Why didn’t Ford pursue the $1-billion congestion penalty from 407 ETR?
Penalty was forgiven due to pandemic-related drop in traffic, but new data shows traffic levels rebounded in late 2020, long before the Ford government opted not to pursue the $1-billion penalty from 407 Express Toll Route owners.
By Paul Webster Special to the Star Feb. 22, 2022
Were highways in the Toronto area congested in 2020 or not?
It’s a billion-dollar question following a decision by the Ford government to waive penalties “in the order of $1 billion” that the operator of the 407 Express Toll Route was contractually obligated to pay when traffic levels on the toll highway fell below mandated levels.
The traffic congestion penalties were waived for the entire 2020 year because the 407 ETR argued that there was no GTA traffic congestion for it to relieve, and claimed the pandemic is a “force majeure” event that releases it from its contract to do so.
In the months following March 2020, when stay-at-home orders were issued in Ontario, traffic volumes on highways near to the 407 ETR did fall far below regular levels.
But Ministry of Transportation traffic data recently obtained by the Star through provincial freedom of information requests shows that starting in May 2020, traffic levels on the stretch of Highway 401 that runs parallel to the 407 ETR through the GTA quickly rebounded.
By late July 2020, congestion levels on Highway 401 were nearly back to normal. And from August to December of 2020 and during much of 2021, traffic congestion levels on Highway 401 often surpassed pre-pandemic monthly norms.
According to internal government documents viewed by the Star, the 407 ETR’s owners (which include majority stakeholder Canada Pension Plan Investments) had the option of reducing tolls to encourage more drivers to use the highway, possibly preventing the congestion clause in the 407 ETR concession agreement from being triggered.
Following a string of communications on the matter, a decision was ultimately made by the Ministry of Transportation in April 2021 to not pursue the penalties from 407 ETR because the pandemic had created so-called “force majeure” circumstances — an event beyond the control of the affected party.
“When we began correspondence with MTO, traffic was decimated because of the stay-at-home orders, and even though there was some recovery going into the summer, we still believed traffic to be down overall and congestion to be suppressed as compared to pre-pandemic periods,” said 407 ETR spokesperson
At first the “MTO was not persuaded by our position,” Basil wrote. But rather than pushing the 407 ETR to reduce its tolls to encourage more traffic to meet its traffic thresholds, said Basil, the Ministry of Transportation eventually agreed that annual minimum traffic thresholds on the 407 ETR and congestion relief penalty payments “do not apply to 407 ETR for the duration of the pandemic.”
This, Basil said, is “not because of the existence or non-existence of congestion on other GTA roads — but because the Concession Agreement clearly defines a pandemic as a ‘force majeure’ event.”
The traffic data in question was first requested by the Star more than a year ago when it reported that 407 ETR had begun seeking financial relief from the province.
In November 2021, staff at the Ministry of Transportation were instructed by Janet Leader, an associate deputy minister of transportation, to release the data to the Star, but a subsequent intervention by a member of the transportation minister’s staff blocked its release.
The data was eventually released only after a provincial freedom of information request was submitted.
Opponents to the Ford government’s plan to build Highway 413, which is planned to run parallel to Highways 401 and 407, said the traffic data deepens their concerns about the government’s decision to waive the penalties.
“My overall worry,” said Peter Miasek, director of Transport Action Ontario, a group that advocates for public transit investments, after reviewing the traffic data, “is that the Ford government’s determination to build the 413 has blinded it to using the 407 to solve traffic congestion on the 401.”
Miasek said he’s concerned the Ontario government is deliberately avoiding making efforts to force the 407 ETR to play a bigger role in alleviating GTA traffic congestion.
Miasek voiced this concern in a letter to Transportation Minister Caroline Mulroney on Dec. 8, 2021.
“The $1 (billion) 2020 penalty forgiveness to 407 ETR,” Miasek wrote, was “a lost opportunity to improve the use of an underutilized asset by negotiating a beneficial compromise of subsidizing truck tolling on 407 ETR and potentially forestall the proposed Highway 413 project.”
In response, on Dec. 24 Miasek received a letter written by Alain Beaulieu, director of transportation user services at the Ministry of Transportation.
“This is not a bailout, and there is no cost to the province,” Beaulieu said in response to Miasek’s complaints about the government’s decision not to fine the 407 ETR for failing to meet its contractual obligations.