Premier Danielle Smith recently announced a bold new vision for regional passenger rail in Alberta.
The premier and Transportation Minister Devin Dreeshen said they are looking to advance projects that will connect airports and communities around Edmonton and Calgary to their downtowns. In Calgary, these regional rail networks — including connecting the airport, downtown and Banff, as well as Airdrie to Okotoks — could meet at a “Grand Central Station” in the Rivers District of downtown Calgary.
In the future, these new regional rail networks could be connected to a high-speed rail system from Edmonton to Calgary when the province’s population is large enough to economically support it. The province is conducting a study to investigate the viability of various routes and the attractiveness of three private-sector rail proposals received to date.
Unfortunately, government directly leading rail projects typically leads to horrendous results. Less than three weeks later, Dreeshen announced the province’s position on the City of Calgary’s existing rail project, the repeatedly overbudget Green Line. The province, Dreeshen said, is not prepared to fund any further budget cost increases and that existing funding is conditional on the Green Line integrating with the contemplated central station, to be located on provincially owned land in the Rivers District.
The province has good reason to finally say enough is enough given the Green Line’s disastrous cost management. The Green Line has already spent $1.5 billion of its $5.5-billion budget — before breaking ground on actual construction. More than $1 billion has been spent on consultants with “no skin in the game” who are more than happy to charge for investigating the city’s suggested design alternatives regardless of their practical merit.
With its regional rail initiative, the province has the opportunity to avoid the Green Line’s mistakes by dumping its big-government, consultant-led planning model and replacing it with a small-government, private-sector-led delivery model, which, as a first step, can be used for development of the Calgary airport to downtown connection, and the central station, which will provide several benefits.
First, a private-sector delivery model will reduce costs to taxpayers and transfer the development and operational risk to a public-private partnership. The province has received a proposal from my firm, Liricon Capital, and our partner, Plenary Americas, as proponents of the Calgary Airport Banff Rail (CABR) project, which would be developed from the outset by the private sector at its own risk. CABR’s public-private partnership will finance its $2.6-billion capital cost 50 per cent by Canada Infrastructure Bank (CIB) and 50 per cent by the private sector, and not only assume development and construction risk but ongoing revenue and operational risk.
Similarly, the central station could also be developed with risk capital from CIB, in stark contrast to the Government of Alberta stepping in to finance a station without any certainty of the future rail service to be provided.
Importantly, CABR, in the near term, can anchor the potential central station, providing critical integration with the adjacent private-sector owners and a clear line of sight to a real train service. Without this certainty, there is a real risk that the private-sector property owners will proceed with current development plans, which will preclude a central station. A near-term rail project connecting the airport to downtown and Banff with a stop in the Rivers District will also provide the expanded tourism market hotel developers need to advance projects adjacent to the newly expanded BMO Centre.
Second, a private-sector delivery model will reduce development time — in CABR’s case, years ahead of any government-led project, since CABR already has eight years of studies and a detailed memorandum of understanding with CPKC Rail, in whose corridor the system would be built. With a targeted construction date of 2027 and completion in 2029, CABR can be built and operational before the Green Line’s expected in-service date beyond 2030.
Third, a private-sector delivery model for the airport-to-downtown connection will increase available funding for the city to complete the Green Line. CABR has proposed to extend its service four kilometres east of the airport to replace the city’s planned Airport Transit Line — which would connect the Blue Line to the airport — saving the city $750 million, which could be reallocated to the Green Line.
Should this private sector delivery model be of interest to the province, the urgency to advance the Green Line, secure the central station site and lock up CIB funding will require that the private-sector rail proposals be evaluated in parallel with the Rail Master Plan Study.
CIB will not survive if the Conservatives win the federal election next year. To secure that funding, the province must advance a project development agreement by fall 2024 or CABR will be terminated. This still preserves the province’s flexibility on delivery models to reach a final investment decision at a later date. The ability to leverage private-sector investment, including the essential support of CIB, can easily be lost through delay and a big-government, consultant-led approach.
Lastly, the province’s new position on the Green Line increases the priority of advancing a private-sector proposal in the near term, which requires a change to the year-old terms of reference of the province’s and city’s Airport Rail Connection Study, which must now focus on economically viable route alternatives that can be advanced in the near term.
Einstein said the definition of insanity is doing the same thing over and over again and expecting a different result.
The province can avoid repeating the insanity of the Green Line’s cost management by switching from a delivery model that is big-government, consultant-led to a small-government, private-sector-led model for regional passenger rail.
Jan Waterous is managing partner at Liricon Capital.