Planning, Real Estate, Infrastructure

Montreal Metro’s New Line: REM

Ground officially broke on the Réseau électrique métropolitain (REM) in Montreal last month. This light-rail project promises to be the largest mass-transit project in the metropolitan area since the Montreal Metro was completed in 1966. In the decades that followed, there was a divestment attitude towards transit projects in the Quebec province, but the aging infrastructure is struggling to support the city’s ever-growing ridership.

Now, CDPQ Infra, a subsidiary to the Caisse de dépôt et placement du Québec (CDPQ), is partnering with the provincial and federal government to finance what will become the 4th largest automated transportation system in the world by means of a Public-Private Partnership.

This unique partnership dates to the establishment of the CDPQ in 1965, where the group was founded to manage the Quebec Pension Plan. Its mandate was reiterated in 2005 as

receive moneys on deposit as provided by law and manage them with a view to achieving optimal return on capital within the framework of depositors’ investment policies while at the same time contributing to Québec’s economic development.”

You can probably already guess how the REM light-rail line fits well under this mandate. According to the REM website, the project is expected to create 34,000 new jobs relating to its construction over a period of 3-4 years. It promises $2 billion in wages paid as well as over $4 billion in local revenue created.

All this construction comes at the cost of around $6 billion, with CDPQ Infra funding half of that bill. The province of Quebec and the federal government of Canada will split the other $3 billion. This comes with a much more expansive role for the private sector for this agreement, as a private sector joint venture will also manage the line after its completion.

This partnership comes out as a real win-win for both sectors. The citizens of Montreal and Quebec get a state-of-the-art light-rail transit system, which expands commuter access from previously unserved Montreal suburbs. The $4 billion of revenue created in Montreal will also go a long way to repay the citizens for their contribution to the project, a return of nearly 65% of the total project cost.

CDPQ will benefit for their service and management from a percentage of the revenue generated as well. The group also stands to gain from the $4 billion created in local revenue as another subsidiary, Ivanhoé Cambridge, a real estate company, has several assets in downtown Montreal.

This comes as a great example of private-public partnerships for Montreal. The government is able to leverage its need and its resources with its close partner’s experience and excellent record of asset management. Together, they are addressing a critical mutual infrastructure concern that makes sense for both the public and for private business. By pooling their resources, each entity has real stake in the project’s completion and ultimate success.

It comes at a time where infrastructure is desperately needed in Montreal its suburbs. North America’s largest city, behind New York City and Mexico City, Montreal has been left behind in terms of serious infrastructure improvement. That is mainly due to poor planning, poor management, and political infighting that has plagued the public sector.

This projects success is already due to the creative investments made by this P3 partnership. No doubt, that we will see real improvements for the cities infrastructure and the overall economy of Montreal.