Friday, March 18, 2011

Downloading LRT Capital Costs

I have heard that the Regional LRT plan includes a lot of downloaded costs to the municipalities where LRT goes - Waterloo and Kitchener. Apparently this came out at a recent meeting of Regional Council. It was one of those situations where staff made a presentation and councillors, realizing that something wasn't adding up, probed until some unexpected truths came out. Or so I hear.

If true, then Kitchener and Waterloo city councils are going to have to come up with tens of millions of dollars to pay to repair the infrastructure damaged by LRT construction: moving hydro polls and lamp posts, replacing curbs and sidewalks, repaving torn-up sections of road.

Just to be clear: this is a bombshell. If true, it means that severely strained municipal budgets will be stretched past the limit.

In addition, there is a second possible set of costs to the municipalities (and this might affect Cambridge as well): What will the Region do if there are cost overruns? The provincial and regional governments have agreed to pay 2/3 the cost of LRT to a limit. We pay the other third of the budgeted cost and we pay all cost overruns. If LRT goes a few hundred million dollars over-budget (which is not uncommon), where will the region get the extra money from? Will they guarantee that they won't demand more from lower tier governments?

When people talk of the cost of LRT, they mostly talk about tax increases. It goes beyond that. It also means cuts to lots of other municipal services: the libraries, arts funding, parks maintenance, road repair, snow removal, on and on and on. We in Waterloo are already cut to the bone because of RIM Park.

I'm throwing this out there, and if anyone has evidence one way or the other, I'd like to hear it. It is not responsible to proceed with LRT if there are any uncertainties of this magnitude.

Update: I have received confirmation that this downloading of capital costs is indeed the plan. And there's more - apparently the region also intends for Kitchener and Waterloo to build parking garages for some of the stations.



Anonymous said...

A bombshell, Yappa, and a deal breaker! said...

The estimates for LRT include all of the above-mentioned costs. I've seen nothing to indicate that any of them would be handled at the city level rather than the municipal one.

The specifications for project bids can require that bidders handle all cost overruns, and that offloads risk from the Region to the bidder. That's been done on other projects of this kind in other municipalities, and I believe that is the approach being considered here.

Are you claiming that LRT somehow forces cuts to other services, even while it increases taxes? And your basis is ...?

-Michael said...

I meant to say: "I've seen nothing to indicate that any of them would be handled at the city level rather than the Regional one."


Anonymous said...

Of course if bidders are required to handle all cost overruns, that fact is reflected in the bids [they will - must- be higher]. Are the Region's cost estimates based on this requirement? This seems highly relevant. Please clarify Michael... said...

The cost estimates are based on empirical figures for all the components. I'm not at all sure that bids that take on cost overruns would be higher than the estimates, as the existing figures are already very conservative relative to how much such a simple LRT project like this can cost.

How to approach risk is going to have be a political decision, and one that I believe will be addressed in the next round of public consultations (which will focus on financing).


Yappa said...

Hi Michael,

Thanks for the comments. A question: I'm not sure what you mean by the next round of public consultation. The vote is in June: do you mean that there will be more public forums before then (other than the ones we just finished?). You are more plugged in to the plans of the Region than I am... I hadn't heard of that.

Ruth said...

Yes. The round of consultations that is now finishing up will result in one or two preferred options. Those will be presented with financing possibilities to Council next month, and go for public consultation in late April / early May.

The general timeline is from page 17 of the RT implementation options report:


Yappa said...

Hi again Michael -

I just realized that I didn't respond to your original question, "Are you claiming that LRT somehow forces cuts to other services, even while it increases taxes?" -Yes, I think so. I think that large expenditures result in tightened belts all around - I think we've seen that since RIM Park. But I'm no expert and that was more of an assumption; I'll try to get better info.

Anonymous said...

I know exactly where you are coming from.

And just in case you think that I am just full of hot air, I PROVIDE THE PROOF HERE.

I would love to hear from you.