Liberals may pay heavy penalty for 407 promise
TORONTO, (Nov. 3, 2003) — New Ontario Permier Dalton McGuinty’s plan to roll back rates on the private 407 Highway north of Toronto may face tough hurdles and is likely to cost taxpayers billions if the government goes forth with its plan.
A report by financial agency Standard and Poor is warning Ontario’s new Liberal government that 407 International Inc. — the private consortium that owns the highway — has an iron-clad contract that protects its interests against government interference. Breaking the contract may cost between $8 to $13 billion in compensation to 407 International’s investors. The contract states the government may be on the hook for whatever the company loses.
The analysis recommends the government break its election promise to roll back the hikes to 2 per cent a year, plus inflation, and keep its hands off the tolls altogether. Tolls have gone up five times in the last four years, and the last increase in February was almost 13 per cent.
The private consortium bought the 108-km highway from the Conservative government in 1999 for $3.1 billion.
Incoming Transportation Minister Harinder Takhar said the contract appears to be tilted heavily in favour of the consortium that includes a Spanish company and Montreal-based SNC Lavalin. “This is a bad contract, there’s no question about it,” he told Canadian Press.
Takhar said lawyers were reviewing the whole document to see what can be done. The government hopes to come up with an amicable agreement with the company. Under terms of the contract, the province can try to renegotiate parts of it after next April.
— via Canadian Press
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