canada

2005.12.30
ONTARIO CANADA
407ETR raising tolls 8.7% in yearly hike -province acknowledges legal power
407ETR has announced it will raise tolls 1st Feb 2006 on the Toronto pike by by 8.7% or C1.3c/km (1.8c/mi) to C16.25c/km (22.4c/mi) for light vehicles (under 5t). There is a small C0.75c/km (1c/mi) offpeak discount. Rates for straight body trucks rise to C32.5c/km (44.7c/mi) and for tractor trailers to C46.5v/km (64c/mi). There are offpeak discounts of C1.5c/km (2.1c/mi) for trucks.

Peak hours are 6am to 10am and 3pm to 7pm weekdays.

(Conversions C$=86c or a factor of x1.38 C$/km to US$/mi)

The concessionaire is dropping an $8.60 (C$10) transponder activation fee presently charged. This they say is to encourage motorists to get transponders.

Those without a transponder presently have their license plates imaged and are sent a toll bill in the mail after computer search of motor registry databases. There is a substantial $2.97 (C$3.45) video toll premium for light vehicles and a huge $43 (C$50) video surcharge for trucks. Unlike light vehicles for which the video tolling was designed, trucks are committing a legal offense by being on the tollroad without a transponder, and could in theory be fined. (There is no provision for cash collection on 407ETR.)

Transponder users who comprise about 75% of transactions pay a $18 (C$21) transponder lease fee and $20.65 (C$24) in twelve monthly account fees, so they have an overhead cost of $38.65 (C$45)/year. A regular moderate user of the 407ETR - one who say does 100km (60mi) per week or 5,000km (3,000mi) on the tollroad each year will be paying an overhead of C0.9c/km (1.2c/mi) on top of the C16.2c/km (22.4c/mi), making its cost C17.1c/km (23.6c/mi).

Pretty expensive but nearly 300k/day think it's worth the high toll
407ETR is relatively expensive compared to other new toll roads in North America, though not the most expensive - California's new tollroads are slightly pricier, and the 91X lanes much more - at up to 77c/mi (C56c/km).

407ETR is very expensive compared to most state owned US tollroads (except the Delaware Turnpike). These were built when right of way and construction costs were much lower and they are usually priced on historic cost recovery basis.

Many of these roads also are interurban or rural roads and cheaper to build and operate whereas 407ETR as an intraurban road is costly. Just count the interchanges - about 30 of them in 108km (65mi).

Also 407ETR's ridership of 284k trips/day weekround, 330k weekdays, seems to indicate a lot of Toronto motorists judge its service in saving hassle and time over competitive free routes is worth the relatively high toll rates. If it weren't calcuating benefits greater than the toll they wouldn't use it.

407ETR justification
In their announcement of the toll increase - not unexpected since they have raised tolls this time every year since they began - 407ETR stressed that the extra revenue will help the company add lanes.

Enrique Diaz-Rato, president of the pike is quoted: "Our customers want to avoid stop-and-go traffic, and these (toll increases) will ensure 407 ETR keeps our customers moving."

28km (17mi) of new lanes have been added to the 108km (65mi) tollroad in the past three years and by end 2006 they should have added another 50km (30mi) between H427 and H404.

Under the terms of the concession 407ETR has to add capacity and ensure there isn't congestion or it is liable for heavy government penalties. The concessionaire says it is working to add lanes before these are contractually necessary to avoid penalty payments.

A backgrounder issued along with the press release reports:

* 700k transponders in use up 245% on 1999 when the concession started

* 347k trips per average workday, up 49% on 1999

* one day record now 414k trips on 2005-06-30

* 407 ETR has spent C$4b ($3.45) acquiring the concession and on expansions

* the province made a profit of C$1.5b ($1.3b) in its concession fee over its costs when it privatized the pike

* the concessionaire extended the highway by 40km (24mi) in less than two years

* the extension plus new interchanges and lanes have cost the concessionaire $645m (C$750m)

* the concessionaire has built 360 lane-km (216 lane-mi) since taking over

* new lane additions have attracted new traffic because they enabled quicker trip times at a couple of previous bottlenecks

* a free roadside assistance patrol assisted 1,300 customers last year and cost the pike $515k (C$600k)

* the toll hike will raise the cost of the average trip of 20km (12mi) from $2.57 to $2.80 (C$2.99 to C$3.25) or 22c (C26c)

* 407ETR just LUUUUVS 91X and other California pikes for having higher tolls they can cite (Well they didn't quite put it that way)

Gov says disappointed
The province has fought tenaciously against 407ETR since the present populist regime of Dalton McGuinty came to power early 2003 promising to roll back 407 tolls. In a statement today transport minister Harinder Takhar is quoted as "disappointed" by the toll rate hike, but for the first time he acknowledges the concessionaire's legal right to make the raise. He has previously charged the concessionaire as being in breach of contract by raising toll rates without prior government approval, and has pushed an apparently endless stream of law suits and appeals against rulings that the concessionaire is acting lawfully.

Here is today's acknowledgment of error by Takhar, though phrased as a hit at his predecessors: "It is unfortunate that the previous government agreed to a contract that does not give the province the ability to protect motorists by approving changes to toll rates." (Dec 20 CNW release)

He said it at last!

License plate denial for toll deadbeats
The latest in an almost unbroken series of legal defeats for Takhar and in favor of 407ETR was a unanimous order Nov 7 by the Ontario high court to the province to reinstitute license plate denial against 407ETR toll deadbeats. The province has since complied with the court order and is now processing license plate denials as required by law.

Takhar says however: "The government is seeking leave to appeal a November 7, 2005 court ruling forcing the (Motor Vehicle) Registrar of Ontario to deny plates to those who have outstanding 407 billing issues. The government is making every effort to ensure that 407 ETR is complying with the 99-year agreement. With another 92 years left, the province will continue its efforts to use every means available under the contract to protect the public interest... This government has a responsibility to protect the public interest and is committed to fighting for the rights of motorists."

We'll continue litigating
Takhar says the province will continue its litigation contesting the base-year basis for establishing penalty payments. He characterizes this as an effort "to require the 407 ETR to seek government approval before raising tolls."

Concessionaires could never raise the capital to pay concession fees if investors thought populist politicians like Takhar had the power to interfere arbitrarily in toll rate setting, so concession agreements don't get written that grant governments such power. TOLLROADSnews 2005-12-30