Port Mann,Hwy 1 Project Delayed

One of the deadlines for financing the Highway 1 / Port Mann portion of the Gateway Project has passed, amid an inflating budget and the backdrop of the current recession.

Whether the project will proceed as a P3 is in doubt, as the budget is now reported to be $2.3 billion, up from the original $1.3 billion. The cost benefits of building this bridge, with HOV lanes expanded to Langley (we've all seen how successful the HOV lane has been), as opposed to building a rail system out to the Valley, are now seriously in question.

First reported in Project Finance Magazine, the story has been carried in more detail by The Surrey Leader:

Connect BC Development Group was picked as the preferred bidder over rival groups last summer and a final contract was to have been signed with the province last fall.

But the banks lined up by the Macquarie Group, the Australian financing partner in the consortium, have so far refused to sign off on the project loan, which was to have been finalized Jan. 8.

The Ministry of Transportation has agreed to extend the deadline another month, and Kevin Falcon has said that the Province will "remain committed to the Port Mann project utilizing alternative means of financing should that be necessary".

The total amount the group is looking to borrow is reported to be $2.7 billion, raising a lot of eyebrows, as they were chosen based on their original lowball bid - $1.3 billion. Now that they are the only bidder, they may be putting the squeeze on the government, who must get it done under a deadline.

Parallels being drawn to the presently souring Olympic Village deal make me wonder if this is standard practice in government bids - perhaps it always has been.

The cost of the project is supposed to be covered by tolls, which seemed a stretch when the cost was $1.7 billion. Wouldn't you expect construction costs to decrease as the labour market cools, and as fuel and materials prices drop?