The recent High Speed Rail announcement by the Ontario government shows promise in recognizing the benefits of utilizing rail passenger service with their new rail based approach to transportation. It is important to keep long range planning active with rail service, but other regions of the province are dealing with service reductions or cancellations The residents in those areas worry their concerns will be overshadowed by a focus on a new service that will require huge amounts of available resources.
The idea of high speed rail between different points on the Quebec City-Windsor corridor has been studied for decades. In spite of that, there are no firm estimates on the cost of such a service, nor the time that might be required for such a monumental change.
The fact is, rail passenger service in Canada over the past two decades has moved backwards rather than just a lack of improvement. As a result, the service value has virtually disintegrated along with the network and any mechanism for oversight. High speed rail is not just an incremental improvement, it is a quantum leap in service delivery, so diverting resources to this process at this point in time makes little sense when there is so much other work that needs to be done.
There are signs however, that the provincial government is starting to think overall about the role railways can play in the transportation system. The mandate letter to Min Del Duca indicates MTO may have been focused too much on highways and a true multi-modal transportation policy framework needs to be developed.
There were two multimodal strategies undertaken by MTO in the province. One, Building Competitiveness: A Proposed Multimodal Goods Movement Strategy for Ontario dealt only with movement of goods in Southern Ontario, but appears to have never been released. The other, the Northern Ontario Multimodal Transportation Strategy also includes the movement of people and although the progress has been glacially slow, the tender for a consultant has gone out. The tender calls for a 30 month time line, (with a 12 month extension, if necessary) so there is an end in sight as this is the final stage of the process.
One of the main problems with transportation in Ontario (and hopefully the consultant identifies it, and includes the solution in the strategy) is the lack of coordination in the system. Rail service providers like VIA, GO transit CN, (on the ACR, currently on life support) and Ontario Northland (prior to the Northlander cancellation) do not co-ordinate their services. But none of the operators co-ordinate their services, in fact, at Union Station, VIA is being squeezed out by a growing GO service. (See the Op-Ed on Page 7 by Greg Gormick) While the GTA needs their commuter service, a properly balanced system would not put regional intercity service at a disadvantage to provide it.
If we are ever going to get people out of their cars, we have to provide an alternative that can easily offer door to door service, and is price and time competitive. That means all levels of government have to co-operate and co-ordinate their transportation systems. Transit systems should also feed intercity systems, which can connect back to transit at the destination, with easy intermodal transfers. where necessary.
We cant even get different levels of rail passenger service providers to talk to each other, let alone co-ordinate their governance and service. So we end up with terminals of different services in different areas of the city and no one seems to care if customers can get from one to another easily.
Motor coach service is provided mainly by the private sector and regulated by route but on sections that overlap there is duplication of service as each service provider tries to scoop the others. In the case of publicly funded rail passenger service, motor coach runs competing schedules instead of feeding trains and operating additional runs when there is no train available.
Tracks should be maintained to permit smooth rail travel at 120 km per hour and fares should be set to be less expensive than the cost of gas used by the average car. The network has to be established to provide as much coverage in the province as possible with minimal investment in new rail tracks.
In most areas of the province, rail passenger service has to be integrated with freight service in order to share the huge capital expense of a railroad. Passenger service still has to be prioritized by contract, including monetary time penalties, for the freight operator to ensure on-time performance does not suffer.
There needs to be a lot of discussion and clarification about the dual mandate of rail passenger service and which level of government is responsible for what part. The operation must balance the intercity connection role with that of economic development. Both roles are vital to the economy, but they often compete with each other. The Northlander used to provide a connection to Toronto and the national rail network for residents of Northeastern Ontario, but also served to bring tourists north. That purpose suffered under continual cost cutting, and that failure contributed to the political will that cancelled the train.
So with all that, I support the idea of high speed rail service, but there is a ton of work to do in developing the system before such a monumental shift in service design goes ahead. I would not want to see high speed rail divert resources away from the more important fundamental work that needs to be done. Let's position the cart correctly and improve the roadbed first.
NORTHERN ONTARIO - POLITICAL ISSUES An opinion on the issues affecting the province and primarily Northern Ontario
Tuesday 9 December 2014
Friday 28 November 2014
First Steps of the start of a new beginning of a Transformation that needs to embrace change
Finally it looks like there is a decision behind the commitment to keep Ontario Northland in public hands. While the details behind that promise will continue to evolve as changes are implemented, it looks like there is a timeline of three years to get the plan together.
This jives nicely with the timeline of another major study being undertaken by MTO, the Northern Ontario Multi-modal Study. The tender for Technical Consulting for this study reveals a scope that is growing, which can only mean good things for Northern Ontario.
This jives nicely with the timeline of another major study being undertaken by MTO, the Northern Ontario Multi-modal Study. The tender for Technical Consulting for this study reveals a scope that is growing, which can only mean good things for Northern Ontario.
If Ontario Northland can demonstrate its ability to create value in the same period of time, the organization stands a chance of becoming as relevant to the development of the region (expanded to all Northern Ontario) as it did in its heyday.
Many who are close to Ontario Northland must be growing weary of the call for new ideas. That plea has gone out so many times in the past, there is not likely an idea left in the North that has not passed by the crown corporation at some point.
What is desperately needed, is a new way to evaluate those ideas. In the past, they seemed to all be shoved through the filter of "cost reduction" before they were thrown up against the wall. Those that showed promise of reducing the cash flow the most were propped up and given priority. Assessment of value, seemed to rank low in the order and decisions were ultimately made by MNDM, who has very little expertise in either rail, telecommunications or development.
Their favourite target was wage reduction and to be fair, there are some examples of overpayment at ONTC. However, there is also recognition of quality of work and dedication of the workforce, so one should be very careful about just slashing collective agreements.....in many cases you get what you pay for.
There is still a need to compare ONTC agreements with benchmarks in the relevant industry, and where a union maintains that there is value in exceeding those benchmarks, that has to be demonstrated. There are too many sceptics in this world for a government to accept anything at face value and survive.
If anything is to be different in this, the umpteenth time of calling for fresh ideas, it must be in the evaluation process. It will no longer be acceptable for MNDM to cherry pick through ideas and keep only the ones that reduce their cost, there must be an independent and transparent assessment of value.
The survival of Ontario Northland depends on the value they can create, judged by people who can recognize it.
Saturday 8 November 2014
MNDM needs help....desperately
The recent open letter from the Minister of Northern Development and Mines, Michael Gravelle gives some clue as to the state of ONTC transformation.
The original announcement to divest ONTC was made in March of 2012 and the subsequent change to transformation happened in April 2014. In all that time it is most likely that ONTC management put together a plan to meet the government objectives.
Unfortunately, it is also very likely that due to the poor relationship between ONTC and MNDM, that plan was rejected outright, rather than being the foundation for a collaborative effort to bring together financial realities with government policy. The recent departure of President and CEO, Paul Goulet, is probably a sign that exercise was unable to be concluded successfully.
MNDM is likely now relying on backroom advice from CN, the company who, under Hunter Harrison, pushed railroad efficiency to new highs. Mr Harrison, who is now working his magic at CP, was heralded as the "best" CEO in the railroading industry for his impact on share price. One cannot deny that Mr. Harrison understood what was holding railroads back from effectively competing with trucks. His method of moving to scheduled service, reducing every cost that did not contribute to revenue, pushing asset utilization up and focusing on customer satisfaction resulted in short term gains that were nothing short of spectacular.
Railroading is a long term industry though, with assets that last decades, and the "Harrison effect" has not been proven over the life of those assets. If these measures could be implemented without the culture of fear that Mr. Harrison used to effect change, and steps taken to ensure capital investments are protected, there is great potential for savings.
CN's motives in providing advice to MNDM is suspect however....they are still interested in acquiring the ONR and will manipulate government to achieve that aim. One only has to look at the price when CN sells rail line to the government to know who gets the better deal in any negotiation between the two.
MNDM needs someone within the organization who understands what is necessary to achieve their goals. Anyone who knows Ontario Northland, knows that there is room for improvement and the union leaders are aware of that. What is needed is a rail industry professional, who is committed to government policy, yet able to maximize revenue in a region that provides marginal traffic.
One would hope that Minister Gravelle is kicking that search into high gear, before the ONTC disintegrates into unrecoverable pieces before our eyes.
The original announcement to divest ONTC was made in March of 2012 and the subsequent change to transformation happened in April 2014. In all that time it is most likely that ONTC management put together a plan to meet the government objectives.
Unfortunately, it is also very likely that due to the poor relationship between ONTC and MNDM, that plan was rejected outright, rather than being the foundation for a collaborative effort to bring together financial realities with government policy. The recent departure of President and CEO, Paul Goulet, is probably a sign that exercise was unable to be concluded successfully.
MNDM is likely now relying on backroom advice from CN, the company who, under Hunter Harrison, pushed railroad efficiency to new highs. Mr Harrison, who is now working his magic at CP, was heralded as the "best" CEO in the railroading industry for his impact on share price. One cannot deny that Mr. Harrison understood what was holding railroads back from effectively competing with trucks. His method of moving to scheduled service, reducing every cost that did not contribute to revenue, pushing asset utilization up and focusing on customer satisfaction resulted in short term gains that were nothing short of spectacular.
Railroading is a long term industry though, with assets that last decades, and the "Harrison effect" has not been proven over the life of those assets. If these measures could be implemented without the culture of fear that Mr. Harrison used to effect change, and steps taken to ensure capital investments are protected, there is great potential for savings.
CN's motives in providing advice to MNDM is suspect however....they are still interested in acquiring the ONR and will manipulate government to achieve that aim. One only has to look at the price when CN sells rail line to the government to know who gets the better deal in any negotiation between the two.
MNDM needs someone within the organization who understands what is necessary to achieve their goals. Anyone who knows Ontario Northland, knows that there is room for improvement and the union leaders are aware of that. What is needed is a rail industry professional, who is committed to government policy, yet able to maximize revenue in a region that provides marginal traffic.
One would hope that Minister Gravelle is kicking that search into high gear, before the ONTC disintegrates into unrecoverable pieces before our eyes.
Wednesday 5 November 2014
Creating an open and transparent government
Yesterday Kathleen Wynne made public the mandate letters written by Ministers to their Parliamentary Assistants. Queens Park media was somewhat less than impressed and totally discounted the effort, focusing instead on existing lapses in transparency at both MaRs and Ornge.
Investigating and exposing the details behind those two issues is indeed important, but it is unfortunate they overshadow the progress, however slow, that is being made toward transparency and accountability.
Mandate letters are incredibly broad in scope and lacking in detail, but they put in writing for the first time, a record of the commitment from the current government for each Ministry. As Ms. Wynne states in each Minister's letter, which is repeated to the PA's, her government is committed to increasing openness and transparency.
This written commitment, if successfully implemented, will mark a huge transformation from the currently accepted method of operation in the government. After years of taking hits from various interest groups for every decision made, government bureaucrats have retreated into back room discussions, confidentiality agreements and public consultations that pay lip service to the notion of informed government policy.
Some people think Ms. Wynne, having made the commitment, should just direct her ministers, and through them, the public servants to embrace openness and transparency. Unfortunately, no large and complex organization, public or private, works that way. The public service is made up of many people with differing political views and ideas about the role of government.
Bringing all those people to share a common belief about the benefits of an open and transparent government will take some time and require strong leadership. It will also require many small steps toward accountability, which include releasing mandate letters devoid of any detail or consequences for failure.
Some of that accountability will come from the public asking questions about how a Ministry's actions correspond to their obligations as outlined in the Mandate letters.
For the Ministry of Northern Development and Mines, one of those obligations relates to the Northern Growth Plan
Hopefully that review of the Growth Plan will make assessments based on some of the Monitoring and Performance Measures contained within it.
Investigating and exposing the details behind those two issues is indeed important, but it is unfortunate they overshadow the progress, however slow, that is being made toward transparency and accountability.
Mandate letters are incredibly broad in scope and lacking in detail, but they put in writing for the first time, a record of the commitment from the current government for each Ministry. As Ms. Wynne states in each Minister's letter, which is repeated to the PA's, her government is committed to increasing openness and transparency.
This written commitment, if successfully implemented, will mark a huge transformation from the currently accepted method of operation in the government. After years of taking hits from various interest groups for every decision made, government bureaucrats have retreated into back room discussions, confidentiality agreements and public consultations that pay lip service to the notion of informed government policy.
Some people think Ms. Wynne, having made the commitment, should just direct her ministers, and through them, the public servants to embrace openness and transparency. Unfortunately, no large and complex organization, public or private, works that way. The public service is made up of many people with differing political views and ideas about the role of government.
Bringing all those people to share a common belief about the benefits of an open and transparent government will take some time and require strong leadership. It will also require many small steps toward accountability, which include releasing mandate letters devoid of any detail or consequences for failure.
Some of that accountability will come from the public asking questions about how a Ministry's actions correspond to their obligations as outlined in the Mandate letters.
For the Ministry of Northern Development and Mines, one of those obligations relates to the Northern Growth Plan
Driving Growth in Northern Ontario
- Continuing to drive the implementation of the Growth Plan for Northern Ontario. You will consult with the Minister of Economic Development, Employment and Infrastructure and work with partner ministries, municipalities, Aboriginal communities and key stakeholders. Your goal is to ensure that priorities for the North align with the objectives of the Growth Plan.
- Continuing to work with the Northern Ontario Heritage Fund Corporation. Together, you will work to create jobs, improve productivity, promote diversification in the region’s economy — and stimulate innovation, entrepreneurship and business development investments in the North.
- Leading our government’s efforts to integrate and co-ordinate northern policy and planning activities, informed by the Growth Plan.
- Conducting a five-year review of the Growth Plan in 2016 to assess progress and achievements to date.
Hopefully that review of the Growth Plan will make assessments based on some of the Monitoring and Performance Measures contained within it.8.4 Monitoring and Performance Measures
8.4.1 The Minister of Infrastructure and the Minister of Northern Development, Mines and Forestry will jointly monitor overall implementation of this Plan and report on what progress provincial ministries and municipalities have made to implement the policies in this Plan.
8.4.2 The Minister of Infrastructure and the Minister of Northern Development, Mines and Forestry will work with external partners to develop a set of performance indicators to assist in Plan monitoring and reporting as set out in Policy 8.4.1.
8.4.3 Success in achieving this Plan's outcomes will, in part, be measured by assessing progress in:
- attracting investment and business growth in Northern Ontario
- diversifying the North's economic base
- supporting education and skills development of the North's workforce
- increasing the involvement of Aboriginal peoples in the northern economy
- improving the connectivity of the northern population though information technologies.
It is further acknowledged that long-term progress in these areas requires sustained, co-ordinated efforts by the Province and all its external partners.
8.4.4 The Province is further committed to the development of performance measures for ministry-specific initiatives that support implementation of the policies in this Plan.
Wide ranging mandate letters are an important step in the quest for an open and transparent government, but real measurements of the progress toward the commitments within them are going to be essential, if they are to have any meaning.
Friday 17 October 2014
Telecommunication service in Northern Ontario
Now that the Ontera sale to Bell Aliant is final and we have no chance of reversing that decision, it will be important to document how well the sale meets the following priorities as stated in the MNDM April 4, 2014 media release.
The government of the day hired KPMG to evaluate the alternatives and there were three alternatives developed.
1. Retention with improvements
2. Divestiture to large operator except Bell (because it would eliminate competition)
3. Sell to local interests
The recommendation was to further explore the option to divest O.N.Tel, and while that was pursued to its end, no company was interested in the purchase due to the presence of Bell in a marginal market.
That fact was reflected by this comment in the ONTC 2003 Annual Report
By default, the government had to accept Option 1 and started to utilize ON Tel as a government supplier. The same Annual Report also noted this:
Telus was brought in as a strategic partner in 2004 as a magic bullet from the private sector. The financial year end was extended to March and this excerpt reflects the continuation of government utilization of Ontera.
In 2006, management at ONTC terminated the agreement with Telus, ostensibly because Telus had strengthened the brand so they were not needed anymore....in reality, revenue had not increased, but expenses to Telus had.
The dependence of government services on Ontera continued;
In 2007-08 Ontera continued to be the provider of choice for government services in their region
It appears that by 2009 the government had stopped trying to utilize Ontera in their operations, although revenue continued to climb until 2011 then started to decline as the uncertainty about the corporation hit again.
Then, in their wisdom, MNDM decided to sell the corporation with Ontera being the first up in the divestment.
It appears the only large company operating in the region was also the only one interested in taking the assets off of their hands. Bell....the company that had been excluded in the original attempt because of the effect on competition.
Except that this time, MNDM did not care about service, they desperately wanted to get rid of the division because it could not make money and in a regulated market it had. Trying to turn around a division from the regulated market that Ontera had operated in, to the deregulated and competitive market that had been created by the internet was a huge and daunting task.
So huge that even a partnership with Telus was unable to deliver. In such an environment, and after a few years of hindsight, MNDM should have recognized that the partisan board they had appointed was incapable of ramrodding the changes necessary. In her report, the Auditor General reported that Deloitte had informed the Ministry in 2006 that the governance structure of Ontera was unwieldy and may hamper Ontera's ability to respond.
One would expect the immediate reaction would be to install someone on the Board with expertise who could both oversee the division and report to the Ministry about the risks. But....no....there was no one ever appointed to the ONTC Commission who had experience in either Telecommunications, or Railroading....from their resumes, it appeared to be just those who may have expressed an allegiance to the Liberal party.
So now we wait...and watch...to see how Bell Aliant provides the services to the region that MNDM determined they were better suited to do. The fact that the federal Competition Bureau thought that some token effort should be made toward Eastlink will be lost over time. Who knows what Eastlink is prepared to offer or will remember they were given the opportunity?
No...it is the huge number of public organizations that were serviced by Ontera that will have to cough up whatever Bell decides in the future....we will never know....except our individual services will be measurable, and I stand ready to compare mine over time.
- Through the competitive process, Bell Aliant demonstrated they can meet provincial priorities to sustain jobs, deliver telecommunications services, invest in the business in northern Ontario and provide value for taxpayers.
The government of the day hired KPMG to evaluate the alternatives and there were three alternatives developed.
1. Retention with improvements
2. Divestiture to large operator except Bell (because it would eliminate competition)
3. Sell to local interests
The recommendation was to further explore the option to divest O.N.Tel, and while that was pursued to its end, no company was interested in the purchase due to the presence of Bell in a marginal market.
That fact was reflected by this comment in the ONTC 2003 Annual Report
By default, the government had to accept Option 1 and started to utilize ON Tel as a government supplier. The same Annual Report also noted this:
Telus was brought in as a strategic partner in 2004 as a magic bullet from the private sector. The financial year end was extended to March and this excerpt reflects the continuation of government utilization of Ontera.
In 2006, management at ONTC terminated the agreement with Telus, ostensibly because Telus had strengthened the brand so they were not needed anymore....in reality, revenue had not increased, but expenses to Telus had.
The dependence of government services on Ontera continued;
In 2007-08 Ontera continued to be the provider of choice for government services in their region
It appears that by 2009 the government had stopped trying to utilize Ontera in their operations, although revenue continued to climb until 2011 then started to decline as the uncertainty about the corporation hit again.
Then, in their wisdom, MNDM decided to sell the corporation with Ontera being the first up in the divestment.
It appears the only large company operating in the region was also the only one interested in taking the assets off of their hands. Bell....the company that had been excluded in the original attempt because of the effect on competition.
Except that this time, MNDM did not care about service, they desperately wanted to get rid of the division because it could not make money and in a regulated market it had. Trying to turn around a division from the regulated market that Ontera had operated in, to the deregulated and competitive market that had been created by the internet was a huge and daunting task.
So huge that even a partnership with Telus was unable to deliver. In such an environment, and after a few years of hindsight, MNDM should have recognized that the partisan board they had appointed was incapable of ramrodding the changes necessary. In her report, the Auditor General reported that Deloitte had informed the Ministry in 2006 that the governance structure of Ontera was unwieldy and may hamper Ontera's ability to respond.
One would expect the immediate reaction would be to install someone on the Board with expertise who could both oversee the division and report to the Ministry about the risks. But....no....there was no one ever appointed to the ONTC Commission who had experience in either Telecommunications, or Railroading....from their resumes, it appeared to be just those who may have expressed an allegiance to the Liberal party.
So now we wait...and watch...to see how Bell Aliant provides the services to the region that MNDM determined they were better suited to do. The fact that the federal Competition Bureau thought that some token effort should be made toward Eastlink will be lost over time. Who knows what Eastlink is prepared to offer or will remember they were given the opportunity?
No...it is the huge number of public organizations that were serviced by Ontera that will have to cough up whatever Bell decides in the future....we will never know....except our individual services will be measurable, and I stand ready to compare mine over time.
Tuesday 14 October 2014
Book Review - Call of the Northland - Thomas Blampied
This book builds on the existing historical accounts of Ontario Northland which are listed in the Bibliography. The author uses a personal trip on the Northlander as the setting for the first seven chapters and that allows him to tie in many stories from various spots along the line. Ontario Northland has a long history in the region and the diversity of the literary sidetrips show how interwoven the corporation has become to the economy and the people in their service area.
After the photo essay in Chapter Eight, the book turns to the divestment phase of Ontario Northland after that fateful announcement in March of 2012. There is a lot of attention paid to the political manoeuvring and the reaction of interested groups and media. Again, the length of time the divestment phase takes, the number and diversity of the groups affected and the reversal of most of the original decision speaks volumes about the complexity of finding the best way to deliver its services.
The author obtained ridership numbers from ONTC, (after much delay...MDNM will not release information willingly) that clearly show "stagnant ridership" was not a legitimate excuse to shut down the Northlander.
Instead, the factors that contributed to increased subsidies are examined in Chapter 15, "What Went Wrong" There are many contributing factors that are presented in no particular order. The book is focussed on the Northlander and since the cancellation of that train is but one impact of the overall picture, the root causes are briefly presented as evidence that decision was unfounded.
The history of Ontario Northland and its implications for government policy in regions of the province, other than the GTA, is a complex subject that could withstand much more scrutiny. This book adds to that discussion by highlighting a very important component of that policy, which has been neglected and cast aside...rail transportation.
In addition the book generates awareness of the larger picture which is being distorted in the name of cost-cutting. The value of the services provided by ONTC and the impact of them in the future of this province warrants a great deal more research and discussion by those who will feel them most intensely. MNDM does not have the capacity to oversee such an important piece of the economy in Northern Ontario and the indifference that has caused needs to be addressed.
My hope is that the author will continue to cover and expand on the continuing story referred to, in the last line of the book.
http://www.northland-book.net/
After the photo essay in Chapter Eight, the book turns to the divestment phase of Ontario Northland after that fateful announcement in March of 2012. There is a lot of attention paid to the political manoeuvring and the reaction of interested groups and media. Again, the length of time the divestment phase takes, the number and diversity of the groups affected and the reversal of most of the original decision speaks volumes about the complexity of finding the best way to deliver its services.
The author obtained ridership numbers from ONTC, (after much delay...MDNM will not release information willingly) that clearly show "stagnant ridership" was not a legitimate excuse to shut down the Northlander.
Instead, the factors that contributed to increased subsidies are examined in Chapter 15, "What Went Wrong" There are many contributing factors that are presented in no particular order. The book is focussed on the Northlander and since the cancellation of that train is but one impact of the overall picture, the root causes are briefly presented as evidence that decision was unfounded.
The history of Ontario Northland and its implications for government policy in regions of the province, other than the GTA, is a complex subject that could withstand much more scrutiny. This book adds to that discussion by highlighting a very important component of that policy, which has been neglected and cast aside...rail transportation.
In addition the book generates awareness of the larger picture which is being distorted in the name of cost-cutting. The value of the services provided by ONTC and the impact of them in the future of this province warrants a great deal more research and discussion by those who will feel them most intensely. MNDM does not have the capacity to oversee such an important piece of the economy in Northern Ontario and the indifference that has caused needs to be addressed.
My hope is that the author will continue to cover and expand on the continuing story referred to, in the last line of the book.
http://www.northland-book.net/
Tuesday 19 August 2014
Poor ONTC-MNDM relationship has big implications
Ontario Auditor General, Bonnie Lysyk, released a special report in Dec 2013 about the Divestment of Ontario Northland Transportation Commission.
In that report, she spoke about the relationship between MNDM and ONTC as it affected the planned divestment
"The Ministry of Northern Development and Mines (Ministry) and the ONTC did not have a trusting or open relationship, so transparent and open communication did not consistently occur."
Although the mandate of that special report was to investigate the accuracy of the savings estimate put forward by MNDM to justify the divestment, (it was found to be wildly inaccurate), she did identify this relationship to be a fundamental problem in the execution of public policy in Northern Ontario.
I believe if the dysfunctional relationship was to be investigated in a comprehensive manner, it would show far more damage to Ontario than an overly optimistic assessment of cost savings that had no regard for value of service.
To begin with, I lifted the description in the critique done by Gravelwatch of the MNR's huge 2009 study of the Aggregate Resource in Ontario which suggests the process may have been flawed.
Ontario’s Ministry of Natural Resource carried out a set of studies called SAROS (State of the Aggregate Resource, Ontario Study). MNR commissioned a set of six papers about the State of Aggregate Resources in Ontario. MNR summarized the results of this work in a publication called the Consolidated Report, which presents 26 key findings about aggregates in Ontario. The critique given here concludes that MNR’s summary needs a broader perspective and too often takes an industrial point of view.
I don't know enough about the aggregate industry to comment on the validity of Gravelwatch's criticism, but I would like to draw attention to the facts used in Saros Paper 2 - Future Aggregate Availability & Alternatives Analysis. (WARNING - file takes a long time to load)
The Feasibility of Alternative Modes of Transportation begins on page 76 and makes some claims that I would like to comment on.
First of all, the 1992 report relied upon, for a lot of issues with rail transport, is entitled "Aggregate Resources of Southern Ontario" and many of those issues are not applicable to Northern Ontario.
It goes on to state that the 1992 report relied on a 1980 report "Mineral Aggregate Transportation Study" which dealt with selected source areas in the Saugeen area and Manitoulin Island. Again, this is NOT Northeastern Ontario where rail infrastructure, owned by ONTC, is already in place.
In the "Source Assumptions" on page 82, the rationale for selecting North Bay as the terminal for access to northern aggregate resources is not adequately explained. I suspect it had a lot to do with the fact that CN, who MNDM obviously relied on for rail expertise instead of ONTC, does not operate further north in the region than North Bay.
That location minimizes the financial benefit of selecting the old Sherman or Dane iron ore pits as locations for the initial source of aggregate for the proposal. Both sites are owned by the Miller Group and have their own unlimited source of aggregate, they have rail infrastructure already in place and they are fairly remote from communities where production activities may disturb local populations.
So if we accept the exclusion of these two natural sites for aggregate production and instead accept the CN premise that North Bay is the logical choice to assess the proposal, what then?
CN operates minimal yard operations in North Bay, having pulled out of a joint yard agreement with ONTC in the 1990's and relocating their operations to their own yard, which they reduced by 3 or 4 tracks to capitalize on the value of unused rail.
Now, to accommodate the increase in traffic, they suggest, through MNDM, that there will be a need for extensive capital costs to acquire land for stockpiles and new tracks. This totally discounts the value of utilizing the ONTC 21-track yard next door and all the existing attached infrastructure that could be used for train building, train testing and car repair. Instead they tally up huge capital costs for the acquisition of land and construction of a new yard. They also list issues relating to available mainline rail capacity as though the one freight train per day (2 when you count the Northlander passenger train that existed then) would impede the proposed gravel trains.
Even the congestion that may have arisen on the CN section of track south of Washago has diminished since CN has taken to routing most of their trains via the US instead of Ontario.
The report calls for the construction of loop tracks to accommodate the gravel trains, an expensive alternative to a conventional yard. I am assuming CN wanted loop tracks to alleviate the need of re-marshalling trains at the turnaround point and thereby circumvent the need for car inspection and brake testing required by federal law. If the train stayed intact, it would not require this safety feature regardless of the fact that the miles travelled would be the same.
The actual freight rate quoted by CN for these trains is unknown, but ONTC's major customers used to rely on CP quoting rates through Sudbury to keep CN rates competitive. This study does not appear to offer any rail alternative to what CN proposed. The proposal also called for trains to return empty disregarding the potential for hauling and disposal of construction waste. This is a huge problem for the GTA and may be more politically and environmentally acceptable than hauling GTA garbage.
There is no doubt changing the "close-to-market" policy for aggregate extraction will result in higher financial costs. But whether or not those costs are marginal is not fairly evaluated in this study. ONTC deserved an opportunity to make their case for the social benefits that can be achieved at the lowest possible financial cost.
MNDM's failure to include ONTC in these discussions is a testament to that dysfunctional relationship. That failure had a big impact on the MNR decision to stay with the "close-to-market" policy for aggregate production, which in turn, had big implications for all of Ontario.
In that report, she spoke about the relationship between MNDM and ONTC as it affected the planned divestment
"The Ministry of Northern Development and Mines (Ministry) and the ONTC did not have a trusting or open relationship, so transparent and open communication did not consistently occur."
Although the mandate of that special report was to investigate the accuracy of the savings estimate put forward by MNDM to justify the divestment, (it was found to be wildly inaccurate), she did identify this relationship to be a fundamental problem in the execution of public policy in Northern Ontario.
I believe if the dysfunctional relationship was to be investigated in a comprehensive manner, it would show far more damage to Ontario than an overly optimistic assessment of cost savings that had no regard for value of service.
To begin with, I lifted the description in the critique done by Gravelwatch of the MNR's huge 2009 study of the Aggregate Resource in Ontario which suggests the process may have been flawed.
Ontario’s Ministry of Natural Resource carried out a set of studies called SAROS (State of the Aggregate Resource, Ontario Study). MNR commissioned a set of six papers about the State of Aggregate Resources in Ontario. MNR summarized the results of this work in a publication called the Consolidated Report, which presents 26 key findings about aggregates in Ontario. The critique given here concludes that MNR’s summary needs a broader perspective and too often takes an industrial point of view.
I don't know enough about the aggregate industry to comment on the validity of Gravelwatch's criticism, but I would like to draw attention to the facts used in Saros Paper 2 - Future Aggregate Availability & Alternatives Analysis. (WARNING - file takes a long time to load)
The Feasibility of Alternative Modes of Transportation begins on page 76 and makes some claims that I would like to comment on.
First of all, the 1992 report relied upon, for a lot of issues with rail transport, is entitled "Aggregate Resources of Southern Ontario" and many of those issues are not applicable to Northern Ontario.
It goes on to state that the 1992 report relied on a 1980 report "Mineral Aggregate Transportation Study" which dealt with selected source areas in the Saugeen area and Manitoulin Island. Again, this is NOT Northeastern Ontario where rail infrastructure, owned by ONTC, is already in place.
In the "Source Assumptions" on page 82, the rationale for selecting North Bay as the terminal for access to northern aggregate resources is not adequately explained. I suspect it had a lot to do with the fact that CN, who MNDM obviously relied on for rail expertise instead of ONTC, does not operate further north in the region than North Bay.
That location minimizes the financial benefit of selecting the old Sherman or Dane iron ore pits as locations for the initial source of aggregate for the proposal. Both sites are owned by the Miller Group and have their own unlimited source of aggregate, they have rail infrastructure already in place and they are fairly remote from communities where production activities may disturb local populations.
So if we accept the exclusion of these two natural sites for aggregate production and instead accept the CN premise that North Bay is the logical choice to assess the proposal, what then?
CN operates minimal yard operations in North Bay, having pulled out of a joint yard agreement with ONTC in the 1990's and relocating their operations to their own yard, which they reduced by 3 or 4 tracks to capitalize on the value of unused rail.
Now, to accommodate the increase in traffic, they suggest, through MNDM, that there will be a need for extensive capital costs to acquire land for stockpiles and new tracks. This totally discounts the value of utilizing the ONTC 21-track yard next door and all the existing attached infrastructure that could be used for train building, train testing and car repair. Instead they tally up huge capital costs for the acquisition of land and construction of a new yard. They also list issues relating to available mainline rail capacity as though the one freight train per day (2 when you count the Northlander passenger train that existed then) would impede the proposed gravel trains.
Even the congestion that may have arisen on the CN section of track south of Washago has diminished since CN has taken to routing most of their trains via the US instead of Ontario.
The report calls for the construction of loop tracks to accommodate the gravel trains, an expensive alternative to a conventional yard. I am assuming CN wanted loop tracks to alleviate the need of re-marshalling trains at the turnaround point and thereby circumvent the need for car inspection and brake testing required by federal law. If the train stayed intact, it would not require this safety feature regardless of the fact that the miles travelled would be the same.
The actual freight rate quoted by CN for these trains is unknown, but ONTC's major customers used to rely on CP quoting rates through Sudbury to keep CN rates competitive. This study does not appear to offer any rail alternative to what CN proposed. The proposal also called for trains to return empty disregarding the potential for hauling and disposal of construction waste. This is a huge problem for the GTA and may be more politically and environmentally acceptable than hauling GTA garbage.
There is no doubt changing the "close-to-market" policy for aggregate extraction will result in higher financial costs. But whether or not those costs are marginal is not fairly evaluated in this study. ONTC deserved an opportunity to make their case for the social benefits that can be achieved at the lowest possible financial cost.
MNDM's failure to include ONTC in these discussions is a testament to that dysfunctional relationship. That failure had a big impact on the MNR decision to stay with the "close-to-market" policy for aggregate production, which in turn, had big implications for all of Ontario.
Saturday 16 August 2014
Comparing two Telecom Deals
The 2013 Financial Statements of the Municipality of Kincardine contain the following entry
In July 2013 the council of the Municipality committed to selling the assets of Bruce Telecom At that date the tangible capital assets of Bruce Telecom were considered held for sale and were therefore recognized at their net recoverable amount and removed from tangible capital assets
The council accepted an offer to sell the tangible capital assets of Bruce Telecom on January 21 2014 for a price of $24M An impairment of 8,388, 297 resulted from writing down Bruce Telecoms tangible capital assets to this value
The revenue from Bruce Telecom in 2012 was around $18M with $17M in expenses. I do not know if those expenses include depreciation or not.
So the value of the assets of this corporation were $32.4M dollars and the company sold for $24 M with no further financial contribution required by the Municipality of Kincardine to Eastlink.
The 2013 Financial Statements of ONTC contain the following information about Ontera
Assets (in thousands)
Ontera Cost Accum Net Book
Deprec Value
Equipment 165,828 127,368 38,460
Buildings 6,751 4,421 2,330
Ontera
Sales revenue 28,408
Operating Expense 22,692
Excess of revenue over expenses before the undernoted 5,716
Amortization of capital assets 5,151
Employee future benefit expense 1,720
Gain on sale of capital assets - (26)
Interest expense 1,084
Deficiency of revenue over expenses (2,239)
Ontera was sold for $6M with a further capital contribution of $15M by the Ontario government.
I am no financial expert, and would welcome the opinion of someone knowledgeable about the details, but it seems to me that MNDM made a very poor deal for the Ontario government. The Competition Bureau may be doing the Ontario taxpayer a favour if they block this deal.
The need for the Competition Bureau to review this transaction has been known from the outset.....if indeed the deal is blocked, it will be very interesting to see MNDM's "Plan B".....and how long it takes them to let the public know what it is.
In July 2013 the council of the Municipality committed to selling the assets of Bruce Telecom At that date the tangible capital assets of Bruce Telecom were considered held for sale and were therefore recognized at their net recoverable amount and removed from tangible capital assets
The council accepted an offer to sell the tangible capital assets of Bruce Telecom on January 21 2014 for a price of $24M An impairment of 8,388, 297 resulted from writing down Bruce Telecoms tangible capital assets to this value
The revenue from Bruce Telecom in 2012 was around $18M with $17M in expenses. I do not know if those expenses include depreciation or not.
So the value of the assets of this corporation were $32.4M dollars and the company sold for $24 M with no further financial contribution required by the Municipality of Kincardine to Eastlink.
The 2013 Financial Statements of ONTC contain the following information about Ontera
Assets (in thousands)
Ontera Cost Accum Net Book
Deprec Value
Equipment 165,828 127,368 38,460
Buildings 6,751 4,421 2,330
Ontera
Sales revenue 28,408
Operating Expense 22,692
Excess of revenue over expenses before the undernoted 5,716
Amortization of capital assets 5,151
Employee future benefit expense 1,720
Gain on sale of capital assets - (26)
Interest expense 1,084
Deficiency of revenue over expenses (2,239)
Ontera was sold for $6M with a further capital contribution of $15M by the Ontario government.
I am no financial expert, and would welcome the opinion of someone knowledgeable about the details, but it seems to me that MNDM made a very poor deal for the Ontario government. The Competition Bureau may be doing the Ontario taxpayer a favour if they block this deal.
The need for the Competition Bureau to review this transaction has been known from the outset.....if indeed the deal is blocked, it will be very interesting to see MNDM's "Plan B".....and how long it takes them to let the public know what it is.
Thursday 19 June 2014
Kathleen Wynne - Doing More with Less
Kathleen Wynne won the election based on Hudak fear and NDP aversion. But give the lady credit, she took on the mess left by McGuinty and convinced voters she could change the Liberal team to match the vision she outlined of an open, transparent and accountable government.
In addition, she is still committed to balancing the budget without massive service cuts, which means the government must do more with less.
In a government as old as Ontario, which has had many different leaders and agendas, it is fair to say, there is likely some duplication. One of the ways Ms. Wynne can achieve savings without service cuts is to root out and eliminate this duplication.
The regional Ministry of Northern Development and Mines was created to give Northerners a voice in a government that very often tended to focus on the populous GTA. Over the years the lack of attention given to Northern Ontario provided separatist advocates with an argument that may have gained traction. By giving Northeners their own Ministry, it was hoped the region would continue contributing to the provincial discussion and economy, and not pursue their own agenda. Unfortunately, MNDM never found their voice for all of Northern Ontario and the separatist calls are rising again.
However tarnished Dalton McGuinty's record is, there are some things he got right. One of those things was the creation of the Northern Policy Institute, with the following mandate:
Northern Policy Institute will provide proactive, evidence-based and purpose driven recommendations to government and industry on policies and programs that strengthen the regional economy and create a more competitive and productive Northern Ontario.
and the following approach
In addition, she is still committed to balancing the budget without massive service cuts, which means the government must do more with less.
In a government as old as Ontario, which has had many different leaders and agendas, it is fair to say, there is likely some duplication. One of the ways Ms. Wynne can achieve savings without service cuts is to root out and eliminate this duplication.
The regional Ministry of Northern Development and Mines was created to give Northerners a voice in a government that very often tended to focus on the populous GTA. Over the years the lack of attention given to Northern Ontario provided separatist advocates with an argument that may have gained traction. By giving Northeners their own Ministry, it was hoped the region would continue contributing to the provincial discussion and economy, and not pursue their own agenda. Unfortunately, MNDM never found their voice for all of Northern Ontario and the separatist calls are rising again.
However tarnished Dalton McGuinty's record is, there are some things he got right. One of those things was the creation of the Northern Policy Institute, with the following mandate:
Northern Policy Institute will provide proactive, evidence-based and purpose driven recommendations to government and industry on policies and programs that strengthen the regional economy and create a more competitive and productive Northern Ontario.
and the following approach
- Non-partisan public policy research
- Engage in practical and applied research on current or emerging issues relevant to Northern Ontario
- Provide fair, balanced and objective assessments of issues
- Recognize value of multi-stakeholder, multi-disciplinary and multicultural contributions
- Complement research efforts of Northern Ontario’s post-secondary institutions and research institutions
- Ensure work publicly accessible, stimulate public engagement
Kathleen Wynne, in an open, transparent and accountable government should welcome the input from such a process. And if she does, one of the reasons for MNDM's existence becomes a duplication that needs to be evaluated
The other areas of MNDM responsibility could be folded into the Ministry of Economic Development Trade & Employment, Ministry of Transportation and Ministry of Natural Resources. The opportunity to flatten the government bureaucracy should be combined with a strategy to decentralize out of Toronto to the various regions of the province. Technology can be used to mitigate the expense of operating over a broader area, it will give policy makers a better view of the entire province, and savings from real estate costs should help pay for the process.
The restructuring should be done slowly so as to utilize attrition to its full extent, but the existence of a detailed plan would go a long way to reassuring Ontarians that fiscal responsibility has arrived in Queens Park.
The restructuring should be done slowly so as to utilize attrition to its full extent, but the existence of a detailed plan would go a long way to reassuring Ontarians that fiscal responsibility has arrived in Queens Park.
Saturday 10 May 2014
Ready, Aim, FIRE...Liberals score direct hit on their own foot
After it became clear the MNDM approach to ONTC could not be spun into a good news story, the Liberals came up with Plan B. What was once "divestment" became "transformation", which in Liberal-speak means divestment is still on the table, but for now, we are going to throw it away bit by bit, because frankly, we don't have a clue how to run it. We need the votes prior to the election, but after that, we are free to do what we want, regardless of any advisory committee input.
This is the key line in their April 4, 2014 news release:
The province will make strategic new investments to ensure ONTC’s transportation services and infrastructure continues to support economic growth in northeastern Ontario.
It says absolutely nothing about not divesting ONTC, merely that their services and assets will be used to support economic growth. Given the model put forward by the Ontera sale, the most likely company to deliver those services and maintain that infrastructure would be CN, which would effectively destroy rail freight competition in the North also.
Now that the Liberals are having difficulty finding a flag bearer to carry the Liberal banner in the Nipissing district, I imagine the question any potential candidate asks first is "What are you going to do with the ONTC file?"
The answer is either "We don't know" or "Carry it through the election, then dump it", neither of which would appeal to anyone asked to invest in an expensive campaign. The announcement of a new plan to transform ONTC rather than divest was the only way the Liberals could hope to chip away at the solid base for PC candidate, Vic Fedeli, but here again, the Liberals shot themselves in the foot.
For whatever reason, the Liberals thought they could announce the sale of Ontera and not suffer any fallout in their bid to oust Fedeli. Unfortunately, for them, the move was seen as an indication of what the real intentions are for Northern Ontario by the Liberal dream team and has so far prevented them from even getting into the race.
If the CRTC and/or the Competition Bureau get enough involved and look at the issue of competition in the telecom industry in Northern Ontario, the federal agency will likely rule against the proposed provincial sale. If that happens, the Liberals, (if they are still in power) will be forced to go to Plan C, which has probably not popped up on the GTA radar yet.
Contact the CRTC
Contact the Competition Bureau
This is the key line in their April 4, 2014 news release:
The province will make strategic new investments to ensure ONTC’s transportation services and infrastructure continues to support economic growth in northeastern Ontario.
It says absolutely nothing about not divesting ONTC, merely that their services and assets will be used to support economic growth. Given the model put forward by the Ontera sale, the most likely company to deliver those services and maintain that infrastructure would be CN, which would effectively destroy rail freight competition in the North also.
Now that the Liberals are having difficulty finding a flag bearer to carry the Liberal banner in the Nipissing district, I imagine the question any potential candidate asks first is "What are you going to do with the ONTC file?"
The answer is either "We don't know" or "Carry it through the election, then dump it", neither of which would appeal to anyone asked to invest in an expensive campaign. The announcement of a new plan to transform ONTC rather than divest was the only way the Liberals could hope to chip away at the solid base for PC candidate, Vic Fedeli, but here again, the Liberals shot themselves in the foot.
For whatever reason, the Liberals thought they could announce the sale of Ontera and not suffer any fallout in their bid to oust Fedeli. Unfortunately, for them, the move was seen as an indication of what the real intentions are for Northern Ontario by the Liberal dream team and has so far prevented them from even getting into the race.
If the CRTC and/or the Competition Bureau get enough involved and look at the issue of competition in the telecom industry in Northern Ontario, the federal agency will likely rule against the proposed provincial sale. If that happens, the Liberals, (if they are still in power) will be forced to go to Plan C, which has probably not popped up on the GTA radar yet.
Contact the CRTC
Contact the Competition Bureau
Sunday 13 April 2014
Ontera - The Liberal Anchor
After two more years of turmoil at the hands of the Liberal government, ONTC has suffered another debilitating attack, by a party eager to appease the corporate world. The Liberal party is trying to convince the corporate world they have the ability and discipline to govern after their unbelievable indifference to the cost of gas plant relocation's and subsequent coverup. The fact that Ontera is being gifted to Bell as the result of a process defined by the problems the passenger and freight rail divisions have endured over the past two decades defies any logic or grasp of good government policy.
Although we do not know the details of the proposed firesale, and likely never will, it is hard to believe that Bell will even maintain service levels in the marginal areas that Ontera has provided service, let along protect price levels with a clear monopoly in the North.
So, with the absence of any reason that makes sense in providing good government we are left to speculate why the Liberals have headed down another road to self destruction.
The creation of the new Development corporation could be a clue. Why the Ring of Fire needs a completely new corporation with all the cost that goes along with that, to develop the infrastructure for the mining industry is a secret known only to the Liberal strategists. The fact is, Ontario Northland has been doing exactly the same job for over one hundred years, the vast majority of which were at a profit. If the object were to provide infrastructure for a mining industry to utilize to extract the resources of the land, Ontario Northland is the company with a history of doing the same thing in the same environment.
With the record of MNDM in failing to protect and utilize ONTC, one wonders if they have advised the government that the transfer of assets from ONTC to the development corporation would trigger an opportunity under the Pension Benefits Act (PBA 69.1 (f)) to wind up the ONTC pension fund. In their zeal to eliminate ONTC they may yet again misread the public relations nightmare that would create for the governing party.
All financing for ONTC has to go through the government and when that government is struggling with a deficit the size of the current one, those funds have to be prioritized. Unfortunately, the Northern region does not represent much opportunity for Liberal votes, therefore the priority has been very low. The new focus on transit as a solution to gridlock presents an opportunity to establish a new revenue stream in a politically acceptable way and create a political platform in the Liberal vote-rich GTA.
So if Green Bonds are the preferred way to fund transit improvements, any projects would have to be fully geared toward an environmentally superior organization, not hard to do, given the efficiency of rail transportation. A telecommunications division in the middle of it however, may gum up the works and it needed to be surgically removed.
This is where MNDM hands the Liberals their electoral anchor. Instead of protecting telecom competition in the north and making a deal likely to gain CRTC approval, the government just turns to the most willing corporation with the deepest pockets to get what pittance they can out of the infrastructure.
It would have made much more sense to spin the division into its own crown agency, like they did with Owen Sound Transportation Commission after the last selloff attempt, or merge it with Hydro One Telecom, where the synergies may have given both government entities a boost.
Now they are at the mercy of a federal organization who must decide whether or not the deal is in the best interests of the public it serves. Depending on the timing the results of that decision could add to the downward pressure on Liberal fortunes in the coming provincial election.
Although we do not know the details of the proposed firesale, and likely never will, it is hard to believe that Bell will even maintain service levels in the marginal areas that Ontera has provided service, let along protect price levels with a clear monopoly in the North.
So, with the absence of any reason that makes sense in providing good government we are left to speculate why the Liberals have headed down another road to self destruction.
The creation of the new Development corporation could be a clue. Why the Ring of Fire needs a completely new corporation with all the cost that goes along with that, to develop the infrastructure for the mining industry is a secret known only to the Liberal strategists. The fact is, Ontario Northland has been doing exactly the same job for over one hundred years, the vast majority of which were at a profit. If the object were to provide infrastructure for a mining industry to utilize to extract the resources of the land, Ontario Northland is the company with a history of doing the same thing in the same environment.
With the record of MNDM in failing to protect and utilize ONTC, one wonders if they have advised the government that the transfer of assets from ONTC to the development corporation would trigger an opportunity under the Pension Benefits Act (PBA 69.1 (f)) to wind up the ONTC pension fund. In their zeal to eliminate ONTC they may yet again misread the public relations nightmare that would create for the governing party.
All financing for ONTC has to go through the government and when that government is struggling with a deficit the size of the current one, those funds have to be prioritized. Unfortunately, the Northern region does not represent much opportunity for Liberal votes, therefore the priority has been very low. The new focus on transit as a solution to gridlock presents an opportunity to establish a new revenue stream in a politically acceptable way and create a political platform in the Liberal vote-rich GTA.
So if Green Bonds are the preferred way to fund transit improvements, any projects would have to be fully geared toward an environmentally superior organization, not hard to do, given the efficiency of rail transportation. A telecommunications division in the middle of it however, may gum up the works and it needed to be surgically removed.
This is where MNDM hands the Liberals their electoral anchor. Instead of protecting telecom competition in the north and making a deal likely to gain CRTC approval, the government just turns to the most willing corporation with the deepest pockets to get what pittance they can out of the infrastructure.
It would have made much more sense to spin the division into its own crown agency, like they did with Owen Sound Transportation Commission after the last selloff attempt, or merge it with Hydro One Telecom, where the synergies may have given both government entities a boost.
Now they are at the mercy of a federal organization who must decide whether or not the deal is in the best interests of the public it serves. Depending on the timing the results of that decision could add to the downward pressure on Liberal fortunes in the coming provincial election.
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