Thank you for allowing us the opportunity to appear jointly before you today.
With me is Mr. Gary McNeil, executive director of GO Transit in Toronto; and Mr. Raynald Bélanger, the vice-president of commuter trains for Agence métropolitaine de transport. I am Doug Kelsey, president and chief executive officer of West Coast Express and SkyTrain in Vancouver. Together we represent Canada's three largest commuter rail operations.
To provide you with some background, our combined operations carry more than 125 million rides per year and represent more than $4 billion in combined public assets. The areas we represent serve approximately 30% of Canada's population. Canada's commuter rail authorities wish to make Canada's communities more livable.
As part of that, we believe we are an essential part of the solution to gridlock, greenhouse gases, and smog in Canada's urban centres. But to do more as governmental service providers, and to do more to help Canada meet its environmental goals, we require a long-term policy solution based on the principles of better and fairer urban corridor access and services for Canada's urban passenger rail authorities, at competitive rates, and based on reasonable contributions above the host railway's cost structure.
Our decision to make a joint submission to you today is the direct result of our shared interests, challenges, and points of view, as well as our dedication to serve the same ridership base as yours--the taxpaying public.
In our past submissions to the Canadian Transportation Act review commission and to this committee, we outlined the benefits of urban commuter rail service and voiced our concerns on a number of serious issues affecting our operations. We are very pleased to see that these concerns have been reflected in Bill C-11, particularly the ability to gain access to the lines of federally regulated railways by means of the dispute resolution mechanism under proposed section 152.1 of the bill. Second is the ability to have the agency determine the amount to be paid to the host railway for such access under proposed section 152.2 of the bill, should commercial negotiations not prevail successfully. There's also the ability of urban transit authorities such as AMT, GO, and West Coast Express to purchase a railway line or corridor offered for sale at net salvage value under proposed section 145.
Under access for commuter rail organizations, proposed section 152.1 addresses a major concern experienced by commuter rail authorities--our inability to gain access to the lines of federally regulated railways under the Canadian Transportation Act as it now stands. Shippers who may feel they have inadequate service have recourse under the servicer provisions of the Canadian Transportation Act. Commuter rail authorities do not have that same protection because we don't currently have the right to access. Under the proposed section 152.1, if the service being provided to a commuter rail operator is inadequate due to the inability to gain access to the federally regulated railways line, that operator may apply to the agency for specific relief.
It's unfortunate that the environment in which commuter rail service providers operate can be highly impacted by host railways. We can face unreasonably high rates, restrictive covenant provisions, and in some cases controls over the actual service specifications of our rail operations, while at the same time not being properly credited for the extensive taxpayer-funded capital that commuter rail operations provide to the host railways.
These significant contributions benefit both the railways' asset bases and the movement of freight traffic. This has been an ongoing concern recognized recently by the government in two bills that have unfortunately died on the order paper, Bill C-26, and Bill C-44. The concerns have a long history.
Some of you actually may recall that an attempt to provide commuter rail operators with some legislative protection failed some 20 years ago, back in 1986, when Bill C-97 also died on the order table. It is our hope that the outcome will be different this time around and that we will be provided with the protection necessary to allow for future access, for future expansion, and for the viability of commuter rail operations in the metropolitan communities and regions that we serve. Without these protections, our ability to support the livability and mobility of our national and regional goals will be severely limited.
In the past, the railways have advocated setting costs for arrangements with commuter rail operators based on “supply-demand” pricing for commercial negotiations. This approach can have an adverse effect for industry, because there's often no other competition or, in most cases, what is termed no effective competition or true comparatives for similar types of service.
Commuter rail is a unique service, with supply driven by corridor, not price. The current rate structure offered to commuter rail operators reflects a clear example of pricing in an environment of no competition. The economies, in some instances, are so unfortunately unfavourable that, despite public demand for services, expansion may be financially prohibitive where the commercial negotiating environment allows for no equality or checks and balances that ensure a level playing field for establishing rates and services.
However, proposed section 152.2 of the bill would prevent such high rates from being charged. Specifically, proposed subsection 152.2(2) lays out a number of factors that should be considered by the agency in determining a rate for the use of railways, land, equipment, facilities, or services. Of particular assistance to commuter rail operators is proposed paragraph 152.2(2)(b), which stipulates that a railway company's cost of capital is to be determined by a rate that is set by the agency and applied to the important net book value of the assets to be used by the public passenger service provider, minus any amount paid by the commuter rail operator in respect of those assets.
The net book value of the asset is the original cost of the asset to the railway, less depreciation. This method of determination of the cost of capital reflects the real cost that the railway incurred to purchase the asset that is being used by the commuter rail operator.
It is only reasonable and fair that the prices being charged for such use reflect the actual cost paid for the asset. Higher costs incurred by the railway to replace assets can be passed on to the commuter rail operators once the asset has been purchased. The cost of upgrades is also a factor for consideration by the agency in proposed paragraph 152.2(2)(c). Hence, there is no need to use another valuation method such as what is referred to as replacement value. Being charged excessive prices for access to operating services and infrastructure places an excessive cost burden on the Canadian commuter rail industry and the taxpayers we all serve. We are confident that proposed changes to the act will address many of our concerns in relation to service and pricing in the future.
In terms of rail line transfer and discontinuance, clause 39 of Bill C-11 proposes a change to section 145 of the act by including urban transit authorities in the list of entities to whom a rail line must be offered for sale at net salvage in the process to abandon a line. This change reflects the real possibility that a commuter rail service may be provided on a line that a railway company wants to abandon because the line is no longer used for freight traffic. Allowing an urban transit authority to purchase the line for net salvage value reflects the fact that commuter rail service is a beneficial public transportation service. It also reflects the reality, faced by many urban transit authorities, of tight operating budgets within which to provide the services we do provide.
In conclusion, we point out that the provisions of Bill C-11, when enacted, will not cause moneys to be spent from the federal treasury. The provisions of the bill contemplate the payment of fairer rates by commuter rail operators and reasonable contributions over the railway's costs. The only change to the system is that commuter rail authorities will have the right of access, a right that will level the playing field and create much-needed opportunities for commuter rail to benefit the livability of our urban centres, the economy and the environment, all for the greater good of the taxpayer and the numerous federal ministries that will benefit from the passage of this bill.
Mr. Chair, I thank you again for allowing us the opportunity to appear jointly before you today. This will conclude our formal remarks, and we'd be pleased to answer any questions that you may have.
