The provincial government has announced the divestment of the Ontario Northland Transportation Commission (ONTC).
At a press conference in Sudbury March 23, Northern Development and Mines Minister Rick Bartolucci announced the “extremely difficult decision” and said while the business is good, the business model is not.
“Stagnant ridership, along with the ONTC's unsustainable financial path, are key factors in today's announcement,” he said. “The government is committed to completing this process in a fair manner, and it will be business as usual while this divestment takes place.”
ONTC Board Chairman Ted Hargreaves said the current business model is not sustainable “and not able to go forward in the future.”
“However, divestment is not foreclosure and we are going forward in an orderly fashion and organizing assets and transferring those assets to other operating entities. It is a measure and step in hope and that is how we look at it.”
While the operation of the Polar Bear
Express is to be ensured, all rail freight and refurbishment assets,
as well as Ontera telecommunications, will be divested. The
Northlander train between Toronto and Cochrane will be cancelled and
replaced with an “enhanced” bus service, while bus services will
be tendered to other operators.
The ferry service between Moosonee and Moose Factory will be consolidated with the Owen Sound Transportation Company, a government agency, which currently operates the Chi-Cheemaun which runs between Manitoulin Island and Tobermory.
Since 2003, the government increased ONTC funding by 274 per cent. However, demand for services has stagnated. The current subsidy on the Northlander train is $400 per passenger, and no longer affordable.
Government funding has increased from $28 million annually in 2003 and 2004 to $103 million this year. Since 2003, the provincial government has provided $439 million. Sales revenues have declined from $140 million in 2005 to more than $100 million this year.
Ridership has remained stagnant at about 320,000 rides a year.
A transition board has been appointed to work with Hargreaves to begin the divestment of the commission.
It includes Philip Howell, CEO of the Financial Services Commission of Ontario; Mahmood Nanji, assistant deputy minister, Ministry of Economic Development and Innovation; Jonathon Weisstub, head of new partnerships, Infrastructure Ontario; and Greg Percy, vice president, operations, Metrolinx.
The ONTC, headquartered in North Bay, has more than 950 employees and Bartolucci said there are more than 130 of those who may be eligible for a retirement package.
When asked what kind of job losses can be expected, the minister said it is too early to tell.
“We want to ensure we get the best possible provider or providers. Our mandate to provide that system does not go away with a divestment. We are looking at a new model and not certainly an onerous job of getting rid of business lines. We are creating a stronger and sustainable model that can provide an efficient and effective transportation system for northeastern Ontario,” he said.
When asked why the announcement was made in Sudbury and not in North Bay, Bartolucci said 11 communities, including Sudbury, are affected by the announcement.
“Sudbury as the media hub of northeastern Ontario, we thought would be the most appropriate” in order to get the message out.
Both Hargreaves and Bartolucci expect keen interest in the business lines.
“We are very confident that the business lines are such that we will be entertaining offers (for them),” Bartolucci said.
Neither would confirm if potential private operators have been found prior to the announcement.
The ONTC has suffered some body blows and tough fiscal years with forestry mill closures across the northeast and the May, 2010 closing of Xstrata's metallurgical site in Timmins with processing operations being consolidated in northwestern Quebec.
That closure resulted in an $8 million to $10 million loss in railway freight revenue, said Ontario Northland Chief Operating Officer Paul Goulet in an August, 2010 interview with Northern Ontario Business. In June of last year, the ONTC lost a bid to refurbish GO Transit commuter coaches when the contract was awarded to a Quebec firm for $120 million. The ONTC's bid was $2.1 million higher. The Metrolinx out-of-province contract sparked a wave of protest in North Bay and throughout the northeast.
North Bay Mayor Al McDonald said he was “stunned and betrayed” by the announcement and disappointed it was made in Sudbury.
“We believe that the unions and senior management be given the opportunity to turn the operation around, to take the handcuffs off and allow them to implement their plan,” he said.
He also said, that after meeting the unions and the North Bay and District Chamber of Commerce hours after the announcement was made, that it was felt the ONTC should be moved to the Ministry of Transportation. However, the mayor said Bartolucci “has said no.”
“That is was we are offering and that is what we are asking for and will continue to ask for,” McDonald said. “We realize that just jumping up and down screaming is not going to do us any good. We need to have a plan.”
Kapuskasing Mayor Al Spacek, the president of the Federation of Northern Ontario Municipalities (FONOM), was “disappointed at both the decision and the methodology by which the announcement was delivered.
“I received an email this morning (March 23) informing me of the decision.”
Spacek said the level of public investment in the ONTC is “miniscule” compared with the capital commitment to public transit in the Greater Toronto Area.
“The Ontario government recently reaffirmed its commitment to spend $8 billion with Metrolinx and $2 billion with the subway expansion in Toronto,” he said. “I'm not aware of any public transportation infrastructure that operates at a profit.”
Spacek said he knows nothing of the government's rationale behind the decision, but said the impact on industry will be profound.
FONOM executives expect to define a strategy to, hopefully, overturn the decision in the coming days.
Nickel Belt MPP France Gelinas, who attended the press conference in Sudbury, said the ONTC is still a strategic asset for the province.
“It cannot be privatized without a tremendous negative effect,” she said.
Ontario NDP Transportation Critic and Timmins-James Bay MPP Gilles Bisson slammed the McGuinty government’s announcement.
“Ontario Northland is a strategic asset for the province, especially as we begin developing the Ring of Fire,”he said. “Getting rid of it is a big mistake with long-term consequences for jobs and families. This is a bad decision for families across Ontario.”
Nipissing MPP Vic Fedeli said the ONTC is just the latest victim of nine years of reckless spending by Dalton McGuinty.
“He’s lied to the people of Ontario again. This announcement today is Dalton McGuinty’s latest broken promise,” Fedeli said. “This decision is only designed to bring in more money through the sale of ONTC assets to fuel their spending problem. The bottom line is the Liberals have a structural deficit problem, not a revenue problem.”
The decision to sell off all ONTC assets and cancel the Northlander train service does nothing to address that, the MPP said.