REM’s Escalating Costs

The following is a translation from the Quebec Newspaper La Presse which seems to to do far more investigative reporting on transit than our local fish-wrap.

What is important to remember the Caisse du Depot is also a concessionaire with the Canada Lin e P-3, which I have now been told that the SNC Lavalin/Caisse concession operating the Canada Line now receives in excess of $150 million annually to operate the line.

It is safe to say that the Caisse learned well and used the Canada Line P-3 as a model to suck billions of dollars from the Quebec and Canadian taxpayer with an overbuilt light metro system, which by all accounts, is not operating to the expectations of the consumer.

The estimated non advertised cost, as stated in the Addendum, of $20 billion, for the 17 km line does not surprise as the cost for the 21.7 KM extensions of the Expo and Millennium Lines is now passing $16 billion (not including cars and more) and climbing.

(Quebec) Construction costs for the Réseau express métropolitain (REM) will rise to 9.4 billion, or 2.4 billion more than the bill of 7 billion expected in 2018.

Fanny Lévesque Fanny Lévesque La Presse

This new data comes from an update of the accounting analysis of the financial package published in 2018 carried out by the General Auditor (VG). Guylaine Leclerc. “It emerges in particular from this update that the construction costs of the REM have increased compared to the estimate established by the Caisse des Dépôts at the time of our audit, in 2018,” she explains. According to his analysis, the sums required to carry out the large-scale project increased from 7 to 9.4 billion between 2018 and 2024.

This estimate includes the costs paid so far and what is required until commissioning complete REM by 2027. We talks in particular about the costs linked to contracts concluded with consortia and the costs linked to the acquisition of land. Guylaine Leclerc also adds that “these costs could increase at the end of the contractual processes” and other methods of settlement aimed at “the determination and final distribution of costs” of the project – the largest public transport project undertaken in Quebec since 50, she writes. This assessment contrasts with that made public by CDPQ Infra in September 2023 when it was stated that the REM would ultimately cost nearly 8 billion.

In November, this cost was revised to 8.34 billion. This is because CDPQ Infra uses net construction costs to finance. This amount takes into account deductions from income and certain contributions obtained during the construction period. According to CDPQ Infra, such a presentation allows it to demonstrate, during public financial updates, that it assumes any increase in costs since it discloses the evolution of its investment in the project, while confirming that the investment of the government remains unchanged. The Auditor General, Guylaine Leclerc, in her report CDPQ Infra, for its part, indicates that accounting for net project costs allows it “to obtain a fair and precise image of the investment amounts necessary to finance the project”.

This way of doing things, based on net costs, is common in the financing and construction of large-scale infrastructure. CDPQ Infra “Moreover, during the update of the REM project, presented last week, CDPQ Infra presented all the costs, including transitional income (goodwill and land capture income) deducted from the gross costs of the project », we specify. More transparency At a press conference, the VG explains that presenting the net construction costs to be financed is especially “relevant” when speaking to your banker. But, she believes that for the sake of transparency, CDPQ Infra could also present the whole picture.

“It’s their choice to present it that way. […] But for us, by making such an update, it is important to present the full costs and the different types of costs,” argued Ms. Leclerc. In its report, it also recommends that the Caisse des Dépôts and its subsidiary CDPQ Infra carry out a new presentation of construction costs following the commissioning of the REM. CDPQ Infra has already committed “to carrying out a complete financial update of the REM project when the entire network is open to users”, specifies the organization. In its evaluation, the VG also emphasizes that during its operation, the contribution of the Government of Quebec will represent more than half of the ridership revenue that the REM will receive.

Furthermore, according to CDPQ Infra forecasts, the Quebec government “would begin to obtain a return on its share capital investment in approximately 25 years.” She also notes that the government’s equity investments have not changed since 2018. In September 2023, CDPQ Infra affirmed that the pandemic, the war in Ukraine and the discovery of century-old explosives in the Mont-Royal tunnel explained the increase in construction costs.

These three factors alone represent 800 million due to the significant impacts on supply chains and labor availability. The AG listed the same factors to explain the increase in costs. A recent estimate of the project was around 7 billion, but in 2018, at the time of the first bidders, the estimated cost was 6.3 billion. In 2017, the cost was set at around 5.9 billion. But when the REM was launched in 2016, the bill was 5.5 billion.

With Henri Ouellette-Vézina, La Presse

Addendum:

The following is from a local transit advocate, who has worked closely on the REM affair and gives some interesting detail on additional costs! Translated using Google translate.

The costs continue to climb. Considering that the REM used the rights of way of several existing commuter rail and future VIA systems and the highway right of way on the south shore as well as the Mount-Royal tunnel, it was as costly per kilometer as would have been the REM de l’Est, which would have been too much to bear for the Government of the CAQ before it was killed.

Count also the cost of the Commuter lines to the East and the Two Mountains trains which were earning a profit and were about to be upgraded with new double-decker wagons and new locomotives which were purchased and sold at a loss. Add also the cost of the loss of the useful freight service on the Doney Spur line parallel to the #420 superhighway and the cannibalization of the riders on the Hudson-Vaudreuil line rendered less profitable but as necessary as ever. 

All these costs were calculated during the public hearings by the BAPE, and denied by the Caisse. The conservative capital costs were stated to be 12 billion by the experts of Trainsparence, Luc Gagnon and Jean François Lefebvre, and up to 20 billion if all the other costs paid by the province and the region not paid for to allow the Caisse’s work to be done. The operating costs calculated by Réjean Benoit raised the overall lifetime costs to another stratospheric level. 

The Liberals and the Caisse should have been horsewhipped…..

The Caisse should be removed from all of the future rail projects that they are starting to wedge themselves into owning and running and the existing REM should be taken over by the province if only so that its future costs will be open to public scrutiny instead of hidden from view according to their commercial contract which disallows all examination and truth.