After news broke this weekend that the City of Ottawa paid the group maintaining the problem-plagued LRT system a multi-million dollar sum for September work, Mayor Jim Watson has asked the city manager to spell out the city’s “rationale” and for quarterly updates on payments going forward.
Watson made the request in an email addressed to City Manager Steve Kanellakos and forwarded to media on Monday morning, saying there’s “been some confusion recently” about what the city has and hasn’t paid to Rideau Transit Group (RTG) amidst the Confederation Line’s repeatedly unreliable service since launching in September.
“To ensure that all members of council and the transit commission are updated on this issue on a timely basis, I would ask that you provide an update on payments made to RTG on a quarterly basis as part of the quarterly Confederation Line update,” Watson wrote.
“Also, I would ask that you provide members of council and the transit commission with a comprehensive overview of the city’s rationale for providing payments to RTG in both August and September of 2019. It would be beneficial for members and commissioners to have a clear understanding of what in the project agreement made these payments necessary.”
The mayor asked Kanellakos to present that “comprehensive update” before the end of this week.
RTG’s maintenance division — Rideau Transit Maintenance (RTM) — has a 30-year contract to maintain the Confederation Line. Through that maintenance agreement, the company is entitled to between $4 million and $5 million per month for maintenance work on the LRT system, which has suffered repeated service disruptions since early October due to a number of mechanical and electrical issues.
Senior city staff have been telling Ottawa city council and members of the transit commission that the municipality has been withholding those monthly payments and will continue to do so until the train service becomes reliable.
Despite statements made over the past few months suggesting the consortium wasn’t paid in full for September, CBC Ottawa reported Saturday that the city indeed paid RTG $4.5-million for that month.
After a Dec. 3 meeting with council members, OC Transpo top boss John Manconi said he believed RTG had received a payment for the “tail end of September” but that it wouldn’t get any money for October and November. However, that comment was made in a scrum with reporters outside the council room — not during his formal LRT update to councillors.
Then, at an LRT press conference mid-January, a different OC Transpo official said: “RTM, I don’t believe, has received a monthly payment.”
The city is now saying it essentially had no choice but to pay the consortium “the full amount” for the month of September.
“The administrative processes detailed in the project agreement effectively required the city to pay the full amount for the first contract month of service irrespective of the contractor’s performance during that month,” Kanellakos confirmed in a memo on Saturday, addressed to members of city council.
“To meet the city’s obligations for RTG’s September invoice, a payment was made in November 2019.”
News of the full September maintenance payment appeared to come out of left field for some councillors and members of the transit commission, which oversees the city’s public transit agency.
“From what I can tell, nothing untoward has happened here, but the communication was badly botched,” Kitchissipi Coun. Jeff Leiper wrote in a weekly newsletter to his constituents.
“Frankly since the beginning of the LRT crisis, the only thing I have really been able to tell residents is that the city has not been paying RTM because of the technical problems. While most councillors including myself interpreted that to mean that RTM hasn’t been getting paid, they have, in fact, received a payment that the city was compelled to make.”
Kanellakos’s memo didn’t further explain how or why the project agreement forced the city to dish out that full September payment, which the mayor is now asking the top city manager to do.
According to the memo, RTG was “eligible for a pro-rated monthly service payment” for Aug. 31 because it achieved revenue service availability the day prior and that “the performance deductions that accumulated for this single day of service were applied to the September payment.”
Kanellakos also explained that maintenance payments to RTG for a particular month aren’t made during that month of service. He said the city first receives an invoice and reviews it before handing over the money.
The city hasn’t paid the October and November invoices “due to the accumulation of performance deductions in September and October,” Kanellakos wrote.
“The performance deductions for November (affecting December’s invoice) and December (affecting January’s invoice) are still under review,” he said.
“As the performance deductions lag the invoice period by a month, RTG is effectively a month behind in its eligible payments and will be required to sustain a high level of performance for at least a month to eliminate this backlog of accumulated deductions.”
On Jan. 29, Kanellakos told reporters that the maintenance payments the city has been withholding are not deferred payments and RTG won’t ever see that money if the city gets its way.
“They may take legal action, ultimately. They may try whatever efforts they can to try and get that money back. But no, we don’t give them that money back,” Kanellakos said.
Clarification: In a subsequent Feb. 14, 2020 memo about the August and September 2019 payments to RTG, Manconi clarified that the city’s first contract month with RTG was August 2019 and September was the second contract month. Because the LRT was only in operation for a single day in August, and because service deductions are applied one month in arrears, the city could only make limited deductions to RTG’s September payment, Manconi wrote. In the end, RTG’s pro-rated monthly service payment for Aug. 31 was $165,661.65 (HST included). For September, the city deducted $14,193.14 for August service and ultimately paid RTG $4,989,502.68 (HST included) for the month.