Reseau electrique Metropolitain (REM) is a fully automated light rail transit (LRT) project proposed by a subsidiary of Caisse de depot et placement du Quebec, to serve the major metropolitan areas in Montreal.Kable
A massive new light-rail project in Montreal is shaping up as Ottawa's first test of its plan to raise billions from private investors, but Quebec is pushing for a federal commitment well before a new Canada Infrastructure Bank will be running.
This week's Quebec budget revealed for the first time how a $6-billion proposal by Quebec's pension fund, the Caisse de dépôt et placement du Québec, would be structured.
Known as the REM, the 67-kilometre-long light-rail line would connect downtown Montreal to several suburbs and the Trudeau international airport. Quebec wants construction to start this fall, with passenger service in place by the end of 2020.
The Caisse would put up $2.67-billion and assume the construction, operation and ridership risks for the project in exchange for an 8-per-cent return on its investment. If returns exceed that amount, dividends are then divided according to formulas that eventually lead to a distribution based on each party's equity stake in the project, proposed as 51 per cent for the Caisse and 24.5 per cent each for Quebec and Ottawa. Quebec is proposing that each government put forward $1.3-billion. Ottawa has not formally agreed to fund the project but has made supportive comments about it in recent days.
"This falls right into the wheelhouse of the proposed role of the infrastructure bank," said C.D. Howe Institute researcher Benjamin Dachis, who released a paper this week on options for the infrastructure bank.
"Now it's a matter of whether this is a sort of thing that feeds into the bank or if it's too soon for the bank to make a decision," he said. "The thing is, this is the right idea … The Caisse is one of the major transportation infrastructure owners around the world."
It was also revealed this week that Toronto's Pearson airport is making a multibillion-dollar pitch to become a transportation megahub.
Both projects could serve as early test cases for how pension funds and private investors can help fund major new Canadian infrastructure projects.
The proposed infrastructure bank – which will have a budget of at least $35-billion over 10 years – is meant to provide a centre of expertise for governments at all levels that would offer advice on negotiating these types of major, long-term infrastructure projects.
However, the bank is unlikely to be set up in time to meet the aggressive construction schedule advocated by Quebec and the Caisse.
The federal government has not yet introduced legislation to create the bank, nor has it launched a public competition to hire the chief executive officer.
Brook Simpson, a spokesman for federal Infrastructure Minister Amarjeet Sohi, said Ottawa has the ability to approve specific projects even though its full, long-term infrastructure plan has not yet launched.
"We will be able to meet their required timelines," he said in an e-mail in relation to the REM light-rail plan.
Meanwhile, Toronto's Pearson International Airport has prepared a detailed policy paper on how a partial privatization of the airport could raise funds toward as much as $12.6-billion in new local and regional public transit that connects to the airport.
The plan proposes a $6-billion high-speed rail line connecting Windsor, London, Kitchener-Waterloo and Toronto. The airport suggests high-speed rail would reduce the need for short-haul flights, freeing up runway capacity for more long-haul international flights.
The Globe and Mail obtained a copy of the 39-page report, dated January, 2017, and marked confidential. The report has not been made public but its content was first reported Tuesday by the Toronto Star.
The transit projects near the airport could be financed in several ways, said one aviation-industry source familiar with Pearson's proposals, but the current discussions centre on some form of private investment in the airport.
"It would be more challenging for the airport to raise the funds itself, but it's not impossible," the source said.
The key to the airport's proposal is to turn the facility into a megahub – defined as an airport that serves more than 50 million passengers annually – with 20 million of them going to or coming from international destinations.
Pearson set a record last year when 44 million passengers travelled through it.
No decisions on airport privatization were announced in this month's federal budget, but officials say the government is still reviewing its options.
Bill Curry