City may postpone LRT

Funding shortfall could mean difficult choices.

A $515-million shortfall for the southeast LRT could mean tough choices for council.

If the funding gap isn’t closed by October, council can either postpone the project, expect inferior construction bids, or backstop the project with city funds until other levels of government come through, potentially increasing city debt and raising taxes by 2.5 per cent, says an update released by the transportation department Thursday.

The options were spelled out ahead of next Wednesday’s council meeting. The city has committed $800 million to the $1.8-billion project.

At the federal government’s request, the line will be built and operated as a public-private partnership.

Council had been hoping to get the line open by 2019, which means sending out a request for proposals this October.

But if the funding is still tenuous, it will lead to inferior bids, said Nat Alampi, program manager for the line.

The city will pre-qualify three teams to bid on the project, and those companies will likely take a year and spend $10 million to $15 million just to negotiate deals with suppliers and develop plans for the line, he said. Talking with the industry, it’s clear fewer companies will feel comfortable bidding if the funding isn’t secure when the city releases its request for proposals.

“It’s quite an onerous task to bid on a P3 of this magnitude,” Alampi said. “They do a bit of a risk assessment on the project (before expressing interest). … They want to ensure they have a one in three chance of getting the bid.”

Administration is suggesting councillors vote to postpone the project six to eight months to give staff more time to secure funding from other levels of government, Alampi said.

That would mean council would debate the project again next spring, after the October municipal election, to see if they feel comfortable moving ahead.

However, Coun. Amarjeet Sohi said he still believes the city can close that $515-million gap before council breaks in September.

The federal government has promised $250 million of the $400 million expected. Edmonton is hoping to get the remaining $150 million from its portion of the future $53-billion Building Canada Fund.

“All we need from the federal government is the assurance that Edmonton will have the ability to use that funding as we wish,” Sohi said.

The province, with support from the Capital Region Board, is expected to contribute $235 million through the GreenTrip program.

Edmonton is hoping for $365 million more, a total $600 million from the province.

That funding could come from future GreenTrip dollars or increases in municipal sustainability dollars, Sohi said. The province is currently wrestling with a tight budget, but the funding doesn’t have to be available until 2015 or 2016.

It shouldn’t be a big request, he said, “given the transformative nature of this project and the fact the funding is spread over three years.”

Even without details, the project can go ahead if the province shows it is committed to the project, Sohi said. “We would like to get all our ducks in order by September.”

Transportation officials said if funding can’t be confirmed before October, the city could guarantee project funding until the remaining federal and provincial dollars are found.

However, the only source for that funding is debt, with debt servicing from a tax levy, the transportation department report said. Closing the $515-million gap with debt would require more than a 2.5-per-cent tax increase.

“Having the city guarantee the remainder of the funding would also reduce the impetus for the other two orders of government to contribute,” the department warned.

The city has already approved spending $187 million of the $800 million it budgeted to buy the land, complete the preliminary engineering, prepare the P3 documents and relocate utilities.

The southeast to west line, now called Valley Line, would run at street level from Mill Woods through downtown and eventually to the city’s west end.