The Mysteries of Capital Budgeting

A few people have left comments here asking when I am going to write about the Federal and Provincial budget announcements. From my silence, you may have assumed a big yawn, or simply too little time, or the sense that there are better things to do. Actually, it’s a bit of all three.

The TTC (and transit in southern Ontario in general) has a big problem thanks to the way governments make their announcments and finance large capital projects. It can be a real shell game trying to figure out how much money from any announcement is really there.

Rather than establishing a standing fund for transit capital projects from, say, a percentage of sales tax, governments use trust funds and other similar devices as holding tanks for money burning a hole in their pocket. Suppose you want a subway. Well, we set up a trust fund and let everyone contribute to it and, eventually, we can actually build it. Never mind whether this is really the best use of the money, it’s been earmarked and that’s what it’s for.

More subtle, however, is the accounting. Suppose you’re Ottawa and you have some spare change left over at the end of the year. Rather than paying down the deficit or lowering taxes (which would affect your revenue in future years), you stash the money in trust for a future project. This allows you to show it as an expense in the current year and have a nice press conference, even though you won’t actually have to spend it for as much as a decade depending on the project. In some cases, the money really is sequestered and earns interest that will contribute to the project, but there’s no guarantee.

Because funds are announced and allocated for projects, we have a few TTC budget lines that are flush with cash, but many that go begging. To further confuse things, these are divided into “above the line” and “below the line” items. “Above” means that the project has Council approval, although it may not yet be fully funded. “Below” means that Council has not yet blessed the project, although other governments may be waiting in the wings with contributions. That’s how pet projects get built, and there’s all sorts of jockeying to ensure that favoured schemes find their way “above the line”.

For those with the stomach to actually read through the TTC’s Capital Budget (two very thick blue binders containing more details about the TTC than even the most hardened transit fan will ever want to see), it’s important to keep in mind both the project status and the source of funding, if any. “State of Good Repair” projects almost always go “above the line” as they have first call on any available funds. Toronto has sad history with deferred capital maintenance (projects large enough that they are funded from the capital rather than the operating budget) and even now we are still making up for this in many areas.

Funding comes from a dizzying collection of programs as each government seeks to rebrand its transit spending with yet another scheme. These are often time-limited, or overlap in various ways with existing programs, and it can be difficult to figure out where the next dollar will come from. In the agenda for the March 26 TTC meeting, a report talks about the funding problems, but the detailed information from the appendices is missing.

Appendix A gives a breakdown of the various programs that fund (or are hoped to fund) the capital program from 2008 to 2012. The numbers down the right hand margin refer to explanatory notes in Appendix B. I am not going to detail these here, but if you make it all the way to the fifth page, you will begin to understand why we have so many problems with planning capital spending for transit.

It gets worse. Look closely at Appendix A and you will note three circled figures in the 2008-2012 column. Line 3 is $481-million of Provincial money that, when the report was written, had not been confirmed. Line 8 is $324-million of Federal money that’s in the same boat. Down at the bottom, is a $278-million “unspecified reduction” that the City made in the budget plans on the assumption that the TTC usually underspends on its capital projects due to generous contingency provisions, or because projects are cancelled or rescheduled beyond the five-year budget window.

The funding shortfall starts out at $420-million, but when these three amounts are added back in, it rises to $1.503-billion.

Provincial announcements made after the report was completed reduce this by $360-million to $1.143-billion, and the recently concluded agreement with Ottawa has released more funding as well. However, this still leaves a great deal to be found, and does not even touch the many “below the line” projects notably the new streetcar purchase and the SRT renovation. Funding must be in place by fall 2008 for the streetcar order to be executed with a supplier, and the SRT project requires funding by September 2009 to be started on schedule.

If you thought all of that was complicated, there’s more. Late last week, there was much confusion over how much, exactly, Queen’s Park had announced to fund capacity expansion on the Yonge-University subway. The relevant section of the Budget has a table of “Metrolinx Transit Projects” (table 1 on page “34” which is really quite near the top of the linked document), and further information about GO Transit funding on page “35”. GO is still separate from Metrolinx and its funding is not yet bundled.

The Yonge Subway Capacity Improvements total $293-million, and this is intended for the Automatic Train Control system. However, this project extends beyond the TTC’s five-year budget window, and only $189-million will be spent in that period. That’s why the TTC shows the smaller amount in its updated figures. The total cost of the ATC system is estimated at $342-million of which about $4-million had been spend by the end of 2007.

This is the sort of confusion that arises when governments announce project-based funding, but transit agencies must restate this into current and future budget years to show where top-up municipal contributions might be needed, or where there will be pressure to defer or reduce some projects.

If you are still here at the end of all of this, congratulations!

This hopelessly convoluted way of planning and budgeting for transit clearly shows it is not a priority, not an important, entrenched program, but a series of ad hoc political announcements designed to give the impression of movement on a serious problem for the GTAH. The underlying question is whether municipal, or at least regional, agencies will be trusted with spending transit funds, regardless of where they come from, or if their every move must be balanced and monitored from two senior governments.

Yonge Subway Early Closings for Tunnel Maintenance (Updated)

Updated March 30: Diagrams, photos and the project description have been added.

A report in the March TTC agenda recommends closing the Yonge line late at night for an extended period to speed up work on tunnel liner maintenance north of Eglinton.

From June 2008 to February 2009, the line will be closed from Lawrence to Finch while work proceeds with the tunnel between York Mills and Sheppard.

From March 2009 to July 2010, the line will be closed from Davisville to Sheppard (according to the report) while work proceeds from Eglinton to York Mills. The report is silent on whether a shuttle train would run between Sheppard and Finch.

The hours of early closing would be from Sunday to Friday (Saturday late evening service would not be affected) starting at 12:30 am. Continue reading

Service Changes for March 30, 2008

Updated March 30, 2008: The attached spreadsheet has been updated to include information on the projected changes in vehicle loads and the list of outstanding changes that are awaiting sufficient resources to be implemented.

One of my readers, Brent, sent in a long note with a summary of service changes that will take place in one week. His introductory comments were:

I see the service summary is out early like usual this time (as opposed to the top secrecy back before the February improvements) and it shows most of the main service changes. (Searching the PDF for “Mar-08″ and “Apr-08″ highlights all the adjustments.) I have compiled them below (I have no life!!), except for cases where there is no noticeable change and it may relate to minor trip adjustments.

Note that the Bathurst streetcar has service reductions on Saturday what with the replacement of CLRVs with ALRVs…

The St. Clair service sounds interesting. With tracks to the carhouses cut off, they’ll just run the same 7 streetcars at 3-minute intervals all day until the late evening, when presumably they’ll just park them somewhere on the ROW and run buses instead (since of course we can’t run the buses on the ROW anyway…)

One service change that doesn’t show up as a change in the schedule is the decoupling of the Evans bus from the Prince Edward bus on weekends, which means that the Evans bus will end up with a 15-minute layover (plus 45 minutes round trip traveling) to maintain a 30-minute headway.

Special arrangements for St. Clair are required because track from Bathurst Station Loop north to St. Clair will be replaced, and a captive set of cars will remain on St. Clair for the duration. These will run a three-minute headway between the two subway stations until mid-evening when the full route will switch over to bus operation.

The TTC has not posted a service advisory for this project on their site yet, but I suspect that this arrangement will carry through until June given the speed of track construction jobs of this size. Even then, until the reconstruction from Vaughan to Dufferin is completed, streetcars will be limited to serving the east end of the line.

One notable problem that the TTC has not addressed is overcrowding in the AM peak period on 509 Harbourfront. With the construction diversions, this seems to have fallen off of the radar, but there was a deputation at the TTC last year from people complaining that cars were full eastbound before they reached Bathurst Street. The new service is actually slightly worse than what was there a year ago in the AM peak, although some off-peak headways have been shortened.

As we know both from riding experience on the 509 and the analysis of CIS data for this line I published earlier this year, the schedule for service on Harbourfront is often more creative writing than reliable fact. In an analysis of the 511 Bathurst route now in preparation will confirm, layovers at Exhibition Loop are quite generous and eastbound service on Fleet is quite erratic. The TTC really needs to start treating the new residential neighbourhoods on Queen’s Quay and Fleet to good, reliable service, not as a seasonal tag end of a route serving an amusement park.