Difference between revisions of "Bridge Cost - various totals"
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Because of the troubles during construction, the construction price went up. The GNWT has put in an additional $16 million dollars in 2010, although some of this went to replacing lost equity. The current construction cost is now estimated around '''$182 million'''. | Because of the troubles during construction, the construction price went up. The GNWT has put in an additional $16 million dollars in 2010, although some of this went to replacing lost equity. The current construction cost is now estimated around '''$182 million'''. | ||
| − | === $ | + | === $300 million === |
| − | However, the money to build the bridge was borrowed, and must be repaid with interest over 35 years, much like the mortgage on a house. Because of the type of bonds issued, the actual repayment amount will depend on the inflation rate during that time. However, assuming inflation at 2%, the total repayment will be around $430 million dollars. Before anyone screams "''what!''", remember that the repayment is being done over time, and a dollar paid 35 years from now isn't worth as much as one now, because of inflation. Adjusted to 2010 dollars, that amount becomes the equivalent of something like '''$ | + | However, the money to build the bridge was borrowed, and must be repaid with interest over 35 years, much like the mortgage on a house. Because of the type of bonds issued, the actual repayment amount will depend on the inflation rate during that time. However, assuming inflation at 2%, the total repayment will be around $430 million dollars. Before anyone screams "''what!''", remember that the repayment is being done over time, and a dollar paid 35 years from now isn't worth as much as one now, because of inflation. Adjusted to 2010 dollars, that amount becomes the equivalent of something like $285 million. Adding in the additional funds the GNWT had to contribute makes this around '''$300 million''' |
| − | === $ | + | === $315+ million === |
| − | Of course, the bridge has other costs after construction. [[Annual Operating Costs|Annual operating costs]] may run $250,000 per year or more, and there is the [[Opportunities Grant]] of $200,000 per year. These will add at least another $14 million over 35 years. Depending on how long the GNWT runs annual deficits and has extra short-term borrowing costs because of the $16 million extra spent on the bridge in 2010, it might be fair to add a | + | Of course, the bridge has other costs after construction. [[Annual Operating Costs|Annual operating costs]] may run $250,000 per year or more, and there is the [[Opportunities Grant]] of $200,000 per year. These will add at least another $14 million over 35 years. Depending on how long the GNWT runs annual deficits and has extra short-term borrowing costs because of the $16 million extra spent on the bridge in 2010, it might be fair to add a couple million in additional interest costs. |
=== Revenue === | === Revenue === | ||
Revision as of 14:28, 18 August 2010
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This article is currently incomplete. BridgeWiki will eventually improve by expanding it. |
How much will the Bridge cost? There are a number of answers, depending on how you define "cost". Below is a discussion of the cost of the Bridge. You can also check the Bridge Calculator page to find out how much the Bridge will cost in 2012 (its first year of operation).
$169 million
Back in 2004, a $55 million construction cost was being used. However, the DCBC was never able to get a construction tender near this price, and the project went into limbo. It was only revived in 2007-2008 when the GNWT agreed to increase the subsidy it would pay. By then, the construction price had risen to around $135 million; this was attributed to major increases in construction materials, etc. for infrastructure projects. To this, there one needed to add around $10 million in development costs (plans, insurance, financing fees, etc), another $10 million in construction and corporate management costs, and another $10 million for a contingency fund. Adding in interest during the construction period on the bonds issued to finance the bridge, and the total came to around $169 million (although often reported as $165 million). The GNWT knew of this cost when it signed the final agreements.
$182 million
Because of the troubles during construction, the construction price went up. The GNWT has put in an additional $16 million dollars in 2010, although some of this went to replacing lost equity. The current construction cost is now estimated around $182 million.
$300 million
However, the money to build the bridge was borrowed, and must be repaid with interest over 35 years, much like the mortgage on a house. Because of the type of bonds issued, the actual repayment amount will depend on the inflation rate during that time. However, assuming inflation at 2%, the total repayment will be around $430 million dollars. Before anyone screams "what!", remember that the repayment is being done over time, and a dollar paid 35 years from now isn't worth as much as one now, because of inflation. Adjusted to 2010 dollars, that amount becomes the equivalent of something like $285 million. Adding in the additional funds the GNWT had to contribute makes this around $300 million
$315+ million
Of course, the bridge has other costs after construction. Annual operating costs may run $250,000 per year or more, and there is the Opportunities Grant of $200,000 per year. These will add at least another $14 million over 35 years. Depending on how long the GNWT runs annual deficits and has extra short-term borrowing costs because of the $16 million extra spent on the bridge in 2010, it might be fair to add a couple million in additional interest costs.
Revenue
The toll revenue the bridge will generate won't be enough to cover these costs. The difference will have to be made up by the GNWT. Toll revenue cannot be determine exactly, as it depends on how much commercial traffic crosses the bridge, which is dependent to so extent on the economy, especially mining activity. For instance, the recent recession has drastically cut the traffic going north on the winter ice road. The annual subsidy required is likely to be in the $3-5 million range; let's optimistically assume $4 million. But since the ferry is no longer required, the $3 million annual costs can be subtracted, so the net subsidy might be $1 million per year or more.
The tolls themselves are a cost, to the trucking companies. Some of this they may be offset by savings they may make by having a bridge; the rest will presumably be passed along to their customers. They in turn may save with a bridge; stores won't have to stockpile goods before breakup, airlift supplies, etc. Just what the value of these benefits might be is a slippery question, which the Cost Benefit Analysis tried to determine. Let's generously assume the entire effect to be neutral.
Net cost
So, although it may vary substantially if freight volumes are very much better or worse, adding this up you might come up with a number like $300 million or more as the cost of the Bridge, spread out over 35 years. But since we have toll revenue, and the ferry would have cost $105 million over the same period, the net cost of the bridge is somewhere in the range of $20-70 million over those 35 years.
At that point we also have a 35-year old bridge with lots of life left in it, so from then on there are positive savings each year from not having to run the ferry (less the cost of maintaining the bridge), even if the tolls are dropped as planned once the bonds are repaid.
