Why a P3 doesn’t work for LRT in Surrey
- Reality Check
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- July 7, 2015
The Canada Line’s P3 model worked because its ridership—and therefore fare revenue—significantly exceeded projections. Under that structure, the private partner’s capital investment is repaid through performance‑based operating payments. When fare revenue covers operating costs, the system functions as intended and any surplus returns to taxpayers. But when fare revenue falls short, taxpayers must subsidize the gap.
This becomes a problem for Surrey’s proposed LRT system, as TransLink expects that it would not recover its operating costs.
In fact, under a Canada Line–style Design‑Build‑Finance‑Maintain‑Operate (D.B.F.O.M.) P3, the financial burden on Surrey would be substantial—nearly $100 million per year. This would be composed of:
- An annual operating subsidy of $22 million on opening day—rising to $28 million by 2041[1]
- An additional $60 million per year over 30 years in capital financing, recently acknowledged by Surrey Mayor Linda Hepner[2]
- Interest to be paid on the portion of financing provided by the private sector in place of public sector financing
- Further concession payments to appease the private sector partner’s desire to make a profit on their investment
In total, this could result in a P3 model for Surrey LRT costing as much as $1 billion more over the long term than not doing it as a P3.[3]
P3 financial performance complicated by poor ridership projections for LRT
Ridership performance is central to P3 viability.
The Canada Line carries 122,000 daily boardings and actually needs roughly 100,000 (or about 5,200 riders per line km) to cover its operating costs[4]. Surrey’s proposed LRT, by contrast, is projected to carry only 2,970 riders per line km on opening day—significantly less than what the Canada Line carries, and likely far below the threshold needed for cost recovery (as LRT generally costs more to operate than SkyTrain).
By comparison, our group’s preferred option (a SkyTrain extension down Fraser Highway to Langley) would perform dramatically better, with 5,443 riders per line km on opening day[5][6]—above the Canada Line’s break-even average, and comparable to the current SkyTrain system-wide average of 5,693 riders per line km[7].
Faster, safer, and more reliable service attracts more riders, generates more fare revenue, and reduces the subsidy required to operate the system. In total, SkyTrain’s operating subsidy would be about $6 million per year[1], and the study notes that optimizing local bus routes could eliminate even that remaining cost.[8]
Business case still points to SkyTrain as only viable option
SkyTrain also produces far stronger transportation and environmental outcomes. It generates twice as many new transit trips and has a positive benefit‑cost ratio of 1.45:1, compared with the LRT proposal’s 0.69:1.
Meaning that for any funding partner in the event of a P3, SkyTrain presents a far more compelling business case.
Based on ridership, revenue, cost recovery, and long‑term financial risk, a P3 model is not viable for LRT in Surrey. Whether we go with a P3 or not, a SkyTrain extension remains the only financially and operationally sound option for rail rapid transit in the region.
Footnotes
- Surrey Rapid Transit Alternatives Analysis (SRTAA) Phase 2 Evaluation — Appendix 3B p.25 (pdf p.369) — under “Average Annual Costs”[↩][↩]
- Surrey mayor mulls taking back gas taxes to finance city’s light rail — The Globe and Mail, July 7, 2015[↩]
- Based on aforementioned values in #1, the total operating subsidy alone could be $720 million from the assumed “opening day” 2021 through operations year 30.[↩]
- ProTrans BC website — Performance Highlights[↩]
- Surrey Rapid Transit Alternatives Analysis (SRTAA) Phase 2 Evaluation — Appendix 3A p.4, Exhibit 3A.3 (pdf p.301) —under RRT1A “SkyTrain new”[↩]
- Precise line length based on SRTAA Appendix 3B p.3, Exhibit 3B.2 (pdf p.347) — under RRT, “distance (km)”[↩]
- Based on APTA ridership data from Q4 2014[↩]
- Suggested in SRTAA Appendix 4 p.28 (pdf p.563) — RRT1A under “Local Bus Integration” + footnote “Savings of $170 million”[↩]
Pictured in header: A Canada Line train on an elevated guideway
Reality Check
Reality Check is the online blog run by the founder of SkyTrain for Surrey, a BC-based community organization that has advocated for the expansion of the Vancouer SkyTrain system, including our successful advocacy for the under-construction Surrey Langley SkyTrain extension.
Media Contact: Daryl Dela Cruz – Founder, SkyTrain for Surrey ・ Phone: +1 604 329 3529, [email protected]
