Metrolinx: Too Many Fingers In The Pie

With all the attention on the Draft Regional Plan, another proposal lurks unnoticed in the agenda for Friday’s Metrolinx Board Meeting.

The agenda itself gives no indication, and the report of interest is called “CEO Report”, an innocuous title.  However, within that report we find a detailed description of the “Metrolinx Project Delivery Process” which the Board is asked to endorse.

First as a matter of process, substantive policy decisions should not be embedded in reports whose title implies a status update, unless the real desire is to hope that nobody will notice.  Second, the proposed process shows that Queen’s Park has no intention of letting Metrolinx operate as a truly independent regional authority, but instead will hold it very tightly under control by various Ministries.

Many have spoken as if Metrolinx would someday become the overarching authority for GTA transit planning, construction and operations.  Not true.  Even the proposed amalgamation of GO Transit with Metrolinx is sitting as unproclaimed sections of the GTTA Act, and my guess is that GO will fight every step of the way against being taken over by an agency that has never run a single transit vehicle.

The Metrolinx Board’s role appears to be, in some cases, to make recommendations to the Minister of Transportation about projects that should be undertaken.  The Minister may (or may not) then assign these and/or other projects back to Metrolinx for execution although it is unclear just how much control the Board can exercise from that point forward.  If the Minister wants a subway to Barrie, and wants to pay for it, it is unclear whether the Board can do anything about it.

That seems fairly simple, but there are many other steps.  Before we even get to a Metrolinx Board recommendation, proposals must be vetted through a “Benefits Case” Analysis (the quotation marks are in the Metrolinx document) to determine whether the scheme fits into the fiscal and policy framework.  The operation of this analysis is not defined, and there is no way to know whether it is inherently biased in any way.  Of particular concern is the question of how alternatives get on the table, and what would actually be analysed.

There are also Alternative Financing & Procurement Analyses that will look at how a scheme might be financed and delivered.

At this point we are only at the Metrolinx Annual Plan and related processes.  The Board’s recommendations go off to Queen’s Park for incorporation in the Budget, and after a sufficiently lengthy wait, a project may or may not be approved.  Then it has to go through procurement which may very well land back in the hands of the original proponent agency (the TTC would likely build subways, for example) even though title to the resulting infrastructure would rest with Metrolinx.

Other agencies who get their oar in are Infrastructure Ontario and other affected Ministries such as Environment and Transportation.  The whole process makes Environmental Assessments, even the old long process, look like a walk in the park.  I leave it to the serious policy wonks to read the report and write a 25-word explanation.

One telling addition to the Metrolinx logo is the phrase “An agency of the Government of Ontario”.  Don’t let that Board full of municipal politicians fool you, this is a Queen’s Park show.  The problem is that the entire process for building a menu of projects, getting approvals, arranging funding and finally building something has a complexity showing that nobody trusts anyone to do things properly.  Queen’s Park would rather create a vast machinery to study and administer projects than actually let an agency get on with the job of building a network.

I suspect that the Metrolinx Board already has its marching orders to approve this byzantine process “or else” as a precondition of money flowing for the next round of RTP projects.  Indeed, a Benefits Case Analysis is already in the pipeline for seven projects (SRT extension/renovation, VIVA, Eglinton, Finch, Sheppard, GO Lakeshore, Yonge North) even though we don’t even know what these projects will entail.  Where is the public input, the Board oversight, if a staff-run process can dictate the structure and fate of a proposal?  How can we ensure that the process looks at the network role of each part rather than a narrow project-based focus?  How do we have proposals reconsidered when the overhead of going back through the mill could discourage discussion of alternatives?

This scheme is all about vesting control of the transportation plan in Metrolinx staff, consultants and Queen’s Park.  It is complex to the point of incomprehensibility, and threatens to undo Metrolinx’ boast of transparency.

The Board should demand a rework of this proposal, but they will likely be too busy with the RTP to pay attention.

9 thoughts on “Metrolinx: Too Many Fingers In The Pie

  1. Steve, am I interpreting you right when I get the impression that you think Metrolinx is a charade at this point?

    Steve: “Charade” may not be the word, but it’s clear that Queen’s Park does not trust Metrolinx to handle its affairs (and billions of Provincial dollars) effectively. Whether this reflects on the staff efforts and process to date, or a feeling that the Board (and constituent municipalities) won’t make the “right” decisions I don’t know.

    One factor at work here is an accounting issue. Historically, Queen’s Park has expensed payments for transit infrastructure and vehicles either on a pay-as-you-go basis or with borrowing that added to the general provincial debt. Now, there is a desire to show balancing assets on the provincial books. In theory, that means there is no net change in financial position. In practice, this assumes that the asset can actually be sold for something close to what we paid for it, and that after such a sale, it would still be operated at a reasonable level of service and cost to match public expectations. Think Highway 407.

    Another problem is “alternative procurement”. This includes both passive investments (a pension plan finances construction of a subway line) and active participation by the private sector (one or more companies enter into a design-built-operate agreement). This is the preserve of Infrastructure Ontario, and both schemes have the effect of moving the cost (and debt) off of the province’s books. They also raise the question of whether the ongoing debt service and/or lease costs will now appear as an expense on the transit system’s operating budget.

    The “benefits analysis” process has not been defined, and it threatens to substitute some sort of economic hocus-pocus for much of the work that goes into planning the transit network. Depending on what is considered a “benefit”, we could end up with short-sighted decisions. It’s no secret that no transit infrastructure will show a direct profit, and the benefits lie in mobility and development potential. However, when reviewed on a project-by-project basis, this could miss the purpose of building a network.

    Lest it appear that I would like to see unconstrained spending on transit, remember that I often argue that we waste far to many capital and operating dollars on a handful of underutilized, expensive projects to the detriment of the network as a whole. My concern here is that there is so much oversight that the role of Metrolinx itself, of municipal direction through the Board, and of public consultation may sink under the weight of the process.


  2. Hi Steve,
    Why should a transit system like Toronto’s be municipally owned and operated? For that matter, why is the ownership question even need asking if the utility is provided at a high level of service and a manageable cost?

    I would like us to see unconstrained transit spending (tongue only a little in cheek). The needs of the system are pretty easy to identify as are the options and for that matter the costs. If management of transit projects is poor, or if municipal self-interests hold on to their fiefdoms, then any amount of planning will be futile and we’ll be sunk.

    One thing is for sure – the status quo is not an option. At least as I see it.

    Steve: There is a very simple reason for municipal ownership — transit is not a profitable investment unless you can cherry pick the best parts of the system. As a matter of general public good, we provide services in the public sector because we can do so for everyone across the city.

    The private sector loves to run transit services as long as someone else picks up the subsidy and insulates them against any losses.


  3. I’d like to let private operators establish their own profitable routes (likely, express buses) duplicating the TTC routes, while retaining the bulk of TTC in municipal ownership.

    One can counter that it will drain revenues from TTC, and hence increase its operational subsidy requirements. But on the flip side, small private operators tend to be flexible and savvy, and perhaps they will find ways to make money on some routes where TTC loses money now.

    At the same time, I do not favor subsidising such private operators, or contracting out the operation of rail services. That effectively places the selected private operator in a monopoly position, their performance being tracked by some kind of artificial criteria rather than by the actual market.


  4. Unfortunately, there are now very few people with memories of privately-owned transport in Toronto. It was obviously bad enough that Toronto voters were happy to have the city buy them out.

    Proposition: if private operators are so good, why don’t we let them take over the unprofitable routes and develop them? Start with Rosedale and then something juicy like … Armour Heights?


  5. I think Steve already answered the questions about private-sector mass transit: it’s “not a profitable investment unless you can cherry pick the best parts of the system.”

    With the huge capital outlay involved, think of the cost of just one vehicle, not to mention staff, fuel, insurance, blah, blah, blah, any private enterprise that takes on an unprofitable route is making a death wish. A bus route is no different from an airline route. Everybody flies to New York, not a lot of flights to Iqaluit though.

    Getting back on point though, how much say will Metrolinx have in Transit City? Dear Lord, will Transit City ever even get built?


  6. So, are you saying that the Province will likely opt for PPPs to develop infrastructure, similar to the building of recent hospitals?

    And, if the books look better for election purposes, does that mean though the overall debt cost would be higher than if the Province arranged the debt financing itself?

    Regarding looking at network as an overall structure, yes it’s important, but where does it stop when politicians all want something visible on their ground, but fight every dense development in their particular jurisdiction? What I mean is, shouldn’t GO be able to simply say, yes, we should have frequent all day service on this line (Lakeshore, for example), but no, we see no need to extend train service to Port Hope.

    If you want to look at network planning as a whole, then likely the agency should also be tasked with oversight of regional planning and development?

    Steve: Queen’s Park seems to be doing a few balancing acts. They want credit for building all of this stuff, but they want an arm’s length agency to appear to be doing all the decision-making.

    PPPs are as much a fetish of Ottawa as Queen’s Park, but as long as we keep up this fiction of expecting Ottawa to kick in some money, we have to go through the motions. From a Provincial point of view, PPPs look good and play to the right wing, but they’re no panacea. We have already seen that in the health care sector and in highways, things didn’t quite work out as expected.


  7. I was expecting Queen’s Park to insert their agenda more directly by controlling the money available for the projects designed by Metrolinx rather than by strong-arming the whole process control structure at Metrolinx; modifying the logo to read “An agency of the Government of Ontario” as if that’s a good thing is telling indeed.

    It also helps explain why ICTS for the Eglinton light rail line has suddenly become popular – the transition back to the same old same is well under way. Let the games begin.


  8. Thanks for picking up on this Steve – with the multi-billions and big choices needing to have been made a decade ago, we can’t trust the municipalities alone, (nor can they necessarily pay for it, and cui bono), and we can’t trust the province alone either (and cui bono). Yet at least there’s a recognition that we’re likely in deep doo-doo from the surge in oil prices, and oh yes, we maybe should do something about climate change and smog instead of mere talk.

    But retrofitting our sprawl for effective transit will be damnably difficult both physically/fiscally and politically, as so many people have literally bought into a way of life eg. sprawl.

    I am worried about the truncated EAs, the bad planning that seems to be passed unscathed at the City level, eg. the WWLRT/FSE, and I’m also worried that the provincial hands will not be fair – who owns the land around some of the proposed transit routes, and are they good Liberals?

    The province has been smart at times, and the Transit Suburbs program of the City is a good clarion call – just we need both effective transit in short order without blowing any more hundreds of millions than we need to have done.


  9. The economics of a regional transit system go far beyond operating costs and farebox take.

    P1 – Breadth and Depth: the better a system is, the more revenue it can earn and more efficiently it can run.

    P2 – The farebox is one source of cash flow to support construction, so is renting retail space, advertising & development of air rights. Tax Increment financing can also support development.

    P3 – a tax paying owner of the rolling stock receives the CCA benefit which can be charged against other revenues – ie the guy selling the trains might make more by owning and leasing.

    P4 – Bigger is better – a regional transit system is more viable that 6 small ones.

    Steve: You won’t get any argument from me on point 1. Better systems attract more riders, but we have to be careful to equate revenue, or more precisely cost recovery, with “better”. A lot depends on how much value we place on providing transit as an alternative to having to own a car and take up road space. Just as GO subsidizes local transit systems to bring them riders cheaply to avoid building more parking, the local taxpayer may prefer to subsidize riders as an alternative to the public cost of roadspace and the private cost of all those extra cars.

    The revenue available from point 2 is trivial compared to fares. Tax increment financing is one of those bits of voodoo economic theory that sounds good on paper, but runs aground when developers say that they shouldn’t be burdened with the cost of supporting transit. Moreover, new development benefits only flow in locations where they are practical, not in stable existing communities.

    A CCA “benefit” is a tax writeoff. To translate this for readers, if I buy a subway train and lease it to the TTC, I get to depreciate (claim Capital Cost Allowance) that train over its useful life as an operating cost. This reduces my net income from the lease itself and from other ventures in which I might be engaged. I am getting a tax write-off (read subsidy) simply for owning a subway train which I probably didn’t pay for with my own money anyhow. In the bad old days of easy credit, I probably borrowed the $20-million, bought the train, and used it and its lease payment stream as collateral against the loan.

    Public sector accounting used to favour this sort of arrangement because leases were considered as operating expenses. Neither the capital asset nor the associated debt showed up on the government books, and it looked as if it was being prudent. This was a favourite scheme of “Wacky” Bennett in British Columbia. However, the rules are much tighter now, and a long term lease from which an agency cannot escape is considered as a future liability and must appear on the books.

    If you want an even better scam, you might build a subway train and sell it to yourself (a related company) at a markup. That’s the “capital cost” on which you base the lease and your depreciation charge. Meanwhile, you pocket as “profit” the markup you charged on the train. Whether anyone in Canada has tried to do this yet, I don’t know, but this sort of dodge was common in the accounting scandals of recent memory.

    A regional collection of six small systems is more viable than six of them operating separately. However, in Toronto we have one really big one (TTC), a modest one (GO), and a bunch of relatively small players. Another issue is that once any organization (or unit) gets too big, the cost of managing it goes up disproportionately to its size.

    In all of this, the points I am trying to make is that the same premise about private involvement and system organization can be viewed in very different ways. There is no single solution.


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