Lead­er­ship by the Caisse is be­ing cred­ited with fast­track­ing Mon­treal’s long dis­cussed re­gional mass tran­sit sys­tem. The mas­sive pen­sion fund will own 51%

Investment Executive - - CONTENTS - BY AN DY RIGA

The Caisse is be­ing cred­ited with fast-track­ing the city’s re­gional mass-tran­sit sys­tem.

so many press re­leases, prom­ises and pro­pos­als; so lit­tle progress. For decades, Que­bec politi­cians talked up count­less trans­porta­tion projects that never got off the draw­ing board — air­port shut­tles, com­muter-train up­grades, tramways, light-rail tran­sit, bus rapid-tran­sit sys­tems.

So, Mon­treal­ers were un­der­stand­ably skep­ti­cal a year ago, in April 2016, when yet another plan sur­faced: a $6-bil­lion light-rail network that promised to solve mul­ti­ple com­mut­ing co­nun­drums at once. With down­town Mon­treal as the network’s hub, the 67-kilo­me­tre Réseau élec­trique métropoli­tain would shoot off in four traf­fic-clogged di­rec­tions by the end of 2020.

Just a year later, the dis­be­lief has faded and Mon­treal ap­pears poised to em­bark on the most far-reach­ing tran­sit ex­pan­sion since con­struc­tion of the sub­way network in the 1960s.

What makes the lat­est scheme dif­fer­ent? This time, an or­ga­ni­za­tion that gets things done is in charge: the Caisse de dépôt et place­ment, Que­bec’s pen­sion-fund man­ager. Op­er­at­ing at arm’s length from the gov­ern­ment, the Caisse is a fi­nan­cial jug­ger­naut ($271 bil­lion in as­sets) that knows how to gen­er­ate prof­its (in 2016, its an­nu­al­ized re­turn reached 10.2% over five years). And the Caisse has ex­per­tise in the area of in­vest­ing in rail­ways, thanks to the $14 bil­lion it has in­vested in tran­sit-re­lated in­fra­struc­ture projects, in­clud­ing Van­cou­ver’s Canada Line and London, U.K.’s Heathrow Ex­press.

Mon­treal’s LRT con­cept has hit some bumps. Que­bec’s en­vi­ron­men­tal re­view board raised con­cerns about rid­er­ship, fi­nanc­ing and own­er­ship. And some en­vi­ron­men­tal­ists want to stop the project, ar­gu­ing its green­house-gas re­duc­tion pro­jec­tions are ex­ag­ger­ated. They also warn that the sys­tem would cut through sen­si­tive green spa­ces and trig­ger more ur­ban sprawl.

But some of Que­bec’s big­gest en­vi­ron­men­tal groups counter that the ben­e­fits out­weigh the draw­backs. For what the Caisse es­ti­mates will be a 2%-4% in­crease in the re­gion’s over­all tran­sit bud­get, Mon­treal will get the equiv­a­lent of a sec­ond metro sys­tem, op­er­at­ing 20 hours daily, seven days a week, with trains on some seg­ments run­ning ev­ery 2.5 min­utes dur­ing peak times.

The pro­posed LRT tar­gets four ar­eas. 1) Trudeau Air­port, dif­fi­cult to reach by car and bus due to traf­fic. 2) The South Shore, served by packed buses that cross the St. Lawrence River on a re­served lane that’s shut down when it’s too windy lest the or­ange cones get blown away. 3) The North Shore, where trains are over­crowded and ser­vice is lim­ited. 4) The West Is­land, where trains are even more scarce and few tran­sit al­ter­na­tives ex­ist.

All of the fund­ing is in place now. The Caisse is pro­vid­ing $2.67 bil­lion, while Que­bec and Ot­tawa are each con­tribut­ing $1.28 bil­lion. The Caisse will own 51% of the network, and the two lev­els of gov­ern­ment 24.5% each.

As part of the deal, Mon­treal’s re­gional tran­sit au­thor­ity is con­tribut­ing $512 mil­lion, and Hy­dro-Québec another $295 mil­lion. And the feds will pay for a new, $4.2-bil­lion South Shore bridge.

Some crit­ics ar­gue the project is too sweet a deal for the Caisse, the goal for which is get­ting a re­turn on its in­vest­ment. But any­thing that ben­e­fits the Caisse also ben­e­fits Que­bec pen­sion­ers. And un­der the deal, once the Caisse has been paid its pri­or­ity div­i­dend, gov­ern­ments will ben­e­fit fi­nan­cially. The Caisse is promis­ing that the project will be the first Cana­dian tran­sit project in which gov­ern­ments will re­coup their cap­i­tal in­vest­ments and their bor­row­ing costs.

This time, when the train leaves the sta­tion, many Mon­treal­ers will be on board.


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