After much doubt, the Province has announced that it is willing to pay its share of the $2.1 billion LRT in Ottawa, including the underground portion downtown. The Federal Government has already pledged to provide its share, with the caveat that the Province must be on board. Assuming that the 1\3rd funding rule applies, the three levels of government should be able to raise a total of $1.8 billion.
That would be $300 million short of the proposed budget. While the city can scale back the project or come up with the money through tax revenues, a third option exist. A consortium of local entrepreneurs can be the fourth financing partner. Of course, private sector financing can come in various forms, and with shared risk comes shared reward. Public Private Partnerships come in various forms, for Ottawa’s needs, the following proposals maybe feasible
NCC Real Estate & Rail - Some of the land that the LRT is expected to cross are National Capital Commission (NCC) owned. Assuming that the city can work with the NCC (which may prove to be difficult), private financing can include an agreement whereby unused NCC land can be leased to the consortium partners. In return for financing the LRT project, the NCC\City can sign a rent-free lease agreement with consortium partners on NCC land for a set period of time, with an option to extend the lease agreement at market rate.
The benefit of the land agreement for the private consortium, would be the value of the land. Based on lessons learned from other major cities in Canada, the LRT would help raise the profile of land along its corridor, particularly near LRT stations. The value of commercial real estate near the LRT line would increase which allows the private consortium to profit off of favorable sub-lease agreements.
Sell Ad Space - The primary challenge of the lease agreement is the involvement of the NCC. As is the case with planning the LRT and the Lansdown projects, the City and NCC do not always work well with each other. Yet, the ad space on trains and LRT stations are property controled by the City. In an effort to raise the additional funds needed for the LRT project, the City can sell permanant ad space to a private consortium. The City can set aside 50% of the ads on trains and LRT stations for the purpose of selling to the private consortium on a permanant basis. This would be the primary benefit to the private consortium , in that, they would be able to use the ad space to rent them out to generate a profit. The City would continue to own the other 50% of ad space.
Reference
http://www.ottawacitizen.com/news/Province+kicks+600M+Ottawa+light+rail+project/2356367/story.html
