Special Report: Light Rail

City at High Risk of Financial Liability if Council Cancels LRT Implementation: Report

If Council cancels the already-approved LRT Plan, local taxpayers are likely on the hook for tens of millions of dollars in money already spent and committed to the project.

By Ryan McGreal
Published April 24, 2017

The agenda for the upcoming City Council meeting on Wednesday, April 26 includes a staff report (item 7.8) on "Cost implications to the City of Hamilton should the Light Rail Transit Project be Discontinued".

At issue here is the $72 million that has already been spent on or committed to the Hamilton LRT project: $16 million spent so far by the City, $15 million spent by Metrolinx, and another $41 million committed by Metrolinx or the City in contracts to third parties.

Hamilton LRT Expenses and Commitments as of February 2017
Spent to Date Remaining Commitments Total
City 2007-2011 $10,785,670 $0 $10,785,670
City Project Implementation $5,139,810 $13,059,500 $18,199,310
Metrolinx $15,103,260 $27,897,500 $43,000,760
Total $31,028,740 $40,957,000 $71,985,740

Metrolinx has proceeded with implementing the LRT plan after Council voted to support implementing it via the following votes:

Council also approved the City entering a contract with transportation planner Steer Davies Gleave to implement the project.

This should not be news to any Councillor. Last October, City Integrity Commissioner George Rust-d'Eye already warned Council that it had committed to implementing LRT and that backing out of the plan would expose the city to legal risk for the money spent and committed.

Contractors Will Seek Lost Profits

The new report notes that Metrolinx has not yet made "a determination on whether it would seek any recovery of LRT expenses," but "it is fair to expect that if the City decided to discontinue the LRT Project, there would be a negotiation between the Province and the City on what discontinuance would cost, if anything, and how the parties would proceed."

With respect to money committed by Metrolinx in contracts, "the contractors would likely seek lost profits and other damages to place the contractors in as good a position as if all contract obligations had been fulfilled." In other words, just because the money has not already been spent, that doesn't mean we won't be on the hook for it.

If Metrolinx or the Province does initiate legal action against the city in order to recover its losses, "the likely financial risk exposure would be limited to monies spent and/or committed, minus any money that could be saved through mitigation measures", for example, redeploying Metrolinx staff dedicated to Hamilton LRT to other projects in order to avoid severance pay.

For those Councillors who claim to be afraid of the unknown operating cost of LRT, despite the fact that we already have a good context for what that cost will be, I hope they will consider the fact that they are risking up to $60 million in wasted spending and legal penalties - more than a decade of gross LRT operating costs!

With files from Nicholas Kevlahan

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.

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By VivSaunders (registered) | Posted April 24, 2017 at 10:19:08

Good article! As an Ontario taxpayer, I would insist on Hamilton restoring the Ontario Moving Forward fund to the same position as before if they back out now. As a Hamilton taxpayer, I would hope Council moves forward on our local LRT project and prevents us from being taxed with nothing to show for it at the end of the day. It appears to me, that even if Metrolinx/Province/Hamilton comes to some sort of compromise or a Plan B , that compromise would include a lower funding commitment to offset the unnecessary millions of dollars spent. (designs, advertising, wages)

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By CharlesBall (registered) | Posted April 24, 2017 at 14:43:25

Sounds like blackmail to me.

Having said that, there is precedent for this of sorts although a firm contract had been executed. The City contracted to build a new City Hall some years ago and lost tens of millions of dollars when powers that be convinced the City to cancel the contract and rebuild the current City Hall farming out offices all over the City instead. We lost tens of millions of dollars on the contract, centralized government and the extra costs of housing the offices in places like the CIBC building and Jackson square to name two.

As I said the city hall building was a firm and executed contract. I would ask a lawyer but I highly doubt Metrolinx or the Province could sue the City unless there is something specifically in the contracts or letter so intent executed to that effect.

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