The REM is the brainchild of two men, Michael Sabia, current PDG of Hydro-Québec and former head of the Caisse de dépôt, and Philippe Couillard, premier of Québec from 2014 to 2018. Denis Coderre, mayor of Montreal before Valerie Plante, contributed to the hoopla that surrounded its birth, and Plante herself was initially enthusiastic. Seven years later, she is the only one of the REM’s progenitors who remains in office. The others have moved on, the way politicians do, to greener pastures.

Launched by Jean Lesage in 1965 to manage the province’s pensions and insurance, the Caisse de dépôt initially focused on bonds, but in 1971 started to build an equity portfolio of mostly Québecois companies. During the eighties and the nineties, it entered the real estate market, and in the mid-2000s, it began to invest in infrastructure, principally foreign airports. It lost $40 billion in the 2008 financial crash, but under new leadership, it got out of short-term commercial paper and back into long-term bonds. Under Michael Sabia, a decision was made to go into the construction business, which included designing and planning the REM.

In 2015, Québec faced a public infrastructure deficit, characterized by a long list of promised projects that had never been built. The Liberals believed that private corporations did a better job of getting things done than government ministries, so they created an agreement with the Caisse de dépôt, by then a crown corporation. Sabia wanted to experiment with building the kinds of projects he was investing in overseas. Couillard wanted a train to the airport and to connect the South Shore to central downtown. The Caisse had previously been part of the consortium that built the Canada Line in Vancouver. Sabia decided to build another SkyTrain.

The Caisse put in $3 billion. The governments of Québec and Ottawa put in $1.28 billion each. Hydro Québec gave him $295 million and the Autorité Regional de Transport de Montréal (ARTM) donated $512 million to cover the money the Caisse would earn from improvements to the land around the train.

In exchange for building and managing the REM (the ARTM would operate it) the Caisse would get an annual 8% return on its money. No other transit line would be allowed to run lines parallel to it, and all bus lines would be required to feed into it. The Caisse would own the REM during the implementation phase but would be free to sell it after that, and the same terms would apply for the new owner (i.e. an annual return of 8%). The government would not automatically become the owner, as is often the case with public-private partnerships. It would have to purchase the REM if it wanted it, and would not benefit from a preferential price. If it decided to wait until the agreement expired, it would have to wait 99 years.

The deal was intended to be mutually beneficial: the Caisse would make money for pensioners, and the city of Montreal would get a new train. However, it clearly benefited the Caisse more than it did the city or the province. Most public-private partnerships last for only 20 or 30 years, not 99. An 8% dividend in 2017 was extraordinarily high, especially when the prime interest rate was only 3.20% in September. Sabia had free rein in deciding what to build, which was a slap in the face, as the transit experts at ARTM—many of whom resigned—understood Montreal’s transit needs better than he did. Economists at IREC (Institut de recherche en économie contemporaine) predicted that municipalities would end up paying the Caisse $500 million a year.1

Nevertheless, the REM was a hit with the media. It was, “the most important transportation project in Montreal in fifty years.” The Bureau d'Audience Publique sur l'Environnement (BAPE) panned it, saying it would contribute little to the goal of getting drivers out of their cars, and giving it control over the Mont Royal tunnel was a serious mistake. Yet none of that mattered. Everyone was so happy that something was finally getting built, they ignored the warnings. They also forgot to ask where they were going to get the 8%.

Sabia later confessed that he didn’t think about whether the REM would fit into the existing transit network, or the impact it would have on the bus system. It was the beauty of using pension money to construct much-needed trains that excited his imagination, and since he was in charge of the Caisse’s billions his glowing words were taken at face value. It must have been really difficult for someone like Valerie Plante, who was a brand new mayor in 2016, to resist getting caught up in the hype and the brouhaha. Sabia himself was so excited he revealed he had plans to market his model internationally.

Governments “internationally” were sharper than Quebec was in 2016. Phil Goff, the mayor of Auckland, New Zealand rejected Sabia’s offer to construct a train similar to the REM when he realized it would be cheaper for the city to build it. Politicians here didn’t figure that out because they were crazy about “privatization,” the idea that government bureaucracies were corrupt and inefficient. and private business could do things better.

Now we realize what a whopper that was. While privatization may have had a few successes—depending on who you ask—schemes such as charging user fees for health services instead of drawing on tax revenue, hits lower-income people the hardest, and building transit projects with a Public Private Partnership (3P) instead of the Ministry of Transport transfers financial risk, but it is usually at a very high price. The REM has created a deficit in the ARTM’s budget. The Montréal Métro currently transports one million people a day, and the REM only moves 170,000. Nevertheless, politicians expect the REM to capture 12% of ARTM revenues in 2027.2

The REM is an expensive train not just because it gets 72 cents per passenger kilometer (compared to the Deux Montagnes train it replaced, which only received 24 cents) but because the ARTM has to give the Caisse 8% on its $3 billion. Where is it supposed to get the money? The rest of Montreal’s transit system is being sucked dry to provide a dividend to a bank that is supposed to be looking after our bas de laine. The irony of it is stunning.

Plante and Project Montreal went along with it in the beginning, but what else were they to do? The people at the top of the province clearly wanted it, so if she was going to do any of the other things she promised to do, she had to smile for the cameras. Now she must walk a thin line between reviving Coderre’s hope of coming back to replace her, and letting Legault know how angry she is. Legault didn’t become Premier until after the REM was born, but he has shown every sign of believing that the businessmen at the Caisse can do no wrong, that they are honest, and only have our best interests at heart. They definitely have a funny way of looking after us. Let this be a warning that the REM could happen again.

Text by Transparence 2000

For more information, check out Le train qui nous dupé, by Laurel Cleugh Thompson.

 

Notes

1. https://irec.quebec/ressources/publications/Note-74.-Reseau-express-metr...

2. https://www.lapresse.ca/actualites/grand-montreal/2024-06-20/transport-c...