Rising demand for resources and workers helped push the price tag for Stage 2 of Ottawa’s light-rail project to a stunning $4.66 billion, city officials told a special council meeting on Wednesday.
“This is a major shift that municipalities across the country are dealing with,” Chris Swail, the city’s director of O-Train planning, told councillors during the marathon six-hour session that drew 18 delegates from the public who questioned city staffers about the plan to extend Ottawa’s light rail system to the east, west and south over the next six years.
Many delegates and councillors told staff they were blindsided by the cost of the project, which came in at $1.2 billion over initial estimates from 2017 when the report into Stage 2 of LRT was released last Friday.
“We must have seen that curve coming,” said Gloucester-Southgate Coun. Diane Deans. “How did that (cost) swing get so wild?”
Many councillors also expressed frustration over the tight timeline needed to approve the massive contracts. Council will be asked to vote on the proposals at its regular meeting next Wednesday, when it will also take up the 2019 budget.
“We’ve had very little time with this,” said Capital Coun. Shawn Menard, noting he and his colleagues have had only a few days to digest the complex, 113-page report explaining the pair of contracts to extend the LRT.
“As the arbiters of the public purse, there should be much more deliberation going on around the table for a project of this size.”
Swail told councillors he understood their frustrations but said the existing timelines are already “really tough” for the contractors and any delays in approving the bids could cause them to miss “key components” of the construction schedule and further increase costs.
Asked about the consequences of backing out of the project now, Swail noted the city has already invested more than $600 million in Stage 2 of light rail. He said the three firms involved would each get a $12-million payout if the deals don't go ahead.
Two preferred proponents
The project would see the east-west Confederation Line extended from Tunney’s Pasture to Algonquin College and Moodie Drive in the west and from Blair Station to Trim Road in the east. The Trillium Line would be extended to Riverside South, with a separate track between South Keys and the airport.
The city staff report recommends two choices for the contracts.
East West Connectors, a consortium led by U.S.-based Kiewit Corp. and French firm Vinci Group, came in with winning bid to extend the east-west Confederation Line at $2.57 billion, about $600 million more than the city had budgeted for.
The contract for the north-south Trillium line would go to TransitNEXT, a wholly-owned subsidiary of Montreal-based construction giant SNC-Lavalin. That deal that would be worth $633 million to build the extended rail line plus another $1 billion for a 27-year maintenance contract.
Some councillors and delegates questioned the wisdom of awarding such a lucrative contract to the subsidiary of a firm that’s currently embroiled in federal controversy, but Swail said the company “fully disclosed” all the issues facing it during the bidding process. He said the LRT contracts include performance securities that protect the city should any of the proponents become insolvent during the life of the deals.
Paying for rail
The federal and provincial governments are expected to fund nearly $2.4 billion of the projects’ total bill.
City treasurer Marian Simulik said the city expects to borrow $1.6 billion to pay for its share of the costs, hundreds of millions more than it previously projected for transit projects over the next three decades. But she said the city should be able to afford the plan, noting its borrowing estimates take into account interest rates up to 4.75 per cent – or about 1.25 percentage points higher than current rates.
The city is still counting on the province to fulfil a previous Liberal pledge to double the gas tax transfer to cover part of the tab. Simulik said she doesn’t expect the new Conservative government to scrap the tax increase, but if it did, the city could look at a “number of options” to recoup the money, such as deferring other capital projects or raising taxes.
Noting that much of the work will be paid for by development charges, she conceded that lower-than-projected urban growth could cut into that funding, but appeared confident there won’t be any other unforeseen issues.
“You have control over most of the levers that are in the plan in terms of funding,” Simulik said.
'Let's make sure we get this right'
Several councillors also wondered why the Trillium Line will have to be shut down for longer than originally expected during construction. The line is now slated to be closed from May of next year until the second half of 2022 to accommodate work on the LRT extension, and a bus line will run in its place.
“This is not a line to nowhere,” said River Coun. Riley Brockington. “There will be real impacts and hardships to people.”
Swail responded that TransitNEXT needs the extra time because it has “doubled down” on its plan to upgrade the north-south stretch of track with new signals and controls, adding the company has built the costs of the extended closure into its bid.
Other critics questioned the structure of the new LRT contracts.
Local architect Toon Dreessen, president of Architects DCA, suggested the city should have “unbundled” various parts of the deals such as construction of the stations and building the tracks in an effort to create more bidding competition and drive down the price.
“Let’s make sure we get this right before we make a bad decision,” he said.