Sunday, November 15, 2009


BC Rail made a profit in 19 of its 22 years before the sale. In 2002, it earned $76.8 million in profits. Forecast for 2003 was: $80m profit

No reason to celebrate the BC Rail deal

By John Irwin
Canadian Centre for Policy Alternatives - March 3, 2004

Last year's tragic case of a bridge failure near McBride, and the loss of railway employees' lives [and a whole list of CN wrecks since then ... see Peter Ewart's How do we sleep beside an Anaconda? Opinion 250 - Aug 14, 2006; also BC Mary on this web-site: August 9, 2007: CN derailment a close call for Prince George residents] raises some important questions about the corporation taking over BC Rail, and whether the privatization deal is really in our best economic interests.

Canadian National's (CN) track record has not been that impressive. The bridge failure resulted in a letter from the federal Transportation Safety Board to the Minister of Transport and CN noting that the company had identified defective parts of the bridge near McBride years earlier, but failed to complete the necessary repairs. A group of former railway lawyers has since requested an inquiry into railway safety in Canada. In a deregulated and privatized environment, monitoring of track and infrastructure maintenance has largely been left to companies like CN.

When CN was privatized in 1995 the federal government provided $900 million in relief for debt that was incurred to pay for much-needed improvements, such as double-tracking to improve traffic flow. CN recently pulled up sections of this double-track for use in its US rail operations. The company is also having difficulties with safety, and much of its highly touted profitability comes from 'savings' made at the expense of infrastructure maintenance. Today's CN is a monopolistic corporation whose first priority is not the interests and safety of Canadians (over 70% of the company is American-owned).

While the privatization of BC Rail doesn't include the sale of the right-of-way, it does clear the way for a trail of lost jobs, lost profits, and lost future opportunity. BC Rail is estimated to be worth close to $2 billion, according to the government's own internal documents. CN paid $1 billion for a ninety-nine year lease [later found to be, in fact, a 999-year lease] of the rail line, access to the BC Rail Pension Plan surplus, and the engines and rail cars. One quarter of this cost ($250 million) is for an $800 million tax credit accumulated by BC Rail that could be applied to future [CN] profits.

As a Crown corporation, BC Rail provides approximately 1,600 jobs for British Columbians. The closure of its North Vancouver headquarters, and other switching yard and maintenance facilities, will result in the loss of more than 700 jobs. The timing couldn't be worse -- BC communities are already suffering from job losses as a result of layoffs in industries such as forestry and from cuts to government services.

The privatization of BC Rail will also reduce employment and economic spin-offs for local communities. These spin-offs help to strengthen and maintain a strong provincial economy. Decent paying employment in smaller municipalities supports employment and investment in other services.

BC Rail is a profitable enterprise. In 2002, it earned $76.8 million in profits. It is expected to make roughly $80 million in 2003, and has forecasts of up to $120 million in net income over the next three years. BC Rail made a profit in 19 out of the last 22 years (the 3 years that were not profitable were years when there was a write down of the debt incurred to build the Tumbler Ridge branch line). These profits will no longer be reinvested in BC, but will be paid out to CN's shareholders.

It is sadly ironic that talk of a new rail link to Alaska, tied to the construction of a natural gas pipeline from that US state and territories in the Canadian north, came up after the sale of BC Rail is nearly completed. The southern terminus of the Alaska railway is likely to be located in Prince George. BC Rail and the provincial treasury will lose out on this future opportunity.

The privatization of BC Rail to one of two major competing railways in Canada also reduces competition. It increases CN's considerable monopoly over transportation in western Canada and its market power over rail operations in North America. It also leaves Prince George in a situation where rail customers now only have one choice for shipping their goods. The anti-competitive effects of the privatization deal may lead to its downfall -- the Competition Bureau will make a decision later this spring. Only a successful challenge of the sale at the Canada Competition Bureau will stop this poorly thought out deal.

What the Competition Bureau won't consider, unfortunately, is the negative economic impact on the province's interior and northern regions. BC Rail was a successful, government-led exercise in province building, and it still could be. This deal isn't worth a one-time cash grab for a provincial government that is desperate for revenues.

John Irwin is a researcher with the Canadian Centre for Policy Alternatives' BC Office. He spent many years as a railway worker in his younger years.


Quote: Can a large private monopoly, with ownership based in the U.S., be trusted to look after such a vital public interest as the main railway system in North Western Canada and one of the two main ones in the country as a whole?

CN, a crown corporation, was sold off by the federal government in the 1990s to largely American interests. Since then it has evolved into a rail giant that stretches across Canada and the U.S. from the Atlantic to the Pacific to the Gulf of Mexico. In 2003, it became even larger when the British Columbian government, in a highly controversial move, sold off BC Rail to CN. This giant monopoly has hundreds of communities, thousands of workers, and tens of thousands of small, medium and large businesses throughout Canada that depend on it.

Some say that a monopoly like CN is no different than any small or medium private business, i.e., they are all businesses. But others argue that monopolies are a breed of a different sort due to their sheer size, lack of allegiance to community or even country, and close interconnection with banks and high finance.

[I've mislaid the source for these 3 final paragraphs. Will paste it in later (I hope).
Also, please forgive the red emphases above ... it just made me so doggone angry!

- BC Mary.]

Thanks for Link #1 which I've embedded in the Quote. But I had already done this for Peter Ewart's column up at the top, did you notice? Thanks again, very much. - M.

Crown corporation CEO pay still exceeds limits, auditor-general says

Click HERE for Neal Hall's complete Vancouver Sun column, Nov. 18/09

... The heads of B.C. Lottery, BC Hydro, B.C. Housing Management Commission, Community Living B.C., Partnerships B.C. and the Legal Services Society also earned more than their limits. BC Rail president and CEO Kevin Mahoney earned $494,182 last year, despite running a relatively small organization with only 30 staff and expenses of $23 million.

The audit of Crown corporations comes less than two weeks after B.C.'s comptroller-general took aim at high salaries and benefits for top brass at BC Ferries and TransLink -- where executives earn close to private-sector compensation, even though their organizations are subsidized by taxpayers.

Doyle's audit also examined whether executive pay and bonuses were well-managed by government. Overall, he said, he was "pleased" at existing rules.

But he said government hasn't kept proper records on how it approves compensation plans, and has not properly monitored whether Crown corporations actually follow those plans. {Snip} ...

While most Crown corporations could link executive bonus pay with actual accomplishments, two of the six organizations were unable to properly justify performance pay, the report concluded.

NDP finance critic Bruce Ralston said the province should only hire Crown CEOs on fixed-term contracts, so they can be replaced without having to pay large severances that come with indefinite employment.

Despite the criticism, Moira Stilwell, labour market development minister, said the audit reinforced that B.C. has acceptable standards for executive compensation. It will take time to bring CEOs under the cap limits, she said.

Quote one: Can a large private monopoly, with ownership based in the U.S., be trusted to look after such a vital public interest as the main railway system in North Western Canada and one of the two main ones in the country as a whole?

Isn't it great to find that the government has the financial resources to find every Sheriff who may have viewed inappropriate photos on government computers, via EMAILS, and yet BC Rail documents circulated by EMAIL by others seem to have gone through the Shredder.

Pity there's a double standard.


Discipline - Sheriffs the latest to be taken to task over inappropriate e-mails Sharing racy images on government account a no-no. Vancouver Sun by Lori Culbert and Neal Hall
Anon 8:45,

You make a very strong point. How can it be so easy to monitor the e.mails of Sheriffs, and so "difficult" to access the BC Cabinet e.mails required by the Basi Virk defence lawyers?

Heck, in the case of the Cabinet e.mails, they can't even figure out who Okayed the admitted destruction of e.mails, at the time of the 2009 provincial election.

Double heck: we don't even know if that's true -- or if the e.mails are still sitting on a shelf somewhere, waiting ...

In our Bizzaro World, of course, the really important question is: Where is the Torch today?

Many thanks for picking up on these ironic reports, given the circumstances.

And btw, it's next Monday (23rd) or Tues (24th) that we can expect a little movement on the Basi-Virk case. Maybe. (ha ha)
Regarding Anon @ 8:45:

From the article in the Sun one fired employee is suing for wrongful dismissal because:

"....he only received the e-mails and denied "having ever forwarded, sent, distributed or done anything other than deleted e-mails which I may have received and deemed to be inappropriate."

Maybe we should start a campaign of sending porn to Lord Gord, Ding Dong DeJong, Colin "Sneer" Hanson, John "under investigation" Les, Mr. Hahn and other deserving folks who should be either looking for new employment or looking out through the bars of cells.
Of course in the case of MLAs, we would have no way of knowing if they ever received our gifts - unless of course they were fired or forced to step down!
Thanks for this article, Mary. I missed it when it came out. Although I was fully aware that BC Rail was a good money-maker for the province, I had no idea it had been in the black for 19 out of 22 years. Given that CN has profitted nicely from picking up BC Rail, I easily posit that, had it remained ours, BC Rail would have continued to make a tidy sum for the BC taxpayers instead of Bill Gates and the other private shareholders of CN.
Exactly SIG...which proves that Gordon Campbell is much more adept at lying, than he is at telling the truth, in my opinion.

He lied about whether or not he'd sell it, just to get elected.

He lied again about not selling it, all the while working up the agreement as he was saying "no sale."

He lied about the railways financial history. Was this history available to all those mayors and business folk who agreed with the sale at the time? Did they bother to do their diligence in seeking the truth?

He sold it for half or less of what it was worth, in other words he gave it away.

He has still not provided an unredacted copy of the original sales contract for the perusal of the owners of the Railway. That's us. I consider that theft...he took what belonged to me, gave it to someone else and has never provided me with the details of the sale. One has to wonder if the BCSC has even seen the deal?

This whole thing still stinks all these years later - and the stench starts in the premiers office.
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