We can’t get Light Rail Transit to Kanata without Stage 2

IMG_4386The stage 2 expansion of Ottawa’s LRT system will extend the system another 44 kilometers in all directions in our city.  It will add 24 new stations. The biggest barrier to getting LRT to serve our Kanata community is getting stage 2 done. We can’t lay track in Kanata without track to connect to. 

As your Councillor, I am committed to working towards securing LRT to Kanata. Without a doubt, this must happen. Even before serving as your Councillor, I was involved in every consultation and strongly advocated for this long overdue service for our community. It is important to remember that originally stage 2 only got us to Bayshore, now we are even closer by extending stage 2 to Moodie and having an environmental analysis done. Having the distinct honour of working on your behalf as your Councillor, I am excited to continue this work now. Yesterday, I met with Premier Ford, Minister Fullerton, Minister MacLeod, and several other Ministers at Queen’s Park. I took every opportunity I had to convey the need for the Province to help fund Stage 2 and Stage 3 of LRT in our city.  

I support Stage 2 LRT for these reasons: 

  • We can’t get LRT to Kanata without Stage 2 LRT 
  • The procurement process has been ongoing since 2017, and the city has spent $600 million to get us to this point. I have full confidence in the outstanding staff and their expertise that they are bringing to this project. 
  • The Stage 2 plan before us today is a radical improvement on the plan presented in the past. Several additional kilometers of track and stations have been added over the last two years, including an extension from Bayshore to Moodie Drive.  
  • This ambitious plan has grown in scope – in a good way. This means that it is more expensive and will take longer to build.  
  • There have been over 150 consultations across the city over the last few years on this project.   As scope of Stage 2 increased, these scope increases were debated and approved by the past Council. 
  • Starting this complex procurement process over would not only be a gross waste of time, resources, and tax payer’s money but it would ultimately delay LRT to our community.  

This is the single largest expenditure our city will make. As your Councillor, I take this responsibility very seriously. I believe we have a robust plan in front of us. I am excited for this, and I am excited to build this for our community, our children, and our grandchildren.   

I will continue to work hard on securing the needed funding to move forward with stage 3 as quickly as possible. Our growing community needs it and our technology park is booming. Please know that I am exploring all options and working with my colleagues on this. 

Here are answers to some of the questions residents have asked: 

Why has the budget increased? And how is this being funded?

The Stage 2 competitive bid process has yielded prices that are higher than those originally set out in the 2013 TMP estimate, totaling approximately $1.2 billion. Early cost estimates are based on preliminary designs and have been further refined during the procurement process by the constructor to provide a fixed price.   

The Stage 2 LRT project budget increased as a result of two key elements:  

  • The City included several scope additions (totaling approximately $700 million), that on a project of this magnitude, are elements that should be in place and done right on day-one and things that will serve the system well for decades, as it grows without the hassle and costs associated with retrofitting or rethinking. 
  • There has been a significant shift in market drivers that have led to cost increases of up to 30% over the last couple of years in Canada for large public-private-partnership (P3) projects like Stage 2, including for example the items below, which resulted in about $500 million in increases to the project beyond the City’s estimate:
    • Greater than average inflation for specialized construction trades, supplies and materials; and 
    • Trade and tariff uncertainty. 

While the Stage 2 LRT procurement has been forced to adjust to the cost increases, given the increased scoped enhancements, the reach and the improved overall system reliability that will result, the overall Stage 2 program represents good value for the money for the City of Ottawa and its residents. In total, most of the additional upfront costs for Stage 2 are offset by the maintenance savings that have been achieved through the Stage 2 contracts.   

The total cost of the Stage 2 LRT project is $4.66 billion and is jointly funded by the Government of Canada, the Province of Ontario and the City of Ottawa.   

In addition to $2.366 billion from Federal and Provincial grant funding contributions, additional sources of funding include $35 million in external funding for some of the bundled projects and the remaining $2.256 billion net cost will be funded by the City form various revenue sources.  

The table below provides a further budget funding breakdown:  

  Cash ($M)  Debt ($M)  Other (Tax, Rate, PTIF) $M  Total $M 
Federal and Provincial Grants  2,366      2,366 
Other Revenue   35      35 
Gas Taxes  382  562    944 
Development Charges  194  771    965 
Transit Taxes    293    288 
Non-Transit Funding (Bundled Projects)       59  59 
Total   2,977  1,626  59  4,657 

Can the City actually afford this project?

Yes. The city prudently uses a long-term affordability model which considers all of the transit capital requirements and revenues over 30 years to ensure that the city’s debt threshold is not exceeded.  

Due to the increase in the estimated Stage 2 LRT project cost, along with other changes in economic factors, the Transit Affordability Model was updated to assess the continued overall affordability and sustainability of the Transit Long Range Financial Plan. The update concludes that Stage 2 of the Light Rail program is affordable.  

Why is the City now proposing that the Province and Federal Government pay 100% of Stage 3?

There are many examples of the Province and Federal government investing in major transit projects that boost productivity, improve the environment, and help business flourish. For stage three projects we are asking that the Federal and Provincial Governments to invest in the same way that they have in other communities. Kanata North continues to rapidly grow and provides $13 billion to Canada’s GDP and is shovel ready for LRT. Here are some examples of transformational transit projects being funded primarily by Province and Federal government:  

  • Hamilton Light Rail Transit  
  • Hurontario LRT 
  • London Bus Rapid Transit System 
  • Toronto Finch West LRT 
  • Waterloo Region LRT 
  • York Region Viva Rapidways 

Stage 2 is a step closer to getting LRT to our community and I look forward to working with all levels of government on this long overdue project for our community.  

Why is the project completion date two years later than previously stated? When will it open?

The Stage 2 competitive bid process has resulted in timelines that extend beyond original estimates, as a result of increased project scope and advanced design efforts.   

During the procurement process, proponents unanimously requested extensions as a result of significant scope changes, such as:    

  • Extending rail 2.5 kilometers further from Bayshore to Moodie and adding an LMSF 
  • Extending Trillium Line 3.4 kilometers to Limebank Station 
  • Provincial decision to unbundle the Highway 417 Expansion Project (Maitland Avenue to Highway 416) 

The updated schedules reflect expertise from two world class designers and builders that have proposed realistic, deliverable and well considered schedules.  

Stage 2 is anticipated to open to the public in stages: 

  • The entire Trillium Line South extension, including the existing upgraded Trillium Line, in 2022 
  • The entire Confederation Line East extension from Blair to Trim will open in 2024 
  • The entire Confederation Line West extension from Tunney’s to both Baseline and Moodie will open in 2025 

How was Stage 2 procured?

Stage 2 is made up of two projects, extending the Confederation and Trillium Lines, however, the project has been divided into three separate contracts, as outlined below:  

Confederation Line Extensions:  

  • The Confederation Line East and West extensions, and their related projects, are being undertaken as a Design-Build-Finance (DBF) procurement; and, 
  • A Memorandum of Understanding (MOU) with Rideau Transit Group (RTG) for 38 additional Confederation Line Alstom vehicles, the construction of the Belfast Yard Maintenance and Storage Facility (MSF) expansion, and for civil and vehicle maintenance and lifecycle. 
  • The $492 million RTG MOU was approved by Council on March 8, 2017 as part of the Stage 2 LRT Implementation Report 

Trillium Line Extension: 

  • The Trillium Line South extension, and its related projects, are being undertaken as a Design-Build-Finance-Maintain (DBFM) procurement that includes maintenance responsibilities for the existing civil infrastructure and rolling stock to 2048. 

Is the City concerned about SNC Lavalin on Stage 2?

SNC Lavalin is one of the largest engineering, construction firms in the world having undertaken significant roles in LRT projects in Canada and around the world including: the Canada Line in Vancouver, Eglinton Crosstown in Toronto, REM in Montreal, Parramatta LRT in Australia, the Purple Line in the USA, MSHeireb Tram in Qatar and many others.  

In terms of Stage 1, we are generally pleased with RTG’s performance. They are behind schedule, but these are incredibly complicated projects and we have full confidence in RTG technical abilities to deliver the project.  

The City is pleased that its rigorous competitive procurement process resulted in a winner with a broad international experience combined with local experience and mobilization. The SNC staff that have mobilized here for Stage 1 can continue to live and work in our community and get to work on building our new system.  

In addition, all City construction contracts, including those for Stage 2, have strong financial safeguards and options to protect the City financially and ensure project completion in the extremely unlikely event that any of our private sector parties are unable to fulfill their contractual obligations.  

What measures are in place to protect the City from proponent insolvency?

As noted above, the Stage 2 Project Agreements (and all City agreements of this nature) are structured to protect the City from risks associated with a private sector partner becoming insolvent or failing to perform. In the event of insolvency, the City can declare an event of default and proceed to tender the remaining project provided the private sector partner (or its creditors) had not already done so itself as part of its liquidation. The City also retains step in rights to preserve important subcontracts, as well as the power to approve and change the control of the project.   

The payment regime for the Stage 2 Confederation and Trillium Line extension contracts is structured to ensure the City never expends more money than has been earned by the contractor for completed works and significant sums are held back to drive on-schedule completion (as well as additional certain bonds). Insolvency, of course, can create schedule delays as a result of the likely change of control of the project.  

The City itself faced the insolvency of ConCreate USL Ltd, who were awarded the Strandherd Armstrong Bridge (Vimy Bridge) contract. Some delays to allow for the transfer of the project to new ownership were incurred, but the project was completed under the control of another firm at no additional cost to the City.   

Another recent example of a successful restructuring is the Carillion bankruptcy. In 2017 Carillion PLC, a global construction firm, became insolvent and by the spring of 2018 all the projects that had previously been under Carillion’s control were back up and running having been successfully sold to new private sector partners.