Vol. 21 No. 8 • February 26 - March 4, 2015 In Our 20th Year Serving Greater Hamilton

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Red Hill Lawsuit Justification

by Don McLean
February 27 - March 5, 2014
Council’s decision to continue an expensive lawsuit against the Canadian government assumes that Red Hill Parkway costs were greatly increased because of the delay from federal environmental assessment. The 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, 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 2006 that a study commissioned by Estrin and carried out B Wolfman Consulting Ltd told councillors that the extra spending was $36 million.

    “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 assumes 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. This may become a significant issue should the city win the lawsuit.

    The alleged 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 Fisheries Department initiated a federal environmental assessment in May 1998. The city 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 city launched legal action to halt the assessment.

    That led to a federal court decision in May 2001 that an assessment was not required, 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. Protests shifted the initial location of work but 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.

    City staff did report a $35 million increase but assured council the vast majority was to be recouped from collecting 16 percent of the project costs through development charges. Wolfman two years later comes up with a similar number 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. V
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