Highway 407 earns huge profits, but still puts the screws to debtors
For those who think the sale of the 407 toll road to private interests was highway robbery, its most recent profit report is further proof that Ontario taxpayers were hosed.
The 407 released its fourth quarter financial results for 2012 this week, with a 128 per cent increase in profits over the same period a year earlier.
Net income for the quarter was $39.3 million on revenue of $187.2 million, compared to net income of $17.2 million for the same period in 2011.
That’s a profit margin of more than 25 per cent on revenue, a nice haul by any measure, and money that should rightly be in the province’s cookie jar, instead of in the hands of a private consortium.
The Progressive Conservative government leased the 407 for 99 years to a Spanish-led group in the late 1990s for $3 billion, telling us it was good fiscal management, because it was able to apply the payment to the provincial deficit.
But look what it has cost us. The 407 is the world’s highest-priced toll road, with average revenue per trip at $6.40 in the latest quarter. It can cost as much as 25 cents per kilometre during peak periods.
By comparison, you can drive from Buffalo to Albany on the New York State Thruway, a distance of 458 kilometres, for $10.85. It would cost about $110 to drive the same distance on the 407.
And anyone who gets behind on payments to the 407 knows that it charges nearly 27 per cent interest, compounded annually, on unpaid balances.
I’ve been writing for years about the 407’s rapacious collection tactics, which involves bill “suppression.” It sends an invoice for a few months, and if it isn’t paid, stops sending them for a few years, while the interest escalates. It then resumes trying to collect on the bill, but with the compounded, 27 per cent interest added to it.
Had the province kept the 407, it could have charged as much to drive on it as the private consortium does, but directed the money towards its current deficit, which stands at $13 billion.
That would be good fiscal management.