Myth #1: “We can save money by cancelling LRT”

ION opponents claim that we can still save money by cancelling the project now. But there’s no getting around the fact that we would have to pay for work done so far.

By the time a new council takes office, up to $250 million will have been spent. In contrast, our region’s contribution is $253 million. The remaining construction funding from the federal and provincial governments ($565 million) is contingent on actually completing the system, and would be withdrawn if we cancelled.

In other words, with $250 million in sunk costs and $565 in upper level funding, ION construction will cost the region only $3 million.

Cancelling after the money is spent to “save” that $3 million is like cutting off your nose to spite your face. The light rail tax increase is locked in, whether we have something to show for it or not. Except it might not be enough to cover all the costs of cancelling.

The work done so far is just part of a total of $739 million committed to contracts with Grandlinq, Bombardier and others. Cancelling those contracts will mean the Region’s lawyers negotiating penalties, and possibly being taken to court. When Ottawa cancelled their LRT project in 2006, it took over 2 years and $36 million to settle with the project partners. And that was before shovels were even in the ground.

No-one wants to speculate what the settlement cost of cancelling an under-construction LRT would be, because nobody really knows. It could be as much as $100 million. It will certainly mean that regional taxes will be more heavily burdened by cancelling ION than completing construction.

But kissing goodbye to $250-350 million is just the start. Read Myth 2 to find out how much more we’d have to pay for transit in ION’s absence.

8 thoughts on “Myth #1: “We can save money by cancelling LRT””

  1. This article is good, but I do wish it had gone further to debunk claims made by Jay Aissa about cancellation, which are pretty clearly false. He claims that in the $250 million, the cost of the LRT vehicles is included. He said, that its still an asset, and if cancelled, he would sell them, oh and sell them at a profit. I feel this is pretty clearly BS, but it would have been good to see a good argument why. He also claims that much of the money spent was on land acquisition, and that land would “still be useful” to the region. Thus his claim is that cancellation costs would be a mere few dozen million. Obviously, his claims are a pile of foul smelling detritus, but a more specific debunking would be nice. I’m not sure if other candidates have similar absurd justifications for their plans.

  2. Aissa’s present stance is that by redirecting the provincial and federal ION funds to a less-expensive BRT project, the grants would be retained. Does this claim hold any water?

  3. Daniel, these are both good points. There’s a lot of detail in the claims that specific candidates have made, too much to include in this series. But to break down these two specific issues:

    1. The Region has a contract with Bombardier for 14 light rail vehicles (LRVs). I believe the amount already spent along this line will be $26M or so (I’ll have to look it up.) To actually receive delivery of the LRVs will require spending much of the remaining $60-$70M to get them. Then, the idea is we can somehow turn around and resell them. So we’d have to spend more just to get to the point where we’d be able to sell them– no doubt at a loss, unless someone thinks they can run a successful used train dealership on Northfield.

    2. The land that has already been expropriated can only be sold back if the buyer wants it. We are generally talking about slivers and slices of properties up and down the corridor. Only a few residences and businesses will be interested in giving the money they got for these easements back, so that claim doesn’t hold water either.

    In addition, if we see a new council try and implement a proper BRT system instead of LRT, there’s a risk that the busway might need to be wider. Certainly with different operating characteristics the entire line will need redesign, which will mean more expensive land-taking.

  4. Daniel, we don’t have data (and likely neither would candidates) on whether or not the vehicles could be resold. Considering we were buying up surplus trains from Metrolinx’s contract though and with nearby municipalities dithering over light rail, it’s not likely to be much of a seller’s market.

    Furthermore, only about $27 million out of a $95 million purchasing agreement has been spent so far – if we cancelled today, it seems highly unlikely we would receive any trains to resell. We’d also still have another $220 million or so in sunk costs.

  5. Mike Purvis,

    So far the only people saying that the federal and provincial money can be retained are candidates who want to cancel the project. This is a huge assumption and I haven’t seen any evidence to support it. Since implementing a BRT system now would require a complete redesign and retendering, we would be looking at a delay of at least 2 years (the time taken to plan and tender the current system). Meanwhile, we’d also see the region negotiating their way out of contracts with GrandLinq and Bombardier, likely for just as long (if the Ottawa example is any guide.) It’s unlikely that the province or the feds will be interested in hanging around, not when many other cities are clamouring for transit funding.

    Regardless, any claim about a “cheaper” BRT system needs careful examination, too. Federal or provincial funding aside, any replacement plan would come at full price, along with contract cancellation penalties for getting out of the current plan. Meanwhile, the current LRT project is already $250M invested.

  6. Mike, there is precedent in the case of the Scarborough subway fiasco, where the province switched plans, however my read of the situation was that the government saw it as vital to winning seats in the by- and general elections. In this case, we don’t have an election on the horizon until after the project is completed. When in Waterloo earlier this month, the Premier said the following: “I really think we have to wait and see what the politicians who come into the various municipalities, what their positions are. But I would just say that one of the things we need to do in this province is we need to move forward on plans that are already underway.

  7. A critical point to mention is that the LRT is bound to be money-saving anyhow. It mitigates long-term infrastructure costs of (1) road construction (which are huge, but always get a free pass), (2) health-care costs associated with air pollution, noise pollution, ground contamination, and the loss of urban walkability/bikeability brought on by more and larger roads, and (3) hidden externalized environmental costs of many kinds (ranging from effects of suburban sprawl to animal deaths from motor vehicles). It is also vastly cheaper than first building BRT, then retro-fitting a LRT when the city is still more built up. Among many other costs! “Saving” money by canceling the LRT is more or less like “saving” money by burning the furniture for heat in winter. It’s fiscal conservatism for those whose planning horizon and memory can handle about 18 months maximum.

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