Highway 407: Options, Priorities, Choices, and Consequences

Change the 407 Act supporters, this cause can really use your support right now. Please go to the Premier’s website and vote this policy idea up. If you have any positive suggestions, please post them there. This could go a long way to nipping this issue in the butt once and for all. Here’s the link http://commonground.ideascale.com/a/dtd/Change-the-407-Act!/13642-25935 Thank-you so much for sharing this and helping decision makers pay attention to this.

Change the 407Act!  Please sign & share the petition  http://www.change.org/petitions/premier-kathlynn-wynne-glen-murray-tracy-maccharles-change-the-407act

This week’s article can be found on page 14 of the Toronto Caribbean here http://caribflyer.com/tc-editions/Toronto-Caribbean-October10-Web.pdf

It was also written by Jodie Parmar, a former Vice President, Corporate Development, Privatization Secretariat/Ontario that successfully led the $3.107 billion privatization of Highway 407.

On March 22, 2011, Robert Benzie of the Toronto Star reported that, “Premier Dalton McGuinty says he’s ‘all ears’ to a proposal that could return $1 billion to Ontarians from the owners of Hwy. 407.” Unfortunately, more than 563 days later, there has been no follow up by any of the Premier’s political advisors or the Ontario public service.

If Premier Dalton McGuinty is sincere and genuine in his concern about 407ETR’s spiralling tolls and sub-par customer service, he is not defenceless if he truly wishes to take the steps that are necessary and sufficient to protect drivers on Highway 407 ETR. There are three specific “lawful” options available to the government in dealing with 407ETR—each with varying degrees of effectiveness and utility—that arise from the applicable legal agreements and legislation.

At one end of the spectrum is the first option—Article 6 of the Tolling, Congestion Relief and Expansion Agreement which is Schedule 22 to the Concession and Ground Lease Agreement. “Respecification” allows for either party to the agreement to request an amendment that would more fully achieve the stated purposes of the agreement. It relies, however, upon the good faith of both parties to act and negotiate in a manner that transcends their own selfish interests to arrive at a collective good. Unfortunately, given that 407ETR is a profit-maximizing entity, there are currently no reasons why it would do so. To the best of my knowledge and understanding, the government has already previously attempted to use this option.

At the other end of the spectrum, rests the second option—paragraph 12 of Schedule B to the Legal Opinion of Counsel to Vendor addressed to the Purchaser [407 International Inc. nee 1346292 Ontario Inc.] and Equity Participants [at the time of closing these were SNC-Lavalin Inc., Grupo Ferrovial, S.A., and Cintra Concesiones de Infraestructuras de Transporte, S.A.] which is Schedule 6.1.4 of the Share Purchase Agreement. The law firms of Goodmans and Fasken Martineau were the Counsel to Vendor (i.e., legal counsel to the Province of Ontario on the Highway 407 privatization). Specifically, in the legal opinion, the private-sector purchasers were advised that: “Our opinion on the enforceability of the Purchase Agreement is subject to the overriding power of the Crown to repudiate contracts by specific unambiguous legislation.”

Yes, 407ETR et al were warned in advance by the government’s legal counsel that it is entirely within the right of the Province of Ontario to repudiate the agreements at some juncture in the future by specific unambiguous legislation without compensation and it can’t be said that the purchaser and its equity participants (and subsequent shareholders such as the Canada Pension Plan Investment Board) were not forewarned about this possibility back in 1999. As a matter of fact, 407ETR acknowledges in documents on its website that they “are bound by the laws of Ontario and Canada”.

No doubt such an action would have enormous populist appeal amongst Highway 407 users that reside in critical electoral districts that ring the GTHA. Such action would be reminiscent of the bold actions taken by Danny Williams, the former premier of Newfoundland and Labrador, in respect of Abitibi-Bowater’s failure to abide by its obligations to maintain a mill in his province.

Coincidentally, Spain (the home country of Cintra/Ferrovial) took similar action in regards to its green energy program in 2010. As reported on August 11, 2004 by John Ibbitson in the Globe and Mail, the Spanish government has in the past protested when the Province of Ontario was disputing matters with 407 ETR back in January 2004 through to March 2006, even going as far as warning that they would veto free-trade negotiations between Canada and the European Union to protect Ferrovial/Cintra’s interests. Given their own more recent actions, it would be hypocritical in the extreme for Spain to do so now given their own actions to repudiate green energy contracts. Furthermore, 407ETR is no longer majority-owned by Spanish interests.

There are those, however, that are concerned that taking such bold action would lead to a chill in the inflow of foreign investment into the Ontario economy especially in the area of infrastructure projects that are delivered by Infrastructure Ontario through Alternative Financing and Procurement (or, as the rest of the world calls them, public-private partnerships/P3s). History suggests that such concerns are overblown.

Given the willingness of Premier McGuinty to get tough with public-sector workers (e.g., teachers), one wonders why his government is not prepared to exercise the same toughness with 407ETR.


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