Roads: GTA West Corridor—Highway 413

[nfitz]

In North America? Do you have a source for this or examples?

I'd assume the OP wasn't just referring to North America.

But Mexico City would be a good example. Only Mexico City, LA, and NYC are more populous, so it's a pretty small group. Going further down the list, Havana is a bit smaller at 2.3 million, and while I haven't done the math, it doesn't have a lot of highways either, especially downtown.

 

[dullturtle06]

I had suggested something like this earlier. 401's route is also more lucrative than 407's because it's a shorter cross town route and connects to more highways. But there are two issues:

1. Express lanes on 401 are less wide than 407, which means lower capacity
2. Drivers exiting from express lanes will have to cross the slow/standstill traffic in the collector lanes and may need to drive 4-5 kms in collector lanes. A lot of their time savings will evaporate in that process.

I would rather have a very reasonable toll (10 to 15 cents per km) on every single highway in GTA and pay the proceeds to 407's consortium to reduce the tolls on 407 to match with rest of the network. Why should some people pay heavy toll while some others get to use the highways for free? For example in Durham there are 3 toll highways now. They pay as much taxes as others in GTA.

A reasonable toll won't hurt business and people badly but may change driving habits of some people.

I'm personally against tolling all GTA highways because I know the toll would be similar to the 407 today with transponter fees. Anyone not upper middle class would be stuck on city roads. As the government has wouldn't say no to free money off hard working people.

But do you think the 407 ETR would agree to such a deal. Also would be an opportunity to make a new contract, or amend the current one.

 

[Steve X]

I'm personally against tolling all GTA highways because I know the toll would be similar to the 407 today with transponter fees. Anyone not upper middle class would be stuck on city roads. As the government has wouldn't say no to free money off hard working people.

But do you think the 407 ETR would agree to such a deal. Also would be an opportunity to make a new contract, or amend the current one.

If the 407 is free for all like the 401. It'll be jammed like the 401 but worst. It'll be the next highway to need a express-collector system. Some tolling would be needed but the toll shouldn't cost an arm and a leg to use regularly. The price to drive from end to end is insane. The highway is there a sole business to profit off GTA drivers.

Tolls should be seen as a way to fund the future transportation network, not a tax grab. That of course requires the government to disclose their tolling income and actually spend it on GTA roads/transit if they were to toll highways across the GTA.

As for paying the 407 ETR to lower costs, that's a terrible deal. They can ask for extraordinary amounts and outright refuse as their income doesn't increase while the highway can potentially fill up with cheaper prices leaving them a bad name. It's a bad use of taxpayer's money and no benefits to the company. The Ford government already determine it's better to build a new highway than to pay them.

 

[Ward8]

there is so much wrong with that 2019 piece in the star that it is quite shocking that it made it to print.

Most of it is generally correct. The "foreign ownership" part definitely bothers me, but the claims about the NDP and the valuation are true. As is the part about being able to cancel the contract, which was the point of linking a years old article. There are a lot of problems wth the idea, but it exists as an option.

This is not a banana republic where a government can snatch away a multi billion dollar private investment as if it was snatching a candy from a child. If government ever decides to do that, courts would quash govt's attempts right away. If Parliament decides to make new laws allowing govt to grab private property, no one will ever invest in Canada, including Canadians themselves.

There is precedent within the current government for cancelling business contracts. I agree it would be a bad look when it comes to doing business with Ontario, but they've done it before and they can do it again if they felt like it. There is also a big difference between an authoritarian government seizing private property, and a democratically elected government ending a lease on publicly owned land. The 407 is a regionally important infrastructure connection that affects the movement of people, employment and goods. Having such infrastructure under the control of an unaccountable private entity, without any regulation whatsoever, strikes me as a bad reason to spend billions on a new highway. One could view the 413 as a competitor to the 407, but I think it's just throwing good money after bad.

 

[Translude15]

We should look no further than Chicago to see the effects of minimal/moderate highway tolls. Even with reasonable toll rates, Chicago's tolled highways are rarely congested as drivers consciously avoid them. Basically every freeway outside of the central Chicago area is tolled and as such there is minimal congestion on those routes.

 

[TOareaFan]

Most of it is generally correct. The "foreign ownership" part definitely bothers me, but the claims about the NDP and the valuation are true. As is the part about being able to cancel the contract, which was the point of linking a years old article. There are a lot of problems wth the idea, but it exists as an option.

The valuation part is completely wrong....to suggest that what we the people sold for $3B is now worth $30B completely ignores the fact that the highway is now about 50% longer than what we sold and in the key middle parts substantially wider (ie can carry more passengers and generate more revenue).

It is like someone selling a bit of land to someone, them building a 30 storey building on it and then complaining that they made money from the condo sales that should have belonged to the original land owner. It is preposterous.

 

[innsertnamehere]

We should look no further than Chicago to see the effects of minimal/moderate highway tolls. Even with reasonable toll rates, Chicago's tolled highways are rarely congested as drivers consciously avoid them. Basically every freeway outside of the central Chicago area is tolled and as such there is minimal congestion on those routes.

I294 is tolled and regularly gets congested.

Most of the toll roads in suburban Chicago are also not the core highway routes of the city other than really I 294, which as I said, regularly gets congested. I-90 towards Rockford is tolled but is also built to be much larger than what an untolled highway on that same route likely would be, meaning it stays relatively uncongested.

Tolls reduce congestion no doubt about it, but just because you drop a couple bucks tolls on a road doesn't make the traffic suddenly be full free flow at all times.

The 413 as contemplated today would likely be uncongested for the first few years more or less at all times of the day, but as growth continues in North Brampton and Caledon it would fill up. It would likely never be as congested as the 401 through central Toronto though, and would have lots of room to add additional vehicle capacity to handle traffic growth, unlike the rest of the existing highway network. I don't really see the highway getting congested outside of the core rush hour for the first couple of decades, even without any widenings.

 

[Ward8]

The valuation part is completely wrong....to suggest that what we the people sold for $3B is now worth $30B completely ignores the fact that the highway is now about 50% longer than what we sold and in the key middle parts substantially wider (ie can carry more passengers and generate more revenue).

Every source I can find pegs the value at around 30B. The number, as far as I can tell, comes from SNC selling a 10% stake for 3.25 billion in 2019.

Worst deal ever? The 407 is worth $30B today – Ontario sold it for $3.1B in 1999

SNC-Lavalin sold 10.01% of its stake of the 407, valuing it at $30 billion. In 1999, Ontario sold it for a fraction of that.

ca.finance.yahoo.com

Why SNC's 407 highway sale may do little to turn around its fortunes

The value of the barrier-free toll road now stands at around $32 billion

financialpost.com

 

[TOareaFan]

Every source I can find pegs the value at around 30B. The number, as far as I can tell, comes from SNC selling a 10% stake for 3.25 billion in 2019.

Worst deal ever? The 407 is worth $30B today – Ontario sold it for $3.1B in 1999

SNC-Lavalin sold 10.01% of its stake of the 407, valuing it at $30 billion. In 1999, Ontario sold it for a fraction of that.

ca.finance.yahoo.com

Why SNC's 407 highway sale may do little to turn around its fortunes

The value of the barrier-free toll road now stands at around $32 billion

financialpost.com

I am not disputing the $30B number, sorry if you thought i was. I am disputing/questioning the comparing that figure with the $3.1B price it was sold for.

The three main things that would lead to an increase in value of this investment would be:

• Increased revenue from tolls
  • more cars using it
  • higher toll rates generally
• Lower interest rate environment (creating a present value of future revenues much higher when a lower discount rate is used)
• More road (expanded capacity leads to the first sub point on the increased revenue bullet) and that more road cost a lot of money to build.

The $3B we sold it for has little to no relationship to its current valuation...that is the part that is preposterous. Only one of those major valuation influencers (higher toll rates) could have been dealt with via a "better" contract. The higher road use and capacity couldn't and, certainly, at the time of the sale no one could have (or was) predicting investment returns/discount rates falling to where they are now.

It would be a very complicated exercise (beyond my excel skills) to try and isolate the revenue from the original 69k of road and figure out how much of that would be on the lanes built at the time and then discount that current revenue from the original lanes at the discount rates prevalent in 1998 ...but that is what you would need to do to isolate how much of that value increase is because of increased toll rates.....my "stick my thumb in the air" guess is that the answer is "not much at all". The biggest impacts would be for more revenue driven by more cars and that revenue discounted at substantially lower rates of return.

 

[Suburban_Toronto]

I am not disputing the $30B number, sorry if you thought i was. I am disputing/questioning the comparing that figure with the $3.1B price it was sold for.

The three main things that would lead to an increase in value of this investment would be:

• Increased revenue from tolls
  • more cars using it
  • higher toll rates generally
• Lower interest rate environment (creating a present value of future revenues much higher when a lower discount rate is used)
• More road (expanded capacity leads to the first sub point on the increased revenue bullet) and that more road cost a lot of money to build.

The $3B we sold it for has little to no relationship to its current valuation...that is the part that is preposterous. Only one of those major valuation influencers (higher toll rates) could have been dealt with via a "better" contract. The higher road use and capacity couldn't and, certainly, at the time of the sale no one could have (or was) predicting investment returns/discount rates falling to where they are now.

It would be a very complicated exercise (beyond my excel skills) to try and isolate the revenue from the original 69k of road and figure out how much of that would be on the lanes built at the time and then discount that current revenue from the original lanes at the discount rates prevalent in 1998 ...but that is what you would need to do to isolate how much of that value increase is because of increased toll rates.....my "stick my thumb in the air" guess is that the answer is "not much at all". The biggest impacts would be for more revenue driven by more cars and that revenue discounted at substantially lower rates of return.

Although I agree comparing the current valuation with the previous sale price of $3.1 Billion dollars maybe a bit disingenious in why its a bad deal. But if you look back at the history of the sale itself, it becomes very evident on why the 99 year lease in my opinon one of the greatest boondogles the Ontario government has ever done. Particularly around this key piece found in this article: https://www.thespec.com/news/canada...mpletely-botched-the-sale-of-highway-407.html

"Typical privatization deals involved 30-year leases. But the Privatization Secretariat instead suggested lease periods of 55, 99 or even 199 years, and asked the prospective buyers to make non-binding bids on these various options. When the longer leases produced higher bids, the secretariat used this to push the cabinet towards a longer lease.

The difference between the bids for a 30-year lease and bids for a 99-year lease amounted to $100 million — not a large amount to cover a period of almost 70 years. Of course, making a commitment for an extra 70 years would tie the hands of future governments and future generations. But that apparently counted for little in the minds of Harris cabinet members, compared to the benefit of receiving an extra $100 million that could be put towards pre-election deficit reduction."

TLDR: We could have sold a 30 year lease for $3 billion dollars and got back the 407 in 2027. vs $3.1 billion dollars and gettting it back in 2096......This would have a dramatic impact on road investments and revenue knowing Ontario government would be getting the highway back in 5 years vs. the mess we are stuck in now.

 

[TOareaFan]

Although I agree comparing the current valuation with the previous sale price of $3.1 Billion dollars maybe a bit disingenious in why its a bad deal. But if you look back at the history of the sale itself, it becomes very evident on why the 99 year lease in my opinon one of the greatest boondogles the Ontario government has ever done. Particularly around this key piece found in this article: https://www.thespec.com/news/canada...mpletely-botched-the-sale-of-highway-407.html

"Typical privatization deals involved 30-year leases. But the Privatization Secretariat instead suggested lease periods of 55, 99 or even 199 years, and asked the prospective buyers to make non-binding bids on these various options. When the longer leases produced higher bids, the secretariat used this to push the cabinet towards a longer lease.

The difference between the bids for a 30-year lease and bids for a 99-year lease amounted to $100 million — not a large amount to cover a period of almost 70 years. Of course, making a commitment for an extra 70 years would tie the hands of future governments and future generations. But that apparently counted for little in the minds of Harris cabinet members, compared to the benefit of receiving an extra $100 million that could be put towards pre-election deficit reduction."

TLDR: We could have sold a 30 year lease for $3 billion dollars and got back the 407 in 2027. vs $3.1 billion dollars and gettting it back in 2096......This would have a dramatic impact on road investments and revenue knowing Ontario government would be getting the highway back in 5 years vs. the mess we are stuck in now.

This, really is my last post on this

• the lease of 99 years was meant to reflect an effective sale....it is not uncommon in land lease situations at all.
• yes, the latter years in any present value calculation have less impact on the result than the first years....play around with a calculator and you will see that.
• people with the benefit of hindsight love to call this a boondogle...the fact remains that it was a fully open tender with exposure world wide and open to bids from anyone...and, based on what people knew at the time $3.1B was the highest bid the government received and it was subject to a 99 year lease.

There really is no point continuing this and I am sure other people are already past the point of interest in our little discussion. The road sold for $3.1B...it has, subsequently, benefited from expansion and increased use and increased tolls and lower investment yield environments to now be worth >$30B....none of that changes the fact that we are where we are and cancelling the contract will just end up with the largest pension fund in Canada suing the largest province in Canada for a whole lot of money (and you may even find out that that pension fund values this road at a figure higher than $30B )

 

[Deadpool X]

I am not disputing the $30B number, sorry if you thought i was. I am disputing/questioning the comparing that figure with the $3.1B price it was sold for.

The three main things that would lead to an increase in value of this investment would be:

• Increased revenue from tolls
  • more cars using it
  • higher toll rates generally
• Lower interest rate environment (creating a present value of future revenues much higher when a lower discount rate is used)
• More road (expanded capacity leads to the first sub point on the increased revenue bullet) and that more road cost a lot of money to build.

The $3B we sold it for has little to no relationship to its current valuation...that is the part that is preposterous. Only one of those major valuation influencers (higher toll rates) could have been dealt with via a "better" contract. The higher road use and capacity couldn't and, certainly, at the time of the sale no one could have (or was) predicting investment returns/discount rates falling to where they are now.

It would be a very complicated exercise (beyond my excel skills) to try and isolate the revenue from the original 69k of road and figure out how much of that would be on the lanes built at the time and then discount that current revenue from the original lanes at the discount rates prevalent in 1998 ...but that is what you would need to do to isolate how much of that value increase is because of increased toll rates.....my "stick my thumb in the air" guess is that the answer is "not much at all". The biggest impacts would be for more revenue driven by more cars and that revenue discounted at substantially lower rates of return.

Inflation would add to some difference as well. What was $3 billion 20+ years ago would have cost at least $6 billion today without any change. However even with extra investments they made, and inflation, the cost probably would have been $10-15 billion in today's dollars. So it was still a big loss to the taxpayers.

 

[Steve X]

Inflation would add to some difference as well. What was $3 billion 20+ years ago would have cost at least $6 billion today without any change. However even with extra investments they made, and inflation, the cost probably would have been $10-15 billion in today's dollars. So it was still a big loss to the taxpayers.

Especially when the revenue isn't going towards transit or paying off debt but instead to some rich CEO/board members and international share holders.

As most of the highway was already built and sold, they gain no expertise from the sale nor did Ontario need expertise in maintaining the highway. Something that might make sense in 3rd world country that needs consultant, construction and financial help. The only thing Ontario gained was the Halton Region portion and east of Markham Rd in which Mike Harris didn't have to spend money building it. As for all the lane widening, they probably did some calculus to determine the maxima for the best income with toll rates, number of lanes and travel time. I really don't think that is consider investing in Ontario highways. Just some typical business strategy.

As for the "99 year lease". Do we think cars would be around in 2098? What if a natural disaster destroyed the highway by the 2060s?

 

[Translude15]

I294 is tolled and regularly gets congested.

Most of the toll roads in suburban Chicago are also not the core highway routes of the city other than really I 294, which as I said, regularly gets congested. I-90 towards Rockford is tolled but is also built to be much larger than what an untolled highway on that same route likely would be, meaning it stays relatively uncongested.

Tolls reduce congestion no doubt about it, but just because you drop a couple bucks tolls on a road doesn't make the traffic suddenly be full free flow at all times.

The 413 as contemplated today would likely be uncongested for the first few years more or less at all times of the day, but as growth continues in North Brampton and Caledon it would fill up. It would likely never be as congested as the 401 through central Toronto though, and would have lots of room to add additional vehicle capacity to handle traffic growth, unlike the rest of the existing highway network. I don't really see the highway getting congested outside of the core rush hour for the first couple of decades, even without any widenings.

Oh absolutely it gets congested, I've driven it. Particularly the central segment between I-55 an I-90 near O'Hare but saying that, the tolls do make a difference on traffic levels. Obviously not 407 levels of free-flowing vehicles but traversing Chicagoland in rush hour via I-294 is infinitely easier than crossing the GTA via 401. The tolls, however small, do make a difference.

 

[wopchop]

Are you saying that reworking the 407's contract is cheaper than $6-10 billion that will be spent on 413? A few years ago 407 was valued at $32 billion. Doesn't spending $32 billion on purchasing that highway strike you a little wrong? And you have assumed that 407's owners are willing to sell the highway at all. It's a lot more than some paperwork issue.

No, I am not saying that at all.
First of all, I believe it is not in the long-term interest of this Province to build this highway and for us to sprawl from Milton to Bolton. From a environmental perspective, I think it is wrong.

What I am saying is that the government should attempt a deal with the Owners of the 407ETR to get a better toll arrangement, especially for commercial trucking, as they are the ones that would primarily benefit from it. There are significant amounts of commercial properties in the GTA that are accessible from the 407, and it would serve the purpose of truck bypass perfectly.

Building 413 could maybe be used as leverage, because if it is toll-free, it will likely siphon traffic and dollars away from 407. That's just one idea. There are a lot of smart people around that can probably think of more.

To me, it is more worthwhile to explore making an arrangement of some kind with 407ETR before spending the resources to build this highway, and forever commiting agricultural/rural lands in that part of the GTA to sprawl.