Transport Committee on Oct. 19th, 2011

[The Chair, Conservative, Merv Tweed]

Thank you and good afternoon, everyone. Welcome to meeting number seven of the Standing Committee on Transport, Infrastructure and Communities. Our orders of the day, pursuant to Standing Order 108(2), are the study of the national public transit strategy.

Joining us here today, from Motor Coach Canada, are Doug Switzer, president and CEO, Réal Boissonneault, chair of the board of directors, and Trevor Webb, a member.

I know that you've been given instructions. Please present, and then we'll move to questions.

Thank you.

[Doug Switzer, President and Chief Executive Officer, Motor Coach Canada]

Thank you very much.

Good afternoon. I’m Doug Switzer, president of Motor Coach Canada, the national association representing the private transit operators of Canada, the motor coach operators supplying scheduled, charter, transit, and tour services.

Joining me today are Réal Boissonneault, the chair of Motor Coach Canada and president of Groupe Tourcar and Autocar Excellence, and Trevor Webb, director of transit operations with Pacific Western Transportation.

We very much appreciate the opportunity to speak with you today regarding the establishment of a national public transit strategy, an idea that we strongly support and feel is long overdue.

While we support the need for a national strategy, I do have one concern with calling it a “national public transit strategy”. I would like to suggest that you may consider renaming it the “national transit strategy”. The name “national public transit strategy” implies a limit to the scope of the strategy, a limit that excludes the private providers of transit services.

The important role that private bus operators play in providing transit services is all too often overlooked when discussing transit policy. Strategies for expanding transportation options for the movement of people and reducing reliance on personal automobiles have traditionally focused exclusively on taxpayer-funded public transit systems, ignoring the private bus operators.

We believe it’s time for a fresh approach, one that recognizes that publicly funded systems are not the only--or even necessarily the best--way to provide transit services. The private bus industry can and should be a full partner in the provision of transit services, working with governments at all levels as well as with the public transit systems themselves. We hope that any national transit strategy will reflect that perspective and include the private transit operators in the new strategy.

A fresh approach to the provision of transit services is desperately needed. If this committee’s deliberations become simply a process for demanding increased government spending to prop up an outdated service delivery model, it will be a wasted opportunity.

Simply throwing more money at the issue is not the solution. Governments at all levels--and indeed, all across the world--are facing severe budget constraints and continuing to spend beyond our means. Running up deficits is not sustainable.

We need to look at how transit services are delivered to see how we can break out of the same old circular arguments about a lack of funding. We hope this committee will do that when it develops a national strategy. Let me be clear. We do understand that more funding may indeed be needed, but if funding is the only issue addressed by the strategy, the committee will have missed an opportunity to articulate the bold new vision that’s needed.

We would like to make three specific recommendations for inclusion in the national strategy.

First, we recommend that transit systems receiving federal funding be encouraged to partner with private operators by competitively tendering for the operation of their bus services.

Second, we recommend that private transit operators be treated the same as public transit operators with respect to tax policies, safety regulations, and other government policies.

Finally, we recommend that publicly funded and operated transportation systems be discouraged from competing directly with private operators, either in scheduled service or chartered services, unless they can demonstrate that the public need and convenience aren't being met by the private operators.

Many municipal transit systems are already successfully partnering with private operators because of the significant savings they can achieve by doing so. One estimate is that nearly a third of the systems in Canada are already contracting out at least part of their services.

Trevor and his firm, Pacific Western, have extensive experience in this area, and I’d like to ask him to take a moment at this point to discuss that experience.

[Trevor Webb, Member, Motor Coach Canada]

Thank you, Doug.

Good afternoon. I'm Trevor Webb, the director of transit operations with Pacific Western Transportation. We are a progressive, industry-leading private carrier in Canada, with operations in motor coach charter, scheduled service, and employee transfer. We have significant operations in student busing and municipal transit. Our current inventory of rolling stock is around 3,000 units in Canada. We also operate and maintain the world's largest fleet of hydrogen fuel-cell buses.

PWT, as a private sector leader, ran a comprehensive transit program for the highly successful 2010 Winter Olympics in Whistler. This was an undertaking that utilized approximately 150 buses and provided five-minute transit service at any stop 24 hours per day.

I believe that you've been provided a copy of my handout, but allow me to briefly summarize.

We operate transit systems under two-party and, in some cases, three-party contracts. Usually we provide full operations, including maintenance and operations services, and we can provide vehicles if required.

Our relationship with local governments is a more dynamic and proactive partnership than the public sector operations, while allowing the local government complete control over the provision of services. Private companies bring a higher level of expertise, efficiency, and accountability to the management and operation of systems. The contractor usually assumes responsibility for cost control, and the municipality or the local government divests its responsibility for the day-to-day management of an operational system.

Cost savings of between 20% to 30% over publicly operated systems ultimately translate to more efficient transit service to the public, which has to be the goal if we are to encourage higher ridership in Canada.

With that, I'll turn it over to Doug.

Thank you.

[Doug Switzer]

Thank you.

The bottom line is that the savings to taxpayers that can be achieved by partnering with private operators are substantial. A recent study conducted for the Ontario Motor Coach Association compared the operating costs of a group of private carriers with those of large regional public transit operators and concluded that competitive tendering of bus operations could save the public transit systems approximately 21% on their operating costs. We’ve provided a copy of that study to the clerk. I understand that he'll be circulating a copy of it to you shortly.

I want to dispel one myth about contracting out services: the idea that savings are achieved by replacing well-paid union jobs with lower-paid non-union jobs. That’s simply not true. Most private sector operators that would be able to take on significant transit contracts are in fact already unionized and their drivers are paid wages similar to those of public sector drivers.

Private operators are able to achieve lower operating costs through better equipment utilization, more flexible work rules, lower maintenance costs, and lower management overhead costs--in short, through higher productivity and efficiency levels. These savings can be returned to taxpayers through lower transit fares, reinvested by systems by expanding services, or used to reduce municipal, provincial, or federal subsidies in order to reduce budget deficits.

How the savings should be spent is a decision for governments to make. You may wish to make a recommendation about that in the strategy, but what we can tell you is that the savings are there to be had if we have the courage to change our thinking--and they are substantial.

We would therefore recommend that the national transit strategy contain a recommendation that all transit systems should explore possible partnerships with the private sector for the provision of bus operations. In our view, it should be a requirement for receiving federal funding that such a review of the feasibility of tendering services is undertaken.

Our second recommendation is that governments at all levels cease discriminatory practices that unfairly treat public and private transit operators differently. For example, sales tax is charged on tickets sold by private operators of scheduled bus services, but not on transit fares. Public systems are exempt from some of the safety requirements that private bus operators have to meet. Also, in some cities, privately operated buses cannot use high occupancy lanes whereas public transit buses can.

The national transit strategy should place private and public transit operators on an equal footing as equal partners in the transportation system. Private bus operators should be treated the same way that public transit is with respect to certain tax issues. Private buses should have the same access to infrastructure as publicly operated buses. Also, all bus operators, regardless of whether they are public or private, should comply with the same safety standards.

Finally, it is unnecessary and wasteful of taxpayers' dollars for publicly funded transit systems to expand their taxpayer-subsidized service in direct competition with existing scheduled services being offered by private operators. Expanding public transit service into areas already being served by scheduled service from private operators--and requiring additional subsidies to displace existing services that were operating without subsidy--is a waste of taxpayers’ dollars.

It's equally unproductive for government-funded systems to begin aggressively expanding into the provision of charter services--again in direct competition with private operators. This forces the private sector operator to reduce or even abandon their service to that community, which then has to be replaced by more taxpayer-subsidized services. This insourcing by transit systems--displacing viable private services with services requiring taxpayer subsidies--is a trend that should be discouraged as a waste of valuable resources that could be spent better elsewhere.

In the end, the goal of the government-run systems should be to increase services to the public, but not necessarily public services.

With that, I’d like to turn it over to Réal to make a few concluding remarks.

[Réal Boissonneault, Chair, Board of Directors, Motor Coach Canada]

Thank you, Doug.

I'd like to conclude by saying that for us the key issue is inclusion in a national transit strategy. For far too long, private bus operators have been on the sidelines of the policy debate over transit services. The development of a new national transit strategy is an opportunity for the government to recognize that we do in fact play an important role in the transportation system and that we can be part of the effort to meet the challenge of providing more and better transit services to the people of Canada.

You can help us to help you improve transit in this country by encouraging competitive tendering for the provision of bus operations, by removing the tax, safety, and other policy distinctions that discriminate against private operators and prevent us from operating on the same level as public systems, and by preventing public systems from competing with existing privately run services.

Thank you for giving us this opportunity. We look forward to your questions.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Nicholls.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

My thanks to the witnesses for their great presentation.

I notice in your presentation that you mention discrimination and discriminatory practices in talking about how “tax is charged on tickets sold by private operators of scheduled bus services but not on transit fares”.

Given that Canadian families are having a tough time making ends meet and getting a budget together, and that living from paycheque to paycheque is quite difficult, are you proposing to put a tax on transit fares as well? Is that the idea behind the lack of discrimination?

[Doug Switzer]

No. I think our intent would be to remove the tax on the private tickets, not to increase taxes on public transit.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I see. So would the proposal extend to all forms of transit? To remove all forms of taxation on, say, air transit or train transit...?

[Doug Switzer]

I wouldn't speak to that, because I think they're in slightly different businesses than we are.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

But let's say a VIA train: would you be willing to take the tax off a VIA train?

[Doug Switzer]

We certainly would--I don't know if the government would--but we're not necessarily in direct competition with them.

When I say we're in competition, there are instances where we have a private bus operator, say Coach Canada or Greyhound, on one side of the street, and directly across from them there is a public bus system. In Ontario, the GO system is right across the street from them. They're both selling exactly the same service--a bus travelling from community A to community B--but on one side of the street you pay tax and on the other you don't.

The other forms of transportation that you're mentioning, such as airlines, are not necessarily in the same business and competing the same way. I wouldn't want to address their level of taxation as to whether it's fair or not.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

What about an inter-municipal train that runs on a public service? Would that be a situation similar to that of public transit buses and chartered buses?

[Doug Switzer]

You wouldn't pay tax on your train ticket if it was a publicly run system.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Right, but if you're taking a VIA train, you'd be charged a tax, I assume.

[Doug Switzer]

I don't know. You'd have to ask the train industry about that.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Do private transit operators have any existing partnerships in Canada?

[Doug Switzer]

You're talking about contracting out...? Yes, about a third of the systems in Canada currently contract out some portion of their operations. Quite often it's not the entire operation. They usually keep some portion of the system run by the municipality and contract out a portion. But in other cases, it's entirely contracted out.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Would you be able to table any reports or figures on their success?

[Doug Switzer]

Sure.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you.

I'm going to share the rest of my time with Madame Morin.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you for joining us today.

In your presentation, you said that operating costs would be lower through better equipment use, more flexible work rules, lower maintenance costs, and lower management overhead costs. But we should not sacrifice passenger safety for profit.

I am interested in Great Britain's case where public transit was privatized, including trains and all sorts of public transport modes. But the number of accidents went up and the private infrastructure company in charge went bankrupt. The UK national audit office found that the savings from privatization were 40% less than what was anticipated. There was a permanent fare increase of 20 to 30% for public transit passengers.

Could you tell me how you will make sure that operation costs will be lower if agreements are signed with the private sector?

[Doug Switzer]

Public-private partnerships, like any government policy tool that is used, are not universally perfect. You can always poke holes in the idea of contracting out or of public-private partnerships by pointing to places where it hasn't worked well. Not all of them have been perfect.

Many more have been. There are many more examples of highly successful partnerships. As I said, it's not a new concept in Canada. Many municipalities are already doing it.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

How do I know that things will work with you? You have just reassured me that operation costs will be lower. How can you be sure?

[Doug Switzer]

Because it has been demonstrated in many other municipalities. I think the answer to the London example you gave us was that it happened in the seventies, when the idea of contracting out was in its infancy. As with any new idea, people made mistakes at the beginning. I'm not an expert on what happened in London, but the fact is that this was a leading-edge idea at the time. There have been many, many more successful public-private partnerships since then.

The reality is that right now if you look at Ontario, for example, with which I am more familiar, you'll see that in the Toronto area, out of ten operators of buses, eight have better safety records than the government-run GO system. So if you just look at the actual performance, forgetting the contracting-out circumstance, the actual performance of private motorcoach businesses is comparable with, if not better than, the safety records of public systems.