To:

Mayors Council

From:

Cathy McLay, Acting Chief Executive Officer and Chief F inancial Officer

Date:

January 18, 2016

Subject:

Canada Line Concession Agreement Overview

PURPOSE
The purpose of this report is to provide the Mayors Council with a high level overview of the
Canada Line Concessionaire Agreement.
BACKGROUND
Canada Line is a 19km rail rapid transit system connecting downtown Vancouver, the
Vancouver International Airport and Central R ichmond. It has 16 stations, two bridges and nine
kilometres of tunnel.
The development and construction of the project w as jointly funded by: the G overnment of
Canada ( Canada), the Province of B ritish Columbia ( the Province), the S outh Coast B ritish
Columbia Transportation Authority ( TransLink), Vancouver International Airport Authority
(VIAA), the City of Vancouver and InTransitBC. The procurement stage began in the summer of
2003 w ith the approval by the Province, TransLink and VIAA to begin a competitive process to
select a contractor to design, build, partially finance, operate and m aintain the line.
The procurement concluded w ith execution of a contract ( Concession Agreement), between
Canada Line R apid Transit Inc. ( CLCO), a w holly owned subsidiary of TransLink, and the selected
contractor, InTransitBC. The finalization of project documentation occurred on July 29, 2005
(Financial Close) and InTransitBC began construction of the system shortly thereafter.
The commercial relationship between InTransitBC and TransLink is governed by the Concession
Agreement w hich sets out the rights and obligations of each party in the delivery of the project
over 35-years, of w hich four years involved the construction phase of the project and then
followed by 31-years of operating and m aintaining the Canada Line.
Substantial completion of the construction phase of the project w as achieved in August 2009
with line opening up to the public on August 17, 2009. During the operating period, payments
will be m ade to InTransitBC for the achievement of performance targets that m easure, for
example, train frequency, safety and ridership.

DISCUSSION
The Concession Payments m ade to InTransitBC during the operating period comprises a
blended payment m ade up of the following three m ain cost elements:
1) Payment to the concessionaire for the costs to operate the Canada Line for the next
31-years ( starting in August 2009) and ending on July 31, 2040 ( the Operating &
Maintenance Costs Element);
2) Repayment of the $721 m illion in private capital that the concessionaire contributed to
the project ( the Capital Element):

3) Payment of the interest on the loan of the $721 m illion w hich gets repaid over the
31-years of the operating concession ( the Interest Expense Element).
The Concession Agreement m akes no attempt to breakout these three cost elements. It is just
one blended payment m ade to the concessionaire m ade every four w eeks (28-days) over 31-
years. It w as structured this w ay to provide TransLink w ith m ore security as the agreement
allows TransLink to reduce or w ithhold these periodic payments if InTransitBC doesnt perform
according to various performance requirements.
The calculation of the Concession Payments m ade to InTransitBC during the operating period is
based on a complicated formula. However the following are the m ain driving factors:
Base Payment
multiplied by
a Compound Inflation F actor
multiplied by
a Ramp-Up F actor
multiplied by
an Adverse Performance F actor ( e.g. 95% if performance is 5% below expected)
Above plus or m inus
a Base Volume Adjustment.
Above plus
a Special Event Adjustment
The Base Payments for each 28-day period during the operating period w ere fixed at the
signing of the Concession Agreement and are all expressed in April 1, 2003 dollars. The
Concession Agreement includes a S chedule that clearly sets out the amount of these B ase
Payments for each of the 404 28-day operating periods. They are as follows:
Period 1
Period 2 to 332
Period 333
Period 334 to 404

$6,947,290.00
$6,408,830.00
$5,236,370.00
$4,063,910.00

The Compound Inflation F actor is based on a blend of the following:

1) Consumer Price Index, for All-Items in, B ritish Columbia
2) Electric Power S elling Price Index (Non R esidential) in B ritish Columbia
3) A Labour Index that is based on the w eighted average hourly rate paid by B C R apid
Transit Company to all unionized employees (or their equivalent from time to time)
4) A F ixed Index that grows at a fixed rate of 2.1% per annum.
The Inflation Indexes are blending as follows:

Consumer Price Index

Electric Power S elling Price
Index
Labour Index
Fixed Index
Total

Up to June 30, 2035

41.80%
2.20%

After June 30, 2035

38.725%
3.025%

26.00%
30.00%
100.00%

35.750%
22.500%
100.000%

The Ramp-Up F actor w as only relevant in the first two years of operation. It w as 80% in the
first year and 92% in the second year and then 100% thereafter.

The Adverse Performance F actor takes into account any adverse performance by the
concessionaire below w hat is required in the contract. As long as the Concessionaire performs
according to plan these adjustments are usually very small and cover essentially two items:
1) Availability (i.e. vehicle availability, station availability and system availability), so e.g.
any problems that result in a train not running to a prearranged schedule or any m ajor
system shutdowns w ould result in a certain percent reduction from 100% based on
another complicated formula as set out in the Concession Agreement; and
2) Quality, so e.g. any graffiti or garbage on the platforms or on or in the trains not being
removed w ithin a reasonable timeframe w ould also result in a certain percent
reduction from 100% based on a formula as set out in the Concession Agreement.
Mystery S hoppers help police this.
The adjustment up or down for a Base Volume Adjustment takes into account any actual
ridership over the base volume ridership.
The further adjustment for a Special Event Adjustment takes into account the cost the
Concessionaire incurs for providing extra service for special events such as Celebration of Light,
Hockey G ames, S anta Clause Parade, etc.
Summary
TransLink is following the payment terms and schedule as set out in the concession agreement
signed on July 29, 2005.