Found Millions

Toronto’s media are abuzz with news and criticism of the City’s discovery that the 2009 operating budget surplus was $100-million higher than previously expected.

This all began with a media advisory Tuesday night that there would be an important announcement the following morning.  Don’t be left out in the dark.  Get there early with your cameras for the best position!  The next twelve hours brought rampant speculation about Mayor Miller resigning to take a job elsewhere, about a reversal of his decision not to stand for a third term, or just about anything else the pundits could spin to fill air time, print columns or websites.

The announcement was an anti-climax after the buildup.  Commentary switched to “why didn’t you know sooner” and variations on how the Miller crew had been misleading the public about the severity of Toronto’s financial position.  Lost in all of this chest-beating was the fact that this surplus is a windfall, a one-time benefit of circumstances coming out better in 2009 than expected.  Many of the savings that produced the surplus have already been factored into the 2010 budget, and we cannot expect a repeat performance — a $350-million surplus overall — in future years.

That’s where the TTC comes in.  For 2010, the City will provide all of its operating subsidy, roughly $440-million, and not a penny will come from Queen’s Park.  The total operating budget is about $1.4-billion, and if it rises as projected by 5% or so in 2011 (through a combination of wage and service increases), this will add $70-million.  Oddly enough, this is almost exactly the amount of the proposed tax stabilization reserve that would carry forward into 2011.

Mayor Miller claims that we could see a 2011 with no fare increase, a 3% property tax jump and a balanced budget.  The kicker is that he assumes he will be able to conclude an agreement with Queen’s Park for the resumption of shared operating subsidies in 2011.  The response was predictable given that this is an “ask” of about $250-million for 2011 before the province has even published its budget for 2010.  I was rather surprised that Miller spoke as if this were a done deal when, if we are to believe Queen’s Park, it is at best still under discussion, and the question of a partial or complete TTC takeover by Metrolinx is still bouncing around the rumour mill.

Regardless of whether the province steps in with operating subsidies, my position on this situation is quite clear.

First, we should not prejudge the use of surplus money from 2009 in the 2011 budget.  Over and over politicians and advocates who support transit speak of the importance of good transit service.  Fare freezes make good pre-election sound bites, but they don’t address the issue of providing better transit service.

Second, this is one-time money, not an ongoing revenue source.  If we use $70-million to freeze fares in 2011, that amount will have to be found anew in 2012 in addition to another $70-million to handle that year’s cost increases.  That’s a prime recipe for big jumps in fares and cutbacks in service, especially if the City is governed by a less transit-supportive Council and Queen’s Park hasn’t stepped in to help out with TTC costs.

Yes, there may be ways to increase the effectiveness of transit spending.  I don’t want to get into a big debate here about everything from wage controls to outsourcing or breaking up the TTC.  These are, to an extent, red herrings in the long term because they will at best achieve a temporary drop in cost pressures.  Eventually, costs will reach a new plateau from which they will grow and we will be back to the same debates about fares, subsidies and service levels. 

We should have these debates, if only to satisfy ourselves of the validity (or not) of alternative ways to provide transit in Toronto, but the long term issue of rising transit costs will not go away, particularly if we expect large-scale increase in transit use throughout the GTA.  The underlying policy issue, however, is what we expect our transit network to accomplish, and what the failure to improve transit’s market share means for the future of the region.

Meanwhile, Toronto must concentrate on maintaining and improving the attractiveness of transit, and anything that artificially hides the ongoing increase in costs simply threatens transit in future years when the increases must be faced.  The 2009 surplus should be seen for what it is, a one-time benefit to a city that tightened its belt and came through the year in better shape than expected.  Toronto should not prejudge transit policies for 2011 and beyond based on a one year windfall and an as-yet unseen provincial funding agreement.