Across Canada, municipal and provincial government policy, especially in the absence of a much-needed federal highway policy, seems to be edging closer and closer to promoting public-private partnersh...
Across Canada, municipal and provincial government policy, especially in the absence of a much-needed federal highway policy, seems to be edging closer and closer to promoting public-private partnerships as the best way to solve infrastructure problems. But can such ventures provide a fair shake for commercial carriers?
In Ontario, for example, the sale of the 407 electronic toll route in 1999 has since been the focus of a lot of bitterness for commercial traffic users. In Nova Scotia, meanwhile, truckers are mandated to use a toll route, which they say does not even offer a significant advantage. And in British Columbia, the Liberal government recently released a Transportation Investment Act that is examining the need for private sector involvement in infrastructure funding. The British Columbia Trucking Association is doing everything it can to make sure the government hears the voice of trucking on where to draw the line on tolls.
If the Ontario Trucking Association’s experience with the 407 ETR is anything to go by, BCTA is well advised to be wary. Ontario’s 407 ETR, at its inception was initially viewed as a good alternative to other, more congested routes, and indeed, to a large degree the trucking industry anticipated the route would be a feasible economic alternative. The Ontario Trucking Association had stated that it was not, in principle, opposed to the idea of tolls under certain conditions.
“The province and the country, for a number of years, have neglected the upkeep of roads. If the Ministry of Transport had built the 407 under a capital budget, we’d need until 2025 or so to finish it,” says Doug Switzer, Manager, Government Relations, for the OTA.
But the OTA, and the Canadian Trucking Alliance as a whole, supported the idea of tolls based on a number of conditions that did not come to be. For example, that tolls must only be imposed on significant new highway construction; that tolls would cover the costs of construction only and would come off the highway once the debt was retired; that maintenance of such roads would be paid for from existing revenues; and that tolls should be set at different rates, reflecting peak versus off-peak demand.
“Toll rates should be realistic, and users should be involved in decisions on their construction. The issue is not the principle of user pay, it’s the specifics of the deal with the 407. The 407’s business plan seems to be to attract commuters, to service the Honda Civics. The number of trucks as a percentage of traffic is much smaller on the 407 than anywhere else, i.e private, aggregate, niche groups. Given 407’s attitude towards trucks, it’s not likely that would increase,” says Switzer.
Several issues have led to the bitterness, disenchantment and disappointment with the 407 situation.
Number one is the shoddy customer service that many users, whether commercial or commuter, say they’ve endured, i.e. billing for trips not taken, the inability to reach customer service, problems with licence renewal because of computer error, etc.
The 407 ETR is converting to a new computer software system representing an initial investment of $15 million and an easier-to-read bill in response to customer feedback.
The 407’s Communications Spokesperson Dale Albers maintains that commercial traffic is healthy on the 407, and that the toll route currently has over 95,000 business accounts, with Go Transit the latest to decide to use 407 exclusively from Oakville to Burlington.
“That testifies to the business accounts – that if they are choosing to use the 407 ETR it actually lowers their business costs,” he says.
Albers also says it’s a myth that the 407 doesn’t bill out-of-province carriers, another common complaint.
“We currently bill to 41 states, and 4 provinces. The majority of our traffic is from Quebec, Michigan, New York and Pennsylvania, and the billing process is exactly the same for them,” he says.
The sale of the 407 in 1999 to the private operator caused more concern as Ontario’s Conservatives appeased the public, saying the government had controls over tolls that it actually did not. And the last straw, for some users, was the ETR’s January 1, 2002 decision to charge one rate (per type of vehicle) all day, every day, including holidays. Currently, heavy transport vehicles are charged about three times the rate of cars.
But Albers says that elimination of the different rates January 1, 2002 did not lead to a decrease in usage overnight, and that he is not aware of any commercial operators coming forward to seek incentives to use the route.
“What is interesting is that in 2001 we did have a night rate which was half of the day rate, and when that was eliminated January 1 not only did we not see a decrease, we saw an increase in the usage during the night. Night usage is less than 6% of our daily traffic. Overnight traffic is primarily commercial traffic, stemming from their economic benefits of choosing to use it even at that early morning hour,” he says.
As a result of frustration with the toll rates, however, in May, the Canadian Courier and Messenger Association (CCMA) announced that one of its members had decided to pull its vehicles off the 407, and that more might follow.
In a press release, the CCMA said it was urging the government to rein in the 407 owners to ensure price gouging on the ETR ceases, and cited a formal document dated Apr. 13, 1999, issued as part of the sale of Hwy. 407, where it says the government misled the public.
‘The Ontario government led the public to believe it would retain control over toll rate increases when it stated: tolls can be adjusted by 2% per year plus inflation for the first 15 years, and thereafter by inflation only. This would mean that tolls could increase by about three cents per kilometer over the first 15 years.’
This was not the case, said the CCMA, noting 2002’s 92% increase for certain commercial trucks and automobiles, which followed on the heels of the 2001 increases, which were between 38% and 50% for other trucks and automobiles. The CCMA said that as long as the traffic flow on the 407 during peak hours is above the low threshold level established by the Ontario government, the owners of the 407 can actually raise toll rates as much as they want.
One company that has pulled some of its trucks off the 407 ETR is UPS.
“The problem is that the toll rate increases have been so excessive, particularly to the trucking industry, they are almost acting as a deterrent to trucks who would otherwise wish to use that highway. I’m not sure if this is a deliberate act on the part of the owners of the 407, if they really want to deter trucks from using the highway, but that is the effect of toll rate increases. As of January 1, 2002, UPS and other users of what we call heavy multiple units, were hit with a 92 % increase in tolls,” says Allan Kaufman, VP Legal and Public Affairs, UPS.
Kaufman notes that before the January 2002 toll rates went into effect, there was at least a reduced toll rate for trucks that used the 407 in off-peak hours.
“In our business, we don’t have too many cost factors that increase by 92 %. To say the least, we haven’t been pleased by that, and as a result we have pulled a significant segment of our trucking fleet off of Hwy 407. The point is that truckers are already paying triple the tolls that motorists pay – that’s bad enough, but to deprive the truckers of even a lower rate during off-peak hours when the passenger vehicles are not using the highway, that’s inexcusable in my view, ” he says.
Though there is a recognized demand among commercial users and commuters for improved infrastructure in Ontario and across the country, is the current format of what is essentially a double taxation tenable?
“There’s always the view that trucks will pay, because time is money, so it was the province that set the differential of 3 times the passenger car rate. I don’t think they understood pay scales, or how tight the margins are in the trucking industry. Time isn’t always money, and they’re asking you to pay over a third of what you’re making to pa
y a toll. Our beef is we pay about $6 billion a year in gas taxes and vehicle registration fees to the two levels of government and to hit us again for tolls is a little hard to stomach. There is only so much money to go around, and governments have swallowed that 6 billion dollars and we’re not going to get that money back,” says Switzer.
Not to mention that, without dedicating fuel tax dollars to fund infrastructure, those who are lobbying for more spending in this area just end up looking like the bad guys when they have to fight for those funds at the possible expense of health and education.
It’s easy to see where better controls could have been built into the public-private partnership scenario, says Switzer.
“You could leave in a lot more government control and you could have a much better pricing mechanism. Instead what the government did is they sold it, which created a mindset that the owners of the highway had to pay them a billion dollars. They not only have to cover the cost of the highway, they have to cover the cost of paying the province for the privilege of operating the highway. Well, they’re not going to pay that billion dollars – you and I are going to pay that billion dollars. So not only does that not protect us on tolls, it actually artificially inflates the tolls because now they have to cover the so-called profit that the province made plus the interest. It should remain what they call a turnkey operation,” he says.
Putting aside examples of public-private partnerships gone awry, though, are tolls our only viable alternative to increased congestion?
“There’s a wide variety of answers, Where we have gridlock now may just be a situation of more expenditure of public transit. Various schemes have been suggested, like truck-only lanes that are tolled. If the rates made sense, it’s an interesting concept. But it depends on the business case. Whenever we catch (the government discussing) something on tolls though, we want them to hear our message loud and clear. It’s not all about whether it’s technically feasible, it’s about whether it’s right,” says Switzer.
The Atlantic Provinces’ Trucking Association’s President Ralph Boyd, meanwhile, does not see tolls as a viable alternative, especially considering the experiences with tolls in Atlantic Canada.
“Taxpayers have to recognize that it can create a situation of double taxation. I don’t necessarily think that moving to the private sector is a wise thing to do in our part of the country. Canadian governments’ idea of a toll highway is building a major artery, in other words the Cobequid Pass in Nova Scotia, a portion of the Trans-Canada Highway,” he says.
The Cobequid Pass toll highway in Nova Scotia, managed by Atlantic Highways Corporation, says Boyd, was somewhat precedent-setting, in that commercial traffic had no safe alternate route at no charge, and were mandated to travel the toll road and to pay the toll.
“Because of the agreement with the private partner, we’re restricted from using the old route which our tax dollars went into building and maintaining. On one hand the government is asking us to continue to pay the same level of taxes, and in addition it’s asking us to pay a toll. For the savings to the industry being a total of about 5 km of travel distance, and a more treacherous route in the wintertime with severe grading, I would say that the trucking industry is probably paying more to operate on that route than they would to operate on the alternate. I can assure you that our taste for toll highways is a very bitter taste,” says Boyd.
When there was talk of a toll highway being developed in New Brunswick, the APTA was also opposed.
Then, following public outcry about tolls, Bernard Lord’s Conservatives promised they would eliminate the toll highway, but in the last capital budget at the end of 2001 they increased fuel taxes in the province, says Boyd.
“We contested the increase from the standpoint we felt it was exorbitant (1.7 cents a litre, with gasoline a little bit higher, at about 2 cents a litre) But we had agreed with the Liberal government that if they opted not to toll it, the trucking industry would consider paying another cent a litre for fuel tax to help offset the cost. Well, they came back with 1.7 and we disagreed mildly but the New Brunswick finance and transport departments announced that they were going to go establish a fund and give a full accounting of that fund on an annual basis. So this is the first province in the country that has come as close to dedicated taxing as possible,” he says.
Boyd would like to see something similar at the federal level.
“What we’re saying is governments, spend your revenue more wisely, reinvest in your infrastructure, and if a business case can be found that, by partnering with the private sector, roadways can be built less expensively and more quickly, then industry would take a look at it.
Truckers in British Columbia will be taking a hard look at the toll route options this fall. In July, the Liberal government under Transport Minister Judith Reid released its discussion paper on tolling in the Transportation Investment Act, 2002. The British Columbia Trucking Association, in anticipation of future announcements about tolling, drafted a response paper which it submitted to the government.
“We’re not exactly sure how far the government is proposing to go. Certainly tolls are being talked about in the context of new bridges and roadways in the lower mainland, such as for a bridge between Maple Ridge and Langley, which is a high priority from our perspective, because it would connect with a major arterial roadway that would travel along the south of the Fraser River, connecting industrial centres along the way, all the way out to Deltaport, a major container port, and to a certain extent with B.C. Ferries,” says Paul Landry, the BCTA’s President and CEO. “We support that project and we acknowledge the importance of tolls in terms of that project.”
In terms of infrastructure priorities, BCTA says it hasn’t attempted to provide advice to government about how to rank infrastructure priorities, but believes that reducing congestion in the Lower Mainland and improvements to the Trans-Canada Highway, Highway 97 in the Okanagan Valley, and highways accessing the U.S. are important for freight transportation and the provincial economy and, therefore, should be high priorities in terms of improvements.
The BCTA says it recognises that the B.C. provincial government faces tremendous fiscal challenges and that events beyond the control of the provincial government, such as the softwood lumber dispute, depressed Asian and U.S. economies, and the September 11 tragedies also negatively impacted the B.C. economy.
But the association stresses that government should not enter into long-term leases involving existing highway assets, nor should it toll existing infrastructure.
“Our highway system has been, and continues to be, financed through fuel taxes and other road-related fees. Half the population of B.C. (i.e., residents in the Greater Vancouver Regional District) are already paying the highest fuel taxes in Canada. To the extent that public debt exists as a result of highway investments, this debt should be financed through existing road user fees rather than through new taxes, fees or tolls. Tolls on existing facilities would be tantamount to tax increases on road users and would be a step backwards in terms of reducing the tax burden in B.C. in contrast to the commitment made by this provincial government and would, unfortunately, reinforce the reputation that B.C. means ‘Bring Cash’. These tolls would increase the cost of transporting goods and doing business, which, in turn, would raise the cost of living,” states the association.
In terms of a tolling policy, the only circumstance under which BCTA’s members supported tolls was for the construction of new highways until the construction costs are recovered (64 percent support).
“We will consider tolling proposals on a case by case basis, if it involves the development of highway infrastructure that wouldn’t otherw
ise be, and tolls should be dropped when the facility is paid for, and we also believe it necessary that there be a free, alternative route,” Landry told Motortruck.
The current toll route, the Coquihalla, was originally developed to support Expo ’86, he says. There were significant cost overruns, and it didn’t start out as a toll facility. But the government decided to toll the facility to finish the project. Tolls were supposed to come off, but have not.
“Neither the previous government nor this one have shown any willingness to eliminate the tolls, and in fact, some consideration is being given to leasing the Coquihalla to the private sector so that it would manage maintenance and collect the tolls in support of operating the highway. I guess we need to know more about that. We are concerned about public sector involvement in a situation like that. We don’t particularly object to the tolls per se because there is an alternative route. (Number 1 Highway through the Fraser Canyon) We’ve encouraged the government in the past to reduce tolls on the Coquihalla to encourage more truck traffic to use the highway. Most of the truck traffic is in fact on Number 1 highway, and it’s only a two-lane highway so we think from a public-safety standpoint more trucks should be using the Coquihalla,” Landry says.
BCTA also says the private sector should not be seen as a panacea for all of B.C.’s infrastructure woes. The Association has several issues and concerns about the Transportation Investment Act, 2002, specifically that if public money is invested in a new highway project, government should maintain ownership of the highway and the private sector should only be allowed to enter into leases to manage the highway for a specified period of time.
However, if the private sector takes complete responsibility for the financing (including purchasing the necessary right of way), development and construction of a new highway, the private sector should maintain ownership of the asset.
If public assets are leased or sold, the BCTA would also like to see a comprehensive public policy context that would demand, among other things, compelling arguments as to how privatization would benefit the public and significant broadly based public consultation to determine whether such action is supported and supportable.
Additionally, BCTA supports, among others, the following principles outlined in the government’s proposed tolling policy: that the public have the same rights to access tolled highways as non-tolled highways; that tolls not be used to generate revenue for the provincial treasury but be used to defray government costs related to highways projects and provide a return on the investment of the private-sector partners; that the same maintenance, safety and other standards, and rules of the road, apply to tolled highways as non-tolled highways; that the privacy of personal information used to levy and collect tolls would be protected; that tolls only be implemented where there are clear, demonstrable net benefits for the users of new or improved transportation facilities, such as travel-time savings, vehicle operating cost savings, reliability and safety benefits; that the structure and collection of tolls be customized to suit the unique circumstances of each private-sector partnership; that toll collection not impede travel on major high-volume routes, and that public consultation occur in all cases where tolls are considered.
Under no circumstances, says the BCTA, should trucks be forced to use a toll route, and when the private sector is involved in the development of new infrastructure, all financial details regarding the costs and revenues associated with a toll route should be fully disclosed to the public.
Despite all the disillusionment with current toll routes and the wariness about future ones, however, public-private infrastructure initiatives may be a necessary evil. As Boyd notes, Canada is one of the few industrialiazed nations that doesn’t make a substantial investment in its infrastructure on a regular basis. And public-private infrastructure initiatives are not necessarily predestined for bitterness and disappointment.
“Public-private partnerships can work and do work. They do work all over the world. For example, the outsourcing of highway maintenance (in Ontario) has been such a successful partnership. In future, toll highways may be the only way we’re going to get highways built, but you could be a lot smarter about it,” says Switzer.mt