By Anel Lewis
The City of Cape Town yesterday bottom-lined the cost of implementing and running its public transport system - and the new price tag is R4,6-billion.
When the Integrated Rapid Transit (IRT) project's budget was first mooted in 2008 the cost was estimated at R1,3bn.
The project has more than tripled in cost, and R16-million of the amount needed for this financial year will be borrowed from the city's rates revenue and repaid in February when the national government allocates its grant funding for transport projects.
The latest adjustment comes after "further refinements" of the IRT's cost estimates.
The city has R584m in hand for a project that will cost an estimated R892m in the 2009/10 financial year, leaving it with a R308m shortfall that will be funded by external bridging finance of R272m.
The latest cost hike of R4,6bn for Phase 1A, which includes running costs until 2013, was revealed yesterday when service delivery integration submitted its first monthly progress report on the IRT to the city's finance portfolio committee.
However, the estimated annual deficit for running the IRT has dropped slightly from R125m to an expected R118m.
According to the risk register compiled for the IRT, the likelihood of the city being unable to fund the project while grappling with low passenger demand, high operational costs and limited skills are "almost certain".
The city is therefore in "ongoing" discussions with the national government about securing more funding.
But the risk register has warned that financial constraints will burden ratepayers and could result in an inefficient service.
City executive director of transport Eddie Chinnappen resigned in December last year, before having to face a disciplinary hearing for his role in the miscalculation of the project's cost.
Mayor Dan Plato said then that fraud and financial maladministration were not to blame for the cost bungle that has forced the city council to downscale the first phase of the project.
He blamed the miscalculation on poor project management and misinformation about cost escalations. Only one official has been held to account for the budget inflation.
A more "financially prudent" version of the first phase of the IRT will be implemented first, so that the city can meet its 2010 Fifa transport requirements. These include the inner city service, an airport to central city shuttle service and Bayside route.
Further projects, expected to cost R3,5bn, will continue as funding becomes available.
Responsibility for the IRT has been shifted from the transport directorate to the executive director of service delivery integration Mike Marsden.
In his report to the finance portfolio committee, Marsden said: "Procurement of the IRT requirements for a 2010 World Cup event transport service is progressing. While the programme is exceptionally tight, there is no reason with sound management that the deadline will not be achieved."
Although revised national allocations will only be gazetted in April, there are "strong indications" that the city will get more funding in the next three years.
The expected amount for 2010/11 is R850m, up from the previously indicated amount of R647m. However, this does not mean that all the funding will be available for the IRT. The money will have to be split between the IRT and the transport, roads and stormwater directorate.
But it does indicate national government support for the project. The city has been warned by KPMG and its risk assessors that the "possibility" that the full IRT will not be rolled out would have "catastrophic" consequences.
These would include delays in projects being completed, with "knock-on" effects on the city's reputation.
A break down of the IRT costs
Total cost of implementing and running Phase 1A for the first three years is an estimated R4,6-billion.
Estimated annual operating deficit for running the IRT is R118-million.
Total expenditure in 2008/2009 was Rö million.
The projected expenditure for 2009/2010 is R892-million.
The city has available funding of R584-million.
The funding shortfall is R308-million, of which R292-million will come from bridging funding and R16-million from rates revenue.
Volvo has a R101,5-million contract to supply 43 IRT truck buses.
Contracts valued at R668-million for infrastructure projects have already been awarded.