Canada: Let's Give It A Chance – Looking At The Long Term Socioeconomic Gains Of The Union Pearson Express

Canada has lots to gain from the UPX transportation infrastructure project yielding first class results and a positive outcome over the course of time. There has been much discussion and debate about the Union Pearson Express (UPX) over the past several weeks regarding its financial and operating performance to date. Commentators and analysts have decried the initial poor ridership figures and its high cost per trip at $27.50 for non-Presto card holders. They also suggest that Metrolinx has spent an inordinate amount on its design and branding.

While some of the criticism may be considered fair and there are certainly lessons to be learned, it is important to note that much of the criticism focuses on what has occurred over a very short time period, particularly in the UPX's first year.

Infrastructure projects, by their inherent nature, deliver returns over a much longer time period. It can take decades for an infrastructure project to pay back its initial investment. Politicians, policymakers and the broader public need to recognize that this is normal course. We need to have the patience to take a long-term view on infrastructure projects and to have the stamina to play the long game. Politicians, policymakers and the broader Canadian public must be aware this is normal course and a rational degree of patience is needed to take a longer-term view on infrastructure projects. By taking the short-term view of continuing to do what always been done and making decisions based on those short term whims and desires, it would be easy to lose sight of the bigger picture, as this short-term vision, more than anything, has led to a pronounced infrastructure deficit across Canada, which stands at $350 billion to $400 billion thus hindering our competitiveness and long term prosperity as a country.

Let's look at the economics of the UPX project. The project has cost $468 million with approximately $68 million in annual operating costs to develop and build. The project was also delivered on time and within budget, an impressive delivery in today's day and age of multimillion-dollar cost overruns and schedule delays. From its outset, the UPX was saddled with a need to demonstrate that it can cover its annual operating costs, although this is a rare occurrence for urban rail services. With the exception of certain transit services in Japan, Hong Kong and Taiwan with revenues that exceed annual operating costs, all others tend to lose money.

Transit ridership delivers economic and social benefits that warrant subsidization. From a policy perspective, taking cars off the road provides congestion relief benefits to users and non-users alike. Productivity benefits also arise from individuals being able to get from point A to point B quicker and with increased on-schedule certainty. In fact, the Toronto Board of Trade suggests that congestions cost the City of Toronto $6 billion annually in lost productivity.

Economic development benefits also arise from new housing developments and new businesses, with increased traffic and opportunities for existing business located near stations. Environmental benefits and health safety benefits result from individuals taking a comparatively cleaner and safer mode of travel.

Tourism benefits represent another important component of economic development which are rarely quantified and considered in traditional infrastructure evaluations. These are likely to be quite significant given that UPX connects two of Canada's largest passenger terminals, Pearson International Airport and Union Station. Let's not forget that most world-class cities like London, New York, Paris or Tokyo have airport-to-city centre rail connections, which help to attract investment, and appeal to highly-qualified personnel. These rail connections help host cities to attain worldwide status and prestige. Toronto's own rail connection may yet help the city reach new heights on the world stage.

Metrolinx indicated that ridership needs to reach approximately 7,000 per day for UPX to break even from a purely financial perspective and it could still reach that with existing projections indicating a ramp up period of at least three years. When socioeconomic benefits are considered, UPX can operate on a much lower level of ridership to cover its operating costs and pay back its initial capital cost. By taking a holistic, longer term view and considering the UPX's benefits from a broader perspective, the economics of the project stack up.

So yes, there are lessons to be learned and Metrolinx is already taking some positive steps to promote the UPX, including decreasing fares. Still, we need to have the courage, wherewithal and patience to make long term infrastructure investment decisions that can maximize socioeconomic outcomes over the long term, investing in what we refer to as 'shovel-worthy' projects. This is crucial to our global competitiveness and long-term prosperity. Jurisdictions that are able to take a longer-term view and understand that it is not just about the dollar today or tomorrow, but the dollar decades from now will be the ones that win in this increasingly competitive and globalized world – and by playing the long game, I believe Canada can win.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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