Bridge costs escalate

Thursday, July 27th, 2006

Bridge will make $3.6 billion in ‘user benefits’ over its 35-year building, operating period: report

William Boei

Rachel Davis The TransLink report says the bridge will see more than 20 million vehicle crossings per year by 2012.

The $800-million Golden Ears Bridge will cost TransLink more than $1.1 billion by the time it is paid off in 2041.

However, the report concedes the bridge is a good deal because TransLink will collect more in tolls during the life of its 35-year contract than it pays the private operator.

TransLink staff calculated that as a public-private partnership, or P3, the project has a razor-thin financial advantage over a completely public project, and project director Fred Cummings said Wednesday that’s a conservative estimate.

NDP transportation critic David Chudnovsky was skeptical, saying that governments can always borrow money more cheaply than the private sector and that makes P3s more expensive.

The report says the bridge will generate $3.6 billion in “user benefits” over its 35-year construction and operating period.

The toll bridge, being built east of Barnston Island, will connect Surrey and Langley on the south side of the Fraser River to Pitt Meadows and Maple Ridge in the north. It is expected to spur development on both sides, cut driving times across the river and help ease the load on the congested Port Mann Bridge.

It is scheduled to open by the end of June 2009.

TransLink will collect the tolls on the bridge and make monthly payments to the operator to cover capital costs, interest, operating expenses and maintenance. The payments kick in when the bridge opens and will continue for 32 years.

TransLink will pay $1.126 billion over the life of the contract, the report says, but it will collect $1.229 billion, most of it in tolls and the rest from about $50 million a year it now pays to subsidize the Albion Ferry, which will be closed when the bridge opens.

“In . . . value terms, projected revenues exceed the costs by $103.3 million,” the report says.

Without the subsidy from TransLink — $160 million over 32 years — costs would exceed revenue by about $57 million.

Staff calculated that if TransLink built the bridge as a public project, revenue would exceed costs by between $92.6 million and $97 million, depending on the timing of the project.

Cummings said that probably understates the P3 advantage because construction inflation for a public project was estimated at six per cent a year, and actual construction costs will likely increase faster than that.

With a P3, the report says, TransLink is insulated from B.C.’s “overheated construction market” because the contract makes the operator responsible for construction costs.

“The value of obtaining a fixed-price, cost-certain contract in this market cannot be overstated,” the report says.

TransLink is directly financing $216 million in project costs such as property acquisition, planning and municipal road improvements. That is partly offset by a $50-million “licensing fee” paid by the contractor.

The rest is being financed by the operator through insurance companies, and the report says that arrangement has earned the project a triple-A credit rating, while as a stand-alone project it would be rated BBB. That resulted in attractive borrowing terms, it says.

But Chudnovsky insisted governments can always borrow more cheaply than private companies.

“Governments get those loans at the best possible rate, and when you talk about 800 million or a billion dollars, a difference of one or two per cent is tens of millions of dollars, which taxpayers have to pay,” he said.

“I continue to be skeptical about that.”

The private contractor is the Golden Crossing General Partnership, led by a Canadian subsidiary of the Bilfinger Berger Group, a German company that builds and operates major projects around the world.

Chudnovsky warned that the project could run into problems with toll rates. He said Toronto thought it had iron-clad guarantees that tolls on its privately operated Highway 407 would not increase, but the operator went to court and won a ruling that “it is the private procurer and not the government which controls the level of the tolls, no matter what was promised at the time of the deal.”

TransLink’s monthly payments will be ramped up from $500,000 per month when the bridge opens to nearly $4.8 million a month after July 2015. The low early payments allow time for traffic — and toll revenue — to generate.

Chudnovsky said that opens a possible conflict between the operator and public interest, because the more cars that use the bridge, the higher the revenue will be.

“The private procurer wants lots of cars to go across the bridge,” Chudnovsky said. “We as citizens probably want fewer and fewer cars to go across the bridge because the cars create pollution, global warming, congestion, all kinds of stuff.

“So there is a tension between public policy goals and the private goals of the company.”

The TransLink report says the bridge will see more than 20 million vehicle crossings per year by 2012. It says travel distances for bridge users will be reduced by an average of 12 kilometres, and trip times by 20 to 30 minutes.

Staff valued travel time savings over the term of the contract at $1.6 billion, vehicle operating cost savings at $1.4 billion and safety benefits at $600,000 for total user benefits of $3.6 billion.

The report predicts that by 2021, the bridge will “induce” the establishment of 735 new businesses on both sides of the river, construction of more than 7,000 new housing units, population increases of nearly 22,000, significantly more commercial floor space and property tax revenue hikes of more than $20 million.


Because of inflation, the tolls drivers will pay for crossing the Golden Ears Bridge are already slated to increase, even before it opens.

TransLink set the toll for automobiles at $2.50 per crossing, double that amount for small trucks, triple for large trucks and half for motorcycles.

By the time the bridge opens in 2009, TransLink expects the tolls to be:

Automobiles: $2.85

Small trucks: $5.70

Large trucks: $8.55

Motorcycles: $1.43

© The Vancouver Sun 2006

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