12/10/2013 03:03 EST | Updated 02/09/2014 05:59 EST

Selling off ONTC could cost up to $820 million and possibly more: auditor

TORONTO - Selling off the Ontario Northland Transportation Commission could cost as much as $820 million, rather than saving hundreds of millions as the governing Liberals had claimed, the province's auditor general said Tuesday.

That figure could climb even higher because not all the costs are known, such as the environmental cleanup of ONTC properties and consultations with First Nations, said auditor general Bonnie Lysyk.

"The government should have had an earlier and clearer picture of the true costs of divestment — and it could have passed on this more accurate picture on to all Ontarians — had it done more due diligence prior to announcing the divestment plan," Lysyk said following the release of her special report.

The Liberals didn't "clearly or fairly communicate" the full impact of selling the northern rail and bus transportation service when they hastily announced the money-saving measure in 2012, her report found.

The government said it would save taxpayers $265.9 million over three years, but didn't mention "significant" expenses or the $325 million they'd earmarked in the budget to cover some of the divestment costs, it said.

It will take 10 years or longer to reduce or recoup the costs, Lysyk said.

It's clear that the Liberals had no plan when it came to selling off the ONTC, said NDP Leader Andrea Horwath. They "made up" a figure to make it look like they were saving money.

"So they basically pulled a fast one on Ontarians," particularly those in northern Ontario, she said.

The "fire sale" of ONTC is similar to the rash decisions to cancel two gas plants before 2011 election that the auditor expects will cost taxpayers up to $1.1 billion, said Progressive Conservative Vic Fedeli.

Unlike the gas plants, the government isn't on the hook yet for the costs of divesting the ONTC, he said. But the Liberals still made the decision without consulting anyone.

"We hear one thing in the legislature — open and transparent and consultations — but in reality, they do not do that," he said.

"They bullied their way through with this announcement."

Lysyk's special report said the government knew just a few months after announcing it was selling off ONTC that it would cost more than double what has been socked away in the budget to cover it.

By March 2013, it knew that the figure had climbed to $820 million, the report said. But it's hard to estimate what the actual costs or savings will be until serious negotiations with potential buyers are underway.

ONTC is a money-losing operation, as its subsidies and revenues from operations weren't enough to cover improvements to its aging infrastructure over the last 20 years, the report found.

Selling off ONTC "continues to present significant positive financial impacts to the province when compared with a status-quo situation of the ONTC continuing to operate as it has in the past," it said.

However, "the ministry is currently controlling the ONTC's financial operations and, in the ONTC's view, has limited the agency's ability to consider new business opportunities," it noted.

The Liberals shut down the Northlander passenger train service last year, saying its annual subsidy had grown from $27 million to $100 million in 10 years. But ONTC still operates passenger bus lines, rail freight services and the Ontera telecommunications network.

The government has struck a more conciliatory tone in recent months, emphasizing that it's looking at "transforming" the service.

It's clear that the status quo no longer works and change is needed at the ONTC, said Michael Gravelle, minister of northern development and mines.

But divestment isn't the only option available, he added.

"That new approach certainly means that we will make decisions about each of the lines that will reflect what we think is the best way forward, in terms of having the ONTC be a sustainable, long term operation," Gravelle said in an interview.

The minister wouldn't say whether it was a mistake for the government to have rushed to announce the divestment in 2012, saying he's "moving forward."

The ONTC has more than 940 employees and serves 53 communities in northern Ontario.