ION - Waterloo Region's Light Rail Transit

[timc]

It looks like he is including construction and financing costs to come up with that number.

[danbrotherston]

Another word for it would be intentionally misleading people.

[Bob_McBob]

But what he is he actually including? The intersecting public works projects? The cost of servicing the debt for 30 years? I thought the land acquisition budget was separate from the ION budget based on some council agendas about expropriation, but even that is included in the original $818m figure (now revised to $868m, minus $25m from the province).

[timc]

I don't have exact numbers, but:

http://rapidtransit.regionofwaterloo.ca/...ions.asp#f

The capital cost is $818 million (now $868 million, I guess), and if you add annual financing costs of $11 million over 30 years, you get a number over $1 billion. Why he didn't go all the way and say it was costing $1.9 billion, I don't know.

My wording probably wasn't the best when I said that was the cost for construction and financing, because the capital cost is more than just construction.

[panamaniac]

It looks like he is including construction and financing costs to come up with that number.

I don't have exact numbers, but:

http://rapidtransit.regionofwaterloo.ca/...ions.asp#f

The capital cost is $818 million (now $868 million, I guess), and if you add annual financing costs of $11 million over 30 years, you get a number over $1 billion. Why he didn't go all the way and say it was costing $1.9 billion, I don't know.

My wording probably wasn't the best when I said that was the cost for construction and financing, because the capital cost is more than just construction.

How can you get to $1.9B?

[Canard]

Nice little microaggression in there calling the LRV’s “streetcars”.

He really is a uselsss human being.

[ijmorlan]

The capital cost is $818 million (now $868 million, I guess), and if you add annual financing costs of $11 million over 30 years, you get a number over $1 billion. Why he didn't go all the way and say it was costing $1.9 billion, I don't know.

My wording probably wasn't the best when I said that was the cost for construction and financing, because the capital cost is more than just construction.

How can you get to $1.9B?

By adding in all the financing (mostly interest) charges. It would be like adding up all your mortgage payments plus your downpayment and arguing that was the cost of your house.

If you wanted to really blow up the price you could take the total payments to GrandLinq, including all the operating expenses, and add them up too. But why stop at 30 years? There is nothing magic about Year 31. Might as well add operating expenses ad infinitum and claim the project is infinitely expensive.

[creative]

Mortgage payments plus down payment does add up to the ultimate cost of a house.

[taylortbb]

Mortgage payments plus down payment does add up to the ultimate cost of a house.

They do, but unless you inflation adjust the numbers they're pretty misleading. While financing cost might take ION capital over $1B in long term total dollars, I seriously doubt it does in 2018 dollars. The region only had Grandlinq finance about $100M of the project, so even over 30 years I doubt the interest tripled that expense, especially at the low rates they would have received.

[timio]

He really is a uselsss human being.

That is a terrible statement to make about a person. He may be a not so great reporter with very obvious biases against rail transit, but to call someone useless as a human is not very constructive to the conversation.

[Bob_McBob]

Confirmed on Twitter, he's adding $200m in interest to the upfront cost to push it over a billion.

https://twitter.com/OuthitRecord/status/...9171111937

[trainspotter139]

Confirmed on Twitter, he's adding $200m in interest to the upfront cost to push it over a billion.

https://twitter.com/OuthitRecord/status/...9171111937

No one will know the true value of the interest on the $253 million until the end of the amortization or until the amortized amount is paid off, whichever comes first. To assume the future value of a project's capital cost, well, you might as well be making up numbers

[MidTowner]

What is the Region planning as far as the interest cost on the $253,000,000 goes?

Even if it is $200,000,000, that is not in 2018 dollars. The real impact is far more nuanced than 100 characters (or whatever). Not worth replying to him on this, he's probably being disingenuous.

[ijmorlan]

Mortgage payments plus down payment does add up to the ultimate cost of a house.

They do, but unless you inflation adjust the numbers they're pretty misleading. While financing cost might take ION capital over $1B in long term total dollars, I seriously doubt it does in 2018 dollars. The region only had Grandlinq finance about $100M of the project, so even over 30 years I doubt the interest tripled that expense, especially at the low rates they would have received.

Even with inflation adjustment one doesn’t get to count the interest costs as part of “the cost” of a project one doesn’t happen to like. If people are talking about buying houses and how much they paid, they talk about the number on the agreement of purchase and sale. How they got that money is a separate issue — from personal savings, using a mortgage, or whatever. The cost of a sweater is what the cash register receipt says, not the total of all the credit card interest payments. And so on.

If future payments are counted in the cost, then the value of the project after the time period needs to be subtracted off the cost. There is no justification to rule that an interest payment 29 years 11 months from now counts towards the cost but the salvage value of the system 30 years from now doesn’t count against the cost. By this standard the cost probably could be argued to be negative, although it would be dependent on how valuable one thought the system would be 30 years later so any discussion about this number would be inconclusive.

When people talk about “the cost” of something they mean how much it would cost to build it or pay for it in cash. Anybody discussing the cost in good faith will make it very clear if they are talking about something different.

[ijmorlan]

What is the Region planning as far as the interest cost on the $253,000,000 goes?

Even if it is $200,000,000, that is not in 2018 dollars. The real impact is far more nuanced than 100 characters (or whatever). Not worth replying to him on this, he's probably being disingenuous.

I can’t remember the details, but I believe the monthly payment to GrandLinq includes an interest component which covers the financing costs of the portion financed by GrandLinq. I believe this amount is fixed for 30 years. For the part financed by the Region, they sold bonds, on which they will of course be paying interest until they are paid off.

I don’t know the maturity period on the bonds, but it’s quite common for governments to issue 30 year bonds so I wouldn’t be at all surprised to find the interest rate there is also fixed.

Which if true means that in fact the total of all interest payments is already known.

And in any case those future interest payments are expected to be paid by a larger, more prosperous Region so they actually will have a smaller impact than they would if we paid them now. I mean in theory we could have raised taxes 10% and paid for our entire share over a 5 year period. If I’m reading the Regional budget correctly we fund approximately $500M per year from Regional property taxes. So a 10% increase would give about $50M per year. Voila, 5 years later, $250M collected, entire Regional share paid off.

But you can tell I’m not a politician, because a politician would be smart enough never to even suggest that we “could” raise taxes by 10%, even as a counterfactual. And a 10% increase really would be quite noticeable to many people. But instead we have a much smaller increase and pay the money off gradually as we use the system rather than upfront; just like most homeowners do their house, actually.