City treasurer preparing detailed report on financial consequences of setback
As city councillors absorb the news that Ottawa’s LRT launch is delayed yet again, they’re also asking how much the setback is going to cost — and who’s going to pay.
The short answer is, we just don’t know yet. But the final tally will certainly total millions, and it’s not at all clear who’s going to pick up the tab.
During Monday’s finance committee meeting, Coun. Diane Deans asked city treasurer Marian Simulik to prepare a detailed report on the financial consequences of the Rideau Transit Group’s (RTG) failure to meet the Nov. 2 deadline.
That report isn’t expected until the end of the month.
But we’ve been here before: In February, the city announced RTG wouldn’t make the original May 24 deadline to hand the Confederation Line keys over to the city, and three months later Simulik issued a detailed report on the financial impact.
Here, in very broad strokes, is what the latest delay could cost us.
OC Transpo budget blown
One thing we know for sure is that OC Transpo has blown its operational budget for 2018.
The city had budgeted $411.6 million for transit operations in 2018, $5 million less than it actually spent the previous year. But even as early as May, the treasurer reported OC Transpo’s operating costs were expected to increase by $21.9 million.
Those costs rose mainly because OC Transpo was forced to continue bus service it had planned to end when LRT — which is supposed to be cheaper to operate — came online, and thanks to the loss of additional fare revenue from the expected bump in ridership LRT was supposed to bring.
That was all assuming passengers would be riding LRT by the end of November, which is no longer the case.
Transit expenses could reach $20M
From the May numbers, we can extrapolate — ever so generally — the sorts of cost increases we can expect. The original delay was about five months. From that, we can estimate the monthly additional costs from the delay to total about $4.4 million.
The city and RTG haven’t agreed on a new deadline, but at Monday’s meeting we heard that the independent experts advising the city’s rail team believe we could be riding the Confederation Line in February.
If we assume another three months of delay; that could cost OC Transpo $13.2 million in additional operational fees.
Separately, keeping the bus detours going costs a little more than $2 million per month. So that’s another $6 million in costs the city will have to incur.
Then there’s the suggestion that transit fares be frozen instead of increasing by 2.5 per cent on Jan. 1, 2019, as planned. That’s another $250,000 per month.
Add it all up, and taxpayers are staring at a potential bill of $20 million.
Savings to offset some costs
Of course, the city will also earn some money because of the delay.
First, there’s the $1-million penalty RTG will have to pay for missing Nov. 2.
The city is also delaying handing over $262 million in payments it owes to RTG when the job is finally finished, which will delay debt payments. Nor will the city be spending money on maintenance or electricity fees for the light rail system during the delay.
The great unknowns
A number of possible costs remain unknown.
OC Transpo gave 345 bus drivers pink slips at the start of August. They were only expected to work until Dec. 1. Are they available to work an additional three months? Will the city have to pay the drivers a premium to get them to stay on? Amalgamated Transit Union Local 279, which represents OC Transpo drivers, did not return CBC’s requests for an interview.
And now councillors are calling for the restoration of at least some of the 24 bus routes that were changed on Sept. 2 in anticipation of LRT. Changing bus routes is a complex business, and it’s unclear whether OC Transpo will cave to political pressure. But even reinstating a few routes will cost money.
Finally, while the city insists RTG is on the hook for any costs caused by a delay, including the additional $2 million for bus detours, the two sides aren’t always in agreement about where the responsibility for the delay lies.
Case in point: the Rideau sinkhole. Neither RTG nor the city will take responsibility for causing the crater, and just who’ll pay for what is still under discussion.
The final cost of this latest delay to taxpayers may not be tallied for some time.
