Toronto Environmental Alliance

Kick in the privates: Four of five mayoral candidates toy with public-private transity plans - cue the alarms

23 September 2010
Paul Terefenko
NOW Magazine

There were some confused looks in the roomful of journalists gathered at the Sheraton early Monday, September 20. We were there to hear the announcement of a major initiative from the Public Transit Coalition (PTC). Left to imaginings, you might think they’d be making a big push for Transit City.

So when the presser turned out to be part of a $500,000 initiative to educate Torontonians about the pitfalls of privatization, the reaction was “Really? Isn’t that kind of specific?”

Well, specific is just what the coalition (comprising the Toronto Environmental Alliance, Amalgamated Transit Union Local 113, Greenpeace and nearly 40 other groups) wants voters to get when they parse mayoral candidates’ transit plans.

All the hopefuls – except Joe Pantalone – are expressing their willingness to dance with public-private partnerships, though details are in short supply.

• Rocco Rossi wants to sell Hydro to pay for transit, and to expand on air rights, land-value capture and “alternative financial arrangements”  with developers – a plan that’s hilarious in its creepy vagueness given his Mafia-themed ad blast.

• Sarah Thomson dreams of putting some transit services up for tender to the highest bidder.

• George Smitherman’s transit plan, subways and all, calls for public/private partnerships (P3s), only he calls it a hybrid “second wave” P3 approach.

• Rob Ford would finance his subway system (no Transit City or streetcars, thank you) by selling $1 billion worth of public land to developers along possible routes.

So almost everyone wants to play with the private sector. But what are the chances we’d get a good deal?

Not good, says TTC chair Adam Giambrone. He says the property values aren’t there to sell air space over stations, and the realities of construction constraints make it a headache for developers.

“We looked into selling air space over the Bus Terminal [which the TTC has owned since the 1920s],” says Giambrone. But in the end, the cash gain just wasn’t there. High-density Rosedale was another option but ran into community opposition.

And the cash wouldn’t be huge if they did get it. “We’d be taking $8 million here, $10 million here. Not that you wouldn’t get a billion in development, but that would go to the private sector,” says Giambrone.

He mentions a way some places do cash in – cities like Los Angeles. “L.A. expropriates half a kilometre on either side [of transit properties], takes ownership, rezones and sells it off.” In Canada, that’s virtually impossible, because you can only expropriate what you need.

Others who know these kinds of deals well say that when you start tallying the sketchy factors in toying with private interests, you risk decades of regrets.

Privatization expert Blair Redlin, a former transportation minister in BC’s provincial government and ex-president of the Transportation Association of Canada, thinks we ought to be very nervous.

“P3s are always complicated, bureaucratic and lengthy processes,” he says. So any politician promising a magic bullet is firing blanks.

Redlin outlines the tangled trip private partnering has delivered in BC. Take the Canada Line, a 19-kilometre rapid transit link built for the Olympic Games and meant to connect downtown Vancouver to the airport and Richmond. Its P3 plan was shoved down the throats of a hesitant transit board.

“For everybody involved, the overall costs were a lot higher [$2.1 billion compared to a $1.5 bil projection],” he says. But costs aside, little details really tell the tale. Once the partnership was in place, the public lost its muscle.

“The original plan changed from a deep-bore tunnel to a cut-and-cover,” he says. Businesses were powerless as crews dug up their streets instead of moving underneath. The government also gave private stakeholders a guarantee of 100,000 daily riders. If the target wasn’t met, private interests would cash in, so nearby bus routes were cut to feed the beast.

Those are the kinds of details, says Redlin, that are often kept quiet when politicians pump arrangements with the private sector.

He offers warning examples from Australia, and the well known Metronet disaster in London, UK. There, an international consortium just folded when its demands for more cash weren’t met, leaving taxpayers paying huge out-of-pocket sums to clean up the P3 Tube experiment.

There goes the myth of risk mitigation. “People who push P3s are often doing so from an ideological perspective as opposed to real-world experience,” says Redlin.

Smitherman’s plan, some experts say, is better than most privatization schemes. He’s calling for air space rights, not gift-wrapped deals that allow private companies to cash in on, say, running a subway line once they’ve taken the risks of building a system.

“That’s better than most P3s,” says Canadian Centre for Policy Alternatives economist Iglika Ivanova. But, she says, “at the end of the day these projects get paid out of public money. We’re essentially subsidizing [the private sector] with public dollars.”

Then she points to the long, drawn-out contract negotiations on these kinds of projects between transit officials and private money and the fact that it all happens behind closed doors, so the public paying the bills has no idea what’s been given away.

“Unions have had problems with this and have had requests for information denied after being told it’s to protect business or commercial secrets,” says Ivanova.

And what’s not often calculated, she says, is the added cost of accountants, consultants and lawyers all getting their cut throughout this process.

Cautions Redlin, “You don’t want to get stampeded into giving land away.” Unfortunately, public negotiators have a tendency to make bad deals; if they weren’t bad, developers wouldn’t bite. “The public sector needs to be cagey in negotiations, and somebody independent needs to take a look.”

It’s not that all P3s are tragedies. Small-scale projects like park rejuvenations or something like the TTC’s new headquarters make sense because they’re relatively simple and don’t lock into 40-year contracts with multinational corporations.

With those decades-long mega-deals there’s just too much risk, says the PTC. “Nothing would make us happier than to have mayoral candidates say no to public-private partnerships and other forms of privatization,” says the coalition’s Franz Hartmann.

“That’s our ideal outcome. We’re asking Torontonians to look at other cities and conclude that privatization would be a disaster.”

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NOW | September 23-30, 2010 | VOL 30 NO 4

As originally published here: http://www.nowtoronto.com/news/story.cfm?content=176885