Ontario's bewildering public-sector sell-offs

“Trust us,” the provincial government seems to be saying, “we can't do anything right. You're better off with Bay Street.”

Thestar.com
May 3, 2015
By Bob Kinnear

It's hard for a lot of Ontarians to understand the latest wave of public-sector sell-offs taking place in this province, especially the ones that nobody ever voted for. But it's even harder for those of us in the transportation business, which has suffered from this wrong-headed strategy more than any other public enterprise.

Former TTC chief general manager Rick Ducharme never visited city hall without a briefcase filled with clippings of transit privatization horror stories from around the world. And that was before the collapse of the biggest public-private partnership (P3) of them all - the privatization of the London Underground, which was supposed to prove the concept for the whole world to see.

Instead, British taxpayers spent more than one billion pounds mopping up the debt left by the bankruptcy of the P3's private-sector partner - after having spent half that already to put the complex deal together in the first place.

Or consider Melbourne, Australia, a city very like Toronto, where privatization has left such a crippled transit system that most citizens have no access to buses after 8 p.m. - and none at all on Sundays. Is that what we want for our city?

Even the supposed successes, once you read the fine print, turn out to be losers. Transit in York Region north of Toronto is the only fully privatized system in Canada and charges the highest fares - $4 for a single Zone 1 bus ride, a dollar more for Zone 2. It is also the most heavily subsidized in Ontario, with taxpayers kicking in an additional $5 every time a paying passenger boards that bus.

By contrast, the publicly owned, publicly managed TTC receives a subsidy of 29 cents for every passenger - one of the best cost-recovery performances of any transit agency in North America. And, I might add, the TTC pays its unionized staff considerably better than the mainly foreign owners of York Region's high-cost transit system pay their workers.

I only wish more people had paid attention to the auditor general's recent report on this province's adventures in what it calls “Alternative Financing and Procurement” (AFP). The AG analyzed 74 P3 projects managed by Infrastructure Ontario and concluded that taxpayers have paid $8-billion more than they would have if the public sector had financed and managed the projects - enough in itself to build a subway three times longer than the beleaguered Spadina extension.

Against that, she balanced the savings estimated to result from private-sector management of these facilities. And that is where the real scandal emerged.

Infrastructure Ontario produced so-called “value-for-money” estimates claiming that efficiencies gained through private construction and operation of these projects will save an astonishing $40 billion - five times greater than the $8 billion in extra costs attributed to private-sector procurement.

But when the auditor went looking for the evidence underlying those estimates, she found only guesswork and bias designed to show public enterprise in the worst possible light. Most she dismissed as blatantly unreal.

To make mistakes is one thing. Ontarians have forgiven their government for E-health and ORNGE (perhaps not the 407). But to continue to pursue such disastrous policies in spite of your own experience, matched by clear warnings from recognized authorities, is the definition of folly. But that's where we're headed, with no brakes on the train.

Once we had a provincial government that demonstrated the power of public enterprise like none other. Nobody in the world had cheaper, more reliable electrical power and public transit than we here in Toronto. Today we have a government that is determined to prove its inability to deliver even such basic public goods as hospitals and courthouses.

“Trust us,” the ministers say, “we can't do anything right. You're better off with Bay Street.”

That, I fear, is the real impetus behind AFP: It's a make-work scheme for underemployed financiers who are having trouble finding easy rents in a time of low interest rates. It's corporate welfare at its worst.

The auditor general, along with many academic experts, says that government is perfectly capable of managing large contracts efficiently. But for how long will that be true if they refuse even to try? When will the self-fulfilling prophecy of government incompetence become true?

I fear that public trust in government will be so eroded by the time our grandchildren are grown up that nobody will remember a time when the trains actually ran on time - a time, already past, when government had the courage to invest directly in building a better future for all Ontarians.