Private-Public Problems

Eglinton Crosstown Station rendering, copyright 2012 Metrolinx

It was recently decided that the upcoming Eglinton Crosstown LRT will be not only built by a private partner, but also operated by one. This has raised many concerns about how the "private" LRT will mesh with the publicly owned TTC.

Many experts and government officials will answer those questions (although perhaps not allay fears) in the coming years. I have my concerns about public-private partnerships (PPPs, or P3s) in regards to the operation of a public service such as transportation, because there are often competing goals between each camp. The "public" part will want to get the best "value" for their tax dollars. The private partner will have one goal: turning a profit.

I certainly don't condemn anyone (private sector or otherwise) for wishing to make money, and any government organization should be concerned about delivering its service at a reasonable cost, but it's dangerous to assume that "saving money" and "making money" are synonymous goals. There are several considerations that any government organization (like Metrolinx) must be aware of when penning a contract such as this one:

1) Public Transit rarely makes money. Indeed, it probably shouldn't; the loss at the fare box is usually more than made up when one factors in the various physical, economic, and environmental benefits that public transit provides. Still, this raises an important question about how much of a subsidy the private operator should receive. To give an idea of what's at stake, the TTC right now recoups about 2/3rd of its cost from the fare box. That missing 1/3rd is paid for by City of Toronto tax dollars. If fare is harmonized, the question is where exactly the private partner will make money. The answer is usually to squint the eyes at those "fat" union salaries, but I wonder if the gap between union and non-union salaries is enough to satisfy the private goal.

2) Public Transit cannot "go out of business". What contractual terms would be set between Metrolinx and the private entity? If we can agree that the reason Metrolinx wishes to have the line privately operated is to pass the "risk" of running a line to a different organization, then we must accept that the private organization is going to want a contract that reduces their risk. After all, if they can't see making a profit off the line, then they aren't going to want to run it. Period. Consider the fiasco with the London Tube as an example.

3) PPPs are complicated entities. I'm reminded of an article I once read about when the U.S. Military got a private organization to make fruitcake for their soldiers. Rather than the typical page you would expect the recipe to be, the recipe was instead over a dozen pages long. The government had to be extremely specific about what they were requesting, so that the private partner wouldn't cut corners, or deliver an "inferior" fruitcake to their men and women. Now, if it takes over a dozen pages for both parties to agree on how to make fruitcake, how complicated do you think a contract for operating a transit line must be?

And let's urge caution from the actual "public" viewpoint as well; when we pay for the privilege of a service (such as public transit), part of the deal is that we get to keep an eye on the books. Private companies, on the other hand, would retain complete privacy over their own finances and operations. It's one thing to criticize the TTC, as they have few corners to hide from public inquiry. It's another thing to cross one's fingers and hope that the public subsidy a private organization is getting is being put to good use.