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The rising price of the NWT's largest-ever public infrastructure project has ceased to surprise most Northerners but at least one man thinks most people are unaware of the true cost of the one-kilometre Deh Cho Bridge. - NNSL file photo

$357 million bridge possible

Galit Rodan
Northern News Services
Published Monday, March 5, 2012

NORTHWEST TERRITORIES
The rising price of the NWT's largest-ever public infrastructure project has ceased to surprise most Northerners but at least one man thinks most people are unaware of the true cost of the one-kilometre Deh Cho Bridge.

NNSL photo/graphic

Bridge cost and revenue estimates
  • Final bill: $357,911,768
  • Interest paid over 35 years: $132 million
  • Cost overruns: $26 million
  • Toll revenue over 35 years: $112 million
  • Savings on ferry and ice road over 35 years: $94.5 million
  • Net cost to NWT taxpayers: $151,411,768
Source: Department of Transportation and NorthernRaven

A former Yellowknifer who goes by the alias of NorthernRaven has been keeping tabs on bridge costs for several years, his curiosity piqued when he realized media were only reporting the capital cost of the infrastructure.

"I just couldn't find a decent summary, and got hooked into trying to figure it out," said NorthernRaven, a computer programmer who asked not to be named.

"It was simple to put stuff online as a resource Š but there's never been any expectation that more than a handful of people might come across it or be interested."

Earl Blacklock, manager of public affairs and communications for the Department of Transportation, has seen the work and, after providing News/North with some updated figures, said he "wouldn't quarrel" with the numbers as presented.

Though NorthernRaven has since moved to the East Coast, he continues to maintain an online wiki site for the Deh Cho Bridge, in which he posits a total cost of about $340 million before any savings or revenue-generating features are taken into account. He also runs an interactive calculator, which allows visitors to the site to select options for a number of variables ­ the bridge's opening date; estimated tonnes of freight on the winter ice road; estimated annual operating costs for the bridge; estimated annual costs of toll collection; and annual interest on the construction cost overruns ­ to obtain an analysis of the net cost of the bridge to taxpayers in 2013 and over a 35-year period.

It is common knowledge that the most recent estimate for the capital cost of the infrastructure is $192 million. However, at least $165 million worth was financed via inflation-adjusted real return bonds, repayable semi-annually until 2046 at an interest rate of 3.17 per cent. Adjusted to 2011 dollars, the total amount repayable is around $297 million, meaning the GNWT will owe about $132 million of interest on the bridge by the time the principal is repaid.

Added to the $297 million is about $26 million in cost overruns to the construction budget, which brought the cost to $192 million as of December 2011 and about $1 million for the capital cost of the tolling infrastructure, according to Blacklock. Blacklock also estimated the cost of the approximate year-long delay in opening the bridge to traffic (the annual cost of running the Merv Hardie ferry and ice bridge plus the lost toll revenue) to be a maximum of $6 million.

This brings the cost of capital expenditures, interest repayment and a year-long delay to about $330 million.

NorthernRaven adds to that the annual operations and maintenance costs for the bridge and the annual costs of toll collection. Blacklock pegs that at about $350,000 and $300,000 respectively.

These operational expenditures added together would total $22,750,000 over a period of 35 years, i.e. the interest repayment timeline as well as when the bridge was originally intended to revert to GNWT ownership from Deh Cho Bridge Corporation ownership. This brings the total (in 2011 dollars) to $352,750,000.

Under the original terms of the public-private partnership that became known as the Deh Cho Bridge Corporation, the corporation would pay to build and operate the bridge but would receive annual subsidies of about $1.5 million from the GNWT (the then-approximate cost of operating the ferry and ice bridge) for 35 years. It would also collect tolls on commercial traffic for 35 years, estimated at $3 million annually. According to the figures of the day, 35 years would have been enough time for the bridge corporation to recover the cost of building and operating the bridge. As previously stated, it would then become the property of the territorial government.

According to NorthernRaven's figures, however, 35 years is not nearly enough time for the GNWT to recover its expenditures now that it has assumed ownership of the project and construction costs have mounted.

Additional costs include the Opportunities Grant and the Involvement Grant to the Deh Gah Got'ie First Nation and the Fort Providence Metis Council, set out in the Community Opportunities and Involvement Agreement signed in 2010.

The Involvement Grant was set at $8,000 per month beginning in July 2010 "for the purpose of promoting community involvement in the bridge project during the construction of the bridge." It was supposed to be paid through to March 2012 ­ 21 months for a total of $168,000.

The Opportunities Grant is an annual grant of $200,000 payable for 35 years beginning the first April that follows the opening of the bridge "for the purposes of creating community benefits and economic opportunities related to the bridge."

Though the Involvement and Opportunities Grants should add $168,000 and $7 million, respectively, to the total cost of the bridge, NorthernRaven calculates the grants at $264,000 and $4,897,768, respectively, for a total of $5,161,768. This is based on the assumption that because of the delay, the Involvement Grant will be extended through March 2013. He also notes that the Opportunities Grant is not indexed for inflation and thus, in 2011 dollars, will be worth less than the stated $7 million.

All this brings the cost of the bridge (in 2011 dollars) to $357,911,768. 

There is, however, one major revenue-generating mechanism ­ the tolls that will be charged to commercial traffic crossing the bridge. The commercial freight is divided into community resupply freight, which will likely stay fairly constant, and mining supply freight, which is likely to fluctuate depending on the state of the economy and as current mines close and new mines open.

To simplify matters, Blacklock suggested using an average annual toll revenue of $3.2 million (in 2011 dollars). At this rate, the GNWT will have generated $112 million in 35 years, bringing the 35-year net expenditure to $245,911,768.

The GNWT will also save $2.7 million annually by not running the ferry and building the ice bridge, amounting to a 35-year cost savings of $94.5 million.

Given these numbers, the net cost to taxpayers over 35 years is $151,411,768. Bearing in mind that the math is simplified and based on many assumptions and estimates, the GNWT does not even come close to recovering its costs.

However, the bridge has an estimated lifespan of 75 years and Mike Aumond, deputy minister of Finance, said the tolls are anticipated to continue at least as long as it takes to pay off the government's costs. The savings from not running the ferry will naturally continue as well.

There are numerous other variables, too. For example, legal proceedings are still ongoing; there is some question about whether the GNWT had to borrow money to cover the cost overruns in the construction budget, thus incurring more interest debt; there is expected to be some cost for environmental remediation of the site; and it is difficult to quantify some of the benefits, like the reduced risk of fuel spills, and reduced energy consumption and greenhouse gas emissions.

NorthernRaven's calculations are not absolutely comprehensive and, indeed, they are not meant to be. They do succeed, though, in pointing out the fallacy of continuing to refer to the Deh Cho Bridge as a $192-million project.

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