VIA Rail

[Bordercollie]

From all his interviews. He's been explicit they HSR is not good for the middle class and that he wants to build a service that everybody can use. Nowhere did he say, "I want to build a service only competitive with single occupant driving."

Very much debatable that the bulk of long haul travel is alone. 200 km Ottawa-Montreal or Montreal-Quebec? Sure. 400 km Toronto-Ottawa or 500 km Toronto-Ottawa-Montreal? Less likely.

Even in the 400KM distance, flying doesn't always work out. 30 Minutes to the Airport, walking from the parking lot to the terminal, checking in, and arriving 90 minutes before departure, time from landing. Then from the airport you need to rent a car to get to downtown or wherever you are going.

So if you take all that into consideration and weather delays it might be about the same. Comes down to which is more convenient and consistent.

 

[kEiThZ]

The problem is that the most probable strategies for generating a BCR for direct Montreal-Toronto service requires intrusion into freight railways' "private" affairs. That is clearly a non-starter under current government policy, but it is really not that sacred an issue IMHO.

It's just a perverse thing of VIA's strategy that in order to win at all, Via must preclude winning between the most populous city pairs that represent a huge source of growth.

Would Toyota adopt a business strategy that precluded selling Lexus, in order to sell more Corollas? Maybe, if the BCR pointed in that direction. The difference is that VIA is the executor of transportation policy first, and only a business second. The more HFR takes its business strategy in this direction, the worse the result will be as an infrastructure strategy.

Hopefully VIA will share more informed and expert analysis of its markets in due course. We amateurs can only speculate. The thing to watch is, what are they saying about the Montreal-Toronto market, and why is connecting the two largest cities in Central Canada only a secondary consideration?

Part of the problem here is the CIB. I used to be super enthusiastic about them and a huge defender. But now I'm less clear on their role. Are they there to make this project commercially viable or to bring it to fruition? What happens if the BCR is positive but it's not financially profitable on a commercial basis? Are they guided by a minimum BCR (as governments traditionally are) or maximizing BCR with additional capital investment if necessary?

The example was given of Calgary where they sprang for an extra station. But that's tens of millions more. Not hundreds of millions or even billions more.

The lack of transparency is bothersome. Especially given that this idea has been getting circulated for the better part of a decade now. And I don't think any of us can say confidently that the CIB will provide any info but the final decision in 6 months.

 

[kEiThZ]

Even in the 400KM distance, flying doesn't always work out. 30 Minutes to the Airport, walking from the parking lot to the terminal, checking in, and arriving 90 minutes before departure, time from landing. Then from the airport you need to rent a car to get to downtown or wherever you are going.

So if you take all that into consideration and weather delays it might be about the same. Comes down to which is more convenient and consistent.

This was discussed two pages back. I wish people would read back before getting into another rehashed discussion.

 

[roger1818]

This was discussed two pages back. I wish people would read back before getting into another rehashed discussion.

To be fair, this thread has 496 pages and lately it has been tending to accumulate several pages a day, making it tough to go back more than a couple days. That is one of the reasons (its Toronto centric nature was another) I was hesitant to join this forum (I have been a regular on other forums for years). The fact that Urban Sky is a regular here is what eventually enticed me. I do understand the frustration though.

 

[roger1818]

From all his interviews. He's been explicit they HSR is not good for the middle class and that he wants to build a service that everybody can use. Nowhere did he say, "I want to build a service only competitive with single occupant driving."

Middle class is a meaningless buzzword that is used because everyone likes to believe they are in the middle class. Of course he isn't going to say he is specifically targeting single occupant drivers, but it doesn't take a rocket scientist to realize that the fewer people in the car, the less economical it is per person, but public transportation (bus, train, or airplane) has the same per person cost regardless of how many people are travelling together (except for large groups where you might be able to get a group rate or charter "vehicle").

Very much debatable that the bulk of long haul travel is alone. 200 km Ottawa-Montreal or Montreal-Quebec? Sure. 400 km Toronto-Ottawa or 500 km Toronto-Ottawa-Montreal? Less likely.

It really depends on the situation, but people do drive long distances alone. I also said the train could be an attractive option for couples even if it isn't cheaper than driving.

The other factor is, the faster the train is, the more expensive tickets are likely to become. In part to cover their costs, but also in part because people would be willing to pay more for a faster trip.

 

[kEiThZ]

Middle class is a meaningless buzzword that is used because everyone likes to believe they are in the middle class.

Are you dismissing what VIA's own CEO said as part of his pitch for HFR?

Come on....

It really depends on the situation, but people do drive long distances alone.

They do. But it really isn't as common as people think. And exceptionally rare for high yielding business travelers.

I also said the train could be an attractive option for couples even if it isn't cheaper than driving.

Never said it couldn't be. Said it would be very much price dependent.

The other factor is, the faster the train is, the more expensive tickets are likely to become. In part to cover their costs, but also in part because people would be willing to pay more for a faster trip.

The flip side is also true. The slower the train, the more price sensitive the user base becomes. And the more unit costs for VIA go up as productivity drops. That's why I said it's a maximization problem on finding the best tradeoff between capital investment and the speed which generates max revenue. But everything we've heard (rumours wise) suggests they are pursuing the minimum viable solution. This is what concerns me and a few other people.

Will people take a 5 hr train to Montreal? Sure. VIA packs 5 hr trains to Montreal and Ottawa today. But politics is also about perception. And if a lot of people don't perceive value in the improvements HFR brings, funding improvements will become politically challenging.

 

[roger1818]

Are you dismissing what VIA's own CEO said as part of his pitch for HFR?

I'm saying he knows how to play the game.

 

[Darwinkgo]

Part of the problem here is the CIB. I used to be super enthusiastic about them and a huge defender. But now I'm less clear on their role. Are they there to make this project commercially viable or to bring it to fruition? What happens if the BCR is positive but it's not financially profitable on a commercial basis? Are they guided by a minimum BCR (as governments traditionally are) or maximizing BCR with additional capital investment if necessary?

The example was given of Calgary where they sprang for an extra station. But that's tens of millions more. Not hundreds of millions or even billions more.

The lack of transparency is bothersome. Especially given that this idea has been getting circulated for the better part of a decade now. And I don't think any of us can say confidently that the CIB will provide any info but the final decision in 6 months.

No, that addition to the project involves 15+ km of new ROW, many km of elevated track -- it is more like they added an UP Express (perhaps more like what Blue22 was envisioned as, a bit more barebones!) to the scope, not a 'single station'. Rail capacity in the west is very constrained by the high volume of freight, so passenger projects mean building track, not optimizing use of existing facilities with a bit of debottlenecking. I'd put in in near doubling the project budget, from around $700 million to $1.2 - $1.4.

As for transparency, I hope that successes build trust over time. I hope they release a wholesome report - I don't think we need to see all the work in the mean time (that certainly is a failure in Toronto's planning process, letting politicians meddle at all phases of project development slowing things down and modifying scope and goals.

 

[kEiThZ]

No, that addition to the project involves 15+ km of new ROW, many km of elevated track -- it is more like they added an UP Express (perhaps more like what Blue22 was envisioned as, a bit more barebones!) to the scope, not a 'single station'. Rail capacity in the west is very constrained by the high volume of freight, so passenger projects mean building track, not optimizing use of existing facilities with a bit of debottlenecking. I'd put in in near doubling the project budget, from around $700 million to $1.2 - $1.4.

I find it hard to believe they doubled the project budget. But great if true. Doesn't change the issues that HFR would face. I have my doubts, Cabinet would approve an $8B plan from CIB if they recommended that. But an encouraging sign if the did that. All their other projects have been them cutting cheques.

 

[Darwinkgo]

I find it hard to believe they doubled the project budget. But great if true. Doesn't change the issues that HFR would face. I have my doubts, Cabinet would approve an $8B plan from CIB if they recommended that. But an encouraging sign if the did that. All their other projects have been them cutting cheques.

Remember that the goal is not to constrain the overall project budget, but to constrain the needed public subsidy. If investments are projected to yield fares higher than their lifecycle cost, then it is a good thing. The $8 billion in your example wouldn't be $8 billion from the government. It would be 'the government needs to contribute $1 billion in subsidy, and $1 billion in equity investment that has a lower claim than private investors (just throwing numbers out there), to secure $6 billion in private investment.

The alternatives might be that a lower project cost which generates fewer fares would necessitate $2 billion in subsidy, $1 billion in equity, to draw in $2 billion in private finance.

As I've said before, it is very weird to think about projects this way since we've mostly been trained to think in a way that is entirely different.

 

[kEiThZ]

The $8 billion in your example wouldn't be $8 billion from the government. It would be 'the government needs to contribute $1 billion in subsidy, and $1 billion in equity investment that has a lower claim than private investors (just throwing numbers out there), to secure $6 billion in private investment.

That's what I used to believe would happen. Except that the CIB have not been able to draw in private investors on any of their projects to date. Hence, the excorciating editorial in Maclean's that I posted in the other thread. At this point in time, we haven't had a single private sector investor come forward to invest in HFR that we know of. Heck, naming Sabia chair almost looks like a ploy to get CDPQ to fund HFR so they can say the got an "outside" investor.

As I've said before, it is very weird to think about projects this way since we've mostly been trained to think in a way that is entirely different.

That seems a lofty goal compared to the reality. Even in Alberta all I see is an MoU to help completing studies and do due diligence. Nothing yet on financing (though we can expect it). And nothing at all on private sector investment. It's kinda hard to see how the rhetoric matches reality right now. I hope they actually get to that point. But right now, it's more talk than deliverables.

 

[Darwinkgo]

There are two gaps that I can see as to why they haven't been successful to date, but it could turn almost overnight. You can't bring investors in before you have prospectus - that is the gap 1. The second one is regulatory risk. The returns have to be quite good if investors are going to pony up before regulatory approval. So it might look like this: the government advances the project to regulatory approval, then sells an 80% or more stake in the project, and the buyer manages the rest. If the project can't attract investors at that stage, they either will be abandoned or the government needs to look at how much subsidy is worth adding to the pot to move the project forward.

I have lots of time for Paul Wells, and he is right, the CIB had lofty goals and it has been hard to show accomplishment because things take way too much time. I want to see it succeed because if it does it unlocks a lot more projects that are interesting but have very high up front costs that are hard to sell to voters as pure government projects.

 

[kEiThZ]

My point here is that if all they are doing is cutting in low interest loans and haven't failed to attract private sector capital, the kind of optimization we are hoping for isn't happening. I sincerely hope I'm proven wrong in 6 months.

 

[SFO-YYZ]

That's what I used to believe would happen. Except that the CIB have been able to draw in private investors on any of their projects to date. Hence, the excorciating editorial in Maclean's that I posted in the other thread. At this point in time, we haven't had a single private sector investor come forward to invest in HFR that we know of. Heck, naming Sabia chair almost looks like a ploy to get CDPQ to fund HFR so they can say the got an "outside" investor.

Do we actually know the current investor profiles of CIB and the capital structures of these investments? I'm not so sure we can come to this conclusion just based on the fact that there's been no information released to the public to date. I used to work in private equity and in vast majority of deals, we don't want our stakes in public/private deals openly disclosed, not until the deal is 100% finalized with ink on paper. I would assume the CIB takes a similar approach with their investor relations.

I realize you've been one of the more vocal voices on this thread voicing concern since the beginning, which is fine. But lack of publicly available information doesn't necessarily mean good news or bad news, as I'm sure a lot of project planning activities and investor conversations are happening in the background. Which is kind of the point of an institution like CIB in the first place - in that they are able to conduct their mandates at an arms length from the government and not under constant obligations to disclose information (in contrast to a purely public agency like TTC or STM which forces them to respond to every political whim).

Lastly, I will add that I'm in agreement that this process could have been expedited whenever possible, and it's also my (and many others') sincere hope to see more concrete plans and project costing for the HFR in the next 6-12 months time frame.

 

[kEiThZ]

Do we actually know the current investor profiles of CIB and the capital structures of these investments?

You can go through the deals they've closed. Crown Corps can't be secretive. So far, as far as I've seen none of it has involved private sector finance. Their great launch project was providing funding to a project that was already approved and had a large institutional investor (REM with CDPQ). With projects like that, we can definitively say the value of the CIB has been minimal. None of these are projects that wouldn't have happened without the Bank. Or even sped up without it.

I realize you've been one of the more vocal voices on this thread voicing concern since the beginning, which is fine.

Go back far enough, you'll find I was one of the most enthusiastic proponents for HFR and the CIB. It's the Bank's middling successes delivering and years without progess on HFR that have be concerned.

This is starting to feel exactly like the Ontario HSR proposal. The Wynne Liberals sat on that for years. Everyone thought an announcement was imminent. When nothing came and there was public grumbling in Kitchener and London, they hastily announced the EA. They then lost the election and we got nothing. The Trudeau Liberals have done the same thing with HFR for years. Sat on the idea. Then launched the JPO, four years into power and now we'll have a decision on the verge of a Spring budget that has a risk of them possibly losing power. I hope people can see why I'm both concerned and pissed that necessary infrastructure doesn't get built in the country and is value engineered to crap.