There was similar enthusiasm for privatization in Bay Street brokerage houses, as well as law and accounting firms, whose services would be needed to carry out the deals. The had been developed in the early '90s by the NDP government of Bob Rae for the purpose of relieving traffic congestion in the rapidly growing urban area around Toronto.
It had been designed as a toll road, but the Rae government promised the tolls would be used exclusively to cover the highway's construction costs and would be lifted once those costs were covered, likely after about 30 years. When the Harris government announced in that it was considering selling the , critics immediately charged that a private owner would raise the tolls — a charge that was dismissed by the government.
Tony Clement, minister of transportation, and Rob Sampson, minister for privatization, insisted that, on the contrary, tolls would likely decrease because the private owner would be keen to attract more users.
One of the important issues considered by the Harris cabinet was the duration of the deal. Typical privatization deals involved year leases. But the Privatization Secretariat instead suggested lease periods of 55, 99 or even years, and asked the prospective buyers to make non-binding bids on these various options. When the longer leases produced higher bids, the secretariat used this to push the cabinet towards a longer lease. Of course, making a commitment for an extra 70 years would tie the hands of future governments and future generations.
So the cabinet opted for a year lease, thereby "handing over a lucrative franchise to toll the Highway corridor for almost a century," note academics Chandan Mylvaganam and Stanford Borins in their detailed study of the deal, published by University of Toronto Press, titled If You Build It … Business, Government and Ontario's Electronic Toll Highway.
Although Ontario had never privatized a highway before, the Harris government proceeded at full speed. After only one day of public hearings, it passed legislation facilitating the privatization in December At least part of the reason for the quick and dramatic jump in the highway's value was that it had been operational for less than two years at the time of the sale and the number of users was still growing.
Mylvaganam and Borins argue that if the government had waited at least another couple of years, the true profit potential of the highway in the explosively growing Toronto market would have been easier to establish, and it would have commanded a considerably higher price.
But that didn't fit the Harris government's electoral needs. Astonishingly, the Harris team failed to provide even minimal safeguards against future toll hikes by the private owner. The only protection built into the deal involved traffic volume; as long as the highway attracted a certain number of drivers thereby fulfilling its function as a relief route , the new owners had total freedom to raise the tolls to whatever level they chose! Sampson, the privatization minister, reflected the Harris government's blind faith in the marketplace when he assured the public that "tolls would not skyrocket because new owners need drivers if they are to pay off debts.
The limit is what the market is prepared to pay and that's a realistic limit. Sampson had evidently reached this comforting conclusion based on his understanding of how free markets work.
It apparently hadn't occurred to him, or to the others inside the Harris government, that the wasn't a free market; it was a monopoly. If there had been other similar roads for drivers to choose from — in other words, if it hadn't been a monopoly situation — the new owner would indeed have had to keep his tolls down in order to compete. But there were no other such roads.
That was why the was built in the first place, and why it was so valuable. David Turnbull, who had become minister of transportation, had the audacity to suggest that motorists had market power and if they didn't like the higher tolls, they should stop using the — even though they had paid to build it through their taxes!
The reality was that the new owners could keep raising the toll rates without losing customers because there was an enormous hunger for a relief route in the Greater Toronto Area, which had already reached five million people by the time of the sale.
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We apologize, but this video has failed to load. Try refreshing your browser, or tap here to see other videos from our team. One of the reasons that there were so many plate denials was that the new owner frequently made billing errors and yet had few staff handling the phones to deal with complaints.
Then, years later, it demanded payment of stunningly large overdue accounts. But after he was elected premier, McGuinty discovered this was more difficult than his campaign slogan suggested; the Harris government had signed a deal with ironclad terms — favouring the foreign company! When the company thumbed its nose at the new government by announcing a hike in tolls, not a rollback, McGuinty decided to take them to court.
That was the beginning of two years of failed litigation. Finally, in , an embarrassed McGuinty government announced it was abandoning its legal battle and acknowledged that the company had the power to set the tolls it wanted and to insist that the government deny plate renewals to delinquent accounts.
It was a complete victory for the private owner. Clearly, the premier sold the highway for a fraction of what it is worth, which is a fraction of what it will be worth in a generation or two or three , when it will still be in private hands. The sheer amount of money the Harris government gave up is astonishing. These mega-billion-dollar price tags reflect how much revenue is expected to be collected — in other words, how much Ontarians are going to pay for the privilege of driving on this road over the coming decades.
Flexibility indeed! Harris should have at least insisted that Ontario have a minority stake in the consortium. This would have allowed the province to share in the profits — as SNC-Lavalin did from the beginning. But if the goal is to strengthen pensions for Canadian workers, there are much simpler, cheaper, more equitable ways to do this than to dramatically overcharge ourselves for driving on our own highways.
The real travesty here is that the Harris government rejected the better option of retaining public ownership — for reasons that seem largely ideological. Had the remained publicly owned, the highway would have — if not by now at least soon — become part of the toll-free system of Ontario roads, saving Ontarians a great deal of money in the years to come. Having a privately owned highway smack in the middle of the most populous section of our country is a problem that limits our democratic options.
Mylvaganam and Borins also argue that the sale of the amounted to an important missed opportunity since the technology used for electronic toll collection on the was the most advanced of its kind in the world. Therefore, they note, public ownership of the could have been used as the basis for developing Canadian expertise in that technology, which is likely to be increasingly in demand as the world looks for ways to discourage the use of cars.
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