Private sector ‘ingenuity’ cuts transitway bill by $120M

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This article was published 27/06/2016 (2851 days ago), so information in it may no longer be current.

The cost to complete the southwest transitway corridor will be reduced by $120 million.

That’s the staggering dollar amount councillors were told during a closed-door briefing Tuesday morning.

Coun. Jeff Browaty said the $120 million doesn’t include the $69 million set aside for a contingency fund for the project, which now looks like it won’t be needed.

The city issued a news release stating the project price tag is now $467.3 million, down from the $587.3 million since Ottawa and the province agreed to finance the project.

“Obviously, this is how a P3 (public-private partnership) project can work positively,” Browaty said as he left the closed-door meeting. “Our engineers had some rough ideas as to how much things were going to cost. By allowing the ingenuity of the private sector, they found all sort of savings that will provide a better product to the public and deliver significant cost-savings to the taxpayers.”

City officials had estimated the combined transitway-Pembina underpass project at $587.3 million — with the corridor cost at $407.8 million; the underpass at $72.5 million; related drainage work along the corridor at $39.8 million; and the contingency fund to cover unanticipated costs at $67.2 million.

Taking the savings and the contingency fund out of the equation, the new cost of the project could come in as low as $400.1 million.

But officials at city hall were sticking with the $467.3 figure as the cost for the project.

Both Mayor Brian Bowman and Transit director Dave Wardrop used the same “stars have aligned” phrase to describe how the total savings were achieved: In addition to the design changes, the contract bids came in much lower than expected as a result of the downturn in the economy, especially in hard-hit Alberta; and the construction consortium was able to lower its cost with lower interest rates.

“The stars have aligned on this project, with innovations, with interest rates, with market conditions,” Bowman said. “There’s a demand for work and we’re able to provide a large project.”

Wardrop said the new design for the transitway and accompanying active transportation (pedestrian/cycling) path will be made public during an open house sometime in mid-July.

As a P3 project, Plenary Roads Winnipeg is doing the final design of the project, will oversee its construction, and be responsible for maintaining the corridor and the adjoining active transportation (AT) corridor for a 30-year period, from the completion of construction in 2019 to 2049. At that point, maintenance of the corridor will be turned over to the city.

Wardrop said there were three main design changes to the corridor that resulted in the bulk of the savings: the elimination of an active transportation (AT) tunnel through the new Jubilee overpass; replacing the transitway tunnel at the Letellier crossing with an overpass; and, eliminating the need to relocate the CN Rail Letellier line as it crosses Bishop Grandin to make room for an active transportation bridge.

Wardrop said the project will no longer be required to relocate the rail line at Bishop Grandin, explaining that the either the AT path will share the transitway corridor at that point, or a new AT bridge will be constructed west of the rail line.

“The stars have really aligned for us,” Wardrop said. “Overall, it’s really come together to provide us with a tremendous value and a tremendous opportunity.”

Bowman said the city’s responsibility going forward is to ensure the project stay on budget.

Construction is expected to start later in July.

Wardrop said the savings will mean city will be able to restore the contingency fund back to its original $69.4 million amount, which will be used to cover any cost over-runs.

Bowman said the city won’t completely benefit from the $120-million savings, adding it will be shared with the province and Ottawa, who are also contributing to the project cost. However, Bowman said it will also mean the city’s annual debt payments will be reduced.

Originally, both city hall and the province were contributing $225 million each to the project, with Ottawa adding $137.3 million.

The city planned to borrow its entire $225 million share, which meant annual financing costs of about $20 million for 30 years beginning in 2020.

Council approved a financing plan that included raising property taxes to cover the transitway finances.

Public works chairwoman Janice Lukes said she hopes the savings will mean the city’s borrowing costs will be reduced and this in turn will mean council won’t have to raises taxes as much as had been planned.

Wardrop said he expects the saving’ to the city will amount to about $35 million.

Bowman said the city’s priority going forward is to ensure the project is properly monitored and keep the costs under control.

The $120-million saving is a dramatic turnaround from the unexpected $20.4 million cost the city had to pay to purchase corridor property from Manitoba Hydro earlier this month.

Bowman would not speculate what impact the savings will have on the city’s ability to complete future rapid transit corridors, but he said planning is continuing on the eastern corridor route to Transcona.

aldo.santin@freepress.mb.ca

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