“Alternative Financing” and the GTTA

At its November meeting, the GTTA approved a report on “Alternative Financing and Procurement” together with a list of projects that will be studied for this approach. For those who seek to understand Queen’s Park’s schemes for transit infrastructure funding, their report provides interesting reading.

In brief, Ontario seeks to have private sector partners undertake financing and possibly construction of new infrastructure up to the point that they go into service.  At that point, the accumulated cost becomes, in effect, a mortgage on the infrastructure to be paid off over an extended period.  This gives the private sector partner (ironically, possibly a large public sector pension plan) a guaranteed long-term return while nothing appears as a charge on the Province’s books.

In the short term, this keeps the budget looking rosy, but as any reputable accountant will tell you, future commitments must appear in your long-term budget plans.  Someone has to pay for all that infrastructure eventually.  In the past, the cost of transit infrastructure (i.e. the interest on capital debt) was buried in the municipal and provincial budgets rather than appearing as a line item in the transit operating budgets.

Long term, we risk having a future government whose support for transit is, at best, tenuous who might point to all the debt servicing costs and say “don’t ask us for operating subsidies, we’re already paying a bundle for your capital debt”.  This sort of remark has already shown up in some budget papers in past years at the municipal level in Toronto.  It’s the invisible part of the iceberg of transit financing.

The projects to be studied for alternative financing fall into two groups diagrammed on maps on the GTTA site.  As I mentioned in my accompanying post on the “Quick Wins, Phase 2”, the concept of “regional” transit has become rather expansive.  Projects are included that might, in the past, have been treated as “local” and outside of the GTTA’s purview.  This comes partly from a recognition that transit anywhere helps the region as a whole, and partly from the desire to move as many projects off of local budgets as possible.

The projects that will be evaluated for AFP include:

  • SuperGo electrification of the Lake Shore corridor.
  • GO rail expansions include using the CPR North Toronto subdivision and, possibly, the station at Summerhill to serve new routes on CPR branch lines.
  • LRT expansions include the Transit City lines as well as the Hurontario and Dundas lines proposed for Mississauga.
  • Converting the SRT to use Mark II RT cars and extending it north to Malvern.
  • Richmond Hill subway extension
  • VIVA extensions in various corridors and conversion to exclusive lane operation.
  • Circumferential  GO/GTTA BRT network

This is a very large bundle of projects.   As usual, Ontario plans to call on Ottawa for 1/3 funding.  Whether they would provide anything, either directly or through their own AFP scheme, remains to be seen.  The problem remains that any current spending creates a future debt service charge, and Ottawa has always been loathe to fund what are, in effect, ongoing operating costs.

None of these facilities will begin operations, and therefore become charges on various operating budgets, until after the next provincial election in 2011.  In the short term, the creative accounting allows us to launch into a rosy transit future, but this must be sustained with solid, ongoing funding for operations.  A problem for politicians still in their infancy, but a serious concern for those observers who, like me, take the long view of transit’s financing and growth as a major part of the GTTA.