Council’s decision to continue an expensive lawsuit against the Canadian government is partly based on the belief that Red Hill Parkway costs were greatly increased because of the delay from federal environmental assessment. The assumed price tag comes from the same law firm that convinced council to launch the legal action in 2004 and to hire it to pursue the case.
At the November 2004 council meeting that approved the lawsuit by an 8-7 vote, Gowlings lawyer David Estrin estimated the delay had cost the city $30-50 million. Then he added $25 million in punitive damages to the higher estimate to arrive at the selected $75 million target of the lawsuit. It wasn’t until June 28, 2006 that a study, commissioned by Estrin and carried out B Wolfman Consulting Ltd, told councillors that the extra spending was $36 million, and almost entirely as a result of inflationary cost increases.
“This net claim is comprised of approximately $35 million in construction contract costs increases and $2 million in increased construction supervision costs, less approximately $3 million in debenture interest savings”, states the report summary.
It goes on to conclude that construction would have started in 1998 instead of 2003, and that as a result “delay averaged 60 months for the major contracts”. It then compares the 1998 prices with those incurred in 2003 to 2006 dollars. But the study makes no adjustment for inflationary increases in other factors such as incomes and taxes. The word inflation does not appear in the report.
The accepted method of comparing prices in different years is to state them in constant dollars rather than contrast the predicted cost measured in 1998 dollars with the subsequent price in 2006 dollars. We don’t know if city councillors questioned the consultant’s approach because the discussion took place in secret session, but it may become a significant issue for federal lawyers and the courts should the city win the lawsuit.
The selection of the length of delay may also be challenged by the federal side because it doesn’t align with either the time taken by the federal assessment or the period spent in court disputing it.
The requirement for a Canadian environmental assessment was widely understood years before it began. The Region of Hamilton-Wentworth (now the City of Hamilton) even cited this requirement in a 1996 request to the Ontario government seeking an exemption from provincial assessment requirements. A federal letter in March 1996 confirmed it and a federal court decision in April 2000 reaffirmed that the Canadian Environmental Assessment Act applied to the expressway.
Up until the Conservative omnibus legislation in May 2012, the rules required federal ministries to do assessments of any project which required a federal permit – in this case a permit for “harmful alteration, disruption or destruction of fish habitat” in the six kilometres of Red Hill Creek below the escarpment that were almost entirely re-routed and reconstructed. Once a permit was requested, the federal assessment would begin, but Hamilton kept the process at bay by not making the permit request.
Complaints from expressway opponents helped convince the Fisheries Department to review the city’s expressway plans, determine that a permit was required, and eventually initiate a federal environmental assessment in May 1998. The region cooperated with this assessment for more than a year and even passed a motion calling for it to be upgraded to a full panel review.
In June 1999 the initial federal assessment concluded that there would likely be “significant adverse environmental effects” and that an independent panel should therefore review the project. The following month (July 1999) the region launched legal action to halt the assessment.
That eventually resulted in a federal court decision in May 2001 that an assessment was not required. That outcome was confirmed by the federal appeals court in January 2002 clearing the way for the expressway to proceed. Actual construction however didn’t begin until August of 2003, when it faced citizen protests and an occupation of a small portion of the valley by the Haudenosaunee which shifted the location of initial work. The project was fully underway by November.
During this period, the project also still faced numerous other regulatory hurdles. For example, studies required by the provincial environmental process were not completed and made public until the spring of 2003.
But while the legal battle over the federal assessment ran less than two and a half years, the Wolfman report assumes the delay was five full years, and bases its calculations on that interval. It also doesn’t mention the city’s approved 2004 capital budget which showed no change in the expected cost of the expressway more than a full year after the court proceedings had concluded.
In October 2004, city staff had reported a $35 million increase in the expressway budget but assured council none of the additional costs would be borne by taxpayers because the vast majority was to be recouped from collecting 16 percent of the project costs through development charges.
The Wolfman report two years later comes up with a similar cost increase but makes no mention of the changes to development charges. It also says nothing about the fact that the majority of the total Parkway costs were covered by the provincial government.
There are no known promises to reimburse either the province or the developers should the city be successful in its lawsuit.