Ontario Conservatives should scrap the privatized Highway 407 contract

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Premier Doug Ford. Photo: Ford Nation/Facebook

Doug Ford has shown a willingness to rip up contracts with business. But why is the premier wasting time on small-fry deals like the province's contract with the Beer Store, when he could be bold and discard the mother of all Ontario's bad deals with business -- the privatization of Highway 407?

Ontario Attorney General Caroline Mulroney, along with other Conservative cabinet ministers and MPPs, have been busy tweeting smiling selfies from corner stores to hype how happy we should all be now that the Ford government has tabled legislation enabling us to pick up a case of beer whenever we stop to buy chips.

Despite the contrived publicity blitz, it's hard to make the case that Ontarians will be substantially better off buying beer in convenience stores than following the tried-and-true method of buying it at the industry-run beer stores that dot the landscape, or at the 450 supermarkets where beer is currently sold.

By contrast, Ontarians would be significantly better off -- saving potentially billions of dollars and endless hours of commuting -- if Ford were to cancel the outrageous 407 deal, signed by former Conservative premier Mike Harris, that gave Spanish-based Grupo Ferrovial control over this key highway for a stunning 99 years.

Indeed, the case for cancelling the 407 contract is much stronger, with a clearer public interest, according to Sandford Borins, a professor of public management at the University of Toronto and research fellow at the Harvard Kennedy School.

It's hard to overstate just how bad a deal Mike Harris made in 1999 when he sold the rights to charge tolls on the 407 for almost a century for a mere $3.1 billion. Today that highway, which was designed to relieve traffic congestion in the heavily travelled corridor around Toronto, is worth an estimated $30 billion. An analyst with the National Bank has described it as a "revenue-generating monster."

Grupo Ferrovial was selected after a bidding process but, in negotiating the terms of the deal, the zealously pro-privatization Harris government failed to impose any limit on how high the company could raise tolls on this crucial roadway.

As a CIBC analyst observed in a 2017 letter to investors: "The 407 International still has flexibility to increase tolls for 81 years."

When the 407 was constructed in the early 1990s, Bob Rae's NDP government promised that the tolls would be used exclusively to finance its construction, and that once paid for, the highway would be free, like all other Ontario highways.

So, if it hadn't been privatized, the 407 would probably now be free (or we could be directing the toll revenue to public transit). Instead, for the next eight decades, we'll go on paying ever-rising tolls to a foreign company for the privilege of driving on a road we will have paid for many times over.

The high toll charges have meant that the privilege of avoiding Toronto-area gridlock has been largely reserved for those driving BMWs, Mercedes and Cadillacs.

Borins argues that Ford could pass a law nullifying the 407 contract, urge the public to throw away their transponders and then announce that the government will no longer prevent license plate renewals to those with unpaid tolls.

The company would sue the government but "by then, its business model would be fatally disrupted," insists Borins who co-authored, with Chandran Mylvaganam, a 2004 study on the 407 deal.

Borins notes that cancelling a contract would be destructive to the province's business climate but, if Ford plans to do so, it makes more sense to cancel the 407 deal, which locks us in for almost 10 decades, compared to former Liberal premier Kathleen Wynne's one-decade deal with the Beer Store.

He also maintains Wynne's beer deal has more legitimacy since its negotiation was more transparent, with public debate, whereas the 407 contract was negotiated in secret, with only a misleading summary of it made public during the 1999 election campaign.

But, since the 407 deal was brokered by a fellow right-wing Conservative premier, it's unlikely we'll see future tweets showing Caroline Mulroney and other MPPs smiling broadly as they drive for free, amidst Honda Civics and Ford Fiestas, on a liberated people's highway.

Linda McQuaig is a journalist and author. Her book Shooting the Hippo: Death by Deficit and Other Canadian Myths was among the books selected by the Literary Review of Canada as the "25 most influential Canadian books of the past 25 years." This column originally appeared in the Toronto Star.

Photo: Ford Nation/Facebook

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