The third-party cost summary actually finds Hamilton's LRT fits within the Treasury Board-approved 30-year budget.
By Ryan McGreal
Published January 14, 2020
Just where did the inflated $5.5 billion figure for the Hamilton light rail transit (LRT) project come from? Ontario Transport Minister Caroline Mulroney claims it came from an independent third-party cost analysis, but that story falls apart on closer inspection.
The third-party cost analysis [PDF] only finds $3.65 billion in total provincial costs over 30 years of operation, which is within the Ontario Treasury Board's approved 30-year budget of $3.66 billion. That scary $5.5 billion total was added onto the front page of the summary without any explanation of how the two contradictory sets of numbers are supposed to add up, and the Ontario Ministry of Transportation (MTO) is hiding behind a confidentiality agreement with the third-party analyst.
An email response from the MTO confirms that the Minister's handout included "the key information from the latest cost estimate" by the third-party vendor. They declined to provide further information on the terms of reference or assumptions that went into the analysis, noting, "the full report includes proprietary and commercially confidential information."
Likewise, when RTH contacted the third party consultant to ask for help understanding the numbers, they declined to comment on who actually came up with the $5.5 billion total or how it was calculated, also citing the confidentiality agreement with the government.
So we still don't know how the alarmist total on page 1 of the Minister's handout is meant to correspond to the third-party cost summary on pages 2-6. The front page doesn't even try to look like it comes from the same report as the rest of the document. Its fonts, colours, layout and even page orientation are sharply distinct from the consistent style across pages 2-6.
What we know is that the third-party cost summary only adds up to $3.65 billion, not $5.5 billion. That $3.65 billion fits the Treasury Board's already-approved budget. In other words, the third-party cost summary actually finds the project is on budget, not over-budget!
And the cost summary itself is a very conservative 'Class D' estimate, representing padded costs piled on top of padded costs. Each line item already includes room for contingencies and escalations, and then the total has an additional $320 million contingency piled on, plus another $190 million escalation.
The analyst never contacted City staff for information on the municipal context, and at least some of the line-level numbers are suspect - like items 40.05.02 and 40.05.03 on page 4, whose cost estimates appear to have been swapped.
In other words, the document has had no independent peer-review and no direct input from the organization best equipped to frame its cost estimates more accurately. Nevertheless, its very conservative conclusions still put the project as a whole within the provincially-approved budget.
Metrolinx itself notes in the internal document released last week that the only project component that has gone over-budget is $87 million in "professional services" - hardly a valid reason to pull the plug on a billion-dollar capital investment!
So where did the $5.5 billion actually come from? The Province refuses to say, and the more we learn about their justification to cancel the Hamilton LRT project, the less credible it looks. It looks exactly like a scary, made-up number meant to justify treating Hamilton's LRT project differently from every other project in Ontario.
Ontario Auditor-General Bonnie Lysyk is reviewing the reasonableness of the government's cost estimate as part of a broader value-for-money audit of Metrolinx, but it may be several months before we see her conclusions.
Meanwhile, the Province is forging ahead with a "task force" that will review transportation investment options for Hamilton, including reviving the LRT plan.
Note: Hamilton Light Rail has launched a 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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