Sunday, December 23, 2012

City of Ottawa - LRT - Some Perspective

We must not measure nature by ourselves, but by itself.
Blaise Pascal, Pensees, No. 149

Well, it is all in, and done. (?) The Oracle of Ottawa was in transit doing the obligatory Christmas Shopping when he heard of the completion of the momentous event. Twenty four to zero. That was hard to believe. The Oracle of Ottawa can only marvel at the full court press results of the best spin doctors and fart catchers that the corporate over - whores could buy. Why they were so proud of the event that they made sure it happened at one of the busiest times of the year. No one would be looking, let alone paying any attention. Pure masterful. The City of Ottawa has signed on for a 12.5 kilometer trolley way  with four "trains" and a tunnel, that has now been modified to a Barrhaven tunnel, that is a ditch with a lid added later... For 2.1 BILLION DOLLARS ! That is not a lot of railroad is it?

CPR AC 4400CW  - What you are not going to get!
 Surely the utmost of value has been received by the bumbling burg(h)ers of Ottawa? Well the Oracle of Ottawa must surely agree, of course. I mean it is the most efficient way to get anything done isn't it, a foreign based sole sourced forever contract. You and yours can bet your last nickel there is a ton of very fine print included at no extra cost. Oh yes, your grandchildren will be still be scouring this monster long after you are gone dear taxpayer... But to be fair, what could you have bought, right now, with 2.1 billion through an efficient capital market where ownership of capital goods is bought and sold right out in the open? You know it as the Toronto Stock Exchange. It is all so much more efficient than soul sourced contracts that are done behind closed doors, yes indeed!  The Oracle of Ottawa has decided on two demonstration cases, the names of which you are all most familiar. What else could we have bought with 2.1 billion dollars?

Case I: Surely you have heard of RioCan REIT? It is the largest real estate investment trust in Canada. Why, it is one of the largest REITs in the Western World! It contains over 350 commercial properties all over North America. From Smithfalls, Ontario, to Texas! Yes; Texas United States. For even more perspective it all adds up to over 80 million square feet all in! How much would it cost to buy something like that?  Well that is easy to find out. You can simply go to Yahoo Financial and enter the stock symbol REI.UN and it will all come up. As of the close of Friday last trading, you could have bought all the outstanding shares for a mere 8.15 billion dollars! Why for the cost of an Ottawa trolley way, the City of Ottawa could have purchased a 25.77% interest in RioCan REIT! And that quarter interest would surely be a hands down controlling interest! And on top of that, all RioCan unit holders receive a monthly "rent check" and it amounts to much more than simple bank interest. It all surely puts a crummy 12.5 kilometre trolley way with four train sets to shame don't it? Why is it you can buy so much in the light of day compared to a closed darkened room. Weird ain't it?

Case II: You have no doubt heard of Canadian Pacific Railway, surely, dear reader? This is a legend monster of a company! It is a Class I rail carrier, operating over 14,000 miles (22,400 km) of track from Vancouver to Montreal! It also has around 1650 engines and all in around 50,000 pieces of rolling stock! Damn! Not to count all that endless real estate! And all the other juicy hidden assets that could be worth more than the mere railroad itself! Well, as of last Friday, you could buy the whole damn lot for a mere 17.51 billion dollars! A 2.1 billion dollar investment would secure you with a 11.99 % interest! This again would be way more than required for a controlling interest! This would happen because CP is most widely held. There are practically no large monster shareholders, and it has an enterprise value of over 21.5 billion. Yes dear reader, you could buy a monster railway at a fire sale price! One of the finest roads, with the finest, newest gear on Earth! So why  did the City of Ottawa pay 2.1 billion dollars for a mere stupid trolley way with a crummy set of four measly French train sets?

 Oh! But if only this was the worst of it dear reader! The Oracle of Ottawa sadly suspects that the shit will get deeper, so to speak. One of the phrases that was heard all through this "train wreck" of a project was: soul sourced foreign contract. That means that the contractor will run and maintain the 2.1 billion dollar trolley way through out it's entire operational life! When one hears soul sourced foreign contract, just say to your self TFW's or temporary foreign workers. How many third world temporary foreign workers does it take to run a 2.1 billion dollar trolley way? The Oracle of Ottawa could not find out the answer to that question. Can you?  

 What you could have got for 2.1 billion dollars. Railroads are cheap in the open market, aren't they?

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