GO Transit: Construction Projects (Metrolinx, various)

[crs1026]

^Is there anything that lays out what the scope of the ‘network’ is?

And is there a link to the presser for those of us who weren't able to watch it in real time?

- Paul

 

[steveintoronto]

The one held this afternoon along with this announcement? If you watch it Oliver Moore of the Globe and Mail explicitly asked if electrification was still on the table or not and Verster gave the answer that I laid out above.

Verster verbally done that a number of times before. It goes back to when DBFOM first came on the Metrolinx scene and Verster arrived. IIRC correctly it's in one or both of the Jonathan English interviews at this site.

I've quoted him in this string and others. I want to see it in writing. Verster's written word, let alone his spoken is questionable, to say the least.

It won't be diesel and we know Catenary is the only real electrical option

Unfortunately we don't. No-one has been more vociferous than myself (equally with a few others) on the need to electrify.

I suggest re-reading the earliest releases on Union Pearson from Metrolinx. I reposted some of it in the electrification string just last week.

 

[steveintoronto]

^ Just watched it, I find nothing definitive unless you want to read into "Best new technology to replace diesel" @ 4:30 - McNaughton (There is absolutely no time-frame or commitment to *act on that recommendation*)....and this is not to build anything, it's to propose solutions. But if people insist on those words being binding, let's start with Verster's "inquiry".

In the event, Moore's questions were excellent, he's right on it, and I look forward to his copy tomorrow. I'd read his tweets at the time of the event.

Something that slipped past many is this:

1. • [B]Ben Spurr[/B]‏Verified account @[B]BenSpurr[/B] 4h4 hours ago
     More
   • Bit of news here is that the Canada Infrastructure Bank is committing to contributing up to $2 billion in financing to the GO project.

The terms of that were not stated, it was purposefully unclear other than being "new money". Is it a loan, like REM got? There's no indication of it being a grant, as per the questions put to him by the press, but not clearly answered.

https://twitter.com/moore_oliver?ref_src=twsrc^google|twcamp^serp|twgr^author

There's my point on the InfraBank financing. It is debt financing. Very slippery and slickly handled. What a bankster! Note how he doesn't offer up that info. Also note how "DBFOM" and "P3" were erroneously used interchangably. To be fair, DBFOM is a form of P3, but to use the term "P3" in the way it was is obfuscation compared to how it's used in other English speaking nations for public infrastructure.

I'm not impressed. Show me the details in print and signed. And that "empty train" that went by? There were two of them. I replayed the vid slowly as the interval was much shorter same direction than 15 mins. VIA added to the festivities. Obviously the time was chosen to maximize the backdrop. Every little bit helps when you're trying to 'bless the fish'.

They mention they are looking for a bilevel solution

Yeaahhh....don't know what to make of that, as it's not referenced to a context. What I don't think it refers to is coach decks. I believe they're talking in 'office lingo' to try impress the Great Unwashed. A "bi-level solution" occurs in physics, math, probably computational algorithms, and some sexual behaviour.

 

[steveintoronto]

Infrastructure Bank to invest nearly $2-billion in GO’s Regional Express Rail program

OLIVER MOOREURBAN AFFAIRS REPORTER
PUBLISHED MAY 30, 2019UPDATED 25 MINUTES AGO
6 COMMENTS
The federal Infrastructure Bank is putting up as much as $2-billion for an upgrade to GO Transit across Southern Ontario.
The debt financing to help fund changes to GO rail – electrifying the agency’s trains and increasing their frequency, aiming to turn the commuter service into an all-day transit option – becomes the federal contribution for this stage of the project.
This investment is not a grant. Bank officials say it is a debt-funding commitment to assist in obtaining low-cost financing. It is in addition to $1.8-billion Ottawa had promised for earlier parts of the project.
The deal announced Thursday is one of few the bank has completed. Announced in 2016 by the federal government and formally created by royal assent in 2017, the bank did not get a CEO until 2018.
Last August the bank pledged $1.3-billion toward investment in a transit project in Montreal. Thursday’s deal is only the second by the bank, which has faced criticism for the pace of its decisions.

Infrastructure Bank CEO Pierre Lavallée said that due diligence for such deals takes time, and that discussions for this one had begun last summer. He also noted that the bank has a 10-year horizon to invest $5-billion in each of its three target areas, one of which is transit.
[...]
The financing comes as the province moves ahead with its request for proposals for part of the GO project, identifying a shortlist of four consortia to expand capacity on the rail corridors. The teams – EnTransit, MTR Kiewit, ONcore Transit and ONxpress Transportation Partners – are each a conglomerate of major transit, construction and banking firms.

Canadian companies play roles in several of the bids, including SNC-Lavalin doing design, operations and maintenance for the team EnTransit. Bombardier is tasked with operations and maintenance for the ONcore Transit bid. Three of the consortia have Canadian banks acting as financial advisers.

The four teams also encompass a wide range of international transportation and construction players. Among them are RATP Dev, Deutsche Bahn, Alstom, Siemens, AECOM and the Hong Kong transit provider MTR.

“We are asking the private sector for their best, most innovative solution to a simple challenge: move people from point A to point B within a certain time frame,” said provincial Infrastructure Minister Monte McNaughton.

“We aren’t telling them what technology or design to use. We have confidence in the private sector’s ability to find the most efficient solution.”

Metrolinx CEO Phil Verster confirmed that the agency was officially agnostic about many aspects of how the companies structure their bids, not specifying which signalling systems or rolling stock was favoured. Also left to the bidders’ discretion was whether the current diesel-powered trains should be replaced by trains powered by externally provided electricity or by a hydrogen fuel cell.
[...]

https://www.theglobeandmail.com/can...k-to-invest-nearly-2-billion-in-gos-regional/

Some review of the UT interview with Verster:

Union Station and GO RER: Metrolinx's Phil Verster on the Future
February 1, 2018 5:00 pm | by Jonathan English | 15 Comments
[...]
Verster explained that GO RER will be developed as a public-private design-build-finance-operate-maintain partnership, rather than Metrolinx developing the expertise in-house. The private partner consortium that will be building and operating the RER system will make many of the key decisions, particularly on technology and the trains themselves. “We are turning to the market and we’re being very flexible in terms of what the market can offer us on RER,” he said, “to build a network, to build a fleet, and to build a service formula that require our timetable commitments.”

One of the key questions for RER is the trains themselves. Today, GO operates an exclusive fleet of diesel-locomotive-hauled bilevel cars. Most international regional rail operations use electric multiple units (EMUs), owing to their rapid acceleration and braking, which shortens journeys and enables trains to run more closely together. Verster explained that EMUs also offer far more flexibility in terms of shortening trains to match capacity to demand in off-peak periods. There are significant performance differences between EMUs and the current bilevel trains, even if the latter are hauled by electric locomotives. Mixing trains that have different performance adds complexity to signalling and infrastructure planning. Infrastructure designed for vehicles with limited performance (freight trains are also a problem in this regard) is considerably more expensive than infrastructure designed exclusively for high-performance EMUs. However, as Verster explained, it would likely be cost-prohibitive to entirely replace GO’s enormous fleet of 1,000 bilevel cars. He did leave open the possibility of a different approach, since the final decision on the fleet composition will be in the hands of Metrolinx’s private partner.

There remain some other significant questions that the private consortium will need to answer. The bilevels have much lower door levels than standard international regional rail trains. Now that platforms are being raised to match the bilevel floors, will GO RER use unique, custom EMUs to match these floor levels? Will some of the platforms be further raised when they arrive? Or will non-level boarding be accepted on the EMUs, at least temporarily? How will the signalling and infrastructure be built to handle very different types of trains without unduly reducing capacity or adding to construction cost? Will a modern international-standard signalling system, like ERTMS, be acquired, given that traditional North American mainline signalling systems are not particularly well-adapted for rapid transit operation? Most important, however, is a question that can only be answered by governments: can a fare structure be developed so that transferring from bus to RER is as simple and costless as transferring from TTC bus to subway is today, so that the RER can truly become a rapid transit backbone for the region? [...]

http://urbantoronto.ca/news/2018/02/union-station-and-go-rer-metrolinxs-phil-verster-future

 

[crs1026]

^The absolute indignity in this is Ottawa allowing the Infrastructure Bank to fund GO while providing nothing for VIA. Is the GO business case that much more attractive?

- Paul

 

[steveintoronto]

^The absolute indignity in this is Ottawa allowing the Infrastructure Bank to fund GO while providing nothing for VIA. Is the GO business case that much more attractive?

- Paul

That's a very good point touched on by some of the comments at the Globe article link *especially in lieu of it being debt financing, not a grant!* In effect, other than a degree of underwriting, it's not debt on the books.

As a side note, conspicuously appearing in the "P3" constructs are "consortiums", vertically integrated with their own bankers/financiers as part of the construct. Siemens in fact often finance their own P3 projects, other times do what the Infrastructure Bank does.

Look for much more analysis in the press on this point. I've touted this for some time, but what worries me is not the model, it's the implementation and accountability. With sparse coffers, P3 models are inevitable if anything is to be built.

 

[crs1026]

^Ultimately, the P3 approach is about raising the capital to fund GO expansion, without the funding appearing on anybody’s books as deficit spending.

I agree, this huge MOAP3 RFP is a lousy way to deliver governance for GTA transit, and it hugely muddies the waters about what GO costs and how well it is being managed. I would be a lot happier if there were a more direct public accountability chain for destiny decissions such as electrification and station location. And more granularity and transparency in how it is managed.

Verster stated that there would be up to ten station development announcements.....again, that’s basically money raised to remove the need for any government to borrow money to build stations.

Not being a finance type, I’m really skeptical that P3 financing is anything more than a shell game - the funding is still an element of the aggregate public debt, and ultimately has to be serviced from public coffers along with all other public debt. But, it seems to have paid off - we now have $3.8B in the coffers. Let’s hope that when the bids come in, the price tag for the remainder of the on-corridor construction is affordable.

At the end of the day - if it brings the money, we can get on with expansion. I’m all for that. I’m actually impressed that the Ford government is moving ahead as boldly as they are. So this was a very positive announcement.

The sooner the RFP can be awarded and closed, the better. I just hope that this isn’t just another mess that will blow up on our kids some day.

- Paul

 

[rbt]

^The absolute indignity in this is Ottawa allowing the Infrastructure Bank to fund GO while providing nothing for VIA. Is the GO business case that much more attractive?

GO has an extremely strong business case compared to VIA.

The GO plan is backed by a completely different level of government who will guarantee payments; whatever interest rate they've agreed to is the business case. The feds won't be on the hook if GO fails to attract customers.

Second, Canadian banks pay around $40B/year in income tax. While only a small fraction of that is actually Toronto centric, senior executives likely put pressure on the feds to keep things moving along.

Third, half the CIB board is from the GTA or financial institutions with large offices in downtown Toronto which will directly benefit from the project. One CIB board member, Stephen Smith, is even a member of the Metrolinx board.

 

[crs1026]

Second, Canadian banks pay around $40B/year in income tax. While only a small fraction of that is actually Toronto centric, senior executives likely put pressure on the feds to keep things moving along.

Sorry if I’m dense - can you explain this point ? I’m not getting it. Are you saying that Ottawa derives an income from the banks’ profit on financing the GO deal?

- Paul

 

[rbt]

Sorry if I’m dense - can you explain this point ? I’m not getting it. Are you saying that Ottawa derives an income from the banks’ profit on financing the GO deal?

I'm saying Ottawa derives an income from the banks (and Toronto in General) and Ottawa has a strong interest in keeping those banks happy. They happen to have most senior staff in Toronto, many of whom take the GO train. Lobbying likely helped reduce friction for a weaker business case. There really isn't an alternative to GO expansion for moving people around the GTA.

VIA still has several alternatives (flying and highways) and few big executives are going to bat for it.

 

[steveintoronto]

Not being a finance type, I’m really skeptical that P3 financing is anything more than a shell game - the funding is still an element of the aggregate public debt, and ultimately has to be serviced from public coffers along with all other public debt. But, it seems to have paid off - we now have $3.8B in the coffers. Let’s hope that when the bids come in, the price tag for the remainder of the on-corridor construction is affordable.

The term "P3" can be extremely misleading, just as a simpler term "mortgage" can be. I've raised this point months back in some of these strings, as its arrival was imminent. It's already here in a milder form (DBFOM) but now we're getting to 'less diluted' forms. It really needs a string of its own. This is a good part of the discussion in the Australian Public Transport projects & stuff string at this site. Oz is way ahead on this, and much more adept at its presentation to the public, and acceptance. Oz rail/transit infrastructure is also at least a large generation ahead of what we have, and many projects are actually Cdn financed (Pension Funds et al). I too am not a 'finance' person, but so we don't get hoodwinked on this, we're going to have to learn, because sure as hell Metrolinx and Masters aren't forthcoming on this.

The GO plan is backed by a completely different level of government who will guarantee payments; whatever interest rate they've agreed to is the business case. The feds won't be on the hook if GO fails to attract customers.

I don't want to disagree, but I can't agree either. Normally I would agree, except QP is in the middle of tearing up contracts by way of passing legislation. This is a massive topic in itself, and in some cases, it's being done in violation of trade agreements. This is a subject about to go ballistic. Pass me a beer...literally.

Second, Canadian banks pay around $40B/year in income tax. While only a small fraction of that is actually Toronto centric, senior executives likely put pressure on the feds to keep things moving along.

This is a remarkably similar argument to the SNC-Lavalin case, and BBD's, and by extension: "If we go bankrupt due to court decisions we'll close shop and open elsewhere", and "9000 jobs will be lost". Sorry, I don't accept it, and if a foreign company does buy the assets and continue the operation, they also pay taxes. And if they operate 'within the law', Revenue Canada is much more apt to see the taxes owing. This point also is ripe for more analysis.

Third, half the CIB board is from the GTA or financial institutions with large offices in downtown Toronto which will directly benefit from the project. One CIB board member, Stephen Smith, is even a member of the Metrolinx board.

" Stephen Smith, is even a member of the Metrolinx board"
What could possibly go wrong? At this rate, an MPP who heads the ministry could be building unneeded stations in his riding...Smith should excuse himself.

VIA still has several alternatives (flying and highways) which are not in a dire situation at this time. There really isn't an alternative to GO expansion for moving people around the GTA.

Apples and Oranges. VIA has a much clearer and researched business case with far less obstacles presented, save for physical ones (terrain, etc). Not only that, HFR could (and I think should) be spun off as a private entity, perhaps even being taken to the market. The Feds are much more adept (for a number of reasons, not least banking legislation and constitutional powers) at spinning off arm's length or completely stand-alone corporations instigated "for the general advantage of Canada" and the legal protections of being so.

There is a common factor I'm seeing in the 'four consortiums for the RFP' though: Siemens. Depending on the latitude of the parameters stated in the RFP, an entity like Siemens might well state: "Open negotiations with Ottawa, directly or via the InfraBank for working with VIA to combine HFR and 'GO Expansion' to share symbiotic facets and develop them together, and we can bid on doing two for the price of one rendering greater value per investment for all concerned".

A Consortium owning/leasing (in part or whole) of a line could host both GO trains and HFR, and lease to 'premium freight' operators too. Far fetched? It's done in quite a few nations, ones with a much more advanced rail system than at least Ontario's. Look no further than Oz on that, but then many in Europe and Asia too. Some of them represented in the 'selected four'.

 

[crs1026]

GO has an extremely strong business case compared to VIA.

The GO plan is backed by a completely different level of government who will guarantee payments; whatever interest rate they've agreed to is the business case. The feds won't be on the hook if GO fails to attract customers.

I don’t dispute the truth of what you are saying, but if that is the reality it’s unfortunate.

There is a difference between saying that GO is a better economic proposition (generates more net value per dollar invested) than VIA versus saying it is a less risky proposition because it is better secured.

If Ontario has made such a binding commitment to backstop the debt that the street is supportive - in effect co-signing the loan with ML - then that liability belongs on Ontario’s balance sheet. And if Ottawa is unwilling to provide a similar backstop guarantee to VIA, that’s a matter of government policy rather than economics or commercial viability.

I find it ironic - and not in a good way - that the price of involving the private sector is for government to retain most of the risk while the private investor holds much less. Might as well just borrow at the government rate and avoid all the complicated math.

- Paul

 

[rbt]

I don’t dispute the truth of what you are saying, but if that is the reality it’s unfortunate.

There is a difference between saying that GO is a better economic proposition (generates more net value per dollar invested) than VIA versus saying it is a less risky proposition because it is better secured.

If Ontario has made such a binding commitment to backstop the debt that the street is supportive - in effect co-signing the loan with ML - then that liability belongs on Ontario’s balance sheet. And if Ottawa is unwilling to provide a similar backstop guarantee to VIA, that’s a matter of government policy rather than economics or commercial viability.

I don't know any details outside of what the press conference presented but here is my logic: CIB is structured to pay a return to investors including the federal government and the $5B seed money the feds kicked in was intended to prove a reliable return could be achieved with hopes of getting private funds in the future, which means someone is on the hook to pay it back. Since the loan was announced without selection of a specific construction partner, I've got to assume Metrolinx (and the Ontario Government) have agreed to make payments because the feds paying back their own loan wouldn't achieve the goal.

It might be a good deal for Ontario which has slightly higher borrowing rates than the federal government. And yes, it should show as debt on the Ontario books. Capital debt doesn't show up in the operating budget though, only the interest on it. The deficit is only operating related costs but you'll find Ontario's debt rises quite a bit faster than just the deficit; the balance is capital projects.

The CIB loan to the REM project was likely very similar terms to the GO RER project but I've not seen the details of that contract either.

 

[steveintoronto]

I find it ironic - and not in a good way - that the price of involving the private sector is for government to retain most of the risk while the private investor holds much less. Might as well just borrow at the government rate and avoid all the complicated math.

This is the case of when it goes wrong. There are cases where it goes right. Just Googling to link an example, and even using a weak search tag series "where P3 projects have gone wrong" lots of hits return, including this one without even including "rail" in the search tags...the implication being that 'rail' is a very common case, good and bad:

Strategic Rail Finance:

Strategies for Successful Public Private Projects A P3 Does Not Make A Bad Project Good; A Difficult Project Easy; Or An Unfinanceable Project Financeable by Gerry Stoughton, SRF Public-Private Infrastructure Advisor Part of a series highlighting strategies for successful Public Private Partnerships. In this series P3 expert Gerry Stoughton offers insights gained while orchestrating funding for major infrastructure projects for the Port of New York New Jersey. Public entities, when confronting challenges to fund and deliver large infrastructure projects, turn to public-private partnerships (P3s) as the best solution. While the use of a public-private partnership structure for the procurement, financing, and delivery of a project often results in time savings, financing efficiencies, and other project benefits, it is very important for public sector entities to understand that a P3 structure by itself does not guarantee a project’s success. Delivering infrastructure projects is often complex and time consuming. Land acquisition, environmental matters, coordination among project stakeholders, design, and construction all involve certain degrees of risk and uncertainty. P3 projects are most successful and benefit both parties when project elements can be clearly and cleanly assigned to each side based on who can perform those elements best and assume the corresponding risk. In a P3, the private partner would likely be more familiar with cutting-edge technology, design and engineering approaches to construct a new facility and take on the associated risks. The public partner, on the other hand, would be better able to navigate through an environmental review process involving federal, state, and local officials on the location of the project. Depending on the nature and degree of project risks, a P3 will not necessarily enhance project delivery or save costs and time. Facility demand can also impact a project’s success – especially when its revenues directly support the financing. P3 structures can transfer revenue risk to the private party or the public side can opt to maintain it – most common when those revenues also support (either directly or indirectly) the public entity’s existing debt. When the public side retains the revenue risk with very questionable demand, the use of a P3 will not solve the problem. In times of constrained public budgets, P3s can seem to be very appealing. P3 project payments from the public entity to the private developer generally escalate over time. This makes state/local budgets look good in the short term, but can mask the long term financial impacts. In effect, this just kicks the problem further down the road. Public entities nearing their statutory debt issuance limits could also look to using P3s. Rather than using state or local debt, a P3 will use a variety of other financing sources. However, the project will still require revenues to pay for these P3 financing sources. The simple truth is that no matter how it is funded – be it a pay-as-you-go, state/local debt, federal funds, or with a P3 – a viable infrastructure project requires a secure and ongoing revenue source. In the end, the fundamentals of the infrastructure project will determine its success. [...]

https://strategicrail.com/classroom...ojects/a-p3-does-not-make-a-bad-project-good/

Public-sector Consulting

Port authorities, rail authorities, economic development agencies, and other governing and legislative entities value Strategic Rail Finance’s extensive rail-industry knowledge and financial expertise.

(more…)

What's not been made clear in the case of the CIB are the terms and conditions and the governing structure of this arrangement. Hopefully the Globe will have a story on this. I note that the Globe had their Oliver Moore piece up almost instantly after the press conference, and the Star has yet to post one that I can find.

 

[steveintoronto]

The CIB loan to the REM project was likely very similar terms to the GO RER project but I've not seen the details of that contract either.

Very hard to find! Even finding mention of it, let alone detail isn't showing with Google searches.

Not directly related, but indicative is this:
How Bombardier Inc suppresses information about how much government funding it receives
With the government considering a historically large investment in Bombardier, some are arguing that transparency should be a condition of any new cash injection
https://business.financialpost.com/...about-how-much-government-funding-it-receives

Is that 'our business'? In the case of BBD being one of the members of the four consortiums bidding for the RFP, I'd say yes...

Edit to Add: See today's Globe Investigation:
See no evil: How Canada is bankrolling companies accused of bid-rigging, graft and human-rights violation
Export Development Canada once described itself as the country’s ‘secret trade weapon.’ But The Globe’s review of thousands of transactions reveals a pattern of secrecy and lax supervision
MATTHEW MCCLEARN
GEOFFREY YORK
AFRICA BUREAU CHIEF
TORONTO AND JOHANNESBURG
PUBLISHED 2 HOURS AGO
https://www.theglobeandmail.com/canada/article-export-development-canada-investigation/

SNC-Lavalin and Bombardier are specifically detailed in the article, Bombardier *by far* being the largest recipient of EDC funds:

Figures shown are Billion $