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Michael Sabia, chief executive officer of Caisse de dépôt et placement du Québec, in Toronto on Jan. 10, 2018.CHRIS HELGREN/Reuters

Montrealers could hardly believe their ears when, in 2016, Quebec’s public pension fund manager unveiled an ambitious proposal to build a $5.5-billion light-rapid transit system that would connect the city’s downtown core to Trudeau International Airport.

After years of dithering, Quebec’s biggest public transit project in five decades was finally taking shape. Michael Sabia, then head of Caisse de dépôt et placement du Québec, even vowed the project would be completed “on time and on budget” by the end of 2020.

Federal and provincial politicians, who had been arguing for years about transit funding in the Greater Montreal area, eagerly subscribed to Mr. Sabia’s vision for a “public-public” partnership that was to be largely financed by the savings of Quebec pensioners.

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Today, the 67-kilometre LRT project now known as the Réseau express métropolitain, or REM, remains well behind schedule. Its overall costs are approaching $7.8-billion and counting. The link to the airport is not set to open until the end of 2024 – and only if Ottawa and Quebec City agree to inject an additional $600-million to build a REM station at Trudeau International.

Mr. Sabia, who will become the federal deputy finance minister next week, is expected to assume a key role in the design and rollout of the $100-billion stimulus plan Prime Minister Trudeau’s Liberal government promised in last week’s economic statement. The statement tabled by Finance Minister Chrystia Freeland set aside $500-million “to support large airports in making critical investments in safety, security and transit infrastructure.” The only specific “eligible” project identified in the statement was the REM station at Trudeau airport.

Mr. Sabia, who is stepping down as chairman of the Canada Infrastructure Bank to become Ms. Freeland’s deputy, will take a direct hand in federal economic decision-making after serving as an outside adviser to the Trudeau government. He has generally taken a “build-it-and-they-will-come” approach to public infrastructure, insisting that major projects stimulate future growth by creating a virtuous circle of economic activity around them.

That is the hypothesis Mr. Sabia embraced in proposing the REM. The Caisse is betting on the LRT line to lead to new real estate developments on land surrounding its stations in currently low-density neighbourhoods on Montreal’s South Shore and West Island.

As a member of former finance minister Bill Morneau’s Advisory Council on Economic Growth, Mr. Sabia recommended the creation of the federal infrastructure bank that he subsequently went on to chair. “Infrastructure investment is among the most powerful and scalable levers of economic growth, with both a long- and short-term impact,” the council said in a 2016 report.

To date, the CIB’s main investment remains $1.28-billion loan it made to the REM in 2018. The 15-year secured loan, which carries an initial interest rate of 1 per cent that rises to 3 per cent later on, took the place of a federal grant. But that has apparently not left Ottawa off the hook for subsequent injections of cash, as the wrangling over the airport station shows.

By the time construction began in 2018, the overall cost of the REM had risen to $6.3-billion. The Caisse was to contribute $2.95-billion in exchange for a 70-per-cent ownership. The pension fund manager projected it would earn an annual return of about 8 per cent.

That was before accounting for recently announced cost overruns stemming from the rehabilitation of the century-old tunnel under Mount Royal through which the REM’s trains are set to travel. The extra cost of securing the tunnel’s walls is expected to amount to several hundred million dollars. The Caisse has only said the additional work will delay the entry into service of the REM’s three lines by about 18 months on average. Observers consider that optimistic.

Despite the Caisse’s controlling stake, most of the funding for the REM is coming from taxpayers. The Quebec government injected $1.28-billion into the REM, giving it a 30-per-cent stake. Provincially-owned Hydro-Québec is investing $300-million to electrify the tracks. Montreal’s regional transit authority is paying the Caisse more than $500-million in exchange for securing future “land value capture” revenue streams near REM stations.

Quebec has insisted it will not put any additional public money into the REM, but Ottawa is calling on the provincial government to contribute to the cost of the airport station. Aéroports de Montréal, the independent authority that runs Trudeau International, backed out of funding the station after it saw revenues dry up as the COVID-19 pandemic struck.

Almost five years after Mr. Sabia revealed his bold ambitious for the REM, transit experts remain divided about the wisdom of the project.

Critics argue the REM’s circuitous route to Trudeau airport, designed to win buy-in from local politicians, will discourage business travellers from using the line. While the Caisse has touted the environmental benefits of the REM’s electric trains, climate change activists warn the project will encourage urban sprawl, while displacing relatively few cars. A 2016 consultant’s report concluded the REM would displace only 4 per cent of car traffic to the airport, with 92 per cent of its users switching from existing public transit options.

A permanent increase in remote work would further call into question Mr. Sabia’s insistence on a building a tentacular REM network that connects far flung suburbs on both shores of the St. Lawrence River to the downtown core. The provincial government has spent hundreds of millions of dollars in recent years upgrading an existing suburban train system that will “compete” with the REM. The REM will also rely on large annual operating subsidies from regional transit authorities and the Quebec government to cover its operating costs.

As deputy finance minister, Mr. Sabia will now help decide whether a postpandemic Canada needs even more projects like the REM. That is mildly unsettling.

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