The portion of the Auditor General’s report dealing with the cancellation of Hamilton’s LRT project paints a picture of poor communication and outright concealment of key information between the Ministry of Transportation and Metrolinx- the transit agency supposedly reporting to the Ministry as well as Hamilton. Particularly in 2018 and 2019 after the Ford Government was elected, there were times when Metrolinx was moving forward with the Hamilton LRT project as if nothing was amiss while the Ministry was taking the steps that ended up killing the project. In addition Hamilton Council was kept completely in the dark about important financial information as it voted to allow the project to proceed.
Government knew LRT cost had tripled by 2016
The Wynne government announced in 2015 it was allocating $1 Billion towards LRT in Hamilton, but by the end of 2016 the government already knew the costs had increased significantly and accordingly Treasury Board upped the allocation to just under $3 Billion. Then in March 2018, three months before the election, the budget was increased again to $3.6 Billion. According to the AG, the more than tripling of the cost of the project was not shared with Hamilton council, meaning all the votes that Hamilton Council took on LRT between 2015 and 2019 were based on the assumption that the cost of the project was still $1 Billion and 100 percent of that cost would be borne by the province.
Government knew in 2016 the Operating and Maintenance costs were between $27 and $32 Million per year
One of the key issues for members of Hamilton City Council was the cost of operating and maintaining the LRT system. It was understood that the O&M cost would be borne by Hamilton, and several councillors saw the finalization of the O&M agreement as council’s final opportunity to vote the project down. According to the Auditor General that cost was known to the government as early as December 2016. The cost in 2016 was $823 Million over 30 years which would work out to more than $27 Million per year to Hamilton taxpayers. When the LRT route was extended to Eastgate Square, the Operating and Maintenance number rose to $950 Million or just under $32 Million a year. Again, that meant that council’s actions from 2016 on, including the critical showdown meeting in April 2017 that saw dozens of speakers for and against LRT, were taken without that critical knowledge of the operating and maintenance cost.
Decision made to ask Hamilton to pay a share, but not acted on
In may of 2019, Infrastructure Ontario, who were in charge of the RFP process, at that point decided to get its own cost estimate for the project and hired a consultant. In October the consultant came back which the shocking news that the cost was escalated to $5.5 Billion. In August of 2019 the Ministry of Transportation, alarmed at the escalating cost of the project, proposed that the Treasury Board agree to either cancelling the LRT project altogether and allowing the $1 Billion to be spent on other transit projects; or to tell Hamilton it would have to come up with a share of the costs in order to qualify for a cost sharing agreement that would trigger federal contributions—essentially the same three-way agreement that had already supported LRT in Ottawa and Kitchener. Treasury board approved the three-way cost-sharing proposal, but it appears such a proposal was not presented to council. So council was still in the dark at that point that the costs had escalated beyond $1 Billion and that the province was thinking of asking Hamilton to pony up for the project. By the end of November, the Ministry concluded that there was no point negotiating with Hamilton about cost sharing, given the ballooning price, and asked Treasury Board to agree to the cancellation of the project—which was immediately agreed to.
Potential Bidders started to bail
At the same time, potential bidders on the Hamilton LRT were getting antsy about the entire project. The three short-listed potential bidders were staring to get worried about the level of commitment to the project from both Hamilton and the Province. One of the short- listed consortia included construction giant Ellis-Don, who in May 2019 had dropped out of the consortium. Then a month later a second bid group, CityLine requested that a break fee be provided which would reimburse bidders for their costs should the project fall apart. CityLine said it would not proceed further in the process unless the fees were approved. Around this time Hamilton Council had asked Metrolinx CEO Phil Verster to come to Hamilton to fully explain exactly how the LRT funding formula would work. The Deputy Minister of Transportation responded, “I would recommend that this invitation be politely declined.” By November the procurement process had collapsed with two of the three short-listed consortia dropping out, apparently unaware that a decision to cancel had already been made.
Did anybody in Hamilton know?
The report says that while approval was given for Metrolinx to start negotiating with Hamilton about the city paying a share of the LRT cost in August of 2019 and again in October there is no record of whether those negotiations actually took place and if so, with whom. Similarly as the costs of the project were known to have escalated as far back as 2016, there is no mention in the report of whether any of this information was shared with anyone at the city, even though a representative from Metrolinx was relocated to Hamilton and working with city staff as well as regularly appearing before council during the 2017-2019 time period.
In the first week of December Caroline Mulroney’s staff, Infrastructure Ontario and Metrolinx huddled to prepare a communication strategy for the Hamilton cancellation. On December 12 the province informed the Mayor about the new $5.5 Billion price tag, and four days later Minister Mulroney came to Hamilton to formally announce the cancellation of the Hamilton LRT project.
Bay Observer Publisher John Best and CHML’s Bill Kelly discussed the AG report: