City-province tussle over LRT cash not without precedent
Alberta's fiscal woes can throw Calgary's plans for a loop
The provincial government changes the funding deal for an LRT project in Calgary.
And there's nothing the city can do but roll with it.
Green Line? Hardly.
It was the $1.4-billion West LRT project. And it was the PC government of then premier Ed Stelmach that changed the rules, not unlike the current UCP government which is throwing the city's Green Line planning into disarray.
A key difference between the two projects — beside the fact the Green Line is nearly four times the magnitude — is that there were no federal dollars for the West LRT.
The west extension of the Blue Line opened in December 2012.
But the city took a big hit when the Stelmach government did two things.
The city's been burned before, on the West LRT and other projects…-Calgary Mayor Naheed Nenshi
A key supporter of the Green Line, Coun. Shane Keating, recalls the province decided to reduce Calgary's funding under the Municipal Sustainability Initiative (MSI) by $300 million.
The government also stretched out the time frame for making its promised payments to the city from 10 years to 15 years.
"The city ended up borrowing more money up front and then extending the financing cost which ended up being about $145 million," said Keating.
"So you can technically say that $445 million were taken out of capital investment, either a reduction or ended up paying in interest."
Other projects delayed for West LRT
The result? Keating said other city capital projects were delayed as construction on the West LRT was already well underway.
In fact, some of those other projects have never been built. He said the unfunded list includes roads, bridges and even projects like a fieldhouse.
"The vast majority of ones put on hold are still on hold." All because money for those projects had to be diverted to pay for the West LRT due to the province changing the deal.
With the Green Line being a much bigger project, the concerns about delays in provincial funding are only heightened.
The Kenney government is signalling it supports the Green Line. But instead of handing the city $555 million in provincial funding for the LRT project in the next four years, the province is offering $75 million.
For the city, that's a huge gap to close.
Calgary Mayor Naheed Nenshi is clearly worried.
"The city's been burned before, on the West LRT and other projects, where we start construction and then the province pushes out the payment of the money and we end up paying a lot of money to the bank."
City council's new Green Line committee will hear on Nov. 15 how administration foresees the future of the mega-project.
While talks go on with the federal and provincial governments, Nenshi is keeping the expectations realistic.
"I'm skeptical that we'll be able to do it without taking on too much debt and too much risk on the original timeframe."
That might mean delaying the 2021 start of construction on the Green Line until the province actually puts down bigger portions of the $1.5 billion that it has promised.
For his part, Transportation Minister Ric McIver said the Kenney government is still committed to the Green Line.
"Money will be disbursed more slowly at the start and speed up as the project develops," said McIver.
"We will fund the original $1.53 billion over nine years, as was always the case. We are simply deferring some funds to the back half of those nine years."
If that isn't enough stress for city hall, then there's Bill 20.
The proposed legislation spells out that while the province will contribute $1.5 billion to the Green Line, it's also giving itself the legislative authority to cancel the entire deal without cause on 90 days notice.
As well, the province wishes to extinguish any city ability to take legal action as a result of a cancellation.
McIver said the language in Bill 20 is standard. However, the same government lawyers who spent months putting together the Green Line funding arrangement for the previous NDP government didn't include these clauses.
It leaves a council member like Keating scratching his head, wondering how the city can sign a contract with a company to build the Green Line or arrange interim financing without knowing if the provincial money will ever actually arrive.
He likens the city's plight to someone trying to build a house.
"You put down your down payment and you get the basement built and then the bank comes back and says, 'Oh, by the way, we've changed our mind. You can't have your funding for your house.' What do you do with the lot and the basement at this point?"
"Either you find other funding to build it or you scrap the plan and there sits a lot of wasted money."
So far, the city has spent more than $460 million preparing for the day construction can begin on the Green Line.
Taxpayers may learn later this week how or when that investment will actually translate into the city's next LRT line.