Don't be distracted by the dubious promise of $1 billion in stocking stuffers: there is no money without the transformative public investment to generate the money that will pay for it.
By Ryan McGreal
Published December 19, 2019
On this matter of $1 billion dollars in Hamilton light rail transit (LRT) capital funding we keep hearing about...
It's really important to understand that there is no billion dollars sitting in a provincial government bank account somewhere. That's not how the LRT funding model works.
Under the Metrolinx procurement model, a consortium is selected through a competitive bidding process to Design, Build, Finance, Operate and Maintain (DBFOM) the system for Metrolinx over the 30 year term of the contract.
Note the third term in that mouthful of an acronym: Finance. The consortium that wins the contract isn't just building the system, they're also financing the capital construction costs as part of the contract.
This way, the Government doesn't have to put the capital cost of the system onto their books. Instead, the government is merely responsible to make the agreed-upon monthly payments to the consortium for 30 years as part of the DBFOM contract.
It's up to the consortium to make sure the construction is completed in a cost-effective manner, and the consortium has to eat any cost overruns that come from mis-calculating the construction cost.
But since the consortium also has to operate and maintain the system for 30 years, they have a strong incentive not to cut corners in the construction either, since it will only hurt their ability to operate and maintain the system cost-effectively.
Sidenote: I'm not a huge fan of P3 contracts. Overall, they actually tend to be more expensive than direct public works, mainly because the proponents build contingency costs into the contracts. The government essentially pays a risk premium in exchange for cost predictability.
But my main point is that the capital cost of LRT under the Metrolinx procurement model is financed by the company operating the system and partially recovered by operating revenues as the system provides rapid transit service.
When the Ontario government says Hamilton can still have $1 billion for some other transportation projects, I honestly don't know what they mean by that, since there is no $1 billion sitting in an account earmarked for our LRT.
If the government is going to invest $1 billion in Hamilton, that money will need to come from somewhere: an addition to the provincial debt, a diversion from some other program, or a new tax revenue stream. Does that sound like the kind of thing this government will do?
In addition, you can't just spend a billion dollars on public infrastructure without doing your due diligence, i.e. public and stakeholder consultation, cost-benefit analysis, design work, and so on. You're talking several years of work.
The easiest thing in the world would be for the so-called 'task force' to turn into the place where good-faith proposals on how to invest $1 billion in public money in Hamilton transportation infrastructure go to die, quietly and peacefully in their sleep.
Which is to say: be skeptical. Be very, very skeptical. Of course, there are people out there who don't actually want any investment and are perfectly happy for our rapid transit dreams to fall into this task force to die. But for everyone engaging in good faith, beware.
There's a reason the Hamilton LRT plan has survived 12 years of political turmoil at both City Hall and Queen's Park, complete with ongoing efforts to undermine, stall, delay and derail it, and it's not because of my florid Twitter threads: this really is the best plan.
Even now, it's not too late to save this project. Despite whatever internal politicking must be going on in the PC Party, what is good for Hamilton is also good for Ontario, and vice versa. Ontario needs Hamilton to thrive and prosper, and Hamilton needs Ontario to treat it fairly.
Don't be distracted by the dubious promise of $1 billion in stocking stuffers: there is no money without the transformative public investment to generate the money that will pay for it. Tell Premier Ford to step in and save Hamilton's LRT from whatever the heck happened on Monday.
We're literally three months away from getting the real numbers from the three consortia bidding on the project. Let's belay the belay, allow the competitive bidding process to conclude, and then see where we are.
Editor's Note: Hamilton Light Rail has launched a new campaign calling on Hamiltonians to send Premier Ford a message calling in him to fix Minister Mulroney's mistake and get the Hamilton LRT back on track. Please join the call to action and make your voice heard.
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