(Montreal) Even before a single passenger had boarded the Réseau express métropolitain (REM), the public authorities’ bill had increased by 4.58%, which represents, according to the ridership projections of those in charge of the project , an increase of 2.4 million in 2023.
This increase will reach $21 million in the tenth year of operation in 2032, to which will be added the cumulative inflation over 10 years, again according to ridership projections from CDPQ Infra, project manager of the REM project.
This increase is attributable to the way in which the Management and Implementation Agreement between CDPQ Infra and the Ministère des Transports (MTQ) and its mirror version for integration into the public transit network, endorsed by the Autorité régionale de metropolitan transport (ARTM).
The two agreements were concluded in March 2018, while the first segment of the REM, the one connecting the South Shore to downtown Montreal, was to be put into service in the summer of 2021.
Contradictory clauses
The particularity of these agreements is that they stipulated that the ARTM, which sells the fares to users, pays CDPQ Infra $0.72 for each kilometer traveled by each passenger, which is referred to as the fare per passenger. -kilometer “from the commercial commissioning of the first segment” of the REM. However, this commissioning is not associated with any date in the two contracts, which seem to take for granted that the commissioning will indeed take place in the summer of 2021.
In November 2020, a new schedule was presented, postponing the commissioning “to spring/summer 2022”, and in October 2022 it was postponed to spring 2023 to finally be brought back to next July 31.
However, both contracts include an adjustment provision for inflation which provides that the rate paid by the ARTM “will be adjusted on 1er January of each year (the indexation date) from 1er January 2022”.
In other words, the inflation adjustment was to begin to apply after commissioning, which was then scheduled for the summer of 2021. From 2018 to the end of 2022, the scheduled rate remained unchanged, at $0.72 per passenger-kilometre.
Rise before commissioning
However, this rate rose to $0.753 per passenger-kilometre on the 1er last January, an increase of 4.58%, and this, before “the commercial commissioning of the first segment”, whereas the contract provided for $0.72 at the time of commissioning.
It took several calls and email exchanges with CDPQ Infra, the Ministry of Transport and the ARTM before obtaining clarifications on this increase, the three entities passing the buck as to who would answer questions from The Canadian Press.
Finally, both the MTQ and CDPQ Infra acknowledged that there had been no inflation adjustment on 1er January 2022, but that there had been one on 1er January 2023.
“Following the mechanism defined by the agreement, the rate increased in January 2023 to 0.7530, which represents an increase of (4.58)%. For reference, for the year 2022, the average annual CPI is 6.8%,” writes Emmanuelle Rouillard-Moreau, spokesperson for CDPQ Infra.
On the side of the Ministry of Transport, spokesperson Louis-André Bertrand explains that “given that the REM has not been put into service according to the initial schedule planned for 2021, the basic unit rate of 0.72 $ has not been adjusted for the year 2022. As provided for in the agreements with CDPQ Infra, the basic unit rate for 2023 has been indexed to $0.753 per passenger-kilometre. »
Slice the pear in half
This means that CDPQ Infra, to whom the contract allowed it to adjust the rate as of 1er January 2022, agreed to cut the pear in half and only adjust last January, while the MTQ agreed to collect a rate increase before commissioning.
Although it is the ARTM that pays the tariff, Mr. Bertrand points out that all Quebec taxpayers are parties to this contract. “The ministry assumes 85% of the net financial impact of the commissioning of the REM and pays a contribution to this effect to the Autorité régionale de transport métropolitain,” he specifies.
The opinions of experts interviewed by The Canadian Press are mixed on the way this contract was drafted. Everyone agrees that clauses linked to inflation are quite normal for this kind of large-scale agreement. However, these experts wonder about the understanding that the ARTM and the MTQ had of their formulation.
Aware of the risk?
There is “nothing abnormal in this procedure insofar as the price remains constant (at $0.72) in ‘real terms'”, explains economist Marcel Boyer, an expert in public economics at the University from Montreal. “This clause is neither new nor exceptional. One can think (or hope) that it was known and understood by the authorities of the ARTM and by the governments, provincial and municipal”, he writes. The important thing, he adds, is “that the partners are aware of the risks they represent and can estimate the price, cost or value”.
Maude Brunet, expert in project management at HEC, points out that this contract is “rather atypical” at the start. “However, on reading the clauses related to payments (p.13), we can notice that in no case the adjustment of payment (from 1er January 2022) is conditionally linked to a prior commissioning, it is rather dissociated to allow a vagueness to be interpreted (in favor of the Fund in this case). »
She adds this rather revealing comment: “The teams of lawyers who draft and conclude these imposing agreements are sometimes unequal, in terms of number of individuals and skills, and unfortunately often to the disadvantage of the public party. »
“We should have waited”
For his part, M.e Claude Laferrière, expert in business law, is not tender in his analysis of the preferred approach in this case. “Why increase the fare from .72 to .753 cents on the basis of inflation when the REM is not in service and the de facto response of the passenger market is unknown? he wonders.
“In fact, we should have waited at least a year after the REM was put into service to announce this fare increase, if that were to prove necessary. For now, the authorities have engaged in a theoretical exercise and clumsy communication that can give rise to a thousand speculations,” notes the lawyer.
Finally, two clarifications are in order. The first is that the cost increase figures of 2.4 million in 2023 and 21 million in 2032 (plus accumulated inflation) are based on ridership projections of 72.6 million passenger-kilometres in 2023 and 636 million passenger-kilometres, as found in the annexes of the two agreements and which are maintained by CDPQ Infra
The second is that the actual costs charged to the ARTM “will be based on actual traffic and not estimated or projected,” said Ms.me Rouillard-Moreau. Also, this rate of $0.753 per passenger-kilometre will be reduced by 20% if the actual ridership reaches 115% of the projections and will be reduced to the cost of the ticket if this ridership reaches 140% of the projections.