Hudak Promises To Incur Massive Project Cancellation Costs As Premier

Update (29 Oct):  A subsequent G&M piece says Hudak would respect signed contracts and would likely leave the Eglinton LRT alone. Also, this site claims Bombardier was paid an extra $68M for the order reduction in cancelling the Scarborough LRT. That brings cancellation costs to $153M.
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Yes, a Hudak led Ontario government would cancel LRT projects in the Big Move, causing major project cancellation losses to sunk costs (many projects are in-flight in planning or construction) and contract escape penalties to vendors like Bombardier for cancelling or scaling back orders.

"I think GO and our subways are the strengths in our system, and I do not believe in ripping up existing streets to lay down track.” - Tim Hudak

Toronto's decision to cancel the previously agreed and in-flight Scarborough LRT has cost at least $85M in sunk costs, plus a yet to be determined amount in fees by Bombardier for lowering the LRT car order.  Hudak isn't specific, but reading the Globe's synopsis, it seems pretty clear his intent is to cancel all LRT projects, possibly even including the already under construction Eglinton Crosstown line (Hudak was in Mike Harris' government, which filled in the under construction Eglinton subway line in 1995, so the history repeating here would be simply grotesque). In addition, this would almost certainly include the in-progress but not yet under construction Finch and Sheppard East LRTs, then a raft of other projects in the province such as LRTs for Mississauga and Hamilton.

“You set priorities and you make choices. But I think that every dollar we build underground is there not just for a generation, but for potentially a century. It’s a worthy investment. You’re absolutely right: I’ll lay down less track than I would if I did LRTs, but I think I get bigger bang for the buck in helping beat gridlock.” - Tim Hudak

The cancellation costs for all this would easily run into the hundreds of millions.  For someone hoping to ride the gas plant scandal to power, this is just astounding.

Additionally, Hudak showed he intends to use the proven talking points for subways such as the old "100 year" chestnut above.  Yes Mr. Hudak, subway tunnels last 100 years, but the trains, tracks, platforms & switches do not.  By this argument, we should bury all our roads, because hey, 100 year "investment."

The other favourite line of LRT proponents is the old "we cannot rip up roads" bit.  It is true that some LRT projects entail road disruptions & dedicated lanes, but as Seoul found, that can actually result in faster commutes not just for those taking transit, but car drivers as well, as removing the buses from their lanes (and possibly some amount of traffic as some drivers opt for transit) speeds up their commutes too.

The biggest whoppers come here:

“[The money] comes from the same place where the Spadina line came from, where the Bloor-Danforth line came from, where the Yonge line came from. It comes from the treasury,” he said. “We did that without tax increases in the past … You do it by finding efficiencies within government.”

First off, the province did not fund the majority of the existing subway network.  Of 64 existing stations, the first 38 stations (or 60% of the total) were funded by the city/metro governments without funding from the senior levels of government.  More importantly Hudak is hinging all this on the ever failing strategy of "finding efficiencies" in the existing government.

How often will voters fall for this deeply dishonest tactic?  Try and take seriously the idea that Hudak knows of billions of dollars of true "inefficiencies" in the current government, as I joked on twitter, perhaps there is a Ministry of Burning Cash that can be shut down. If so, wouldn't he be bragging about this specifically?  Embarassing the government day after day over the waste in Question Period?

Even as a matter of good public service, if the leader of Her Majesty's Loyal Opposition knows of significant areas of taxpayer waste, is he going to sit quietly on them waiting for an election which might be years in coming, letting the government keep wasting money which could be saved?

On the other hand, maybe the claim is true that he plans to "find" these efficiencies, but only once in government.  If so, how can he promise they are there?  He can't know this.  It's a hope, maybe an educated one, but still a gamble.  Even if you think say, 5% of all government spending is true waste (like leaving unused buildings lit at night or whatever example of clear out and out waste you can think up, not talking here about spending you just don't like, which still has a purpose) - it will tend to be a thousand or more little spots of waste.  There isn't really going to be a Minister of Burning Cash that accounts for 80% of the waste.  Finding those unnecessarily lit buildings or other duplication, overpayment & such is going to be tough. Maybe the process for getting someone a driver's license take 14 steps and can be shaved to 13 steps with months of work by the Ministry of Transporation and this saves like $5M a year.  I'm sure such inefficiencies exist in government as they do in every large organization, but wringing them out is tough work.  Complex multi-deparment processes have dozens of stakeholders and usually no one person fully undertands the purpose of everything in there, so spotting the "waste" takes weeks of stakeholder interviews to find the steps that no longer serve useful purposes or are duplicated elsewhere.

The obvious place this is going is that Hudak's idea of "efficiencies" is a set of service cuts for programs he doesn't approve of.  Wage cuts for public sector workers.  Layoffs.  Social assitance payment reductions.  Facility closures.  This is what is glibly hidden in the euphemism of "efficiencies."  Hudak doesn't spell these out because naming specific cuts before you're safely in power with a majority government is harmful to your chances of getting there.  This is an "elect me and then I will tell you my agenda" promise.

Yes, some of this is up on the party's website in a set of lengthy "white papers" which are statistically read by no one at all. The reality is that if Hudak had popular cuts to make in the name of efficiency, he would be bragging about them.  In fact, even Hudak's specific paper on the public sector has vague or small bore promises like a "top to bottom program review" and "a smaller cabinet" - about the only headline cost saver is a public sector wage freeze (which is a cowardly way of implementing a wage cut, since inflation will still increase government revenue, while increasing costs for these workers).

All of this makes me extremely dubious of the one good promise in Hudak's talk with the Globe, to build a relief subway line for the overcrowded Yonge line.  Even just the smallest version of the relief line running a backwards L between Pape on the Danforth line and to King station on the Yonge line will run over $3B in current dollars, while the likely needed version which goes up to the Eglinton LRT (assuming Hudak doesn't cancel it) is $5.5B.

When push comes to shove and the magical efficiencies don't appear, will this really get funded by a party whose fortunes rest on 905 belt voters?  How will Mississauga and Hamilton voters feel about their LRT projects being cancelled to fund a DOWNTOWN RELIEF LINE subway?  This would be the first thing cut. 

All of that in exchange for halting a bunch of viable, funded and shovel ready transit projects in exchange for ones that cost much more, serve fewer people and take years longer to complete with much additional risk. It will be the Scarborough subway but at a province-wide scale.

Here's hoping the Premier hangs on another year or two with Horwath's legislative support, and maybe even accelerates the existing projects to make the political costs for Hudak cancelling them too high to countenance. 

Dedicating Lanes to Transit Speeds Up Cars & Other Seoul Lessons

In a previous post we looked at Seoul's experience with a free market led surface transit "system."  Seoul has several other important lessons to teach Toronto though.  From that excellent paper I was citing:

Removing car lanes and dedicating them to transit can speed up everyone's commute:

In Seoul's case this was done with "Bus Rapid Transit" (BRT) where buses operate in dedicated lanes and private traffic is not allowed in those lanes.  But surface LRT on major roads would achieve a similar effect since it would remove the need for buses to operate on those roads (say, Finch Ave W or Sheppard Ave E in Toronto).  Seoul's experience was that bus speeds of course increased tremendously, but so did car speeds:

 

Private Funding of Transit Infrastructure is No Panacea:

 

Similar to Mayor Ford's difficulties in finding a for-profit partner to build (or even share costs) on his desired subway expansions, Seoul has found this difficult too.  The above is about LRTs, but even in subways bringing in PPPs is risky, as Seoul has discovered with the privatized "Line 9" subway, constructed in a PPP and where government is required to guarantee revenue to the privatized operators if ridership doesn't meet projections:

if ridership is lower than predicted, the city has had to pay the company tens of millions of dollars each year. MKIF and other investors made 13.1 billion won (US$11.8 million) from the line in 2010, 29.2 billion won (US$26.2 million) in 2011, and 38.4 billion won (US$34.5 million).

As they say of PPPs, the net result is to privatize the profits and socialize the risks.  The experience has already had Seoul nearly come to just buy out the private entities once over a planned fare increase, and as the previous link shows, they are currently changing the structure of the deal due to sustained pubic dissatisfaction with the arrangement.  These changes are causing one of the partners to pull out, poor dears:

But the biggest change is a deep cut in the rate of return guaranteed to private investors, from its current annual level of just over 13% (8.9% after taxes) all the way down to just under 4%.

If it takes a 13% annual ROI to keep free market players in the transit game, this isn't anything like viable. No way running a subway line should be this profitable - it's literally a utility.

World Class Cities Do So Use LRTs In The City:

One of the absurd arguments from subway advocates, led by Deputy Mayor Norm Kelly was that "world class" cities don't put LRT in the city proper, they use it in the outer suburbs, which for Kelly & co means the 905 belt, deeming everything in Toronto's legal boundaries to be "urban" regardless of actual density or zoning.  As noted in a previous post, parts of Scarborough and Etobicoke have lower density than Mississauga or even Brampton, but apparently anything less than subways is a grave insult to these "urban" areas of large single family houses on wide lots with plenty of parkland.  Despite the above mentioned problems getting private partners for all of them, they're pushing ahead on a set of up to 10 lines, from here:

That is a map of Seoul the city, proper.  These are not in their equivalent of a 905 belt surrounding the city.

In fact, Seoul's has one LRT line running already, this one is admittedly outside the city proper, but it was built to serve 32 million riders a year at opening, rising to over 50 million/year in years to come, quite comparable to the projected ridership on the planned Scarborough subway extension.

What a Free Market Municipal Transit "System" Looks Like

Former Rob Ford chief of Staff Mark Towhey gained some notoriety in the 2010 mayor's race for a blog post he wrote prior to joining Ford's team where he advocated the city simply shut down the TTC and sell off whatever assets that anyone wants to buy.  For anyone familiar with internet libertarians, it is a familiar refrain of blind ideological faith in the free market to provide for all needs, and that government cannot do so.

Sometimes libertarians are operating in the realm of sheer fantasy with no actual real-world examples of the magical benefits they claim will happen out of their various privatization schemes, but in this case there is a contemporary example of a major city that largely left the free market to determine its surface local transit, Seoul, South Korea prior to 2004:

 

The likely libertarian excuse for all this will be the government controlling the fares and providing operating subsidies - of course the fact that the government found it necessary to control the fares to keep transit affordable to the people most in need of it, the working class & poor won't register with them.  Instead the price controls & subsidies will be some do-gooder activist government intervening apropo of nothing, lacking adequate faith that eventually the free market will cure all its own self created ills.

Nonetheless, even if we accept that fare controls & subsidies have some negative effects, the multiplicity of coordination problems and unethical competitive behaviour are inescapably the consequences of running transit as a for-profit business.  Each transit company still competes for passengers and has incentive to overcrowd, rush & avoid unprofitable passengers. 

All of this goes into why in 2004 Seoul found it necessary to greatly extend the level of government control over the surface transit system, taking control over schedules & routes in addition to fares (while leaving the private companies to still operate the system).

Some context about Seoul is important here - today it is a (groaning as I type this overused moniker) "World Class City" and biggest city in a prosperous rich-world democracy, but that is quite a recent development.  South Korea's income per capita rose tremendously in recent decades so the fact that its bus system was very nearly fully private is an artifact of a developing world governance structure & capability, it also takes place in the context of a society that mostly couldn't afford cars, and thus most people had no other options than transit, however unsafe & inefficient it was.  Once prosperity rose to the level of mass car attainability, use of this wild west bus system fell precipitiously (ibid):

The alternative is to realize that transit is a natural government function as roads & rails are natural monopolies - there's only so much land to build them on, and use is rivalrous, so each competitor on the network makes the network worse.  Government must govern these things if they are to work for the people who need them (rather than for shareholders).  The actual drivers & operators may not need be government employees but the system as a whole needs to be, well, centrally planned or it will be a disaster.  Public transit is a utility, a necessary and proper function of government.

 
This is really quite common for libertarian fantasies - you usually find that their fantasy system used to exist in the early stages of societal development and the government intrusive/managed systems were introduced to solve the obvious, real and pervasive problems that leaving whatever function to the free market created.  Liberal do-gooders and socialists don't win these arguments to have government intervene unless there are already big problems with the status quo.  That government runs transit in most places is no different from why every rich world society found it necessary to have government manage health care, the US being just the latest (and very late) example:  If you want these things to work, government must be involved. 

As usual libertarians, it has been tried your way, and it failed, which is why the government is in there to begin with.  

Incidentally the article I'm quoting is an excellent look at Seoul's stupendous transit system, and more importantly how it got that way, as opposed to "transit porn" pictures of the subway route maps without any context of how it was all funded and built.