THE WORLD HAS CHANGED, SO SHOULD TRANSIT PLAN
Calgary needs to take a serious second look at the costly Green Line, writes Bob Holmes.
“The future ain’t what it used to be.”
This well-known saying by former New York Yankees star Yogi Berra was probably not meant to be a contribution to a public policy debate. But it should be the focus of city council’s Green Line committee when it meets June 1.
The current cost for the Green Line project is $4.9 billion, with funding of $1.5 billion from each of the federal and provincial governments, and the balance from the city. The majority of the $4.9 billion will be borrowed. The operating cost of the Green Line after completion is $30 million to $40 million per year after revenue from the fare box is taken into consideration. This does not take into account the annual debt servicing costs on the money the city will borrow.
Some Calgarians have expressed concern about the risk because of the scale and cost of this project. “Business leaders again question Green Line plans as vote looms,” Calgary Herald, May 4. They have proposed to “de-risk “the project by significantly reducing the scale and cost of the project. “Opinion: Here are ways to reduce Green Line’s financial risks,” Calgary Herald, May 8.
But financial and project execution risks are not the only risks facing this project.
THE RIDERSHIP RISK
Ridership is the fundamental aspect of any transit project. It is the major criterion that determines the return on investment. It also directly impacts the net operating costs of the investment — higher fare box revenue means less taxpayer subsidy. The city estimates that the daily ridership on the Green Line will be 65,000 people. This seems optimistic. In the north, the line only runs on Centre Street to 16th Avenue, and the existing bus rapid transit (BRT) line into the downtown will run beside it. In the southeast, the line only runs to Shepard. We do not know the assumptions that this ridership estimate is based on. Is it from the existing population? What assumptions have been made about population growth and downtown employment? Are there best and worstcase scenarios? The ridership forecasts are being updated for the committee meeting. This is a good idea. The updated ridership report should be made public.
Prior to the pandemic, the vacancy rate in the downtown was about 25 per cent. There is a real possibility that the pandemic, and the way Calgarians and companies have adjusted to it, will change where and how some of us work, and other aspects of our lives. Some have called this the “new normal.” In the transit world, this has implications for ridership. The future will be different than what we thought when planning for the Green
Line began. We can’t predict it with certainty. But we can be very strategic about the infrastructure investments we make.
THE AFFORDABILITY RISK
In the last three months, the federal and provincial governments have had to spend massive amounts of money because of the pandemic and associated impacts on our economy. These expenditures, while necessary, were not budgeted and will be funded by borrowing. The federal government’s 2020 deficit is expected to be $250 billion. The total debt, just under $1 trillion. The 2020 provincial deficit is forecast to be $15 billion. The debt, just under $100 billion. The City of Calgary estimates lost revenue of $250 million to $400 million this year and has asked the provincial and federal governments for help. The amount of personal debt has been a concern of the Bank of Canada and CMHC for some time. All this government and personal debt has to be repaid.
It has been argued that because the federal and provincial governments have each committed $1.5 billion to the Green Line project this is a good deal for Calgarians. But Calgarians pay taxes to all three levels of government, not just the city. You can only spend a taxpayer’s dollar once. So if you choose to spend $4.9 billion on one massive project, other priority projects will not get funded. The pandemic has reminded us that there are many other priorities and demands on public funds: in health care, long-term care, pandemic preparedness, housing, encouraging the diversification of our economy, and other city priorities, to name a few. Finding the funds for these priorities while locked into paying high levels of debt will be difficult.
The Green Line is an infrastructure project. History has shown that investing in infrastructure projects in order to create jobs in a recession can be sound public policy. But it has to be the right project at the right cost. This requires discipline and hard choices. The focus of infrastructure projects is usually on capital costs and job creation. The annual ongoing operating costs frequently get less or no attention. By the time the project is completed, it’s too late. Spending $4.9 billion for the Green Line project as presently conceived, with a $30 million to $40 million annual operating cost funded by the Calgary taxpayer is an expensive way to create jobs.
Calgarians and Albertans know that our economy was in trouble before the pandemic. So whether we return to a pre-pandemic “normal” or a “new normal,” we are in a period of great uncertainty.
Many companies headquartered in Calgary have cut back their capital expenditure programs because of current and future uncertainty and an unwillingness to add more debt to their balance sheets. This is a strategy the Green Line committee should seriously consider in its upcoming meeting.
A WAY FORWARD
The alternative proposal put forward by a group of Calgarians is a thoughtful proposal that still invests in transit and creates jobs, but with a more affordable capital and operating cost. It should not be dismissed as coming from armchair quarterbacks. It is from taxpayers. It should be considered on its merits.
The Green Line committee needs to step back from looking at alignment details through the downtown or the design of another bridge over the Bow River. The times we are in require that the committee and council look at the big picture.
The current Green Line project should be restructured as two separate strategic projects. One project is to invest in further improvements to the already well-used bus rapid transit system on Centre Street into the downtown. This is a scalable project. In other words, the improvements do not need to be bundled in one large project. They can proceed as money becomes available, and they can proceed quickly.
The other project is a surface LRT line from downtown to the ridership rich residential communities like Mckenzie Towne and Seton in the southeast. Much of the planning and land acquisition work to date on the southeast portion of the Green Line can be used on this revised project.
Bob Holmes is a former city commissioner of planning and transportation, chair of the Calgary planning commission, and former senior vice-president of planning and capital projects at the Calgary Health Region. This is his submission to the Green Line committee.
There is a real possibility that the pandemic, and the way Calgarians and companies have adjusted to it, will change where and how some of us work, and other aspects of our lives. Bob Holmes, former city commissioner of planning and transportation