Southeast to West LRT Phase 1 Details and Analysis

Recommendation: That the November 1, 2011, Transportation Services report 2011TS7378 be received for information. Report Summary This report provides information regarding the schedule, funding opportunities, governance model and private sector input for the Southeast to West Light Rail Transit Capital Project 11-66-1673 Phase 1 (Centre West LRT Station to Whitemud Drive LRT Station/Park n Ride Lot.) Previous Council/Committee Action At the June 22, 2011, City Council meeting, the following motion was passed: That Administration provide a report to Transportation and Infrastructure Committee, outlining details and analysis on Phase 1 of the Southeast to West LRT Capital Project 11-66-1673 (land acquisition and downtown to Whitemud stage) identifying: - scheduling and funding opportunities - governance model - private sector input Report Project Schedule Preliminary Engineering Funding to cover Preliminary Engineering for the Southeast to West LRT line was approved by City Council

on June 1, 2011, with financing by Municipal Sustainability Initiative in the amount of $39 million. Preliminary Engineering was initiated August 2011. Preliminary Engineering involves developing the project design to a 30% level of detail. During Preliminary Engineering, public consultation enables neighbourhoods and stakeholders along the LRT corridor to have input on the aesthetics and architecture of the system and as much as possible attempt to address their expectations and areas of concern. Administration expects the Preliminary Engineering for Phase 1 and tenderready documents to be completed in spring 2013. If funding is in at that time, the next stage can commence by summer 2013. Procurement of a construction manager or design-build team would take six to ten months, depending on the delivery method selected. Construction can then commence in the spring of 2014, and requires four construction seasons to complete, with completion in 2017. Preliminary Engineering for the remainder of the system (Whitemud Drive to Mill Woods Towne Centre and Centre West Station to Lewis Farms) can be completed by fall of 2013. Preliminary Engineering project schedule, including major milestones and public involvement is provided in Attachment 1. A map showing the proposed construction staging of the Southeast to West LRT is provided in Attachment 2.

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ROUTING Transportation and Infrastructure Committee | DELEGATION R. Boutilier/L. Rosen/W. Mandryk WRITTEN BY N. Alampi | November 1, 2011 Transportation Services 2011TS7378 Page 1 of 4

Southeast to West LRT Phase 1 Details and Analysis Land Acquisition The total cost for land requirements of the Southeast to West LRT based on conceptual planning is $215 million. Of this total $160 million covers the most urgent land purchases for the project including all land requirements for Southeast ($115 million) and Downtown sections ($15 million) and critical land for the West sections ($30 million). During Preliminary Engineering land requirements are being refined. Land opportunity purchases have been temporarily financed through working capital and the land enterprise fund. $36 million of land purchases are being actively pursued at this point. The land acquisition process is the greatest challenge to the project delivery schedule and can take up to two years to complete. Land acquisition continues during Preliminary Engineering. All critical land requirements must be secured prior to the start of construction. To meet the 2017 completion date, funding for land will be required in January 2012. Identifying and funding the critical land requirements during Preliminary Engineering enables the City to meet the construction schedule and provides information for property owners along the LRT line to make decisions. Phase 1 Delivery Method If funding is approved by spring 2013, a delivery method assessment will be conducted. The assessment will include a risk assessment of the project and market review to determine industry capacity and preferences. Examples of delivery methods include Design-Build, Construction Management, Design-Build-Maintain, etc. Opportunities to include financing generate more options such as DesignBuild-Finance, Design-Build-FinanceMaintain, etc. In these scenarios, the City retains control of operations including service standards, frequency of service, fares, security, etc. Funding Alternatives A critical assumption for all financial scenarios is that shared funding from other orders of government is very important. The estimated funding requirement is based on a 2015-2018 construction period. Prices are affected by inflation, changes to the construction schedule and the delivery method. The funding scenarios include the use of debt and the redirection of grant funding. The 10-year Capital Investment Agenda identified decreasing capital funding sources in future Capital Budgets. Identified funding in the 2012-2014 capital period reduces to $2.3 billion and in the 2015-2017 capital period reduces further to approximately $1.5 billion. The currently identified 10-year capital funding is insufficient to meet both identified renewal needs and significant growth projects. Any funding over the construction period requires some use of debt. Scenario 1 (Attachment 3) outlines the funding support based on other orders of government contributing to the construction on an equal cost share basis with the City funding the cost of all land over the two years before construction. Scenario 1 is based on

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Southeast to West LRT Phase 1 Details and Analysis financing 100% of the City share through debt, to be repaid through a property tax increase. The City contribution for the land acquisition would be at 100% for $130 million. The City share of the construction would be approximately $467 million for a total of $597 million. The debt repayment based on a 4.5% cost of capital would have a debt servicing requirement of $40 million each year over a 25 year period. This would require a tax increase in each of five years for a cumulative increase of 4% in 2011 budget dollars. Scenario 2 (Attachment 3) is based on redirecting $50 million a year in grant funding for four years to fund a portion of the Citys share of the project. The balance of the City contribution would be financed through debt to be repaid with corresponding tax increases. The debt repayment would amount to $26.6 million dollars a year over 25 years. This would require a tax increase in each of five years for a cumulative increase of 2.66% increase in 2011 budget dollars. In either scenario repayment could be managed within our debt servicing limits as most debt borrowed has been at a low rate, the borrowing would move the City near the upper end of the MGA debt limits and could put our AA+ credit rating at risk. The following outlines potential and previous other government funding sources. Provincial Funding GreenTRIP To date the Province has committed to $497 million of GreenTRIP to NAIT LRT. The total GreenTRIP available to the capital region is $800 million. The Capital Region Board recommended $732 million of the $800 million be allocated to LRT extension; there is $235 million potentially available. GreenTRIP funding is limited to two-thirds of the eligible project cost. An application to GreenTRIP should be submitted for a funding request for the Southeast to West LRT. Federal Funding Building Canada Fund - $100 million has been committed to NAIT LRT. The federal government has made other commitments to LRT across Canada including Vancouver, Toronto and Ottawa, so there is potential for LRT grant funding from the federal government. P3 Funding The federal government has funding available for P3 initiatives. The total funding available for all Canadian projects is $1.2 billion over a number of years with project eligibility restricted to projects exceeding $30 million with a maximum contribution of 25%. A P3 delivery model could be used for the Light Rail Vehicle maintenance facility. The contractor could maintain the facility while the City would use it for Light Rail Vehicle maintenance activities. A P3 model should not be used for portions of the main LRT line. A P3 model should be used only if it is for the entire main line (track, stations and electrical systems), along with the maintenance facility and the Light Rail Vehicle. Separating the main line or portions of the main line, into a separate

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Southeast to West LRT Phase 1 Details and Analysis P3 contract would create high-levels of risk and inefficiency associated with construction scheduling and integration. Governance Model Currently Council and Transportation and Infrastructure Committee make all decisions respecting LRT in Edmonton and receive advice from City staff. An alternate method of governance is to create a Council Committee by bylaw, as more specifically outlined in the November 1, 2011, Transportation Services report 2011TD9324, LRT Construction Governance Board. Private Sector Input Preliminary Engineering Phase Preliminary Engineering assignment incorporates third party private sector input into the engineering. Risk Assessment and value engineering workshops will include both local contractors and international LRT operators to ensure that considerations from all aspects of the project lifecycle are factored into the design. Constructability workshops will also be conducted as part of Preliminary Engineering. North American LRT contractors are asked to review engineering designs and proposed construction and methodologies to ensure the designs are feasible. Detailed Design and Construction Phases An experienced LRT contractor will be fully involved during the next phase of project delivery. As part of a Design-Build or P3 delivery model, the City would hire a contractor to manage both the detailed design and construction of the project. Therefore, the designer would report to the contractor. As part of a Construction Management delivery method, the City would hire a designer and a contractor concurrently under separate contracts. Both the designer and contractor would report to the City, and would collaborate during the overlapping design and construction phases. Corporate Outcomes Citizens use Public Transit and Active Modes of Transportation Edmonton has sustainable infrastructure that fosters and supports civic and community needs.

Budget/Financial Implications Administration prepared a capital profile for this project which was submitted as unfunded and is included in the Capital Investment Agenda and 2012 - 2014 Capital Budget Process for review and discussion by Council. Attachments 1. SE/W LRT Preliminary Engineering Schedule 2. SE/W LRT Construction Staging Map 3. SE/W LRT Funding Options Others Reviewing this Report L. Rosen, Chief Financial Officer and Treasurer, Financial Services D.H. Edey, General Manager, Corporate Services

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