How much would it cost to cancel Waterloo Region's LRT?
A handful of candidates running for office in the October 27 municipal elections – including Waterloo mayoral hopeful Dave MacDonald and Jay Aissa, who is running for regional chair – are seeking to cancel the region's light rail transit project.
But if the LRT were cancelled by the end of the year, the region says it would lose hundreds of millions of dollars, both to construction and other work that's already begun and lost government grants.
According to the region's transportation commissioner, Thomas Schmidt, by the end of 2014, the region will have paid between $225-250 million dollars in total costs already. That money, which covers everything from engineering and design consulting work, construction costs, payments for train cars, land appropriation and utility relocation, is lost if the LRT is cancelled.
On top of cancellation costs, $565 million in funding from provincial and federal governments will disappear.
Some projects, like relocating Hydro One lines and Kitchener Gas and other utility lines along the proposed LRT route, will need to be completed and paid for regardless of whether the project is cancelled or not.
For example, $29.3 million is budgeted to move utility infrastructure that includes everything from Kitchener Gas lines to Bell lines, while the budget to move Hydro One lines is set at $26.3 million. That money will be spent whether or not the LRT, the construction of which is being carried about by the Grandlinq consortium, is cancelled.
Here's a look at what the region says it will cost to cancel the LRT.
Distrust of region's numbers
Aissa and MacDonald say they do not trust the region's cost estimates and vow to cancel the LRT if elected.
Aissa says he believes there are a number of hidden costs not shown in the region's reports, including inflation and specific charges for components such as power transformers. He says the region's projected cost of $1.9 billion for the LRT over 30 years is actually closer to $2.4 to $2.5 billion. He says he is also concerned that building the LRT is adding to the region's debt.
Further, Aissa believes that the money lost on the project in the event of a cancellation would not be as much as the region says, because equipment could be sold off and construction of operations buildings and payment of staff could be withheld.
Here's a look at Aissa's major points about cancellation costs, and the region's responses to each.
CLAIM: The region can sell the vehicles it has purchased. "That $95 million that they count for the vehicles, we can sell those vehicles for a price same or plus," said Aissa.
RESPONSE: While it would technically be possible to sell completed vehicles, a potential sale depends on the progress made by builder Bombardier, said Schmidt, the transportation commissioner.
"If at this point we're far enough along that if we cancelled everything, we would pay the costs of cancelling, and essentially have nothing. Or have a bunch of parts because that's what they would do, they would give us the parts," said Schmidt.
But if Bombardier can finish building the vehicles, after which the region would complete the project, take possession of the units, and then attempt to sell them, perhaps to regional transportation agency Metrolinx, says Schmidt.
"Whether we would get full value for the trains, it would be highly unlikely," said Schmidt.
Project office and consulting
CLAIM: Aissa commented on a line in a regional financial closing document from May 27, which has a line item called 'Project Office and Consulting', at a cost of $51.8 million. He says that is another cost that the region would be able to recoup.
"We're talking about project office and consulting, which is $51 million, did we buy a building for Grandlinq? So I don't know about that one," said Aissa.
RESPONSE: According to Schmidt, the line 'Project Office and Consulting', in the financial closing document does not refer to a physical building. Instead, Schmidt says the $51.8 million is for costs of general engineering consultants, financial work by Deloitte, Infrastructure Ontario costs and the salaries of regional staff who are working on the LRT.
CLAIM: Aissa took exception to the cost of land appropriation posted by the region, which is tagged at $42.3 million. "They're talking about the land at $42 million, this is not a loss, we still have the land, and we need the land for expansion right?" said Aissa.
That idea was also echoed by MacDonald, who suggested the land could be used by a public transit system that is not the LRT. "That's not a wasted investment, that's not thrown away, they can use that land to make dedicated bus lanes," said MacDonald.
RESPONSE: That land is not necessarily easy to sell, says Schmidt. "I'll phrase it this way, most of the property that we've purchased is say a metre or two metres off the front of someone's property. So, I guess you can explain to me who we would sell it to," says Schmidt.
However, Schmidt said the land could be used for a bus rapid transit route, if the LRT were to be cancelled. Any bus route would have to run along the same route.
CLAIM: Aissa takes issue with the construction of roughly 12 power transformers that are expected to be built every 1.5 to 2 kilometres along the track. "I figure about $2 to $3 million for each transformer, times 12 of them you get $36 million," said Aissa.
RESPONSE: Schmidt questions where Aissa's numbers come from, since official breakdowns haven't been released publicly. "Essentially, we're given one price for doing all of the work, so we do have a breakdown in background but that's not something that has actually been released," said Schmidt. "We haven't provided information to say, 'You know this piece of track costs this amount, this transformer costs that amount.'"
"My response would simply be, it is included in the price of the whole project," he said.
Hydro One & utility line relocation
CLAIM: Aissabelieves only $8.1 million of the $26.3 million that was budgeted to move Hydro One lines and bury them underground has been spent, and that the remainder can be recouped.
RESPONSE: Schmidt says work that has already started to move hydro and utility lines will be completed, even if the project is cancelled.
"If you started to move the hydro lines, you have to finish moving those hydro lines," said Schmidt.
That means the region would pay $55.6 million to move Hydro One lines and utilities infrastructure, even if the LRT is cancelled. There’s $26.3 million in the budget to pay for burying Hydro one lines from Courtland Dr. to Fairview Park Mall, and $29.3 million to pay for moving utility infrastructure, from Union/Kitchener Gas, Kitchener-Wilmot Hydro, Waterloo North Hydro, Bell and Rogers.
In this discussion, MacDonald says he also believes the region has not been upfront about the running costs of a rapid bus service between Fairview Park Mall and Ainslie Street Terminal in Cambridge.
CLAIM: MacDonald says he doesn't trust the region when they say the LRT is on time and on budget.
"You have to look at history, at history behind other government funded projects," said MacDonald. "Do they ever come in on budget? Do they ever come in on time? Absolutely not."
RESPONSE: Schmidt told CBC that Grandlinq is responsible for any cost overruns due to construction delays. That only changes if the region decides to alter or delay the plans.
If the region cancels the LRT, then a termination clause in the region's contract with Grandlinq would kick in, and the region would have to pay additional penalties.
“The intent of that clause is essentially to be fair to both parties. So if Grandlinq has done work, then we should pay them for that work they have completed. If they’ve entered into contracts that have a cost to them, we should pay for them for those contracts when we cancel,” says Schmidt. But he couldn't say how much the region would be on the hook for.
"The difficulty in calculation that is obviously work is being done every single day. Every day the amount of work that they would’ve done would be different,” he says.
Effect on economic development
The executive directors of economic development at both the city of Kitchener and the city of Waterloo say they've seen millions in investment from property developers as a result of the incoming LRT system.
Justin McFadden, the executive director of economic development for the city of Waterloo, says the expectation in the investment community is that the project will not be stopped, and they are spending accordingly in commercial, residential and office space. McFadden estimates the amount being invested into Waterloo because of the construction of the LRT runs into the tens of millions of dollars.
"If you look at developments like Northfield Station for example, and across the street there's the Waterloo corporate campus, those investments are a big part of the decision," said McFadden. "These are multi-million dollar properties and eventually could be multi-million dollar projects and if you pull the LRT out from that then you would see the ones that haven't started construction not come to light."
Rod Regier, McFadden's counterpart at the city of Kitchener, says three major construction projects related to LRT are underway in the downtown core, with a combined value of just over $100 million.
Regier adds that it's not just the light rail that is attractive to developers, but also its integration with VIA and GO trains.
"The LRT is part of a system, it's not a stand-alone project," said Regier. "And that whole system, the way it's been articulated, has resulted in a tremendous amount of developer interest in station areas."
Within the area of King and Victoria alone, where the multi-modal hub is planned to be built, Regier says the city has forecast five million square feet of development, worth about $1 billion in new construction projects.