Privitization of Toronto Services

[Whoaccio]

I recently returned from a trip to London and noticed the great degree of privatization that had occurred there. As I saw it, the bulk of city services have been subcontracted to private firms. Public transit & waste management were probably the most visible of these services. Anyways, it got me thinking about possible applications in Toronto. I don't think it is a panacea to all of Toronto's problems, but it seems to be at least worth a concerted look.

Usually this debate tends to get characterized by overly dramatic statements on both sides. The main point of contention seems to be a conflict between people who see it as a "race to the bottom" in terms of municipal salaries and people who view it as a one step solution to all of the problems under the sun. I don't really think either is fair. Privatization is not a substitute for solid municipal leadership and governance. If we have bad governance now, dispensing services to the private sector wont change much. Conversely, I don't think it is the City of Toronto's job to provide jobs. Even from a left wing perspective, if we wanted to provide a better experience for less fortunate residents, we would be better off increasing efficiencies and funneling the savings into improved services.

Looking around Canada, there are some quite successful examples of P3s. Take the Canada Line in Vancouver. For 1.5b in public funds, Vancouver has a 19km rt line, a portion of which is through dense urban areas. That works out to a km cost of roughly 80m a km. The Spadina extension, on the other hand, is running at nearly 400m/km for a route which is largely through open fields. The Canada line will also be completed in 9 years from approval to commercial service. A route half as long in Toronto will likely take more time. The cost difference between those two is large enough that it deserves to be more closely examined.

No offense to city personnel, but is 150k $ for a ticket collector really an efficient allocation of resources? The sheer amount of overtime collected throughout the City suggest a serious lack of management. If anyone has any thoughts or relevant information I would really like to get a debate started on it. There are enough examples of responsible privatization working quite well for cities around the world. It seems too good to not look at it.


http://www.tvo.org/cfmx/tvoorg/theagenda/index.cfm?page_id=7&bpn=779108&ts=2008-01-17%2020:00:48.0

http://hosting.epresence.tv/munk/archives/2008_apr22_633444515956275000/?archiveID=62

p.s. I don't know if this is more applicable to the "Toronto issues" section or Transport & Infrastructure section.

 

[TOinTO]

I don't think it is the City of Toronto's job to provide jobs. Even from a left wing perspective, if we wanted to provide a better experience for less fortunate residents, we would be better off increasing efficiencies and funneling the savings into improved services.

Well said. It's also not the city's job to try to raise the level of compensation in the labour market by dictating employment practices to the vendors they deal with. The city's job is to provide services to the residents at a good value.

Our left wing councilors don't acknowledge the extent to which their pandering to the unions is in conflict with improving city services and better supporting the poor. They pretend that we can have both.

We gave the TTC workers 3%/year (plus a guarantee to be the highest paid transit workers in the region) which will result in TTC fare increases or service cutbacks - both of which will more significantly impact poorer citizens.

We need to reduce union power if we want to get control over the city's finances. Contracting out more service delivery should help to do that.
Unfortunately, you can't contract out police services and that's the most expensive service, and the most powerful union, of the bunch

 

[Hipster Duck]

Looking around Canada, there are some quite successful examples of P3s. Take the Canada Line in Vancouver. For 1.5b in public funds, Vancouver has a 19km rt line, a portion of which is through dense urban areas. That works out to a km cost of roughly 80m a km. The Spadina extension, on the other hand, is running at nearly 400m/km for a route which is largely through open fields. The Canada line will also be completed in 9 years from approval to commercial service. A route half as long in Toronto will likely take more time. The cost difference between those two is large enough that it deserves to be more closely examined.

People like scarberiankhatru have blown the whistle on the TTC's accounting practices for the Spadina subway extension and I largely agree with him. They have really cooked the books, including massive contingencies for elephantine subway stations like Leslie that would be more than adequately served with a simple College or Dundas-esque design or tunneling under fields like the one between Steeles and the CN line in Vaughan where at-grade service would do the trick. They have inflated the costs of construction and its probably to promote their streetcar agenda. While a P3 may not be any more transparent, at least they're not guided by ideological thinking.

 

[Whoaccio]

They have inflated the costs of construction and its probably to promote their streetcar agenda. While a P3 may not be any more transparent, at least they're not guided by ideological thinking.

I largely agree w/ scarberiankhatru's assessment of the Spadina line's sprucegoose caliber costs. I don't think P3s are the only way to cut costs, I just think they are the most reliable. No private group in their right mind would inflate costs to the degree seen on Spadina. If our governments seemed committed to delivering cost efficient solutions, I wouldn't feel as if P3s are that useful. Time and again though, it appears as if they are trying to spend as much money as possible. I've heard the TTC is considering a P3 for the Finch West LRT, it should be interesting to see how that works.

re ShonTron

A worry I perpetually have with P3s is that it will lead to more areas for the city to screw up in. City management already gets screwed on union contracts, I don't have all that much faith that we wont get screwed on a P3 project. Hwy 407 is a great example of governments getting screwed. I don't think P3s are a catch all solution to all of Toronto's problems, but they are useful and deserve more consideration.

 

[ShonTron]

For every positive P3, like Viva, or RAV, there's the ones that justifiably scare people away from the idea, like Highway 407, or Blue 22, or Brampton Civic.

There's ways of making P3s work, and I have become less opposed to the idea, even if costs are higher over a long term because of profit, because as said, the TTC plays fast and loose with expenses, like the ridiculous contigency for the York extension, never mind the overbuilds. But have to make the agreements ironclad, and frame the problem before giving it to the private partner, and there needs to be a discussion of the need first, something lacking with Blue 22.

Many P3s have only reinforced the P6 criticism that plagues many of these types of projects. (public partner pays, private partner profits). There needs to be a lot of debate and care when going this route.

 

[BobBob]

I don't think it is the City of Toronto's job to provide jobs. Even from a left wing perspective, if we wanted to provide a better experience for less fortunate residents, we would be better off increasing efficiencies and funneling the savings into improved services.

Very good point. Even the phrase "race to the bottom" when talking about opening up union jobs is silly, as it sounds ominous yet merely describes the situation that everyone else with a regular job is in: you get paid what the market will bear.

 

[Chuck]

They have inflated the costs of construction and its probably to promote their streetcar agenda.

It's even simpler than that. The TTC inflates their cost estimates so that no matter how much money is wasted on useless expenditures, and no matter how inefficiently the work proceeds due to poor project management on the TTC's part, the job always comes in "under budget". After all, how can you possibly accuse the TTC of wasteful spending habits when all of their projects are delivered on time and under budget?

Sadly, contractors are fully aware of the TTC's inflated budget estimates, and the first thing they do when bidding on TTC projects is apply a 25% premium on the work, simply because it's understood in the industry that that's what you do when bidding on TTC work.

 

[tkip]

In my humble opinion....

I still tend to think that buried beneath most of the justifications for contracting out and busting unions is envy. Whether it's public or private people always push the anti-union stance and reflect that if wages drop then that's just fine since it's what they make anyway so why should someone else in a union job make more.

 

[junctionist]

No, it's because these people realize that taxes are increasing, but many city services are declining and there is massive backlog of infrastructure repairs and maintenance. Thus, citizens want to improve municipal efficiency with the hope of finding savings which can be used to improve the city or make it more economically competitive.

 

[Whoaccio]

I still tend to think that buried beneath most of the justifications for contracting out and busting unions is envy. Whether it's public or private people always push the anti-union stance and reflect that if wages drop then that's just fine since it's what they make anyway so why should someone else in a union job make more.

I think there may be an element of that, but mainly among the Lou Dobbs "immigrants stole my job" crowd. On the whole, most people just think that being paid 150k$ to sit in a booth collecting tickets is slightly inefficient. It's also not the rich people that are hurt by it. The TTC union has a guaranteed 3% wage increase stipulation, and 70-80% of the TTC's costs are labor, basically raising the cost of the service by ~2% per year which either gets passed on in decreased service or increased fairs.

That isn't really going to affect somebody living in Rosedale that much. They will either use the car or swallow the hike. A poorer resident though is the one who is hurt by it. It's always the poor that swallow the bulk of cuts to municipal services, not some aristocrat. It's a weird kind of wealth redistribution where the really poor transfer what wealth they do have to the unions (who are hardly "poor").

 

[ganjavih]

Yes, there's a misperception that unions protect the weaker and less fortunate among us who have no one else to look after their interests.

 

[simply Dan]

If the federal government had spent billions of taxpayer’s dollars to build the new Pearson Terminal 1 it would have been one of the biggest spending boondoggles in the history of this country.

 

[Urban Shocker]

The sad thing is that the weaker and less fortunate - who stand to benefit most from the better pay and benefits that union membership would give them - sometimes hold the most anti-union views.

 

[Whoaccio]

The sad thing is that the weaker and less fortunate - who stand to benefit most from the better pay and benefits that union membership would give them - sometimes hold the most anti-union views.

That is rather condescending. The problem with keeping wages higher than a typical market equilibrium would typically set, is that it limits the demand for labor and raises unemployment.

If employers are forced to spend more on a service than market forces demand, they will just use less of the service. That's why countries with high minimum wages, like France, tend to have unemployment levels in the 8-12% range. Youth unemployment, even more so, is abhorrent in these countries (I believe England is over 15%). Within Toronto, demand for services like labor are unnaturally stunted due to this. So, if somebody who is really poor tries to get a job sweeping streets or collecting tickets, he will get rejected because the city is already paying someone 3x what normal market forces would stipulate.

That's not to say there are no good reasons for minimum wages. Obviously, a basic set of standards is needed to protect against labor arbitraging and generally unscrupulous practices. That is why we have government set minimum wages though. Having unions enact secondary minimum wages, which vary from company to company, doesn't really help anybody except the people that currently hold jobs. It's great for the middle class unioners who already have jobs with guaranteed wages ever year, but for actually poor people it just locks them out of the market.

 

[scarberiankhatru]

^ I agree, Whoaccio.

And I'm not exactly a whistle-blower...unimaginative2 has been criticizing absurd TTC construction practices for years. It's the rabid light rail fanatics like Steve Munro that crunch numbers and expose hard-to-find reports in their constant attempts to prove subways are "too expensive" that end up proving how many billions of dollars could be saved in construction.

I wonder if the Spadina extensions' $500M contingency component is an attempt to "responsibly" foresee the cost inflation that contracted companies (as Chuck says) add to their TTC bids. What I'm suggesting, basically, is this: was there already $500M of padding included in the management and engineering and tunnelling and station costs before the $500M contingency was added? I gotta wonder...