Early this week, Council approved a budget increase for several capital projects, including the 50th St. Grade Separation in Ward Métis. Construction tender is now fully funded, which means this project is going forward.
This crossing sees approximately 35,000 vehicles per day, and is blocked up to 64 times a day, totalling up to five-and-a-half hours per day of delays. The crossing services a variety of neighbourhoods, but also a substantial amount of industrial area.
The road serves as an important detour for the inner ring road, as we have diverted the truck route to 50 St. away from portions of 75 St. to reduce noise and disruption in central neighbourhoods. It was also identified as one of three top priority grade separations in the city, due to the volume of traffic and degree of disruption.
Conceptual planning for the project was completed in 2010, and in 2017, this project was proposed to our federal and provincial partners as an $86M grade separation. At that time, it was still the top priority for grade separation in the city. The proposal included the City’s share at $16M. Further development of the project saw the design expanded, and the cost increased to $103M - with the increase borne by the City.
At the budget adjustment this year, the estimate had risen to $145M. That was a very uncomfortable increase. This week, we learned that the construction tender had come back, and the project had increased to $179M. This project was considered funded before my election, and is currently under construction, so you can imagine how difficult a pill the increase from $103M to $179M was to swallow. We’ve already spent close to $35M on the project.
2010 — Conceptual Planning completed
2017 — Submitted application to National Trade Corridor Fund (NTCF)
2018 — Concept Validation and Preliminary Design (Underpass / Overpass Evaluation)
2019 — Final Recommendation of an Overpass
2020 — Detailed Design and Early Works Construction (Procurement of a Construction Advisor)
2021 — Tender Documents and Specifications ○ Pre-Tender Estimate (August) - SCBA recommendation $145.3M
2022 — Tender for Final Construction (work completed to date totals $35.5M)
Market Inflation Pressures
I want to be clear that these price increases are not a case of “bad project management”, or administrator error. The vast majority of city-led projects are on time and on budget. Our city is a ship in the global macroeconomic sea. Recently, waves in that sea have become very turbulent.
Nickel prices (a key ingredient in stainless steel) have risen by 300 per cent over the last week leading up to tender close (mid-March). Fuel prices (including diesel) have risen by 25 per cent. Structural steel has increased in price by 54 per cent. The retaining wall material and labour costs have increased in price by 35 per cent. Underground drainage and utility services are in high demand resulting in a 10 to 15 per cent increase in prices. These compounding factors are driving up costs on projects.
I want to share some specifics about why it was important to approve the project at this stage. The original federal funding for this project was approved as part of the National Trade Corridors Fund, which funds up to 50% of eligible project costs, which originally came in at $39.8M. Indications from the federal government are strong that they’ll increase that amount to $70M to top up the most recent budget increase, meaning Edmontonians would only be covering approximately $2M of the increase.
It is also important to note that the timelines on approving this increase were tight. Construction tender expires on April 8th, four days after the council meeting was held. If we want to lock in current prices, and move forward with the project, it has to be approved before April 8th. Additionally, we are not able to simply tender the same project repeatedly. If we paused the project and it went out to tender again, we would have run the risk of seeing further increases given the economic instability we are currently experiencing.
Furthermore, this would have placed our partnered funding from the provincial and federal governments in jeopardy. It is likely that our partners would have looked to park that money elsewhere, and other jurisdictions would be happy to use our funding in their municipality. A plausible outcome would be that we spend several years developing a new project, and in that time, the costs of construction may or may not improve, and the costs borne by the city may be a higher proportion of the project costs if we're unable to secure support.
Concerns around the scale of the project also arose during Council's conversation. Isn’t this a very large, very expensive, piece of auto-oriented infrastructure? Why is it 6 lanes? Can we reduce that?
The answer is that the grant funding we are receiving from the federal and provincial governments is tied to a project 6 lanes across. From my perspective, like many Albertan infrastructure projects, this is overbuilt to accommodate demand projected decades into the future. Unfortunately, I arrived at this conversation too late to have real influence on the design of the overpass, and we’re unable to break our contractual obligations.
My support for this grade separation is primarily driven by the value it delivers to the industrial area, and its importance as part of the inner ring road. This is a very important goods movement corridor. The existing rail connection adds value to the industrial area, however the delays drive millions of dollars of costs, and make Edmonton a less attractive location for businesses. It should be noted that commercial properties pay considerably higher taxes to the city, so it is vital that we remain an attractive area for investment within the region.
Approving this increase places us in the best possible position to receive the additional federal funding, and see this project move forward. Additionally, it can be incredibly frustrating getting stuck at this rail crossing. Often you’ll spend 15 minutes watching trains go by, and as the traffic piles up, only a few cars make it through before the next train begins to cross. Once you’re stuck, there is very little that you can do. I heard this concern from many residents who spoke with me during my campaign. Putting that frustration to rest will be well received by the communities that rely on this crossing.
Before I conclude, I do want to note that I do not believe the factors compounding costs are not exclusive to the 50 St. Grade Separation. This is likely a harbinger of what’s to come for infrastructure projects throughout North America in the short term. I am very keen to receive analysis and updates on all the other capital projects in progress which will be subject to these same forces at tender.
There are many planned capital projects that need to be closely scrutinized to ensure the expectations of Edmontonians are met during this turbulent economic period, especially going into our four year budget in 2023.
I look forward to further conversations about the state of our capital projects. I think it will be critical to ground these conversations in responsible fiscal policy so that we can make progress on key projects and investments that will help us become a more attractive, competitive, climate resilient city.
Written By: Ashley Salvador