airlines and cars. Wasn't that part of the premiers' pitch?

Don't put too much stock in a politician's pitch. If you read the summary of studies in that link I gave you, you'll find that HSR is expected to dramatically reduce flights but not highway traffic. That's been the experience all over Europe.

And this still does not address the issue, that quite a few travellers will prefer to have an auto on the other end of the trip. That's why they take their cars. If we want people to leave their cars at home, we are going to have to build good transit in the end markets. Ever get off at a stop other than Union in the GTA (Oakville, Oshawa, Guildwood, etc.)? Transit is rather sparse in those areas.

3 points:
-Transit is being expanded, as I've already pointed out.
-HSR serving smaller cities will create demand for local transit.
-There's nothing wrong with people driving to the train station, especially in suburban areas. By your logic GO Transit should be a failure, when it's obviously not.

Lastly, see my cost argument above. If the fares for HSR start approaching airfare, who's gonna wanna take it?

People who want an option that's faster, more comfortable, safer, more reliable, and more convenient than flying. Again, look at the experience in Europe. Flying has no advantages over HSR for distances of several hundred kilometres.

That's ambitious. If it costs 12 billion just for the HSR. Imagine what a hub and spoke system is going to cost. Now try selling that to the rest of Canada.

You're confused. I'm not talking about HSR spokes, I'm talking about conventional rail feeding HSR mainlines. Again, look at how other countries do it. And again, the provinces are leading this, not the feds. It doesn't need to be sold to the rest of Canada.

 

[kEiThZ]

Again, I don't dispute the fact that HSR will steal passengers from flights or have the potential for profit. Indeed, downtown to downtown, a VIA is really only slower by about 1.5 hrs. Beating an airplane won't take much. Hence, my pitch to simply upgrade the VDQ-Windsor corridor to simply allow the max speed of VIA's current rolling stock. IMHO, that would allow it to be competitive for all but the most time-sensitive travelers. More so, if VIA adds express trains that only stop in Kingston and strictly suburban stops (Guildwood, Oshawa, Fallowfield, Dorval, etc), for example.

What I am doubtful is whether HSR is politically viable. Everyone on here says it is. Fine. But I don't see any HSR projects on the books in Canada. What's the hold-up if it is viable? If someone says its the Conservative federal government...well the Liberals had a decade and a half in power and several recommendations and did nothing. And provincially we've had administrations of all stripes, none of whom have made inter-city rail a priority. This is the reality of Canada. There is no political party staking its election platform on a HSR.....and rail investment will always take a backseat to other priorities. Heck, local transit will always be priority over inter-city rail. Imagine what 10 billion would do for transit in Ontario and Quebec after all.

What I am suggesting is that an upgrade of VIA that might at least be better than plans that don't get off the ground. Upgrading VIA would probably at least start drawing more passengers and build support for an HSR line down the road.

Anyway, that's my take.