WATERLOO REGION - Light rail will cost the Region of Waterloo up to an additional $25 million, largely due to delays in vehicle delivery.

The total added costs are expected to be $50 million - putting the project budget at $868 million - but the province is kicking in another $25 million.

The region's share of the extra expense will not cost the taxpayer more because it can be accommodated within the existing funding strategy.

"On an $800 million plus project, I think it's a highly satisfactory outcome," said Craig Dyer, the region's chief financial officer.

He called it a "terrific result for the community."

The region will also try to recover all the additional costs related to late delivery from Bombardier, which could ultimately lower the region's portion.

The agreement with Bombardier for 14 light rail vehicles allows for a maximum of about $4 million for damages for late delivery, but the region plans to go after all the added costs of $24.6 million.

"It will be our intention to recover as much as possible from Bombardier," Dyer said.

Even without compensation from Bombardier, the added capital cost can be absorbed, largely due to additional revenue from transit-related development charges.

That's following changes to the province's development charges act that led to an amended regional bylaw that came into effect this year, resulting in the region collecting money for the project that wasn't originally anticipated.

There were also project savings to the tune of $10.9 million, and the extra funding from the province halved the project budget increase, bringing its total contribution to $325 million.

"We have approached the federal government to seek potentially an increase in their funding share of the project," Dyer said.

The added costs are due primarily to construction variations, significant utility relocation and vehicle delays at Bombardier's end.

The service was initially expected to launch in July 2017, but that's been pushed back to the end of April 2018. The added costs for GrandLinq, the consortium hired to build and operate the light rail system, is mostly for staffing related to keeping people on the project longer than anticipated.

Also included in the new project cost estimate is a settlement recently reached with the region and GrandLinq for more than 100 construction variations up to Feb. 1 worth $28.1 million, representing about 60 per cent of the amount requested. There may be some additional requests after this date, and all the costs for the light rail project will be finalized next year.

The project contingency was small at $12.4 million, about 1.5 per cent of the original budget. That fund was incorporated into the new budget calculations.

A typical public-private partnership project would have a contingency of about 10 to 15 per cent, equivalent to between $80 million to $120 million for the Ion project.

"What we experienced is not out of the ordinary," Dyer said.

Regional staff were asked at the last budget meeting to provide an overview of the financial implications of a possible reduction to the planned urban tax levy increases to fund the light rail project.

The update on the Ion project budget released Friday looked at reducing the 2018 tax increase to 1.25 per cent from 1.5 per cent, and keeping the 2019 increase at 0.75 per cent.

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"It's possible. It's really tight," Dyer said.

Because the margins are slim, he said staff will continue to recommend 1.5 per cent for next year to regional councillors, who will look at the Ion update at the budget committee meeting on Wednesday.

"That will be up for them to consider."