Planners call for some private funding
City LRT planners are proposing that the new line slated for west Edmonton be partially financed with private dollars.
An update scheduled for council’s executive committee Monday on the west leg of the Valley LRT line is recommending the city pay for the $2.67-billion project using a design-build with partial private finance (DBF) model. What that means is a private contractor would finance the construction of the project, but not take part in the management and operation of the line once construction is complete.
“So you’ve got a contracting team, a design team and you’ve got a finance team, and their responsibilities are over at the end of construction,”
The idea, I think, is to make sure we’re getting best value for money on what will be the most expensive infrastructure project we’ve done.
said Bruce Ferguson, the city’s branch manager of LRT expansion and renewal.
Ferguson said the private financier would be part of the team bidding on the contract to build the project and would bear any financial risks associated with missing deadlines or going over budget. The city hopes to put the massive project out for bids in March.
A DBF project typically sees the city withhold a portion of the funds from the contractor during construction, a difference that the financier makes up for the builder. Once the builder is finished the project, the city would pay the contractor the funds that are withheld.
It means the successful bidder for the 14-kilometre, 14-stop extension would carry the additional risks in terms of financing.
“If the contractor is late we know they are accumulating interest on their payments,” said Ferguson.
If the contractor takes longer than scheduled, the cash flow from the city typically stops, with final payment not coming until the LRT line is finished.
City spokeswoman Lindsay Yarmon said this would be the first city DBF contract if approved.
Ferguson said DBF financing is different from the public-private partnership (P3) model currently being used to build the southeast portion of the Valley line, which sees the private company running the train for many years after construction.
Mayor Don Iveson previously said a public-private partnership would not be used in constructing the west Valley line, which will run from 102 Street downtown to the Lewis Farms transit centre.
Coun. Andrew Knack represents west Edmonton’s Ward 1, where a large portion of the west LRT leg will run through. He said there are pros and cons to any financing model and he will look for more explanation as to why the DBF model has been suggested as the preferred option.
“The idea, I think, is to make sure we’re getting best value for money on what will be the most expensive infrastructure project we’ve done,” said Knack.
City administration will also ask council to approve an additional $30.5 million for the project’s procurement stage. Ferguson said asking for the additional funds is standard at this stage of the project.
The Government of Alberta previously committed $1.04 billion to the expansion project and the city is hoping to hear more about federal support in the spring.
Ferguson said the difference in funding models for the two sections of the Valley line won’t result in any disruptions for passengers.