Improve Financial Management at City Hall

Everyone expects and deserves that their tax dollars are being spent wisely and prudently to get maximum benefit for each dollar sent to City Hall. Financial management must be seen to be at the heart of every decision made by Calgary City Council. Poor management comes in many shapes and sizes – the largest relating to poor long term planning and oversight. To maximize benefit we must engage in effective planning and ensure oversight is complete and extensive.

Green Line LRT Project – an example

In two years, the proposed 46 km, 28 station Green Line LRT serving the far southeast to the far north of Calgary has been truncated to run 20 kms with 14 stations – ending at 16th Ave N and Shepard in the south. The busiest transit corridor in all of Calgary (Centre St North) has been lopped off and South Campus – one of the biggest drivers of car traffic in the SE, has been ignored.

This could have been avoided with better oversight and long term planning:

  1. Council failed to plan for the long term. Back in 2006 (including Ward 7 incumbent), decided to run the northern leg of the Green Line up Nose Creek and not service the inner city communities of Ward 7. That decision prevented any planning along Centre Street, including set backs for new developments that have since been built, or the purchase of properties along the route that may be required.
  2. Key costs ignored: Council did not take into account interest costs to finance its $1.5B portion of the project over 30 years.
  3. Most expensive options chosen: 4 k tunnel that includes tunnelling under Bow River, is more expensive by a factor of 3, it also prevents placing a station in Crescent Heights.

“As we know, council’s design decisions on this have not tended toward the cheaper design,” Nenshi said.

Description: Between July 2015 and the Q1 2017, the Green Line LRT project was described as a $4.5-$5 billion capital project to deliver a 46 km, 28 station LRT from 160 Avenue N to Seton. In May 2017, Council, on the basis of City Transportation staff recommendations (2) approved (3) a “Stage 1” plan based on a Class 3 capital estimate of $4.65 Billion, at a much reduced, 20 km track -14 station scope. Transportation staff explained the change in scope as the result of public engagement, a full analysis of land requirements, and the recommendation for underground stations in the Centre City.

Issue: In approving the staged approach, the only significant risk mitigated seems to be (2) the land acquisition costs involved in the 26km of LRT track deferred from the original 2015 proposal. Given that the current Class 3 capital cost is considered a “Preliminary” estimate with a -30% to +50% cost range at a 10-40% definition level, this exposes the City taxpayers to significant remaining risk, given that the stage 1 plan includes an ambitious number of “firsts”, including a 4 km city centre tunnel and 8 bridges.

Analysis: In the July 2015 transportation planning audit (1) , the Green Line program was one of three projects audited for procedure, criteria, integrity of data and communication to Council in the prioritization of transportation projects. The audit found “missing elements for an effective prioritization process” and recommended four major changes, namely:

  1. Create a portfolio management plan for projects.
  2. Requires a cost-benefit analysis to support value for money
  3. Prioritization should include operating cost and GHG criteria.
  4. Prioritization criteria for cost-benefit analysis should be quantitative not qualitative.

Conclusion: It is clear that politicians at all three levels (municipal, provincial and federal) have made rash “infrastructure” and “sustainability” investments to counter economic hard times in the run up to re-election (e.g. the July 2015 Conservative Federal announcement less than a month before issuing the federal election writ) The result, in combination with a failure by city council to have a workable long term plan, heed audit findings of process shortcomings in communication, cost-benefit and portfolio management of transportation projects significantly increases the risk of the council running into time and cost over-runs, particularly given the size and complexity of even the current Stage 1 project. Both Federal and Provincial levels of government have committed to contributions of $1.53 billion, leaving City of Calgary to fund the remaining $1.5 billion. But it is not clear who will pick up any cost overrun but it is almost certainly the City (funding and financing scenarios have been deemed confidential (3)).

In Ward 7 council election, the Green Line issue demonstrates the vital need for comprehensive financial management at City council that will face increased risk of not meeting its financial and delivery promises for this major infrastructure project. As Ward 7 candidates, only Brent Alexander has the work, community and life experience to improve management of major projects and provide transparency when making investment decisions under pressure. Ward 7 needs someone who understands the need for continued infrastructure investment yet concerned about managing your tax dollars wisely – particularly in this economically challenging time.

References:

  1. City of Calgary Auditor’s Office, AC2015-0561 “Transportation Planning Audit Project Prioritization, July 8, 2015.
  2. Transportation Report, C2017-0467 to Strategic Meeting of Council, May 15 2017,
  3. http://agendaminutes.calgary.ca/sirepub/mtgviewer.aspx?meetid=2241&doctype=MINUTES
  4. Calgary Sun Green Line Debt Servicing Costs

Background:

Fast facts about “Stage 1”:

§ 20 km of LRT track

§ 14 stations

§ 4 tunnels including the 4 km Centre City tunnel from 20 Avenue N to Macleod Trail

§ 1 km of elevated track between Inglewood/Ramsay to 26 Avenue stations

§ 8 bridges

§ 3 park and ride facilities with a total of 1800 – 1900 stalls

§ 1 light rail vehicle (LRV) Maintenance and Storage Facility

§ 70 low floor vehicles

§ $4.65 billion capital construction cost

  • Stage 1 is projected to begin construction in 2020, pending approvals and funding, and is anticipated to open in 2026.

Transportation Planning Audit Project Prioritization July 8, 2015 (1)

In the Municipal Development Plan (MDP), City has set long-term goals for transportation including a 10-year capital plan (Investing in Mobility, IIM)

In the July 2015 audit, the Green Line program was one of three projects audited for prioritization process – procedures, criteria, integrity of date and communication to Council. It “found missing elements of an effective prioritization process”.