VIA Rail network developments

[Mister F]

Originally Posted by lrt's friend

We need to hit as many significant locations in SW Ontario as possible. In my opinion, to maximize ridership, there needs to be stations in Guelph and Stratford.

Stratford isn't on the proposed high speed line because it's out of the way and too small. But the line that it's on would still have train service under the proposed plan. The existing line to Sarnia via Stratford would feed into the HSR line at London and Kitchener.

Originally Posted by lrt's friend

The model used in Europe has intercity trains sharing the track with local trains with only local trains stopping in smaller communities. Is this an option here? This may require additional track in certain locations to accommodate local trains.

That's exactly what they're proposing actually, at least east of Kitchener.

Originally Posted by acottawa

The Toronto-Ottawa-Montreal corridor current attracts 2.1 million pax/year (from the 2015 Via Annual Report). If HFR leads to a 100% increase in passengers, each ticket would have an average payment to the pension plan of $47.51, so without paying for the train, it is already more expensive to pay the pension plan than it is to take the bus, buy gas, or even take Via's current service if you book in advance. Even if you assume all of the HFR efficiencies lead to a 50% reduction in cost (from $107 to $53) - which is a huge assumption- you're looking at an average ticket price of $100, which is not going to lure people off the bus (which was your original assertion that started this conversation). As I said earlier, a train service can have cheap tickets, it can have high capital costs, it can have significant private sector funding, but it can't have all of the above.

I've seen estimates for HFR ridership of between 7.2 million and 9.9 million (the latter figure might include the Quebec City section). So ridership would at least triple and potentially quadruple on that route.

Originally Posted by acottawa

Ok, but commuter train usually refers to a specific type of service not any service that happens to carry commuters (with London real estate prices so high, all kinds of things have been turned into commuter services, including Ryanair). https://en.wikipedia.org/wiki/Commuter_rail I am still not aware of any examples where something that looks like a GO train shares track with a high speed train running at high speeds on the shared portion. In most cases, the high speed trains run at conventional speeds in this sections or there is a parallel track for the high speed trains.


I assume you mean Salerno (because you will need scuba gear for a train to Palermo). That's an interesting example, but I think it is unlike Kitchener in several ways. It is no primarily used as a commuter service, it is an extension of a high-speed line (from Turin to Naples) rather than the core element of a high speed line, and it actually runs at high speeds, so it isn't sharing track with commuter trains (which continue to go around the mountain).

Of course something that looks like a GO train wouldn't share tracks with a high speed train. GO is electrifying anyway, so they will be buying electric trains. No doubt that if the tracks are upgraded to handle 250 km/h, GO will buy faster trains. Commuter trains going faster than 200 would be quite feasible in that case, just like they are in other countries.

Yeah my bad on Salerno. That high speed line doesn't have commuter stations but it is a core element of Italy's high speed network. It will eventually be extended to the end of the peninsula. Speaking of Palermo, lines in Sicily are being upgraded to 250 km/h as well. A bridge to Sicily has been talked about for years and could happen someday. No scuba gear required.

Still, high speed trains sharing track with commuter trains is quite common. Some examples include the lines from Bologna to Verona and Padua, which between them have dozens of stations. Both have trains that go 250 km/h. The line from Berlin to Hanover largely runs in the same right of way as the old one except for some urban bypasses, which could be an option for the Kitchener line. The Acela Express in the States shares tracks with commuter trains, including on the admittedly short high speed sections where they go 240. In France, TGV trains to Bordeaux go 220 km/h while slower local trains use the same tracks. This line is busy enough that a new high speed line will soon open to relieve it.

[HighwayStar]

Originally Posted by Truenorth00

Exactly. They'll even accept returns as low as 5% if they are super secure. They only care about preservation of capital and returns above inflation and prime. A 5% rate of return will still double your money over and above the 2% inflation target rate, in 24 years. That's solid for a pension plan.

These days... who wouldn't accept a "super secure" rate of return of 5%?? How does the average person get in on this??? and CPPIB notwithstanding, subsidizing the other PS Pension funds through VIA fares does not seem fair to those of us not covered by a DB PS Pension.

Why not let those of us without a DB PS Pension invest in this???? I'd happily risk some of my RRSP.

Originally Posted by acottawa

Ok, so rather than buy bonds, or invest in the equity market, or buy real estate, the CPPIB is going to lend money to another crown corporation at a rate higher than if the government just floated a 30 year bond to pay for the rail line. And they won't make this loan directly, but have it brokered by a third crown corporation. So the CPPIB gets about the same return it could have got elsewhere, some combination of Via Passengers and the Federal Government pay more, plus a whole lot of consultants, lawyers, advisers, lobbyists and political parties make off like bandits from all the money floating around.

This kind of complicated scheme makes sense of your religion believes interest is forbidden, or if you're a small southern European country trying to hide debt from the EU so you can join the Eurozone, but it makes little sense for a secular country with a AAA credit rating.

Excellent points... my only question is where else the CPPIB could get a "guaranteed government return" of 5%+...

For the record I am fully in favour and totally excited at the possibility of rail expansion and Infrastructure construction... I'm enjoying very much the technical discussion on this thread.

My issue is this financing construct seems to be a shell game introduction to a pyramid scheme...

Only the PS (and hangers on) and lawyers will win.

[Truenorth00]

Originally Posted by HighwayStar

These days... who wouldn't accept a "super secure" rate of return of 5%?? How does the average person get in on this??? and CPPIB notwithstanding, subsidizing the other PS Pension funds through VIA fares does not seem fair to those of us not covered by a DB PS Pension.

Why not let those of us without a DB PS Pension invest in this???? I'd happily risk some of my RRSP.

If you're contributing to CPP, you're already benefiting.

Originally Posted by HighwayStar

Excellent points... my only question is where else the CPPIB could get a "guaranteed government return" of 5%+...

Plenty of places. Outside Canada.

Read this:

http://business.financialpost.com/news/f...on-plans-the-new-masters-of-the-universe

4 of the top 8 global infrastructure investors are Canadian pension funds.

Originally Posted by HighwayStar

For the record I am fully in favour and totally excited at the possibility of rail expansion and Infrastructure construction... I'm enjoying very much the technical discussion on this thread.

My issue is this financing construct seems to be a shell game introduction to a pyramid scheme...

Only the PS (and hangers on) and lawyers will win.

Like I said earlier. This would not be necessary if the public would accept taxes and spending at the level necessary to keep the country competitive. They won't. Ergo, private capital is required.

This would not be strange in any other part of the world, where these pensions plans invest. It's only strange in Canada, because we have a long tradition of talking and talking, expecting government to do something, and then refusing to accept taxes or higher debt loads that would allow the government to build something. It's no coincidence that all those complaining about private investment here, would be the first people to complain if the deficit was suddenly $7-10 billion higher. Hypocrites abound.

We've had decades of inaction. And talk. And talk. And talk. It's left Canada as the only country in the developed world without high speed rail. Forget HSR. We don't even have a solid conventional speed intercity service. Meanwhile in the last 20 years, the Chinese have literally gone from having steam engines on some rail lines to the largest high speed rail network on the planet. That's who we will have to compete with in the coming decades. So, I for one, am happy that the infrastructure bank is finally going to remove politics a bit from projects and break the logjam. They can get to work building something so that we might have at least a faint hope of having a competitive economy in the future.

This country has massive infrastructure needs going forward. The last FCM study estimated the infrastructure backlog of just facilities in critical condition at over $100 billion. And that doesn't begin to address the infrastructure needed to compete in the 21st century such as high speed rail, smart adaptive energy grids and fibre networks. To actually be competitive, Canada would need something approximating $200 billion in NEW infrastructure spending over the next 10-15 years. The public will never support that much new public spending. So let the private sector fund a portion of it and stretch the payments so users can at least get the services needed and pay for it.

[1overcosc]

Originally Posted by HighwayStar

Why not let those of us without a DB PS Pension invest in this???? I'd happily risk some of my RRSP.

I agree that the infrastructure bank should be opened up to the general public. Many Canadians would love the idea of personally investing in their country like this.

[Truenorth00]

Originally Posted by acottawa

I don't recall a government ever get voted out of office for building too much infrastructure.

They never get voted out for building infrastructure. They get voted out because the "deficit is too high and they're going to bankrupt the country/province/city". I'm largely a fiscal conservative. But it seems to me that conservatives these days are all about deferring spending and letting the bills mount rather than actually being fiscally responsible. Meanwhile, of course, we have the Liberals who promised small deficits on infrastructure and then spend nearly triple on new social programs. So I'll take what I can get here with the bank.

Originally Posted by acottawa

The federal government is planning to spend $186B on infrastructure over the next 12 years. There is no particular reason why they couldn't spend $4B (about 2% of the total) to build a new railway.

The FCM says over $140 billion worth of infrastructure is in poor or very poor condition:

http://www.fcm.ca/Documents/reports/Canadian_Infrastructure_Report_Card_2016.pdf

That doesn't include the replacement cycle for a ton of stuff. And it doesn't address new requirements like smart grids, high speed rail, etc. So $186 billion is not as impressive when you look at it in context. So either they add tens of billions more or look to leverage private sector funds on those projects where institutional investors are interested. Added bonus if these area Canadian pension funds and the money is being recirculated inside Canada, instead of these funds having invested billions building up the infrastructure of other countries.

[Truenorth00]

Originally Posted by 1overcosc

I agree that the infrastructure bank should be opened up to the general public. Many Canadians would love the idea of personally investing in their country like this.

I'd love to see them do some kind of Infra Real Return bond. Inflation + 2% or something like that.

And if all goes well I can see them starting to sell bonds to mutual funds and the like. Launching like that is very difficult though. I can see why they stuck to the pension funds for launch. It's much easier to deal with a handful of seasoned investors who have timeframes well beyond the average individual investors than deal with thousands of bondholder who think $100 000 is a major investment.

[HighwayStar]

Originally Posted by Truenorth00

.
Like I said earlier. This would not be necessary if the public would accept taxes and spending at the level necessary to keep the country competitive. They won't. Ergo, private capital is required.
.

My whole point is Public Sector Pensions Funds are not (or should not be) considered "Private Capital".

[HighwayStar]

Originally Posted by Truenorth00

I'd love to see them do some kind of Infra Real Return bond. Inflation + 2% or something like that.

And if all goes well I can see them starting to sell bonds to mutual funds and the like. Launching like that is very difficult though. I can see why they stuck to the pension funds for launch. It's much easier to deal with a handful of seasoned investors who have timeframes well beyond the average individual investors than deal with thousands of bondholder who think $100 000 is a major investment.

Whats with this "seasoned investor" nonsense. Offer a 5% Infrastructure Bond to the general public and the "amateur investors" will be banging down the door.

Again... and your posts and reference articles bear this out... Canadian Pension plans are taking a risk by diversifying into "Infrastructure". There is no "fixed return" once it is built, beyond what an underlying government has "guaranteed" to pay. You have one government department paying another government above market rates... and to quote acottawa... brokered by a 3rd government department.

Please explain how this is not a shell game.

[phil235]

Originally Posted by HighwayStar

Whats with this "seasoned investor" nonsense. Offer a 5% Infrastructure Bond to the general public and the "amateur investors" will be banging down the door.

Again... and your posts and reference articles bear this out... Canadian Pension plans are taking a risk by diversifying into "Infrastructure". There is no "fixed return" once it is built, beyond what an underlying government has "guaranteed" to pay. You have one government department paying another government above market rates... and to quote acottawa... brokered by a 3rd government department.

Please explain how this is not a shell game.

If you are waiting for the general public to get the same returns as large institutional investors, you are going to be waiting a long time.

Not sure I understand your argument about the government just issuing a bond instead. Of course it could do that, but then it is guaranteeing the payment and taking all the risk, which falls directly on taxpayers. That is very different from diversifying the risk amongst various pension plan investments. Pension plans expect to lose money on some of their investments. That's why they hold broad portfolios and regularly adjust their investment mix to make sure that they can meet their future obligations. The direct risk to taxpayers is much lower.

As for the return on investment, it depends on the type of infrastructure. Train fares, road tolls, water rates etc. all provide revenue streams that are directly linked to infrastructure. Same as any investment - you are paying for access to a future revenue stream.

[HighwayStar]

Originally Posted by phil235

If you are waiting for the general public to get the same returns as large institutional investors, you are going to be waiting a long time.

Not sure I understand your argument about the government just issuing a bond instead. Of course it could do that, but then it is guaranteeing the payment and taking all the risk, which falls directly on taxpayers. That is very different from diversifying the risk amongst various pension plan investments. Pension plans expect to lose money on some of their investments. That's why they hold broad portfolios and regularly adjust their investment mix to make sure that they can meet their future obligations. The direct risk to taxpayers is much lower.

As for the return on investment, it depends on the type of infrastructure. Train fares, road tolls, water rates etc. all provide revenue streams that are directly linked to infrastructure. Same as any investment - you are paying for access to a future revenue stream.

Point taken about some types of infrastructure providing a return... and with paying customers VIA would certainly fall into that category.

VIA currently requires (and probably always will) some form of government (i.e. taxpayer) subsidy.

VIA can also raise fares.

My point is we how have the Teachers Pension Fund getting an "above market" rate of return... guaranteed by the Federal Taxpayers and VIA customers.

Not sure why Federal Taxpayers and VIA customers should be on the hook for a Provincial Pension fund... and it's a wide open question what will happen if these PS Pension Funds start running dry someday...

And it's doubly unfair that us "regular folk" do not have access to these "investment" vehicles.

[acottawa]

Originally Posted by Mister F

Still, high speed trains sharing track with commuter trains is quite common. Some examples include the lines from Bologna to Verona and Padua, which between them have dozens of stations. Both have trains that go 250 km/h. The line from Berlin to Hanover largely runs in the same right of way as the old one except for some urban bypasses, which could be an option for the Kitchener line. The Acela Express in the States shares tracks with commuter trains, including on the admittedly short high speed sections where they go 240. In France, TGV trains to Bordeaux go 220 km/h while slower local trains use the same tracks. This line is busy enough that a new high speed line will soon open to relieve it.

LGV Sud Europe Atlantique is under construction and not yet operating a high speed service. The plan is to build a parallel high speed line.



Acela is 4 tracked most of the way so the Acela trains can go around commuter and regional trains. In places where they share tracks, the Acela trains do not go at high speed.

Bologna to Verona (at least the last time I took that train in 2012) has a high speed line built parallel to the local line that carries regional trains and local trains.

Berlin to Hanover only runs at high speed between Staaken and Oebisfelde, where again there is a high speed line runs parallel to the old line that is used for other services.

To my knowledge, nobody is proposing building a parallel high speed line between Toronto and Kitchener (although scenario A has a few small segments of new track that could presumably be used for higher speeds than the shared track would allow).

I have also not seen any indication that GO is going to upgrade their fleet with high speed rolling stock (electrification does not necessarily mean high speed - most electric trains run at conventional speeds). There are no high speed commuter trains in North America, so it would have to be a custom order which would be extraordinarily complicated and expensive. GO trains often have standing passengers - not sure if a high speed service would even be allowed.

[acottawa]

Originally Posted by Truenorth00

This would not be strange in any other part of the world, where these pensions plans invest. It's only strange in Canada, because we have a long tradition of talking and talking, expecting government to do something, and then refusing to accept taxes or higher debt loads that would allow the government to build something. It's no coincidence that all those complaining about private investment here, would be the first people to complain if the deficit was suddenly $7-10 billion higher. Hypocrites abound.

But the difference is that in Canada people expect to use infrastructure at below market rates. People expect roads to be free, public transit to be massively subsidized, utilities to be subsidized, recreational facilities to be free or subsidized.

If all of the highways in Ontario were tolled (as they are in many countries) they would have no problem finding investors in toll highways (and wouldn't need an infrastructure bank to get involved). If highways were tolled then buses could charge more, and via could charge more and investment would be forthcoming.

This is a demand problem, not a supply problem and all of these convoluted intra-government money movement schemes are not going to solve that.

[Horus]

Originally Posted by acottawa

If they build a bypass Kitchener bound GO trains would use the bypass. Not sure if there would be enough traffic to maintain a Guelph to Kitchener GO service (especially since they are building a new highway to encourage Kitchener-Guelph traffic to drive).

I'm not sure I understand this comment. Guelph is just a stop en route for GO service between Kitchener and Toronto. So is Breslau. So is Georgetown. GO is not going to cut out Guelph from this line since it naturally just falls in the route between Kitchener and Toronto.

There is no explicit Guelph to Kitchener GO service at present. When full-day, 2-way service is implemented (soon, they say), you could use GO to get from Guelph to Kitchener, but that's just a byproduct of the real purpose of the line.

[phil235]

Originally Posted by HighwayStar

My point is we how have the Teachers Pension Fund getting an "above market" rate of return... guaranteed by the Federal Taxpayers and VIA customers.

Not sure why Federal Taxpayers and VIA customers should be on the hook for a Provincial Pension fund... and it's a wide open question what will happen if these PS Pension Funds start running dry someday...

And it's doubly unfair that us "regular folk" do not have access to these "investment" vehicles.

I guess the question is whether this actually is an above market return. I think the proper comparison wouldn't be a government bond, it would be other investments with similar risk that the pension plans could make instead of investing in HSR. It may be that it is above market, just not sure that is clearly the case.

To the extent that this return is consistent with returns on other infrastructure investments, Via is just assuming the cost of funding based on the risks associated with the project. True it may pass some of those costs on to users of the service, but that isn't necessarily a bad thing.

[phil235]

Originally Posted by Horus

I'm not sure I understand this comment. Guelph is just a stop en route for GO service between Kitchener and Toronto. So is Breslau. So is Georgetown. GO is not going to cut out Guelph from this line since it naturally just falls in the route between Kitchener and Toronto.

There is no explicit Guelph to Kitchener GO service at present. When full-day, 2-way service is implemented (soon, they say), you could use GO to get from Guelph to Kitchener, but that's just a byproduct of the real purpose of the line.

A large concentration of commuters live in the southern neighbourhoods in Guelph, so Go may not have a problem with a station that is in the south end of town.

[acottawa]

Originally Posted by Horus

I'm not sure I understand this comment. Guelph is just a stop en route for GO service between Kitchener and Toronto. So is Breslau. So is Georgetown. GO is not going to cut out Guelph from this line since it naturally just falls in the route between Kitchener and Toronto.

There is no explicit Guelph to Kitchener GO service at present. When full-day, 2-way service is implemented (soon, they say), you could use GO to get from Guelph to Kitchener, but that's just a byproduct of the real purpose of the line.

If they build a bypass, trains are going around Guelph. While they could fairly easily continue a Guelph Toronto service as a branch (because the Guelph station is on the Toronto side residential street bottleneck) whether they would bother running that service to Kitchener is unclear (a bus would be much faster, for example, especially when highway 7 is upgraded to a freeway).

[acottawa]

Originally Posted by phil235

I guess the question is whether this actually is an above market return. I think the proper comparison wouldn't be a government bond, it would be other investments with similar risk that the pension plans could make instead of investing in HSR. It may be that it is above market, just not sure that is clearly the case.

To the extent that this return is consistent with returns on other infrastructure investments, Via is just assuming the cost of funding based on the risks associated with the project. True it may pass some of those costs on to users of the service, but that isn't necessarily a bad thing.

The CPPIB is required by law to maximize return without undue risk because they (Finance Ministers back in the 90s) explicitly did not want it being used as a political slush fund. Part of the reason the infrastructure bank is being created is to allow politicians to muck around more. If the CPPIB (or most pension funds for that matter) wants to invest in a railway project it would need to convince the board that the risk profile and return are similar or better than for other projects.

The returns that have been kicked around on this thread (5%) is consistent with a pretty safe investment (a municipal bond, a blue chip corporate bond, etc). So the CPPIB would need to be convinced the risk is as low as that.

Via itself (or any new company that gets set up to run the project) has hardly any assets or collateral and if the railway fails any assets seized would be worth below cost (I guess they could sell the tracks for scrap).

This gets to the paradox of the whole thing. Anything the Government could do to convince the CPPIB (or other institutional investors) that it is a safe investment (i.e. loan guarantees) negates the need for for the CPPIB and other institutional investors because the government can just fund this directly. And lower deficits has been cited as an incentive to to this, but loan guarantees (or other contingent liabilities) have to be booked in the budget, so it will have to effect on the deficit.

[roger1818]

All this talk about can commuter and HSR share the same track is predicated on the assumption that the conventional definition of high speed rail (speeds above 250 km/h) is being used. It would not surprise me if they are taking a more liberal definition of HSR with a top speed of 177 km/h (the maximum for Class 6 track). This is faster than anything else we see in Canada (VIA has been granted an expedition to allow LRCs to run at 161 km/h on Class 5 track, which has a normal top speed of 153 km/h for passenger trains). At these lower speeds, combining service with commuter rail is feasible.

It is also possible that only the new bypasses will have class 8 or 9 track and be dedicated for HSR (with GO Trains continuing to use the existing track).

[YOWetal]

Originally Posted by roger1818

All this talk about can commuter and HSR share the same track is predicated on the assumption that the conventional definition of high speed rail (speeds above 250 km/h) is being used. It would not surprise me if they are taking a more liberal definition of HSR with a top speed of 177 km/h (the maximum for Class 6 track). This is faster than anything else we see in Canada (VIA has been granted an expedition to allow LRCs to run at 161 km/h on Class 5 track, which has a normal top spe.ed of 153 km/h for passenger trains). At these lower speeds, combining service with commuter rail is feasible.

It is also possible that only the new bypasses will have class 8 or 9 track and be dedicated for HSR (with GO Trains continuing to use the existing track).

This is a very good point. If by some miracle the Liberals are re-elected I wouldn't be surprised if this is what the study recommends and is slowly implemented with a launch of the RFP right before the next election.

[Truenorth00]

Originally Posted by HighwayStar

My whole point is Public Sector Pensions Funds are not (or should not be) considered "Private Capital".

Nonsense. If government wants to restrict their investments, government should be prepared to both pay more as an employer and face the backlash they get for higher premiums, both from the public (CPP) and employees (HOOP, Caisse, etc.) that would be required to keep the plans actuarially sound.

Originally Posted by HighwayStar

My point is we how have the Teachers Pension Fund getting an "above market" rate of return...

There is nothing "above market" about it. Pension funds rarely get above market returns. Their number one goal is capital preservation. They usually seek out returns above inflation and/or prime.

Originally Posted by HighwayStar

guaranteed by the Federal Taxpayers and VIA customers.

There's a cost to getting capital. Who knew?

Originally Posted by HighwayStar

Not sure why Federal Taxpayers and VIA customers should be on the hook for a Provincial Pension fund...

Because they want access to the capital that those funds have. Why is this such a difficult concept?

Originally Posted by HighwayStar

and it's a wide open question what will happen if these PS Pension Funds start running dry someday...

Hence why they are getting ahead of the curve and investing. Also, that's a pretty salacious accusation. Do you have evidence any of the plans are not actually sound?

Originally Posted by HighwayStar

And it's doubly unfair that us "regular folk" do not have access to these "investment" vehicles.

I have friends on Bay Street. You and I will never, ever see the opportunities that they have. Get over it.

When you have a bank roll of billions, the discussions and investments you have and make are very different from the average RRSP account.

Originally Posted by HighwayStar

Whats with this "seasoned investor" nonsense. Offer a 5% Infrastructure Bond to the general public and the "amateur investors" will be banging down the door.

Trying to raise $70 billion through 5% bonds would be a nightmare for a bank starting out. Down the road, maybe. At launch, if they announced that, I would actually doubt their competence.

Originally Posted by HighwayStar

Again... and your posts and reference articles bear this out... Canadian Pension plans are taking a risk by diversifying into "Infrastructure".

The risk profiles have increased, mostly because they've actually been so successful snatching up the best projects from around the world.

Originally Posted by HighwayStar

There is no "fixed return" once it is built, beyond what an underlying government has "guaranteed" to pay.

Your statement is self-contradictory. If they have a guarantee from the government to pay, they absolutely have a fixed return. Unless you expect the Government of Canada to start defaulting sometime soon.

Originally Posted by HighwayStar

You have one government department paying another government above market rates... and to quote acottawa... brokered by a 3rd government department.

Please explain how this is not a shell game.

For one. Not all the pension plans are public pensions plan. We'll start with that. Next, pension plans have mandates on returns and capital preservation so they have to operate as any private investor would. So drop this nonsense about them being a "government department". They are not, no matter how much you call them that. The funds owe their fiduciary duties to the plan members. Not the government. Lastly, nobody is paying above market rates. What the government is paying, are market rates for borrowing at that level, usually some premium on LIBOR.