“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.

4 thoughts on ““Alternative Financing” and the GTTA

  1. With the mention of CPR (and also including CN), it’s been mentioned a couple of times that GO only rents / leases the rails it runs on, and that the rail companies often give priority to their own traffic. This sometimes causes scheduling issues with passenger traffic.

    Would it be possible for some form government to use eminent domain to ‘purchase’ certain rail lines and give them over to GO and VIA? This way the Union Station / Lakeshore corridors (amongst others) could be prioritized for passenger traffic, and rented back to CN/CPR as needed for freight traffic.

    This certainly wouldn’t need to be done for all rail lines in the GTA, but it would certainly make sense for some.

    Steve: Aside from whether they would want to do this, I don’t know if the City or Province have the ability to expropriate land from the railways. In any event, they would want a lot of money, and would claim future development rights (via land density swaps) as an integral part of the land value.

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  2. I am not a lawyer, but I don’t believe that municipalities or the province have jurisdictional authority under the Constitution to expropriate land owned by federally-regulated railways (e.g. CN and CP).

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  3. CN wouldn’t be causing such problems to GO Transit if the government had privatized only the trains, but not the tracks when CN was privatized in the 1990s. Many other countries (like European countries) that privatized their railways either kept the tracks in state hands or created a separate company who solely runs the tracks. It is because the privatization ignored passenger rail that GO and VIA can’t run as much service as they would like due to high access fees and freight train priority. (Of course this wouldn’t have helped with CP, but most of the track used by GO and VIA is CN).

    I have heard that even track financed by GO becomes the property of CN or CP. Why is this? Shouldn’t it remain the property of GO and be maintained by CN or CP, and leased to them when there is spare capacity?

    Steve: Yes, when GO pays to have tracks upgraded, the new track is the railway’s property. The alternative would be that CN would factor the capital cost of the work into the lease for using the tracks as an operating cost. It’s cheaper for GO to pay up front.

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  4. With rail corridor purchasing: There was a bill passed last year that should allow such a purchase to be possible, however, it has to be something the railway is willing to part with. From Burlington to Pickering, CN has alternative tracks it can use, so it may be concievable that GO may be able to bargain with CN on that – Hamilton has flexibility as well, but Aldershot doesn’t, as I recall. CPR is a completely different matter though, as they have no alternate routes available in the GTA for their network. The Midtown Corridor is their primary and only artery. They will never sell it, period. This corridor is sure to prove very challenging, as CPR and GO Transit don’t really get along very well. However, what I would sincerely like GO to purchase is the CPR branch that goes from Thorncliffe Park area down to Union Station (I really don’t think they use this anymore). This would bring a dramatic improvement to the performance of the Richmond Hill Line as it gets rid of almost all the useless winding through the Don Valley – the CPR track is pretty much a straight line from Queen Street to the Midtown Corridor, but the CN ones sharply meander all over the Valley. The only drawback is that the CPR track involves more bridges, which, should they want to double track, becomes a more expensive undertaking.

    In the Wynford area, where the CPR crosses the DVP, a new, slightly complicated but workable junction could connect the CPR Midtown to the current GO Richmond Hill corridor a short distance south of Oriole Station. Given the relatively small scope of the new junction, I’d definately call this a powerful “quick win” (a notable improvement in travel times on the Richmond Hill Line should result).

    This setup would also allow for a potentially far superior connection between GO Transit and Transit City lines – instead of dropping a GO Station at Eglinton along the current Richmond Hill Line alignment, drop a station at Don Mills along the CPR corridor instead (which would right beside the new junction). This would allow both Eglinton (with a veeery small detour) and Don Mills LRTs to connect to both Midtown GO and Richmond Hill corridors. It would be an excellent little hub for travel in all directions on both networks, truly a case where everybody wins, definately what Flemingdon Park could do well with.

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