Largest project in Calgary's history under threat from provincial changes, says Nenshi
New rules in Bill 20 allow province to pull funding without cause, surprising city
Calgary Mayor Naheed Nenshi says city staffers have so far been unable to find a single contract with the Alberta government that allows the province to unilaterally torpedo the deal without cause.
That's in stark contrast to the assertions of Alberta Transportation Minister Ric McIver after Premier Jason Kenney's United Conservative Party government inserted just such a clause into Calgary's Green Line LRT funding agreement with the city.
Bill 20, an omnibus bill introduced by the UCP on Monday, would let the Alberta government pull a promised $1.53-billion grant for the Green Line with just 90 days' notice and without cause.
The provisions were included in Bill 20, an omnibus bill introduced by Finance Minister Travis Toews on Monday.
- Bill 20 would let province pull Calgary's Green Line LRT money without cause
- Alberta government plans sweeping changes through 2 omnibus bills
What's more, the province didn't notify the City of Calgary — or the City of Edmonton, whose Valley Line LRT is also affected — about the changes.
"I've been unable to find any City of Calgary contract that includes that language," said Nenshi.
"People are still looking. If it's standard, we didn't know about that. But the more important thing is it's not a standard project, it's the largest public works project in the history of Alberta and, as such, you can't use boilerplate language. You've got to figure out how to do this by reducing risk and maximizing value across the board."
A city spokesperson said funding agreements with the province are negotiated on a project-by-project basis.
The former NDP government had pledged a total of $1.53 billion toward the project in a signed agreement, matching amounts committed by the federal government and the city. The federal funding is contingent on matching the contributions of the other two levels of government.
Minister defends termination clause
The current UCP government has agreed to still provide about $1.5 billion to the Green Line, but also altered when it would provide the funds. It slashed its contribution over the next four years by 86 per cent in the recent budget and promised money would flow after 2022-23.
McIver, a former Calgary councillor, said termination clauses are standard in government contracts. He pointed to examples on Wednesday, none of which were an apples-to-apples comparison with the Green Line agreement. None were between the orders of government, and all but one required cause for termination.
McIver defended the clause and said the Green Line agreement allows the federal government, which is also pitching in $1.5 billion, to terminate its side of the deal — but that clause kicks in only if the city defaults on its end of the contract.
A department staffer explained that the two levels of government have different approaches but same intent.
"The agreement with Canada enables them to terminate based on default, Alberta's agreement allows the Lieutenant Governor in Council to terminate the agreement. The mechanisms are different because we're different governments, but the intent to allow either party to terminate the agreement is the same," said Alberta Transportation spokesperson Brooklyn Elhard.
No consultation
Questions about why the province did not notify or consult with the cities prior to making the changes through legislation were ignored.
"The changes were made as part of Budget 2019 and therefore appear in Budget 2019," was the only response from Elhard.
McIver, however, has also said he fully supports the Green Line and wants to see it built.
"I've personally advocated for the Green Line for 20 years and campaigned on it when I first ran for city council in 1998," he said on Twitter.
"My constituents want the LRT, they expect me to help get it built and I intend to do so."
Green Line under threat
Nenshi said the termination poses a serious threat to the massive transit project, particularly because it's being built as a public-private partnership.
"We're looking at what's called a design-build-finance. That means that the private sector partner puts up the money and gets reimbursed," he said.
"So if you have a clause that says with 90 days' notice, we can not reimburse you, who's going to bid on that contract? And if they do bid on that contract, what kind of risk premium are they going to charge to make sure they get their money back?"
Nenshi said Bill 20, which added the clause, makes it "almost impossible, if not impossible" to follow that model.
The mayor also said the change in funding timelines from the province will require the federal government to be more flexible in the way it delivers its share of the money, otherwise the city won't be able to proceed with the project.
When asked if the city would start construction without that flexibility, Nenshi said no.
"I wouldn't. I think that's too much interest, it's too much borrowing," he said.
A spokesperson for the federal government said it remains "fully committed" to the Green Line and will work collaboratively with the city and the province to finish the project.
"We are monitoring the situation closely and await further clarity. We remain committed to providing federal support to this project," when asked about the recent changes introduced by the province.
With files from Scott Dippel and Kim Trynacity