VIA Rail

[crs1026]

I wonder how they feel about the Canadian. Can't see the Liberals deliberately cutting jobs, but there have been policy proposals.

- Paul

 

[nfitz]

It's not good. The budget calls for "$867.3 million over three years on a cash basis, starting in 2017–18, to support its operations and capital requirements." That's $289.1M a year.

In fiscal year 2015, VIA reported $377.9M in government funding. At first glance, this looks like a cut.

This is new funding in addition to what they'd usually get. Look at the detailed year-by-year amounts - 2015-16 amount was $0 not $300 million.

 

[steveintoronto]

A number of posters have jumped the gun, and missed. Others are far more circumspect. I'm still digesting some details, including VIA's own published budget http://www.viarail.ca/sites/all/fil...n/Summary of the 2016-2020 Corporate Plan.pdf (p.39, see also financial table on p.69). The Press is misreporting the situation, as much by omission as intent.

For now, I wish to point out articles like this, just up at the Globe, there's going to be a lot more detail coming out in the next while: (I'm still digesting this, so will have to edit purely for economy of space rather than detail)

Federal budget 2017
Ottawa eyes more private cash in infrastructure push
Jacqueline Nelson

OTTAWA — The Globe and Mail
Published Wednesday, Mar. 22, 2017 8:00PM EDT
Last updated Wednesday, Mar. 22, 2017 8:00PM EDT

The federal government is ramping up plans to attract private-sector money to major infrastructure development while tightening the funding that new municipal projects are eligible for.

After pledging to spend more than $180-billion on infrastructure building and refurbishment through new and existing programs, Ottawa revealed an update to its investment targets in the 2017 budget on Wednesday. It also expanded on plans for the Canadian Infrastructure Bank, which will generate even more building in partnership with institutional investors from Canada and beyond.

One of the most significant changes in the budget is a clampdown on the amount of federal funding that new municipal infrastructure projects will be able to lock in – a maximum of 40 per cent per project for new public transit construction and expansion projects. That’s down from the 50-per-cent maximum that the government pledged to fund in last year’s budget for its first phase of projects.

The move is aimed at encouraging provinces to step in with more financial support for local projects. Under the Conservatives, infrastructure building was typically funded evenly between three levels of government, with the municipal, provincial and federal layers each taking one-third of the cost. The Liberal government shook up that model last year, pledging funding of up to 50 per cent for its first phase.

The infrastructure and housing details were welcomed by Canadian municipalities, who said their focus will now shift to encouraging provinces to match Ottawa’s money as part of a national infrastructure plan.
[...]
Members of the country’s institutional investor community, including leaders of the largest pension funds, have said in recent months that it’s early days for the infrastructure bank, and have expressed that they will need to see more details on how the bank will work before they can judge the appeal of potential investments.

There were few specifics revealed Wednesday about how the bank would be run. And there was no mention of asset sales or privatizations in the works.
[...]
The budget did show that of total spending planned through the Infrastructure Bank, the government will carry $15-billion on its balance sheet, split equally between public transit, green infrastructure and trade and transport infrastructure deals. The focus will be on large projects such as regional transit plans, transportation networks and electricity grid interconnections.

The Canadian Life and Health Insurance Association expressed its approval of the government’s plan to move ahead with creating the Infrastructure Bank, noting that its members already hold more than $690-billion in long-term investments such as real estate, bonds and infrastructure. “We look forward to working closely with the new Infrastructure Bank and helping to fund the needed investment in Canada’s infrastructure,” said Frank Swedlove, the chief executive officer of the CLHIA, in a statement.
[...]
Among the largest focus of infrastructure spending comes through the next wave of public transit projects, which are set to receive $20.1-billion in government investment over the next 11 years, as well as an additional $5-billion expected to flow through the Infrastructure Bank toward such projects. When the federal government is striking its bilateral agreements with provinces and territories on these projects, it will use a formula based 70 per cent on expected ridership and 30 per cent on population.

http://www.theglobeandmail.com/repo...-cash-in-infrastructure-push/article34392164/

There's going to be more announcements, and much more to discuss in the near future on this...

 

[kEiThZ]

http://www.theglobeandmail.com/repo...-cash-in-infrastructure-push/article34392164/

Some interesting deets on the planned infrastructure bank. But that only makes HFR looks less hopeful for this year. Clearly they are fleshing out investment metrics with large investors. But they also seem to be focused on setting it up mostly for public transit and the like.

I strongly suspect they intend to stick to their 3 year study and will announce the HFR (if it's going to happen) in the last budget of election year. And that's all assuming it doesn't all go to pot with their budget. With no plan for a balanced budget, a $1.5 billion investment in VIA might be a tough public sell. I'm not sure.....

 

[crs1026]

What caught my eye is that the Bank will only fund a maximum of 40% of project cost. That forces government to pony up the other 60%. In other words, somebody has to want the project enough to commit significant funds

That will work fine for local projects eg transit where the municipality and the provine may both have an interest and can each afford a 30% down payment. But it leaves VIA at Ottawa's mercy. It seems unlikely that Ottawa will ever work up the enthusiasm for HFR to find the $2.4 B, even if the Bank is willing to advance the remainder.

It may still come to be if there is intense pressure from both Provinces, or if Dorval and Pearson fill up to the same extent as the 401, or if it does somehow become an election winner....but all of those seem unlikely.

What the last few years seem to prove is that the EA-to-shovel-to-ribbon cutting timespan is just too long to make infrastructure something that politicians find advantageous. The Bank seems like a good vehicle to get infrastructure funded, but as more of a back room exercise. If you can't make the project sound essential, and sustain interest with Del Duca style repetitiveness, politicians will gravitate to other topics.

- Paul

 

[steveintoronto]

What caught my eye is that the Bank will only fund a maximum of 40% of project cost.

Do you have a reference for that Paul? You might be confusing direct funding from federal general coffers v. PPP or PFI. I read of a "leverage" of 4:1 private/federal, the latter acting as underwriter, terms not yet finalized. As such, the lowest rates of interest on borrowing are realized. Canada Savings Bonds are on the way out, but other forms of 'bonding' are coming in.

In all fairness, the media is still coming up to speed on getting the details right, and I'm loathe to jump in too far without reference, but will look for some to buttress the case. A point of detail on D-S' statements for HFR (as it pertains to the ex O&Q): It has always been presented as the RoW being completely privately held (albeit that could be a consortium with taxpayer involvement) and the rolling stock government owned.

Frankly, the London UK Crossrail project as a *Limited Company* (with two levels of government as shareholders) stands as a shining model of success, at least in the many respects now evident. What London got completely wrong prior was the 'privatization' of various tube lines. It appears lessons were learned. It wasn't that the concept was wrong, it was the implementation.

Edit to Add:

[...]
The Liberals clearly see a need to attract private investors to help pay for infrastructure projects, including affordable housing, given the federal government's tight fiscal position.

At the centre of that push is a proposed new infrastructure bank that would use public dollars to leverage private investment in three key areas: trade corridors, green infrastructure and public transit.

The government is setting aside $15 billion in cash for the bank, split evenly between each of the aforementioned funding streams, with spending set to start as early as the next fiscal year on projects based on budget projections.

Morneau said that the government wants to have the bank up and running this year, including having some projects that will be identified for investors.

But the budget document again projects that the majority of the bank's spending won't happen until after 2022. And in the case of trade corridor infrastructure, spending isn't expected to start until 2020, even though some experts argue this stream would give the country the biggest economic bump. [...]

http://www.ctvnews.ca/politics/libe...-housing-plus-push-for-private-cash-1.3336470

A left-leaning view. The facts appear to be correct, but what isn't examined is the awful truth that the cupboard is bare. If the private sector isn't involved, things just won't get built, and GDP shrinks.

Stay-the-Course Budget Fails to Offer Details on Infrastructure Bank
Promise of transit money, but little information to allay privatization fears.
By Jeremy J. Nuttall Yesterday | TheTyee.ca
[...]
The Liberal government’s budget included information on some spending from a proposed infrastructure bank, but left Canadians in the dark about how the controversial bank will work.

Overall, the Liberals’ second budget Wednesday introduced few big changes. Spending will rise 4.8 per cent to $330.2 billion, while government revenues are forecast to rise 4.4 per cent to $304.7 billion. After a contingency allowance is concluded, the deficit is forecast at $28.5 billion, up from $23 billion this year.

The budget did contain some general information on how the government plans to spend $35 billion over the next 11 years through its Canada Infrastructure Bank, but few details on its operations.

Critics have complained the bank is part of a privatization push by the Liberals that will increase infrastructure costs while lining the pockets of big business. Most private partners will want an eight- to nine-per-cent return on any investments, which will result in higher costs and tolls and user fees, opponents warn.

On Tuesday a government spokesperson told The Tyee the budget would include more details on the infrastructure bank plan.

But David Macdonald of the Canadian Centre for Policy Alternatives said the budget failed to shed light on the government’s plans. There was actually more information on the bank in the fall financial update update last year.

“There’s even less detail in this budget,” Macdonald said. “It appears now we’ll have to wait for the actual legislation and the creation of the board of this new bank before we find out what are the long term plans in terms of driving P3s down the throats of municipalities.”

The infrastructure bank pops up repeatedly in the budget, without details.[...]

https://thetyee.ca/News/2017/03/22/Budget-Infrastructure-Bank-Details/

Note the serendipity of this, if not irony:

Canada Joins China’s AIIB
Posted 27 minutes ago Share Print 0
The Asian Infrastructure Investment Bank said Thursday it has approved 13 applicants, including Canada, Hong Kong and Sudan, to join the China-led institution launched about a year ago, expanding its membership to 70.

The new members will officially become part of the Beijing-headquartered bank once they complete necessary procedures. As widely expected, the number of AIIB members is now set to outstrip that of the Asian Development Bank, led by Japan and the United States, which has 67 members. [...]

http://www.marketpulse.com/20170323/canada-joins-chinas-aiib/

 

[crs1026]

Do you have a reference for that Paul?

It was in the article that @kEiThZ quoted.... http://www.theglobeandmail.com/repo...-cash-in-infrastructure-push/article34392164/

Also noted http://www.theglobeandmail.com/news...it-funding-in-federal-budget/article34393421/ which says the same thing. As a Torontonian, I take some comfort in noting that transit debates in BC can be as loopy as they are in this city.

- Paul

 

[TOareaFan]

What caught my eye is that the Bank will only fund a maximum of 40% of project cost. That forces government to pony up the other 60%. In other words, somebody has to want the project enough to commit significant funds

That is not how I read the stuff in budget. There seems to be two separate things....there is $20.1B over 11 years of direct transit investment spread across the country and allocated based on a combination of population and ridership. These are the funds that (as I understand it) are now subject to the 40% of project cost limit. So if that pool of money was fully used over the 11 years you get to about $50.25B of transit build over the 11 years nationwide.

Separate from that is the investment in the infrastructure bank....and that would be used to leverage private/institutional investment.....it would be silly to establish rules on that as each deal would be undrwritten separately on a case by case basis to maximize the funds (and, the return to the private/institutional investors).

 

[steveintoronto]

It was in the article that @kEiThZ quoted.... http://www.theglobeandmail.com/repo...-cash-in-infrastructure-push/article34392164/

Also noted http://www.theglobeandmail.com/news...it-funding-in-federal-budget/article34393421/ which says the same thing. As a Torontonian, I take some comfort in noting that transit debates in BC can be as loopy as they are in this city.

- Paul

Here is the only mention of the 40% figure in that article, and it is for *Direct Federal Funding*!

One of the most significant changes in the budget is a clampdown on the amount of federal funding that new municipal infrastructure projects will be able to lock in – a maximum of 40 per cent per project for new public transit construction and expansion projects. That’s down from the 50-per-cent maximum that the government pledged to fund in last year’s budget for its first phase of projects.

The article is specific in noting:

There were few specifics revealed Wednesday about how the bank would be run.

Most of the details regarding the present Infrastructure Spending is detailed here:
http://www.infrastructure.gc.ca/plan/ptif-fitc-eng.php

Note the change in the above linked document as referred to in the Globe article:

To get projects moving quickly, the Government will fund up to 50 per cent of eligible costs for projects. Funding under the program will be allocated to municipalities based on ridership, as per the PTIF allocations table.

 

[crs1026]

Most of the details regarding the present Infrastructure Spending is detailed here:
http://www.infrastructure.gc.ca/plan/ptif-fitc-eng.php

Thanks for pointing me to this. That document indicates that PTIF funding will cover up to 50%, which is even better. But it looks like the funding is all pointed to the Provinces... looks like I confused this fund with VIA funding.

Since I'm a bit in the weeds - to clarify - Was the VIA request for funds for the new equipment a direct request for capital, or is it a request to PTIF, or will it be a proposal to the Bank?

- Paul

PS - yeah, I'm being a downer - but - a further question - from what I gather, the Bank is a way to attract private investment in infrastructure, the benefit being it is an alternative to government carrying borrowing on its balance sheet. So the public deficit looks better. But - government is backstopping the risk. How does government not carry that liability on its balance sheet? Ends up amounting to the same thing. And - if the Bank has to guarantee investors a higher return on their investment than it would cost the government to borrow the money in the first place, why not just borrow the money and let government reap the return? When you reduce high finance to kitchen table home budget accounting, it seems like a lot of work for very little gain.

 

[steveintoronto]

The following is an article written in the Globe with a co-author being the man behind Montreal's REM, which besides the following, is becoming contentious due to detail, not concept, and complicating VIA's plans for HFR between Montreal and Quebec. Nonetheless, the authors make the case for a Cdn Investment Bank and the financial model that that is being used in many other sovereign investment banks: (Pardon the length, the Globe would be wise to reprint this in lieu of the present dearth of explaining this)

Private infrastructure bank will put Canada on a path to growth
MICHAEL SABIA AND MARK WISEMAN

Special to The Globe and Mail

Published Saturday, Oct. 29, 2016 8:00AM EDT
One week ago, the Advisory Council on Economic Growth, of which we are both members, made its first report to the Minister of Finance. One of our key recommendations is to create an infrastructure development bank, a first for Canada.

Many who have looked at the proposal have rightly recognized that this institution will invest more money in Canadian infrastructure, and put the country on a better competitive footing to gather the ingredients necessary to improve productivity and growth – talent, jobs and investment.

But that’s not the end of the story. The new bank will indeed do all those things. But it will also do those things better, which will make a big difference to Canada. The gap between a great project and a poor one is vast, big enough to consume billions of taxpayer dollars.

Big sums are involved. Our proposal calls for $40-billion from the federal treasury over 10 years. By investing through a development bank, Canada can multiply the impact of every federal dollar. In our experience investing around the world, a bank such as the one we propose should be able to attract $4 of institutional equity capital for every government dollar invested. That’s $200-billion of new equity to build what we need, in addition to traditional debt financing.

As a magnet for capital, the bank can accomplish two critical financial goals. First, it can expand Canada’s investment in infrastructure and thereby stimulate some near-term growth, and boost economic productivity for decades to come. Second, it can free up federal resources for other municipal and social projects that cannot be financed with private capital. Why not let private capital foot most of the bill for major projects such as highways and bridges, high-speed rail, port and airport expansions, smart city infrastructure, broadband and the national grid? Private investors will take on a share of the risk, too. That will leave more money for municipalities, schools, First Nations infrastructure, social housing and other urgent needs.

The financial case seems pretty clear. Largely overlooked so far, however, is another essential part of the bank’s mandate: to act as a national centre of expertise on infrastructure.

The two roles, financial architect and centre of expertise, go hand in hand because success depends on a lot more than assembling the financing. Canada needs to build more infrastructure; estimates of the need range from $150-billion to $1-trillion. But it also needs to do a better job of delivering new projects on time and on budget. Several studies show that best-practice project selection and delivery can reduce costs by 15 per cent to 25 per cent. Many projects are plagued by waste and budget overruns. Fixing those problems provides real value for money, and that’s what this bank is about.

Doing infrastructure better requires substantial change. It requires thinking differently about planning, delivery and operation. We see five substantive ways that an infrastructure development bank can tip Canada’s efforts from “good enough” to great.

First, it’s remarkable that Canada has no national inventory of the state of our infrastructure. You can’t build tomorrow’s infrastructure unless you know where you are today. The bank should assemble that inventory.

Second, equally remarkable is the lack of a national infrastructure plan. The bank we propose would work with federal, provincial and municipal governments to develop a plan with two overarching objectives. One is connectivity – the transportation of people, goods, energy and data within and across our borders. Canada’s ranking on a leading connectivity index fell from eighth in 2012 to 13th in 2015. This has to be fixed. The other is revitalizing our cities. High-performing, highly livable cities are magnets for talent and investment, and the innovation, growth and job creation that follow.

Third, infrastructure investors have become highly sophisticated over the past 10 years. But many governments, including ours, have not kept pace. The bank we propose would hire world-class experts in finance, engineering, project management and procurement to ensure that the two sides of the bargaining table are evenly balanced. That’s essential to good outcomes. And speaking as institutional investors and Canadians, a fair outcome is critical.

Fourth, as projects such as Chicago’s botched parking-meter deal have shown, contractual details matter. A lot. In our experience, well-written contracts that anticipate every eventuality are critical. The proposed bank would negotiate the operating contracts that set the rules for service levels, capital requirements, pricing changes and so on. Getting this right is essential to the public interest and can’t be overemphasized. In many respects, it’s what separates a successful partnership with institutional capital from a one-sided deal. The bank will ensure we get this right.

Finally, the bank’s operational expertise – in procurement, in the management of tender processes and in the co-ordination of siting and permitting – would be available to governments for large investments, even on projects that the bank does not finance. In this way, the bank can act as a springboard, helping infrastructure managers raise their game.

Canada needs to improve national productivity to unlock more growth in the medium term. And we need economic stimulus to deliver growth now. More infrastructure will help a lot, and better infrastructure will help the most. Getting there requires a break with the past and bold steps in new directions.

Michael Sabia is chief executive officer of the Caisse de dépôt et placement du Québec. Mark Wiseman is senior managing director at BlackRock Inc.

http://www.theglobeandmail.com/repo...h-to-growth-and-productivity/article32571644/

 

[steveintoronto]

Since I'm a bit in the weeds - to clarify - Was the VIA request for funds for the new equipment a direct request for capital, or is it a request to PTIF, or will it be a proposal to the Bank?

It's not just you Paul, there appears to be a purposeful campaign to keep this murky. I've noted a number of newspaper articles getting this wrong! The Guv had better make an effort to clarify this, and soon, or it will go sour very quickly. In all fairness, Morneau is doing the circuit in the next few weeks explaining the budget. He'd better start doing a better job on this. I'm more than a little ticked that he's dazzling the thin-skinned and gullible with the fairy-dust feel-good "innovation" sleight of hand. He might just as well have stated: "Canadians don't dance enough, and it's a great investment in the national health index, so we're investing in creating dance centres that will encourage Canadians to dance together". WTF? Innovation will happen where it wants to, not where 'the state' deems it most appropriate. Canada needs a change in mindset, and from that, ostensibly, innovation can flow.

VIA has been provided with funding in the last budget...details I don't have on hand, but it's appropriated over time. I linked their corporate plan yesterday, here it is again, I'm loathe to repeat details from memory:
http://www.viarail.ca/sites/all/files/media/pdfs/About_VIA/our-company/corporate-plan/Summary of the 2016-2020 Corporate Plan.pdf (p.39, see also financial table on p.69)

I'll add more details on this later after reading this again.

But - government is backstopping the risk. How does government not carry that liability on its balance sheet?

This is a very pertinent question, and it got the previous UK Labour Gov't into very deep doo-doos by 'privatizing' the operations of various tube lines in London and network rail operations to "keep it off the general ledgers". In other words, it can actually appear as an *asset* and not a cost.

Rather than be-labouring this point (pun fully intended, and I'm a Centrist), this *will* come up in Canadian politics since the confusion has already started, and I'm short on time to find the background most apt, but this gets you there:

The great debt deceit: how Gordon Brown cooked the nation’s books
Amid global financial turmoil, and on the eve of Labour’s conference, Fraser Nelson and Peter Hoskin reveal the true extent of the nation’s debt — equivalent to £26,100 for each British household — and Brown’s scandalous manipulation of the Private Finance Initiative

17 September 2008, 12:00 AM
Fraser Nelson and Peter Hoskin
Amid global financial turmoil, and on the eve of Labour’s conference, Fraser Nelson and Peter Hoskin reveal the true extent of the nation’s debt — equivalent to £26,100 for each British household — and Brown’s scandalous manipulation of the Private Finance Initiative [...]

https://www.spectator.co.uk/2008/09/the-great-debt-deceit-how-gordon-brown-cooked-the-nations-books/

I have to repeat, this blew-up severely politically and economically in the UK....and it wasn't that the model is wrong, it was the *implementation*. Morneau had best start explaining this concept, and soon, or the National Pest and TorStun will tilt it to their own end.

 

[SaugeenJunction]

Two new VIA tenders up on MERX, all based around Quebec City:

Gare de Ste-Foy - Rénovation de la Gare
(station renovation)

Gare du Palais, Québec - Climatisation du hall principal
(air conditioning/climate control)

 

[kEiThZ]

And - if the Bank has to guarantee investors a higher return on their investment than it would cost the government to borrow the money in the first place, why not just borrow the money and let government reap the return?

Because that makes the government look bad. That's what all the infrastructure banks come down. A way to leverage private capital to help politicians get elected by looking like great fiscal managers who don't blow up the deficit and debt. In reality, all they are doing is borrowing a lot more and spreading it out over a longer payback. But hey, I'm not complaining if that means that infrastructure actually gets built in my lifetime.

It's like Wynne's hydro cut. Look's great and merciful now. But we all pay more in the long run.

$4 billion for HFR is a great deal for government over 30 years. But politicians work in 4 year cycles. And worse HFR might actually cost them votes. Namely the votes of any stops that might lose service. I have argued this here before and been shouted down. Why would any MP in Kingston or Gananoque or Belleville support HFR?

 

[steveintoronto]

Why would any MP in Kingston or Gananoque or Belleville support HFR?

I know this has been discussed prior almost a year ago, hopefully this timetable is still current. I'll keep digging to see what else can be found to answer that point.

[...]
VIA Rail has repeatedly stressed that HFR "would allow the re-design of the current frequencies operating on the shared environment to better meet regional needs for increased service" (for instance on page 3 of its 2015 Sustainable Mobility Report). Note that despite 15 frequencies are currently offered south of Brockville (6x TRTO-MTRL, 8x TRTO-OTTW and 1x TRTO-KGON), only Kingston and Brockville are effectively served by more than 6 trains per direction and day:

View attachment 72010
[...]