

If the $50 billion 2014 Winter Olympics in Sochi, Russia, have raised the specter of runaway public spending on infrastructure, Vancouver, Canada, offers an alternative.

One of the legacies of the Olympic Games held here four years ago is a light-rail line that has become something of an international model in transit circles. The sleek Canada Line runs from the suburb of Richmond, British Columbia, into the heart of Vancouver, with a spur to the airport. Since it opened in 2009, it has picked up more riders than expected—112,000 per day, or about 40 million per year. The Canada Line also has come with costs that are predictable, thanks to the innovative financing scheme that built it and continues to sustain it today.

The Canada Line was the first transit project in North America to use a public/private partnership, or “P3,” in almost every way these partnerships are possible. A private firm was responsible for designing, building, and partially financing the 19-kilometer (12 mile) line. The firm also is responsible for maintaining the infrastructure and operating the service until 2040.

It is not uncommon for private companies to take some mix of those five jobs in projects such as toll roads, hospitals, and jails. But to assign all five of them to a private contractor in the context of a transit project was unusual. Today, light-rail projects In Edmonton, Alberta; Denver, Colorado; and the Maryland suburbs of Washington, D.C., are moving ahead with Vancouver as their model.

Related: Building boom near Vancouver stations | ​Q&A: How Canada does P3s | Vancouver’s next rail line takes a different approach

The decision to build the Canada Line in this way was controversial. Critics—especially unions—said it was a form of privatization that delivered no real benefits, financial or otherwise, to the public. Many others pooh-poohed the projections of 100,000 riders a day, saying those rosy forecasts rarely came to fruition. Local politicians balked twice at approving the line before finally managing to get a yes vote through.

Four-plus years after railcars began to roll, most of those fears have melted away. To riders, the Canada Line is seamlessly linked to Vancouver’s other two SkyTrain metro lines run by the regional government agency TransLink. Passes and tickets are good on any line. The trains are driverless and automated, like the other SkyTrain lines. The only visible difference is the Canada Line’s cars are bigger and configured differently inside than those on the other SkyTrain lines. And Canada Line staff wear distinctive green-and-blue jackets not seen elsewhere in the system.


How It’s Structured

As is often the case in P3 deals, the private sector partner on the Canada Line is a consortium made up of many parties. The partners are SNC-Lavalin (a Montréal-based engineering and construction company), the Caisse de Dépôt et Placement du Québec (a credit union), and British Columbia Investment Management Corporation (which manages billions in British Columbia pensions). Their consortium is called InTransitBC. A subcontractor called Protrans BC (a subsidiary of SNC-Lavalin) handles ongoing maintenance and keeping the trains running on time.

InTransitBC invested C$720 million (about US$670 million) in the deal. That is 40 percent of the project’s total price tag of C$2.05 billion (US$1.87 billion). The rest of the money came from the federal, provincial, and municipal governments, as well as TransLink and the Vancouver Airport Authority. In exchange for InTransitBC’s upfront investment, TransLink pays the consortium mortgage-type payments to cover the debt repayment along with money for operations and maintenance. Last year, that payment amounted to $104 million. It goes up slightly each year.



When asked how Vancouver’s experience has been with the Canada Line, Doug Allen, CEO of InTransitBC, says those performance metrics are what matters. “If you’re meeting all of your targets from an operational perspective, and you’re meeting the public’s need based on their response, that’s success,” Allen says.


The Canada Line contractor used “cut and cover” tunneling techniques, saving millions of dollars but outraging some business owners and commuters. (Paul Joseph/ flickr/ CC/ no changes)

Risk and Reward

In the P3 model, TransLink transfers not only responsibilities to InTransitBC, but also risk. There are risks involved at every step of a rail project. A design flaw can later cause cost overruns or delays at the construction phase. A construction flaw can later create difficulties with maintenance or operation. Traditionally in Canada, the public sector has owned all of those risks. Authorities were stuck with whatever system they got, often at a higher cost than expected.

On the Canada Line, however, the private sector owns most of those risks. InTransitBC designed, built, operates, and maintains the system. So there is no one else to blame if problems occur. Matti Siemiatycki, a University of Toronto professor of geography and planning, says this is something Vancouver got right. Siemiatycki has assessed a wide range of Canadian P3s, including the Canada Line. “One of the things they did really astutely is the type of risks they transferred,” Siemiatycki says.

One risk TransLink didn’t transfer was ridership risk. InTransitBC is not penalized much if ridership falls or doesn’t rise as much as expected. So the operator doesn’t exert pressure on TransLink to get routes or schedules changed in order to meet ridership goals. “It means the line is extremely well integrated into the system,” Siemiatycki says.


None of this was easy to negotiate. The woman who orchestrated the setup of the project for TransLink, lawyer Jane Bird, says it’s a tough job for the public sector to figure out what exactly to demand of the private partner. And it requires thinking about projects differently.


“What Are We Really Trying to Accomplish?”



One regret that Bird has relates to communications during the construction phase of the project. To build a downtown tunnel, one innovation that InTransitBC came up with was to use the “cut and cover” method of construction, rather than boring the whole line. It saved hundreds of millions of dollars.


In retrospect, says Bird, “I would have spent more time talking to the public and elected officials about how innovation works. There were all sorts of good public reasons to do [cut and cover].”


Value for Money?


Before the project was built, a TransLink subsidiary determined that the public would save C$92 million (US$84 million) overall, compared with the cost of doing the project the traditional way. That assessment, however, is based on assigning $260 million to all those risks InTransitBc was assigned—risks that may or may not actually cost the company real money. Take that risk premium away, and traditional construction penciled out $141 million cheaper.


It will take many more years to draw a definitive conclusion on the Canada Line. Four years in, it is largely viewed as a success by most experts who’ve looked at it as well as the people who ride it every day. But the stations are still new, the escalators to the platforms are still young, and the train cars still have their gleam—and 2040 is a long time away.

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