In this section, we will see the complete mess that Toronto’s transit funding is in. Years of putting off a proper funding arrangement coupled with a naïve hope that Ottawa will fund 1/3 of capital projects leaves us with a huge menu of projects and expectations, but no money to pay for them.
As before, the material is the TTC’s presentation, reformatted to simplify it in this medium, with my comments appearing in italics.
- CSIF signed; Transit-Secure signed; TYSSE pending
Ontario Bus Replacement Program
- Revised; now 1/3 funding but amortized over 12 years
- Requires City adjustment to Debt target for delayed timing of payment
- Funding provided for Quick Wins re YUS Subway Capacity requirements
- Consideration of LRV Cars, SRT, TCP Initiatives pending Regional Transportation Plan in Fall 2008
- No current commitment for planned award in Fall 2008
- Federal reduction for population change for 2010-2013
CSIF is the Canada Strategic Infrastructure Fund.
You can see how Queen’s Park is attempting creative accounting by paying its share of the bus replacement over the nominal life of the buses. This stretches out payments into future budget years, but if the same approach is taken to other projects, the result is the same — a mountain of transit payments that Queen’s Park won’t be able to afford. Also, this type of accounting may violate recent principles for the public sector if it hided an unavoidable debt as a future budget requirement.
Note also the expected reduction in gas tax revenue due to population shifts.
Needs are covered $83M surplus
LRV contract subject to funding commitment
Projected shortfall with funding assumptions $807M
Funding assumptions not yet secured $621M
Base Funding Shortfall $807 million
Unsecured Funding: Provincial Long Term Funding $249 million Metrolinx ATO Funding $ 20 million Federal BCF Funding $352 million
Total Funding Shortfall $1.428 million
This is just for the basic “keep the lights on” projects, never mind anything new like Transit City.
HOW ADDRESS SOGR FUNDING GAP?
- Okay for 2009, problem in 2010 and beyond
- Need funding commitments from Provincial and Federal governments
- Review linkages between base SOGR capital program and Move Ontario 2020. Benefits include:
Move Ontario is proceeding
Approach consistent with expectations
TTC Base SOGR capital program gets support
- Consider Strategic Funding Packages
- 204 LRVs in base SOGR program $1.25 billion ($609 million in 2009-2013)
- Provincial and Federal funding required to proceed (one-third each)
- Potential joint TTC/other GTA procurement for Move Ontario 2020 vehicles
- Consider alternate financing options
Note again the reliance on Federal funding. “Alternate financing” includes schemes such as leasing or some other mechanism to shift the debt from the public to the private sector. All this does is to convert a capital debt into an ongoing operating budget commitment, and that violates accounting standards. A debt is a debt is a debt.
Combine SOGR project with Move Ontario 2020
SRT vehicle replacement $139 million (2009-2013) SRT conversion $221 (SOGR subtotal) $360 million SRT Extension / cars $685 (Project total) $1.045 million
- $1.7 B combined total project could be considered for funding directly by Move Ontario 2020
- Third party could handle some or all elements (eg. procure cars, convert infrastructure, extend line)
In case anyone thought my claim in Part 1 that the SRT project is a scheme to shift this mode to the private sector (for which read Bombardier as they are the purveyor of this technology), it’s right here in black and white. This also explains some of the pressure for a “metro” in the Eglinton corridor in Metrolinx’ plans replacing the proposed LRT from Transit City. Yet another sop to Bombardier that will divert billions of public money from other projects.
- AODA Provincial goal of full accessibility by 2025
- TTC goal – all facilities and services accessible (Services 2010/Stations 2020/Light Rail 2018)
- Need Provincial commitment to long-term sustainable funding for accessibility
Easier Access Phase III ($157 million in 2009-2013)
AODA Projects (est of $36 million)
Wheel Trans Vehicles ($67 million)
Wheel Trans Operating
- Funding of $140 million included under CSIF
- TTC working with Province and GTA Transit Agencies on GTA Farecard Project
- TTC Smartcard Business Case Analysis -June 2007
- TTC report back anticipated by early 2009 after Provincial response on analysis of Provincial farecard system & comparison to June/07 review
- Current estimate of TTC Fare system implementation cost in order of $365 million
STRATEGIC FUNDING PACKAGES
2009-2013 IMPACT ON BASE CAPITAL PROGRAM FUNDING SHORTFALL
1. Streetcars $953 million 2. SRT 360 3. Accessibility 204 4. GTA Farecard 24 Total $1,541 million
- TTC OPERATING
Not fully funded
- Need increased subsidy to:
Move forward with RGS and support City’s Official Plan
Operate new lines as they come on stream
By this point in the presentation, I was getting seriously depressed, but there’s more.
TORONTO-YORK SPADINA SUBWAY EXTENSION
- $2.634 billion over 10 years (to 2015)
- Provincial and Federal funding confirmed
- EA approvals received
- Contribution Agreement pending
- Project team and reporting being set up
- Continue to progress design phase into 2009
The Toronto-York subway represents about 10% of the total capital needs over the next decade, but holds most of the committed funds. This is the danger of project-based funding. Our “partners” say “we’ve given you your subway, now bugger off”. That’s exactly what happened on Sheppard, and it’s here again with the Spadina extension.
BELOW THE LINE (over 10 years)
- M02020/ Transit City Plan ($13.75 B)
- Other Recommended ($674M)
- Waterfront – ($355M)
M02020 / Transit City Plan Initiatives $13.750 billion over 10 years (to 2018)
- Under Provincial MoveOntario 2020 funding of $17.5B announced June 15, 2007 for 52 Rapid Transit initiatives in GTAH
- EAs and construction for new LRT lines
- LRV facility requirements / New LRV Cars
• Subtotal: Transit City Plans $10.13B
- SRT Extension / Cars ($1.2 B)
- Yonge North Subway Extension ($2.4 B)
• Subtotal: Other M02020 $3.62B
Move Ontario, like the TTC’s own projects, presumed 1/3 Federal funding. Ottawa has already been quite clear that new transit money is not in the pipeline, and plans based on such funding are not credible. Add to this the understated cost estimates in Move Ontario and Metrolinx proposals for additional projects in their White Papers, and we have a big problem with funding transit capital programs for the GTAH, not just Toronto.
Other TTC Recommended
- $674 million over 10 years (to 2018)
Bremner Streetcar Line Expansion ($195m)
Integrated Ticketing System ($225m)
Energy Conservation ($30m)
Industrial Facility / Subway Car Cameras ($79m)
AODA Initiatives ($39m)
Toronto Coach Terminal ($22m)
The Integrated Ticketing System is a project to hold the cost overrun in the GTA farecard plan. This is the difference between the original and current cost estimate.
As for Toronto Coach Terminal, why is the TTC even in this business? The existing Bay Street terminal has been propped up by TTC loans for years, and the only way we will ever see this money back in the TTC’s account is to sell the land. Why should the TTC be involved in a new coach terminal when this is clearly a Metrolinx responsibility?
And, no, I have no idea what the “Industrial Facility” is all about, although I will try to find out.
- $355 million over 10 years (to 2018)
Union Station New Platform ($127m)
East Bayfront / West Donlands ($217m)
The Portlands line is cheap compared to the rest because it is a relatively short extension, all on the surface, and it does not include any major structures or vehicles.
- Capital Program:
consistent with Commission and City Council approved plans
budget envelope largely unchanged (+1.6%)
- Long-term, stable a predictable capital funding is required:
2009 budget affordable within City debt guidelines
$1.4 billion funding shortfall for base program in next 5 years
Support of Strategic Funding Packages will address shortfall
- Additional funds must be secured to proceed with Transit City, MoveOntario 2020, Waterfront, Other
- Secure LRV Funding before award this fall
- Follow-up with Province
Long term funding agreement required
- Follow-up with Federal Government
BCF program funding to be confirmed
Thank you for reading this far if you are still with me. Normally I wouldn’t publish infomation like this in such excruciating detail, but I wanted people to see how bad the situation is with the TTC’s own document. It would have been simpler if it were online, but they have not yet mastered the art of publishing everything that appears at meetings online before, or at least immediately after the sessions.
Soon we will see the Draft Regional Transportation Plan from Metrolinx. How any of this will be paid for is a huge question, although somehow money will be found at least for the pet projects. The big question will be whether we continue on a project-by-project basis grabbing all available funding for one or two projects with the right political and commercial backing, or whether we will make real choices about transit needs and recognize that the whole system, unglamourous though that may be, needs major improvements.
Sad…. very sad. Enlightening, yet sad.
Is there a big cost return on the Bay Street Terminal? Does the 22 mil mean that we will be making a 10 to 20 % return on our bucks? If so let it ride, if not , give it to the free parkers and let them look after it!!
Steve: According to the financial statements, Toronto Coach Terminal made less than half a million in 2007. Meanwhile, it continues to accumulate interest on a loan from the TTC to the point where there is more interest than principal. The only way we will ever see the money is to sell the place.
Why we should be putting $22-million into either this terminal or a new one is utterly beyond me.
Maybe they’re counting on a Fall election?
Steve: Well the way things look, it’s probably more of Harper with at best a slightly stronger opposition. Dion hasn’t made any warm cuddly noises about supporting cities, certainly nothing on the scale that the TTC budget or MoveOntario implies.
The sooner we stop building assumed funding from Ottawa into our transit planning, the better.
What is the history of the “3 levels x 1/3” funding formula? How much of the existing TTC and GO infrastructure has been built that way?
Another point: if relying on Ottawa to fund 1/3 of all capital costs is unrealistic, then are there any particular projects in the pipeline (save the Spadina subway extension) that are more likely to get 1/3 funding from the Feds?
Steve: No GO/TTC infrastructure has been built on a 3 x 1/3 basis. This formula was concocted during the late days of the Liberal administration in Ottawa to show the level of funding Toronto hoped to get from that source. Even the Liberals didn’t bite for the simple reason that a 1/3 share would leave them open to huge claims for funding across the country.
Project-based funding inevitably triggers the need for a complex project approval process, and the Tories require that any application for funding include a business case analysis of various alternative delivery schemes (e.g. PPP’s). By contrast, earmarked funding streams such as points on the gas tax have a known, predictable value and are not tied to how any specific project is delivered.
The York/Spadina extension has Federal funding based on 1/3 of the 2006 cost estimate of $2.090-billion. Ottawa has paid $697-million into the trust fund for this line, and that’s all they will pay. Any cost increases have to be paid out of interest earned on that contribution. The estimated as-spent cost is estimated to be $2.633-billion up to 2015, and the Federal portion will be lower than 1/3 by the time the line opens.
You can read about some of this process in the TTC report on the Project Delivery Strategy.
Btw, 697 million invested at 3.5% for 10 years would earn about 286 million in interest. Since the principal will be spent as the project goes forward, the expected interest should be cut in half, to 143 million. The total contribution comes to 697 + 143 = 840 million.
This is less than 1/3 of costs (2,633 / 3 = 878 million), but not much less.
Steve: Yes, this works provided that the project actually comes in on budget. We shall see. There are almost always add-ons to projects like this, and inflation in the construction industry is running ahead of basic interest rates due to shortage of capacity. The real question is how big the contingencies are in the original budget to absorb this sort of effect.
One thing I don’t understand, we know the average bus lasts 18 years, and the average streetcar and subway car last 30 years. This means that the TTC should be replacing 1/18th of the bus fleet, and 1/30th of the streetcar and subway car fleets, every year. This does 2 things, it makes it easier to get money, because you looking for smaller amounts, but every year, when you place orders, you make orders for delivery and payment over several years. It also means a smoother cost for vehicle maintenance, in that you know part of your fleet is old, part is new, and most are in between. This is exactly how private companies that maintain large fleets do it.
Steve: This assumes that a company has a fairly static fleet size that can be rolled over annually. However, the bus fleet went through a huge expansion in the late 60s and early 70s with the buildout of the suburban bus network following the BD and YSNE subway construction. This created a bulge in the bus fleet, by age, that came up for replacement by the late 80s. At that point, we were into an era of less than robust vehicle designs as well as a gradual cutback in service.
The large bus orders of the current decade come from a combination of the second-generation echo of that original suburban expansion, a backlog of vehicle requirements from waiting for the industry to produce something more reliable, and the start of building the fleet back up to the level it was at 20 years ago.
Buses can be bought as a commodity because there are production lines running and all the TTC is doing is reserving space in the queue. Rail cars are not the same, and they are all one-of orders from a manufacturer’s point of view. Another problem we would find with small annual car orders is that the underlying technologies would change from year to year and there would be considerable variation in the fleet. This is especially true for the electronic subsystems.
As for projects, a similar process could be used, you plan to build a small portion every year, based on what you will need in the future. Say in 1955, then TTC would have committed to 1 mile of subway, and 5 miles of new streetcar lines every year, we would now have the Sheppard line mostly completed, and most of transit city would be built already.
Steve: Many have talked about this sort of scheme, but it requires two things. First, we need to agree on the network we are building. The political discussions of the past decades have not been pretty as competing visions of what constitutes a “good” network and regional squabbles over “me first” delay commitment to any line. Second, we need reliable funding. With the ups and downs of the economy and changes in government at Queen’s Park, the TTC gets what it can from year to year, and capital projects inevitably required political blessing. Can you say “Spadina/York subway”?
If the TTC had a dedicated revenue stream such as points on sales tax, it could plan a multi-year construction program, and individual project approval would be less contentious because we wouldn’t be debating which subway we would build once a decade or so. In theory, this is the sort of thing Metrolinx will be advocating so that we can plan to build networks, not projects. Whether this will be accepted politically is another matter.
Steve wrote, “The sooner we stop building assumed funding from Ottawa into our transit planning, the better.”
This is another side effect of the Spadina Extension leading to a lack of funding for other projects: aside from it being a waste of money (which could do so much more elsewhere), it means that everything else uses the three-thirds funding formula as some sort of holy grail.
As I recall, when the province announced their third for Spadina, they required Toronto and York to sign on by a deadline. Toronto and York bickered over how much each will pay, coming up with a 60/40 split that neither was happy about, but they figured the federal portion was a pipe dream and that this would never proceed under this formula. A year later, the feds kicked in their third (third based on the then-current figures) and all was set. Now, everything revolves around this formula like it was “the way we always did it”.
I assume you don’t blame the TTC for the funding problems. They are right to place these items in the budget in order to make the case for funding.
It is the federal and provincial government who have to step up. Instead of an ambiguous pressure on the parties for more money, we should stand up and say the NDP is the best party to vote for in the next election if you want more federal funding for transit.
Steve: I hate to say this, but even though I live in Jack Layton’s riding, I am not holding my breath for more money from Ottawa even if we had a Liberal/NDP coalition. I support Jack as my MP, and was glad that he managed to squeeze some money out of Paul Martin. However, the real issues are much more basic: neither of the major parties has much interest in large-scale funding of transit federally, Queen’s Park is retrenching due to the changing economic climate, and the City is not exactly flush with money either. We have to produce plans that show the real scope of our needs, but these must be tempered by the funding available to build.
Meanwhile, the NDP has to watch out for erosion of its voting base by the Green Party, a group that seems to love the environment, but also wants to be fiscal conservatives (in the small “c” sense). This is not a recipe for massive investment in transit infrastructure.
If the federal and provincial government where prepared do fund a bad idea, like the York subway, I don’t see why they wouldn’t eventually fund good ideas like Transit City. Especially in light of the urgent need to burn less fossil fuel.
“We have to produce plans that show the real scope of our needs, but these must be tempered by the funding available to build.”
I don’t think there is much in this budget that you think should be “tempered”. What would you change, besides the SRT? It’s probably too late to change the York subway.
Steve: I am speaking of plans in the broader context of not just the TTC but also Metrolinx. Definitely the SRT needs to be rethought, and the Metrolinx proposal for an Eglinton “Metro” is completely irresponsible given both the likely demand and the cost.
“neither of the major parties has much interest in large-scale funding of transit federally”
So you shouldn’t vote of either of them. The NDP have a plan to provide $840 million for transit in Toronto over four years, which should cover more then half of the shortfall. That money wouldn’t be for specific projects and would be ongoing funding that would likely grow in the future. I believe that a Liberal/NDP coalition with many Toronto NDP MPs would be able to deliver that.
Steve: As and when there is an NDP/Liberal coalition, I will hold Jack Layton’s feet to the fire on that, but without Liberals elected in ridings where the NDP is going to come third, that coalition won’t come into being. I have no brief for the Liberals and have always been an NDP supporter, but I also don’t believe in wasting my vote. I’m lucky and can vote for Jack, but not everyone has the luxury of being able to vote NDP and have it count.