Province moves to block road toll increase Government seeks arbitration
407's owners cite contract rights
CAROLINE MALLAN QUEEN'S PARK BUREAU CHIEF
The Ontario government has moved to block the proposed increase in fees for drivers using Highway 407.
The government yesterday wrote to the owners of the private toll highway that it wants an arbitrator to intervene in a bid to force the road's owner to lower toll rates.
The formal notice to the company is the latest development in the war of words between Premier Dalton McGuinty's Liberal government and the 407-ETR company that is planning to raise tolls once again on Feb. 1.
"We are asserting our rights under the existing contract, which allows us to challenge their demand to raise tolls without first satisfying our requirements and moving the matter to arbitration," McGuinty told the Star yesterday after meeting the editorial board.
In a letter signed by assistant deputy transportation minister Bruce McCuaig to the head of the Spanish-led consortium that owns the road, the government maintains that if the Highway 407 company proceeds with the new hike, the province will view it as being in default of its contract.
The government insists that tolls cannot be raised without their approval, an assertion that the 407-ETR rejects.
Analyses by two credit rating agencies back up the company's position that its agreement with the province allows tolls to continue to rise unfettered as long as traffic volume on the expansive stretch of highway north of Toronto continues to increase.
"We are disappointed that the government has threatened us with default. We are not in default," said Dale Albers, spokesperson for the 407.
"We look forward to defending our rights within the contract."
McGuinty said the province has also formally notified the 407-ETR that it will invoke a provision in the contract that allows for renegotiations on the fifth anniversary of the contract being signed, which falls in mid April.
"We are invoking our right to renegotiate the contract at the five-year mark," he said. "We have a number of options that are available to us and we will not shrink from our responsibility to stand up for 407 users and Ontario taxpayers generally."
The previous Conservative government sold the 407 to the private sector in 1999. Then-premier Mike Harris promised that annual toll increases would be limited to 2 per cent plus inflation over the first 15 years.
But the secret 99-year lease with the private consortium signed by the Tories allowed for increases without government interference as long as traffic was increasing. In the past five years, tolls have jumped up to 200 per cent.
But the contract also clearly states that any renegotiation cannot adversely affect the company's bottom line, a stipulation that a company spokesperson says makes any renegotiation attempt by the province pointless.
Albers said the road owners have already offered to lower some of the administration fees levied on users, especially people who do not have a transponder for the road, along with other fees and some tolls.
A spokesperson for Transportation Minister Harinder Takhar said that offer of lower tolls only applied to overnight trips on the road and were minimal at best, and did little to offset the impact of the planned 1-cent-a-kilometre toll hike scheduled to kick in on Feb. 1.
That hike represents an average jump of $78 a year for regular commuters who use the road. Rates have risen six times in the past 52 months.
Just weeks after being sworn in as minister, Takhar, who represents Mississauga Centre, said he had reviewed the contract and that it was even worse than he had envisioned in terms of favouring the highway's owners.
Yesterday he said the government will consider the highway's owners to have defaulted on their end of the contract if they proceed with the latest proposed hike.
"Our position is clear: in proposing a toll increase without obtaining government approval, 407-ETR is not complying with its contractual obligations. And we are moving to dispute resolution to settle this issue," Takhar said in announcing that the province will invoke the dispute resolution mechanism contained in the massive contract.
One bargaining chip on the province's side is its ability to withhold licence plate renewals for people who use the road, but do not pay their bills.
Under the contract, the province is supposed to deny the plates to those who don't pay, but it has refused to do so since 2000 after customers complained about poor customer service and errors in billing.
As a result, the company is owed $15 million in arrears.
But Albers added that since the contract actually requires the government to deny plate renewals, the highway's owners would be pushing for that term of the deal to be fulfilled during the upcoming arbitration process.
