Canberrans will pay an upfront $375 million to the Canberra Metro consortium, plus an average $64 million a year over 20 years, to build and operate the much-debated tram line from Gungahlin to the city.
The final price of the project is $710 million, Capital Metro Minister Simon Corbell said on Tuesday, announcing that the contract had now been signed with the Pacific Partnerships-led consortium.
But because the payments are spread over time, the taxpayer is committed to the $375 million lump sum when construction is complete, plus an annual operations payment, $48 million in the first year and $75 million in 2038, or an annual average of $64 million over the life of the project.
Mr Corbell said initial work would begin in June and substantive work in August. But Canberra Metro chief executive Martin Pugh said while some work would begin on moving underground pipes and wires, the consortium had about six months of design to do before construction began.
Mr Corbell said the design of the terminus at Alinga Street had been "enhanced" to become a key meeting place, LED lighting and world-class design had been incorporated for stops along the route and a new public square would be built on the Northbourne median between the historic Melbourne and Sydney buildings. The square would cost about $7 million, paid for by the consortium. Fare revenue goes to the government.
"This is a very exciting time for our city," Mr Corbell said. "This is a transformative project for our city. We have to plan for a growing city. We have to plan for a city of over half a million people and while some people will continue to think about Canberra as a small country town, the reality is that we aren't."
The announcement comes after months of debate about the cost of the project and its benefits, and a row this week between the government and business leaders, who don't like the pay deal negotiated by the consortium with the construction union.
The consortium has previously indicated it would employ about 500 construction workers, 250 directly and 250 through sub-contractors.
On Tuesday, Mr Pugh said 200 to 500 construction workers would be employed. About 100 to 120 designers were working on the project at the moment.
The 12-kilometre line is a big gamble for the government in an election year, given the cost to a budget already deeply in the red, and the strong opposition from sectors of the public – evidenced on Tuesday when Can the Tram disrupted the announcement with a large protest banner.
The sign-off also sets up a stark contrast between Labor and the Liberals, with the Liberals promising to tear up the contract with Canberra Metro if they win government. Cancelling the contracts will mean a big compensation payment to the consortium, although no one has yet provided an exact figure.
Mr Corbell said the government had signed a standard termination-for-convenience clause but the payout amount would depend on the financial commitments the consortium had made at the time the contract was cancelled. He wouldn't specify a cost, dismissing questions about costs of cancellation as hypothetical.
Opposition leader Jeremy Hanson repeated the promise to cancel contracts on Tuesday and described the upcoming October election as a referendum on the project.
"We have made our position very clear," he said. "[Deputy opposition leader Alistair] Coe and I wrote to the consortium almost a year ago and said our policy was that if we form government we won't proceed.
"The biggest risk to the ACT is proceeding with a white elephant that we cannot afford."
Infrastructure Partners chief executive Brendan Lyons praised the deal and called on the ACT opposition to step away from plans to scrap the contract if elected in October.
"Everyone respects the rights of the opposition to oppose legislation but it's time for the Canberra Liberals to go back to a position of respecting contracts and the rule of law," he said.
The project was one of the key planks of the Labor-Greens power-sharing deal after the 2012 election, and the Greens' Shane Rattenbury welcomed the contract signing, saying the project took vision and courage but was necessary.
The tram would create a more sustainable, liveable and resilient city, he said.
Pro-tram group ACT Light Rail welcomed the "tremendously brave political decision", spokesman Damien Haas comparing the project to the filling of Lake Burley Griffin and the construction of Parliament House.
"Capital Metro light rail will change Canberra's future in a way that people are yet to truly understand," he said.
The Conservation Council's Larry O'Loughlin welcomed the "massive investment" in public transport.
The consortium is led by Leighton-subsidiary Pacific Partnerships. Construction is headed by John Holland, a subsidiary of Chinese giant CCCC, whose website says it is the largest listed company in the international infrastructure and engineering sector. Spanish firm CAF will supply the 14 trams and Germany's Deutsche Bahn is the operator.