When Jim Watson promised during his 2010 mayoral campaign that the first part of Ottawa’s light rail line would be on time and on budget, he probably couldn’t have imagined that the banal political slogan would become at the heart of a public inquiry a dozen years later. .
But Watson’s insistence during that campaign that Stage 1 of the Confederation Line be kept at a price of $ 2.1 billion, even though that figure was a preliminary estimate, has been one of the focal points in the early days of long awaited LRT public consultation.
It was a key line of question Wednesday for former deputy city director Nancy Schepers of commission co-chair John Adair.
Adair pointed to a 2009 report on the board of Schepers, an engineer, which showed that $ 2.1 billion was an early estimate and could increase or decrease by up to 25% as more details are confirmed.
But once Watson began campaigning for $ 2.1 billion, that number came to life, the lawyer argued.
Ottawa Mayor Jim Watson, pictured here in a 2015 photo, gave life to the $ 2.1 billion LRT price cap promising to deliver the project on time and on budget during the 2010 election , listened to LRT’s query. (Alistair Steele / CBC)
“My simple point is that Mr. Watson, as he was then, and the other board members who worked with this $ 2.1 billion, timely, budgeted platform were making the same promise to the public as you , as experienced professionals, they weren’t ready to go to town hall, were they? ” Adair asked.
“In the absence of estimates, I agree,” Schepers said. “Yes”.
But she also told Adair that she wasn’t too worried about Watson’s political mantras, which she’d heard before.
“It’s not the first time this has happened,” Schepers said.
“And, you know, as a staff, we report to the City Council. And if that wasn’t realistic and at some point we said, ‘You know, that’s not possible,’ then we should do our homework and justify it that before the commission and the council “.
Exploring the first decisions of the city
The first three days of the four-week investigation have revealed a number of basic issues that the commission seems to want to examine, from whether the policy improperly limited budgets and deadlines to whether contract details failed. finally.
TARGET | The LRT’s low budget left some worried about a “failed acquisition,” according to the investigation:
The LRT’s low budget left some worried about a “failed acquisition”, the consultation said
Rob Pattison, who heads Infrastructure Ontario’s LRT division, says he was concerned that the budget was too low for companies to meet and that there were few or no bidders for the project.
The investigation has heard several times how the budget limit was a potential problem and several key players stated that they were concerned that no one would bid for it at that price.
On Tuesday, another commission lawyer asked the former city treasurer if there had been discussions about whether the price cap could lead companies to “excessively promising” to meet the budget.
Political pressure on the budget and schedule are not the only ways in which investigative lawyers have been investigating whether the city’s decisions, even before the contract was awarded, contributed to the problems of the the Confederation.
One of those decisions? Go with a public-private partnership, or P3 model, in your contract with Rideau Transit Group (RTG).
The Confederation Line was the first time this funding model was used for a municipal LRT project in Ontario, according to research.
That’s why provincial officials, including Watson, who had just resigned from the Ontario Liberal Cabinet in late 2009, wanted Infrastructure Ontario to advise the city to establish the contract.
The ideas behind the payment plan
One of the key components of this type of traffic financing model is that the winning developer designs, builds and maintains the system, but also takes on some of the funding.
In the case of the Confederation Line contract, RTG assumed $ 300 million in private funding, which the city would return as part of the monthly payments of the 30-year maintenance contract fees.
This private financing actually costs the city, because a municipality can usually apply for a loan at a much lower rate than corporations. In 2012, the city estimated that it would pay $ 165 million more in interest over 30 years than if it had borrowed the money.
(Interestingly, the investigation learned on Wednesday that in May 2011, the city did not plan to include private funding in its contract, unless other levels of government paid the additional cost. They did not, but the city opted for a design-construction -finance-maintain – or DBFM model – anyway.)
While more expensive for the city, proponents of public-private partnerships say private funding gives the company an extra incentive to finish on time so payments don’t start until the project is delivered.
The agreement is supposed to create a healthy “tension” that drives companies to meet the project schedule.
John Adair, co-director of the commission conducting a public inquiry into the Ottawa light rail system, suggested that such a contract, and the city’s strict adherence, could have been detrimental to the people. of Ottawa. (Kate Porter / CBC)
But Adair argued that once the project came more than a year behind schedule, the model left RTG with much-needed money.
Until it delivered the light rail system, RTG would not get its final milestone payment of more than $ 200 million, while the costs, including debt service of $ 300 million, were accumulating.
“RTG was under enormous financial pressure because of the model,” Adair told Schepers, suggesting that the consortium was “killing itself financially.”
Schepers backed down, arguing that RTG’s partners (SNC-Lavalin, ACS Infrastructure and Ellis Don) were great players who should have known what they were doing.
However, Adair argued, RTG could not afford to continue delaying its delivery date, but at the same time, it could not ask the city not to enforce the contract because this “is not an option” according to the model.
“The guiding principle at all times is to look at what is in the best interests of the people of Ottawa, regardless of what the contract says,” Adair suggested to Schepers, who only allowed for flexibility.
Wednesday was not the first time this week that the commission’s lawyers have suggested that the city holding the contract, or at least enforcing it in its strictest sense, has been detrimental not only to RTG partners, but for the people of Ottawa.
On Friday, the former CEO of RTG, Antonio Estrada, will have to testify about, among other things, how the city managed the Rideau Street sinkhole.
First, on Thursday, Yves Declercq, of the train manufacturer Alstom, and Manuel Rivaya, of OLRT Constructors, are expected to appear.