Transport Committee on May 16th, 2006

[Thomas Garlock]

That's true, in the area of regulation.

Going back to the language concerning setting of tolls, fees, and other charges, we think it is very important to financial markets that Parliament make a policy statement in statute, rather than waiting to have this clarified in regulation. I know I don't have to explain to the members that financial markets can be very sensitive to nuance, and if they believe that our ability to manage our funding stream is going to be undermined by activity on the part of the government, it's going to have an impact on our rating.

By way of example, at the Niagara Falls Bridge Commission we work very diligently to improve our financial standing. We support all of our activity by virtue of our tolls, fees, and charges. The first exception in more than 68 years has been the partnership with the Government of Canada and the Province of Ontario on the BIF. That resulted in major improvements on both the Lewiston-Queenston and Peace bridges. But as far as ongoing operation, we support ourselves. We go to the bond market to fund our capital projects, and if the financial markets believe that our ability to fund this is going to be impaired, it's problematic.

I started out by saying we work diligently to improve our financial standing. In 1993, when we made our last significant bond issue of $130 million U.S., we had a triple-B rating, so our cost to borrow was not insignificant. Through careful management in the years since then, by 2003 when we did a refinance, Standard & Poor's rated us as an A. You can appreciate how dramatically our cost to borrow went down.

Obviously these costs are ultimately borne by our toll payers--Canadians, Americans, and visitors to the two countries. In the instance of the not-for-profit operators, we have a powerful incentive to keep all of our costs low so we don't have to pass them on to our toll payers.

[Don Bell, Liberal, North Vancouver, BC]

What mechanism is in place now for dealing with complaints and tolls?

[Thomas Garlock]

Again, for all of the not-for-profits, we are governed by various boards and commissions. In the instance of the Buffalo and Fort Erie Public Bridge Authority, the five Canadians are federal appointees. The Americans are appointees of various offices of the State of New York. In the instance of the Niagara Falls Bridge Commission, my Canadian commissioners are appointed by the Premier of Ontario, and the Americans are appointed by the Governor of New York. It is their specific role in statute that created our entities to address local community concerns. So when we have any kind of complaint from the public, they are very responsive to it.

I might add that in our enabling legislation, the guidelines for our creation of toll structure are very clear. We're to collect tolls only to satisfy our capital purposes, our ongoing operations, and there's specific language that limits how far we should go.

[The Chair, Conservative, Merv Tweed]

Mr. Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chair.

I understand your problem, and I'm aware of the importance of not having your capacity to raise capital be affected.

We had discussions with officials from the Department of Transport, and we asked them many questions, particularly on section 15 and the fact that they want to get involved in toll stations. They seem to believe that you are creating traffic congestion to make more money and that traffic flow is a problem. They claim to want to ensure smoother traffic, because currently, in some cases, too many people are using your bridges and tunnels when there are other routes they can take. Simply put, do you acknowledge that there is an actual problem, or do you believe that Transport Canada is creating one?

[Thomas Garlock]

No, Monsieur, I would not say that it's not true, but it may be a misinterpretation.

I don't believe there is a correlation between congestion at the border and toll structure anywhere at this time. I do believe that in drafting the bill, the agency is concerned that in the future, in the case of our two crossings.... I operate three bridges on the northern part of the Niagara River, and Ron operates one bridge on the southern part of the river. I think that the Department of Transport would be concerned that if I were to drop the toll for transport trucks to a dollar, for example, transport truck traffic would suddenly dry up on the Peace Bridge. That would diminish his ability to recover the revenue to satisfy his bonds; that would be a predatory practice.

Conversely, if a crossing was not as close as we are—with a considerable distance to the next crossing—an operator could engage in predatory practice by charging a very high toll, which would be unfair to toll payers.

I believe it is those extreme situations that the minister would want to address. In no way does the language that we proposed to you this morning impair the minister's ability to intervene in those situations.

I don't know of any instance when congestion is related to tolls at this point in time. In fact, on the international bridges, congestion is usually the result of what is happening in one plaza or the other, with either the United States Customs and Border Protection or the Canada Border Services Agency, with all due respect. We take your money very quickly and send you down the way.

It is this predatory practice that the agency is concerned with, and the minister would be in a position to address it.

I hope I have answered your question.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Yes.

There are many bridges and tunnels in Ontario. Your association manages a few of them. However, doesn't the province of Ontario have a procedure to solve these problems? If, as you say, predatory practices are going on, does the legislation allow the Government of Ontario to intervene? I know that the Province of Ontario manages several of these bridges.

[Thomas Garlock]

Actually, Ontario is directly responsible only for my crossing. At the other crossings between Ontario and New York, it's either the Federal Bridge Corporation, or the federal side of the Buffalo and Fort Erie Public Bridge Authority, or the Blue Water Bridge Authority at Point Edward.

In the instance of my three bridges, yes, the province has a direct ability to intervene because the four commissioners are appointed by the premier. And believe me, we are very responsive to the interests of Ontario officials, given that they are the people we work for.

I don't quarrel with the minister's interest in having a role in tolls, fees, and other charges when it has a direct, devastating impact on border efficiency. Clearly that is a national interest; I cannot quarrel with it.

We're only concerned that we don't send the wrong message to financial markets, particularly the not-for-profit entities that float bonds in the public markets. In our case, we're able to float bonds that are tax-exempt in the United States, making our borrowing cost very low. But if those markets believe that our ability to set the revenue streams to satisfy the bonds may be impaired by the minister's activity, we're going to pay more to borrow the money.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

There's talk about setting up a procedure to deal with complaints regarding toll stations. There would be an applicable procedure, as well as a person or organization responsible for dealing with complaints. Do you have an idea of how this would be done in our organization? Have you had discussions with Transport Canada, or do you prefer to let the department delegate the organization that would receive the complaints?

[Thomas Garlock]

I think it's a combination of both, quite frankly. I will tell you that right now, with the Canadian dollar strengthening against the United States dollar, we are starting to hear from some of our bridge and tunnel users. I know from talking to my colleagues that just about everyone I'm aware of is ready to address that situation.

We went from a significant disparity between the two currencies not long ago to now climbing very close to parity. But we are not insensitive to that, particularly those of us who have been established with public benefit corporations. We have to respond.

I will give you the example of how the Niagara Falls Bridge Commission began. I wouldn't be with you today if it weren't for a terrible accident. There was no loss of life, but when the Falls View Bridge--the Honeymoon Bridge--collapsed into the gorge in January 1938, it was owned by a private operator. At that time communities on both sides of the river were having some issues with the operator, and they said they had an interest in having a quasi-public entity do this because they wanted the entity to be responsive to the community. That's why the Niagara Falls Bridge Commission was created. That is why we have four Canadian commissioners and four American commissioners, to be sensitive to the interests of the communities we serve.

Finally, we perform many public purposes. In Canada, under section 6 of the Customs Act we provide hundreds of millions of dollars of infrastructure, usually at no cost whatsoever to the government. As I say, the border infrastructure fund of late has been an incredible tool in improving border operations, but generally speaking we pay to build these facilities for CBSA, and even more important, we continue to pay to maintain them. In the instance of the Niagara Falls Bridge Commission, I would estimate that cost to be about $4.5 million a year that we bear.

So obviously it is not an inexpensive pursuit operating an international crossing and making sure that it is done in a safe and efficient manner that is responsive to the interests of the people of Canada and the people of the United States. We are asking the committee and your colleagues in Parliament to clarify this language on fees and tolls so that we are able to do that efficiently and at the lowest cost to toll payers.

[The Chair, Conservative, Merv Tweed]

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

Thank you very much for coming here today.

Remind me, Mr. Garlock, of the number of members you have on the Bridge and Tunnel Operators Association.

[Thomas Garlock]

Mr. Julian, there are 10 members responsible for 11 of the crossings between Ontario and New York and Michigan. The anomaly is that on the Canadian side, the Blue Water Bridge is operated by the Blue Water Bridge Authority, a Canadian crown corporation, and it's operated by the Michigan Department of Transportation on the U.S. side.

The other anomaly is that the Niagara Falls Bridge Commission is the only entity responsible for multiple crossings--the Rainbow, Whirlpool Rapids, and Lewiston-Queenston bridges.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

And each of those members is essentially from the private sector, or are some of them from the public sector?

[Thomas Garlock]

Actually, there is only one truly private sector member, and that is the Ambassador Bridge between Windsor and Detroit. The remainder are public benefit corporations. They're all formed a little bit differently. They all came about in a different way.

I explained how we were created. I will tell you how the Peace Bridge came about. It was built in 1927, but in the financial difficulties of 1929 the private owner went broke. That's when the Government of Canada and the State of New York stepped in to create the Buffalo and Fort Erie Public Bridge Authority.

So the Ambassador Bridge is a privately owned, for-profit crossing. The others are in some way, shape, or form a quasi-public-benefit corporation.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Coming to the consultations, you mentioned three consultations with the ministry through the process of the elaboration of the legislation. Did the first consultation talk about some of the needs that bridge and tunnel operators may have?

[Thomas Garlock]

I believe that it did--and when I say three; it was at least three, but I'm not sure if my memory--

[Peter Julian, NDP, Burnaby—New Westminster, BC]

It could be more?

[Thomas Garlock]

It could have been more. It was in regard to Bill C-44. There was some general discussion, and I will say that Department of Transport staff have been exemplary in keeping us aware of the progress of the bill. But I am here today because while there may be some belief that some of our concerns could be treated in regulation, again, I can't stress strongly enough the need to have a policy statement in statute.

I think when you have an opportunity to read the comments of the bond counsel, the financial adviser, and Standard & Poor's that we have brought with us today, it will help you more clearly understand our bit of anxiety over the language concerning tolls, fees, and charges, and in the area of safety and security, our interest in avoiding redundancy.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

You will be providing those letters to the clerk for translation, so we can circulate it to the committee?

[Thomas Garlock]

We have, sir.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

The three consultations or more--are we speaking more informally, or were they formal? Did the ministry sit down and basically run you through what the legislation would contain and give you the opportunity to raise concerns?

[Thomas Garlock]

They were rather formal, and ministry staff travelled to Toronto on one occasion to meet the members of the Bridge and Tunnel Operators Association.

Just after Bill C-3 was introduced the agency arranged a conference call, not only with the bridge and tunnel operators, but with the railroads as well, with affected constituencies. The agency made a very strong effort to brief us on the provisions.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Did you see progress as the consultation process moved along? Did you see the legislation develop in a way that responded to some of your concerns?

[Thomas Garlock]

In all candour, there has been a measure of empathy for our concerns by the agency, but steadfastly they have felt our concerns could be treated in regulation. This is even after we arranged for bond counsel to spend significant time in a teleconference with agency staff to explain the sensitivity of financial markets to the language that is present in the bill.

They have been empathetic, they have listened, but I think there may be some difference of view of how this should be approached, whether through regulation or through statute.

The members all know far better than I that statute is a serious matter, addressed by Parliament, by the people's representatives. It is not easily and quickly changed, and because of that it would give financial markets a sense of stability.

The regulatory process, while consultative, can happen more quickly with more frequency, and I don't think it would convey the stability that a change in the statute would convey to the financial markets.