The Mythology of “New” Federal Gas Tax Subsidies

Recently, Canada’s new Finance Minister rolled into town and visited TTC’s Hillcrest Yard for a celebration of the “new” gas tax revenue Toronto will see from Ottawa. Even Rob Ford was there, although he studiously avoided being photographed with the much-hated new streetcars his buddies, the feds, are helping to pay for.

TTC CEO Andy Byford gushed about all this new money and what a difference it would make to Toronto.

In a reply to a comment in another thread, I looked under the covers of the announcement and found it wanting. The issue is important enough that it merits a post of its own.

The Announcement

Ottawa has concluded a national agreement to which Ontario, the Association of Municipalities of Ontario, and the City of Toronto are partners. This will extend the gas tax regime a further 10 years to 2024, with annual indexation by 2%.

The program is not just a transit subsidy scheme, but an infrastructure support program for a wide variety of projects.

The total pool of federal gas tax dollars is divided by population, and within Ontario there are three blocks of funding: one goes to the AMO for allocation to all municipalities, one goes to Queen’s Park for projects in areas that are not incorporated towns, etc., and one part goes to the City of Toronto.

At the beginning of 2014, Ontario’s population was 13.6-million, while Toronto’s was 2.8m. On a per capita basis (the allocation scheme for the funding) this will bring Toronto just under $800m over the next five years, less than $10m more per year that we have received in recent years.

We often hear about the deficit in funding TTC’s capital plans which stands at $2.7-billion as of the 2014 capital budget report. Turn to the second last page of that document, and you will see that the TTC already provides for $154m/year in federal subsidies out to 2023. In other words, the deficit is only $2.7b because this “new” subsidy was already counted back in November 2013. The hole is only slightly less daunting if we actually get $160m/year, but the extra won’t go very far.

Yes, it’s nice to have continued funding confirmed by Ottawa, but this is not a new spend for them, merely the continuation of an existing program. The TTC’s budget woes are just as bad this week as they were before July 11.

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14 Responses to The Mythology of “New” Federal Gas Tax Subsidies

  1. Trevor says:

    Emperors. Clothes.

    Plus ça change….

  2. Malcolm N says:

    Well at least, it is new, in the sense that at least it is not going to run out next to immediately. However, clearly the federal government has the fiscal room to make substantial investments in the major cities, where major infrastructure is now required.

    There has been a sustained building boom in the GTA, Calgary and to some degree Vancouver. Clearly money needs to flow based on the fact that in these areas there are substantial new needs. Flowing money just based on population is a broken model, as growth is what drives major infrasture expansion requirements.

    Ottawa needs to stop allocating money to specific projects, and provide money in a sustained capital fund to support new infrastructure. Canada is also not seen to be doing much to redefine its infrastrure to be less fuel intensive. Calgary needs to run an entire new LRT line, which will also realistically require a tunnel in the core, and expand to 4 cars accross the city. Ontario needs funding to support a major expansion in transit across the GTA.

    It would be quite feasible to set up in the federal budget a major capital fund for transit specific support, aimed at the large cities to “reduce dependence on cars” where it makes the most sense. If the federal government set up $5-6 billion, the GTA’s annual take should be about 2, matching the province, and permitting a $4-5 billion rate of spending. This would permit money to support projects aimed within Toronto, and regionally.

    Money should also be permitted to flow to dedicated holding accounts so that it is in the possession of those actually managing the build to be dispersed as construction proceeds, and not subject to changes at the whim and will of the political currents of the day.

    At that level of support, you could proceed quickly with the smartest projects. If the EA is done, shovels need to be in the ground. This is true in Toronto, and Calgary. Toronto needs to get the EA done on a DRL, and to get shovels in the ground ASAP. Spending on the smartest projects at a rate of $4billion/annum, should actually make a substantial difference, as long as we stay away from Rolls Royce type projects. Convert transit only rail corridors to LRT? Build out most of the proposed LRT projects!

    This of course would still leave a very important issue, the need for a stable fund for transit maintenance and operations. Unfortunately there is little in the way of political glory here.

  3. Bruce K says:

    This looks like it was just a photo-op for two politicians who will soon be facing an election.

    Steve: No! Surely you jest!

  4. Bob Patrick says:

    Steve, you do realize Harper has members in the GTHA? Where in the world did you ever think that he won’t fund transit in GTHA?

    Steve: Yes, I realize there are Conservatives in the GTHA, but the context of my article was that some folks (including some of the more gullible media) seemed to be taking this as if it were “news”. The important point is that the TTC has already built the expected level of funding into its plans published last fall, and so the shortfall is just as big today as it was before the announcement.

    Real news from Ottawa would have been a substantial increase in funding, but that’s not what we got.

  5. Bob Patrick says:

    Steve, why does council lack so many bold moves? They can’t even agree to ban cars during rush hour on King and Queen?

    Steve: Councillors are elected locally, not city-wide, and they look after local issues first, with few exceptions. As for King and Queen, banning cars during rush hour is overkill, especially if this were extended to parts of the route where congestion really is a problem. Guess what — it’s not at King and Bay. Also, there is severe congestion outside the core and outside the peak that a “downtown” peak period ban would not affect at all.

  6. Malcolm N says:

    Steve said

    “Councillors are elected locally, not city-wide, and they look after local issues first, with few exceptions. As for King and Queen, banning cars during rush hour is overkill, especially if this were extended to parts of the route where congestion really is a problem. Guess what — it’s not at King and Bay. Also, there is severe congestion outside the core and outside the peak that a “downtown” peak period ban would not affect at all.”

    The question becomes what does it take to get the council involved in the overall city as its focus and interest. How can we get past pet projects and realization as to what will be required.

    Also Steve would it make sense to look at special permits to drive at peak in limited areas of the city. This of course a two part question. Can you reasonably justify such a limitation, and in car crazy North America, actually begin to approach such a limitation.

    Steve: I don’t agree with such an approach because Toronto is not London: it does not have a business core with dense transit service and a long-standing shortage of road capacity. The King car encounters delays, for example, in Parkdale at locations where there is not enough intersection capacity to handle the traffic. Notable examples are Jameson (Gardiner bound) and Queensway westbound. The problems here are not parked cars, but more cars trying to get through the intersection than there is time to handle them. Jameson was affected when the Dufferin bridge was closed because traffic that would have used Dufferin was added to the load at Jameson. There are cascading effects all over the place whenever there is a planned or unplanned blockage, and often these are not parked vehicles, illegal or otherwise. There are motorists who want to drive through the King neighbourhoods, but this is a residential street, not an arterial.

    The TTC acknowledges that the scheduled service on King does not reflect actual driving conditions, and they would need many more streetcars that they don’t have just to field service that could deal with actual traffic conditions. That said, some of these conditions are transient (special events, construction projects, accidents, breakdowns) while others are chronic. We have not planned for known events. For example, the simple fact that diverting via Queen and Parliament around the Don Bridge takes longer than a straight run along King was not provided for in the schedules, and the effect of adding the 501 Queen diversion to the already stressed King/Spadina intersection in May was not recognized until after this misguided plan was actually implemented. There are many problems, but a few are “own goals”.

  7. Malcolm N says:

    Steve said:

    “The TTC acknowledges that the scheduled service on King does not reflect actual driving conditions, and they would need many more streetcars that they don’t have just to field service that could deal with actual traffic conditions.”

    If they could actually run the scheduled service, clearly it would have an effect on crowding on the cars, would the service improvement be enough to have an impact on the volume of car traffic? What else can reasonably done to make the trip faster, or more important predictable?

    Steve: That is an attractive prospect, but there are several interacting problems at work including headway reliability, bunching caused both by overloading of “gap” cars and by traffic signals, construction projects both on King and elsewhere that cause transit and/or road traffic to divert to a path adding to congestion, and others. This is also not a peak-only problem. Unscrambling it, presuming that this can be done, will be challenging. The basic point is that there is no single “magic fix” that will cure everything in one go.

  8. Malcolm N says:

    Steve said:

    “The basic point is that there is no single “magic fix” that will cure everything in one go.”

    I would not expect any magic fixes. Any transit lines or traffic improvement will likely only have a marginal effect. However, many marginal effects may add up to a real improvement. I would not expect any single road or transit change to have a large impact.

  9. Malcolm N says:

    Steve going to the no single magic fix, has anybody done a study of wait times at the various intersections? Has there been any recent look at re-aligning the various signal times along the way? Do or even can they make any allowance during construction?

    Clearly, while there is no way that realigning the time on a couple of signals will solve the ills of the world, it might achieve a very slightly better balance.

    Steve: I am working with the City Transportation Department and the TTC on precisely this problem — what factors affect the movement of streetcars along King. The study is not yet public, but anyone riding the route knows that the signals do not favour transit in many locations.

  10. Malcolm N says:

    Steve said:

    “I am working with the City Transportation Department and the TTC on precisely this problem — what factors affect the movement of streetcars along King. The study is not yet public, but anyone riding the route knows that the signals do not favour transit in many locations.”

    While they should certainly favour transit, the question is, are they aligned now on a vehicle count basis? Or is their current timing based on an older traffic counts?

    What is the impact of the areas that have curbs that come out to the car (parking in the areas between) on running speed versus having 2 lanes with parking in the right lane? Does this configuration slow the Streetcar down or speed it up? Also has city transportation ever looked at red light cameras (is there such a thing as a left turn camera?) for the King and Queen routes? Are they looking at cameras at more than Queen and Jameson, and King and Jarvis? I realize they are extremely expensive, however if well placed do they make a difference?

    Also how much difference does the cars being heavily or overloaded make in run time – it has always seemed longer, but it is actually substantial?

    Steve: The work is in progress and I do not want to comment on it at this time so as not to prejudge the outcome.

  11. Malcolm N says:

    Steve said:

    “The work is in progress and I do not want to comment on it at this time so as not to prejudge the outcome.”

    I certainly appreciate your position. I hope that the overloaded cars, actually do represent a significant portion of the delays, simply as the new cars will therefore represent a notable improvement to route performance. I am concerned however, that this particular line suffers now from a similar problem to expressways, in that the discouraged users will fill any moderate increase in capacity virtually immediately. I worry that a very large increase in capacity will be required in order to have a notable effect (ie not until complete line changeover) and even then continued growth will put pressure quickly on the line again.

    I suspect that the TTC had better be ready in the west to add considerable service to Queen in the next couple of years, so that it runs on a headway similar to that of King. In the east I suspect that at the least the Cherry bus south of King will need to run on a much more frequent basis. In addition to running additional cars on the King route itself.

  12. Malcolm N says:

    Steve, what are your thoughts on the degree to which funding transit in the major cities is a federal vs provincial issue?

    Given the very high level of tax power, and the large tax take from a handful of major cities in Canada I would have thought that there would be a awareness of the issue, and the major infrastructure requirements involved.

    Would it make sense for the federal government to have a program for infrastructure catch up aimed primarily at the high growth areas of Canada, notably Vancouver, Calgary, northern Alberta, and Toronto? I suspect that even a handful of billion per annum would go a long way to make a solution reachable.

    Steve: The Federal government has programs like that, but they turn the tap on and off at their whim, and it’s not a dedicated funding stream that municipalities can count on. That said, I think there is too much of the “Ottawa should pay for it” attitude as an avoidance of embracing the degree to which local funding can do some of the job. The real problem is at Queen’s Park where years of cutbacks have left us with a much lower funding rate for transit than we had under the Davis formula 40 years ago. Some of QP’s problems come from cutbacks in Federal funding transfers, but not necessarily in the transportation sector. In other words, it may not be a case of getting Ottawa to fund transit, but to do a better job in areas where they once had a stronger presence such as health care, thereby freeing up provincial money for transit.

    The financial limits in Ontario are fairly close at hand, and to some degree that is a question of what in my mind were some questionable spending choices, but to a great degree, the province has much more limited tax authority with more broader responsibilities. A targeted program of $5-6 billion nationally/annum would make a huge difference nationally, and would rapidly address the biggest problems in the country. Toronto needs a large one time boost to catch up, and more money needs to go to major repairs, refurbishing and maintenance just in order to maintain its current capacity. Allowing the full conversion to rapid transit/ high frequency commuter transit to happen soon is important, before people just accept that this is normal.

    I would love to see a real plan, with detailed stop information, for RER on at least Lakeshore East and West, as well as Stouffville, and Kitchener/UPX. A real idea on user friendly fares and fare integration with the TTC, MiWay, Viva etc.

    A significant federal contribution would help transit here, in Calgary, and Vancouver. It would provide a platform on which the provinces and regions could build. The investments required in each are very substantial, and I suspect that they would also result in an increase in growth, and a reduction in EI. The province knowing that there would be say matching funds up to 2 billion per year for regional express rail or LRT or BRT would likely be very quick to find and use the money in a transformative way.

    The next issue of course is how to ensure that such funds are not just hijacked for pet projects.

    Steve: The Feds (and QP too) love to entangle their funding arrangements with “safeguards” to avoid money going to projects that don’t meet the aims of whatever program is funding them. Oddly enough, when it’s an Ottawa pet project, the rules rarely apply.

  13. Malcolm N says:

    Steve said:

    Some of QP’s problems come from cutbacks in Federal funding transfers, but not necessarily in the transportation sector. In other words, it may not be a case of getting Ottawa to fund transit, but to do a better job in areas where they once had a stronger presence such as health care, thereby freeing up provincial money for transit.”

    Yes, Ottawa did step back, however in some of these areas they have started to reappear. However, along with leaving a shortage of money, I think your point of money disappearing on a whim is too valid.

    Steve said:

    “The Feds (and QP too) love to entangle their funding arrangements with “safeguards” to avoid money going to projects that don’t meet the aims of whatever program is funding them. Oddly enough, when it’s an Ottawa pet project, the rules rarely apply.”

    I would have said almost the opposite, they current system seems to ensure that they are ensnared with rules to make sure that they are only spent on high visibility pet projects. It should be that the higher levels of government should be able to act in a broader way, and yet they seem worse, more perochial.

    If anything the rules would need to be set, to limit the feds and province so that the funds were tasked to broad goals, and then all politicians were required to step away. The request for proposal should stop setting specific outcomes, and start looking at the desired tasks/goals that the purchase/project is intended to achieve. Closer to the procurement process that the F35 managed to dodge the first time. If this is done properly, with enough public input, it will be obvious and objectionable to all when they push to put the fix in (like it has been in the F35).

    These project need to be designed, agreed by the broad region, and then the money placed in a construction holding fund.

    Steve: Pols hate holding funds that they don’t control, for obvious reasons.

  14. Malcolm N says:

    Steve said:

    “Pols hate holding funds that they don’t control, for obvious reasons.”

    Yes, but are there any good reasons that do not involve using taxpayer money to get credit and win elections, as opposed to best governance. It really seems we need to have people in office who are not really all that fond of being there, where they are not primarily concerned with re-election while in office, and are more concerned with good governance, best practice and best reasonable outcome.

    As you have said before, need to do a major study of all reasonable lines in terms of a network not each line in isolation. Funding needs to be dedicated to a network solution, not a line solution.

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