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Two construction workers on the site of the Reseau express metropolitain (REM), a major public transit project, in Brossard, Que. on May 11.Paul Chiasson/The Canadian Press

Public-transit projects are eminently political endeavours. Caisse de dépôt et placement du Québec has discovered that the hard way, after its messy removal from a proposed $10-billion light-rail transit project to link downtown Montreal to the city’s long-neglected east end.

Quebec Premier François Legault and Montreal Mayor Valérie Plante last week announced that the provincial transport ministry and two Montreal-area public-transit authorities would take control of the project, known as the REM de l’Est, in the face of mounting opposition from east-end residents and urban-planning experts to several aspects of the Caisse’s plan.

The incident illustrates the pitfalls inherent in the $420-billion pension fund manager’s efforts to sell governments on its offer to build and operate infrastructure projects. The Caisse has touted its turnkey model as an “innovative” way for governments to finance projects that eliminates public liabilities for cost overruns while providing stable returns for the pension fund. But the Caisse’s ability to deliver on that promise is increasingly in doubt.

In 2015, former Caisse chief executive officer Michael Sabia persuaded then-Quebec premier Philippe Couillard’s government to test run the model with its $6.9-billion Réseau express métropolitain (REM), a 67-kilometre LRT project linking downtown Montreal to Trudeau International Airport and the city’s west-end and south-shore suburbs.

But the project, first slated to begin operating by the end of 2020, remains far from completion, while the massive concrete columns erected to accommodate the elevated LRT tracks bear little resemblance to the slick and modern renderings the Caisse presented to sell the project. Instead, the REM infrastructure looks like a Brutalist holdover from the last century.

The project has also been marred by a dispute over the financing of a $600-million REM station at Trudeau Airport. The Canada Infrastructure Bank, which is lending $1.3-billion for the REM, last year agreed to provide a $400-million loan to Montreal’s airport authority to build the terminal. The federal and provincial governments are also each lending $100-million to Aéroports de Montréal to complete the station, raising the overall tab for taxpayers.

What’s more, the REM will require ongoing operating subsidies from the provincial government to ensure the Caisse earns its required return on the project and to prevent passenger fares from rising to levels that would discourage commuters from using the LRT line.

The Caisse had been roundly criticized for acting in a heavy-handed manner to get its way even before it tabled its proposal for the REM de l’Est in late 2020. Mr. Legault’s Coalition Avenir Québec government nevertheless signed on to the second project in the hopes of kickstarting redevelopment of the city’s deindustrialized east end.

But negative public reaction to the Caisse’s plan to build unsightly elevated tracks on a major downtown thoroughfare and through quaint lower-income east-end neighbourhoods, including the heritage Morgan Park area, led Mr. Legault to pull his support for the Caisse’s proposal – five months before a provincial election.

“The aerial section crossing downtown would have been a historic error that we absolutely had to avoid,” Ms. Plante insisted in announcing, alongside Mr. Legault, that the public-sector Société de transport de Montréal and the Agence regionale de transport métropolitain, or ARTM, will now work with the provincial transport ministry to develop an alternative to Caisse’s project. The new project will drop the REM de l’Est’s downtown section altogether and link up with the city’s subway system in east-end Montreal. It is expected to cost far less than $10-billion.

The ARTM, a provincial body responsible for planning public transit in the Greater Montreal Area, had been especially critical of the Caisse’s proposal. In a February report, it estimated that 94 per cent of rush-hour passengers on the REM de l’Est would have been diverted from the STM’s subway system or an existing suburban train-network, putting the financial viability of those public transit systems at risk.

Caisse chief executive officer Charles Émond, who was appointed to the top job at the pension-fund manager by Mr. Legault in early 2020, last week appeared to accuse Ms. Plante of flipflopping, telling reporters that the mayor had privately told him 10 days earlier that she supported the Caisse’s revised plan to bury a 500-metre portion of the REM de l’Est along René-Lévesque Blvd. He also noted that the Caisse had trademarked the REM de l’Est moniker, implying the city and province cannot legally use that name for their project.

His comments sounded like sour grapes, leaving Mr. Émond, who earned $6.3-million in 2021, with an even bigger black eye than had he humbly accepted the decision of elected officials to take control of the project from the Caisse.

Some analysts suggested the REM de l’Est debacle should not hurt the Caisse’s chances of selling its turnkey infrastructure model to other cities. Mr. Émond’s comments suggest otherwise.

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