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ALBER'I'A
I'RANSPOR'I'AIICIN

O^ue of the Aliiiishr

Deputy Goverumem House l.euder
ML/i, Ciilgiiiy-Hufs

December 14, 2020

Don Fairbairn
Chair, Calgary Green Line Board
c/o The City of Calgary
P.O. Box 2100, Station M
Calgary, AB T2P 2M5

Dear Mr. Fairbairn

The Province has completed its Review of the Calgary Green Line project.

As you know, I communicated the results of the Review to Mayor NenshI In a letter
dated October 9, 2020, which I have attached as an appendix. In the October 9 letter I
indicated that Alberta Transportation officials will work with the City and the Green Line
Board to ensure the Province's concerns are fully understood. I understand that meet
ings between Alberta Transportation and the project team began almost immediately
and have continued weekly since that time. I also understand that the province commu
nicated our concerns in detail to the project team, including a direct explanation from the
external consultant and author of the Review, who discussed its contents in detail.

Supplementary to these regular meetings, 1 am providing this letter to relay the con
cerns identified in the Review in writing. None of what i am about to outline should be
new information, as department officials have been candid with the city to outline what
was raised in the Review. I understand the city is working diligently to respond to these
issues, and we appreciate their efforts. The province has condensed the concerns and
recommendations outlined by the external consultant into a summary document, which I
have attached as an appendix. As well, the province is in the process of solidifying a
project expert to work on our behalf to mitigate the issues identified in the Review and
any other concerns that may arise over the course of the Green Line project.

Review Scope and Context

As you know, the Green Line project is split into various stages, and within each stage
there are multiple segments. Stage 1 was approved by Calgary City Council on June
15, 2020, and is comprised of segments 1,2a, and 2b. Segment 1 travels from Shepard
in SE Calgary to Ramsay/Inglewood, segment 2a from Ramsay/Inglewood to Eau
Claire, and segment 2b from Eau Claire to 16"^ Avenue NW, including a bridge over the

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Bow River. At this time, I understand that segments 2a and 2b are still undergoing plan
ning studies and detailed design has not concluded.

The project has undergone several significant changes in scope and cost since it was
first announced, including the latest version of the project, which was only revealed in
the weeks prior to City Council’s vote, and which the province had not had an oppor
tunity to analyze in detail. Following Council’s approval of stage 1, the province an
nounced that we intended to take the time necessary to complete a thorough and in
formed analysis of the benefits and risks of the latest version of the project, before obli
gations are incurred by the province, to ensure that taxpayers are protected.

The Review highlighted a number of concerns about risk and certainty of the project as
it is currently designed, and the province has asked the city to respond to the issues di
rectly.

Concerns

The primary conclusion of the Review is that the Green Line project is at a high risk of
running severely over budget, for three key reasons:(1) the full scope and nature of
costs, including contingencies, are underestimated;(2)the city’s approach to procure
ment means that the extent of potential cost overruns will not be known until some con
tracts have already been awarded; and,(3) decisions on timing are driven by political
considerations, not technical or commercial concerns. There are additional considera
tions regarding project governance and funding that I will outline below.

First, when compared to similar LRT projects It is apparent that the city has underesti
mated cost contingencies by a significant margin. This is compounded by the fact that
segments 2a and 2b have not been fully designed. We are also aware that the city has
already spent several hundred million dollars on the Green Line project, but different of
ficials have received different amounts. It is necessary that the city complete a revised
and more accurate cost estimate, as well as a full accounting of money already spent
before the project can proceed.

Second, the financial, commercial and technical risks of the Project are significantly in
creased by launching procurement of vehicles and segment 1 before the full costs, risks
and schedule of the proposed segments 2a and 2b are known. The Review concluded,
in discussion with the city’s own Project Team, that there is a very real likelihood that
the current project budget is not sufficient to achieve the full scope of stage 1 (segments
1,2a and 2b) of the project. However, the city’s phased approach to procurement
means that affordability challenges will not be known until some contracts have already
been awarded. Put simply, a third of the LRT could be under construction before it be
comes apparent that Calgary cannot afford to build the rest. This is a significant problem
given that segment 1 is not itself a functional transit line; it terminates in Ramsay/Ingle
wood, at least 2 kilometres from the nearest existing LRT station and approximately 2.5
kilometres from downtown. It is a line to nowhere. It is not a prudent use of taxpayer dol
lars to construct a transit line to nowhere at any time, least of all in the midst of an oil

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price collapse and pandemic recession. It is a similarly impractical plan to procure seg
ment 1 while the riskiest and most costly segments (2a and 2b) are still undergoing de
tailed design and the costs are not understood. The city needs to reassess its procure
ment strategy in two ways;(1) it cannot launch procurement on one segment while the
costs for the other segments remain fluid and unknown, and (2) it cannot launch pro
curement on a line to nowhere if, in the city’s own estimation, there is not enough fund
ing to connect the line to nowhere to the rest of the LRT system. The province does not
approve of the existing procurement strategy and will not approve funding for a line to
nowhere.

Third, the Review found that project timelines are not being driven by commercial or fi
nancial considerations, but by arbitrary deadlines and politically motivated concerns. It
is unacceptable that a project worth several billion taxpayer dollars be driven by political
considerations at the expense of a functional or financially sound project. The city must
revise the schedule and procurement strategy based on the practical reality of con
structing a major transit project.

Given the issues described above, the procurement processes underway for the light
rail vehicles and segment 1 are premature. We alerted the city to this possibility in the
letter from the Deputy Minister of Transportation on August 13, 2020. The city ignored
this warning and decided to launch segment 1 procurement anyways. The city’s deci
sion will lead to commercial and reputational consequences which were unnecessary to
incur in the first place had the city taken the Review seriously.

Financial Considerations

We recognize that the conclusions of the Review may have implications for our federal
funding partner. We have already requested, prior to the Review, the front loading of
federal funding to reduce city borrowing costs. Following the Review, we verbally in
formed the federal government on the required flexibility to extend the construction end
date and this request was formalized in a letter from the province to the federal govern
ment on November 4, 2020. This approach would reduce the schedule pressure and as
sociated risks. I understand that officials in Alberta Transportation communicated the
sending of the letter to the Project Team, mitigating the risk of leaving the federal contri
bution on the table. To that end, I am unclear why no one has informed the Mayor that
we have actively engaged the federal government on funding, given that he expressed
concerns in a letter dated December 3''^ to Minister Toews.

We believe it is important that the province and the city agree and implement a coordi
nated approach to maximizing the federal support available for the Green Line project,
which may include the potential for financing support from the Canada Infrastructure
Bank. Sending conflicting messages to our federal funding partner is not productive.

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Governance

The province welcomes the opportunity for both provincial input on the representation
and make-up of the Green Line Project Board and the invitation to establish a joint tech
nical working group that includes members of the Green Line Program Team and mem
bers of Alberta Transportation working on the Green Line review.

With respect to the project board, we understand it is intended to be collaborative and

consensus-driven in nature. As such, the province will accept no liability for the actions
or recommendation of the Project Board. For your awareness, Boyden, the executive
search firm responsible for identifying candidates for the Project Board, has been in
touch with my office to share names of potential candidates and we have been working
with the firm without delay.

With respect to the joint technical working group, the province is currently considering
how to best structure provincial representation on this working group, to undertake this
collaborative on-going role. The outcomes and decisions from the joint technical work
ing group should be confirmed by the Steering Committee and have senior officials of
Transportation act as a coordination point for the Province.

Key Takeaways

A summary of the Review’s recommendations is attached to this letter, and we expect

that the city will work with the province to address each concern directly. I will take a
moment to broadly characterize my expectations moving forward.

• The project is not approved in its current format. As outlined in my letter to Mayor
Nenshi on October 9, 2020, the outstanding issues identified in the Review must
be addressed before province would approve funding this project.

• The province expects an updated analysis on ridership given the context of the
COVID-19 pandemic and economic downturn, an updated and comprehensive
set of cost estimates, risk reports and contingency analysis that is currently se
verely lacking and dated.

• The city must pause and reassess significant aspects of the Green Line project
and procurement approach that avoids launching procurement before costs are
fully understood.

• The province expects the city to review alternative procurement models for the
Green Line project, including ensuring there is a coherent procurement approach
to delivering a fully functional LRT system, with a phased or “scope ladder” ap
proach to expansion if the current project budget or additional funding sources
allow. The Review suggests that this may be a base case “segment one" project

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 from Shepard to 7th Avenue/ 2nd Street station in the Downtown Core; the tech
nical working group should review the feasibility of this option and the outcome of
the review should be reported back to the board.

• The province expects the city continue to providing a full accounting of funds al
ready spent on the Green Line project, as part of the weekly engagements.

Conclusion

I lastly wish to highlight some concerning elements that have emerged around the Re
view. It has come to my attention that the city appears to regard the Review as a formal
ity exercise that is simply delaying the beginning of construction. This sentiment is evi
dent in the Mayor’s characterization of the Review’s due diligence as “red tape” in regu
lar comments to the media and to other Ministers. Not only does the province reject this
characterization outright, but it is fundamentally discrediting to the legitimacy of the Re
view if key officials believe that the Review itself is a mere formality. It is plainly evident
that the city does not currently understand the depth of our concerns and the serious
ness with which we take them, so allow me to be clear: the Green Line is not a func
tional transit project in its current form, the Province will not approve it as currently de
signed. The Green Line project is the largest infrastructure project in Alberta’s history
and taxpayers are on the hook for almost 5 billion dollars; the province takes the Review
and the concerns identified very seriously and we expect the city to do the same.

The province is supportive of the Green Line project moving forward in a well-planned
and timely manner to deliver value for money for Alberta taxpayers, and we maintain
our funding commitment of $1.53 billion at this time. However, the City must take steps
to address the concerns identified in the Review.

I look forward to working with the city on next steps to advance this LRT project.

Sincerely

Ric Mclver
Minister of Transportation

Classification; Protected A