Paying the Piper

The Toronto City Summit Alliance (TCSA) recently published a discussion paper on transit and transportation infrastructure funding in the GTA.  This document will be discussed at an invitational working group meeting on July 14.

There is little new information in this report which follows on the heels of a similar paper by the Board of Trade (see my post from May 2010) and a Metrolinx review of revenue options in 2008.  Much more fascinating is the process:  a major discussion of provincial infrastructure planning and revenue generation policy is taking place outside of the agency charged with that task.  Indeed, Metrolinx VP John Brodhead is listed as a co-chair of the working group along with TCSA’s Julia Deans.

Metrolinx itself may be unwilling to discuss the so-called “Investment Strategy”, but this does not stop well-connected external groups from pursuing a more activist agenda.  After years of decrying excessive public sector spending, Toronto’s business community has discovered that failure to spend on infrastructure costs the city dearly in lost productivity and attractiveness for investment.  This is not a problem that turns around overnight even assuming we all agreed on what to do.

Queen’s Park may be horrified of proposing new taxes, tolls, “revenue tools”, but with the understanding that spending on transportation in urban regions is essential, even the more conservative elements at the Pink Palace will have to take notice.

Like much of North America’s industrial infrastructure, Toronto’s roads, sewers, schools, electrical grid and transit system were built decades ago, and the scale of building generally exceeded the demand.  People took for granted that the services would exist, that capacity would be available, and that business activity could proceed unfettered by the need to reinvest in public infrastructure.  Just as steel mills rusted away for lack of modernization, municipal infrastructure decayed, its capital value depleted by tax cuts, the equivalent of asset stripping through dividends, that weakened our ability to reinvest and expand.

Surprise, surprise!  Transportation demand is growing faster than system capacity with the predictable result that commute times go up, and congestion is a standard complaint throughout the GTA.  Transportation capacity growth focuses on downtown Toronto, essential to the continued expansion of its workday population, but little is done for outlying areas where congestion is worst.  Even commuter rail, long viewed as an inexhaustible supply of transit from the 905 to Union Station, is seeing limits on its planning horizon thanks to various physical and technological constraints.

The TCSA report lauds Metrolinx plans, unsurprising considering that agency had a hand in TCSA’s work, but also raises concerns about local systems.  Just as expressways depend on local arterials and streets to feed them with traffic, a regional network needs a network of finer-grained services.  TCSA hints at a need for better co-operation between local and regional operations, especially on the TTC’s behalf, and hints darkly that if this doesn’t happen, “further restructuring may be necessary”.  This is needless sabre-rattling that would have more credibility if Metrolinx and Queen’s Park actually had something to offer toward operating budget funding.

Predictable, sustained funding is the big barrier, not just to individual projects, but to a culture in which transit is seen to grow constantly and actively to show that it can be an alternative to some types of auto travel.  Announcements are cheap, but nobody ever gave up their third car thanks to an announcement.  “Broader public and private sector support will tend to erode unless significant transit/transportation improvements are delivered on-time and on-budget.”.  To this, I would add that these improvements have to be delivered where they are seen to have a benefit to more than a handful of riders and property developers, and address existing and growing shortfalls in the system.

The big four of potential revenue tools are:

  • Road tolls on freeways
  • Regional fuel tax
  • Commercial parking levy
  • Regional sales tax

In only a few months since the Board of Trade report, the level of proposed taxes/fees has doubled so that each of these would generate not $1-billion (BOT report) but $1-2b (TCSA report).  The magnitude of spending required both for capital investment, future operations and local system funding is dawning on people at many levels.  Oddly enough, this is not accompanied by calls to rein in transit spending, at least from the point of view that we have vastly too much service and infrastructure.

TCSA argues that any new funding must pass two tests:

1. New funding instruments must be fair, effective, efficient, transparent and accountable, and seen to be so.

2. New funding instruments, or at least some of them, need to do more than simply provide the quantum of funding required for the Big Move; they need to also help to moderate increasing congestion, and possibly achieve stable or reduced congestion levels in some corridors.

I agree that any new funding schemes must be seen to be fair, but I am less convinced that the second option will be achieved in the short-to-medium term given the backlog of construction needed just to catch up with decades of inactivity.  Even as we dig our way from one side of the GTA to the other, population growth will add to network demand, and moderately scaled additions will only keep pace, not produce a tangible improvement.

The goal is to make travel around the region easier.  Whether this will also accomplish the task of reducing congestion remains to be seen.  Transit’s market share is under 10% in much of the GTA.  Even a huge increase in transit capacity and ridership will not replace much of the traffic now on the road network and may only serve to relieve existing congestion enough to accommodate some of the latent demand.  This is a big marketing challenge for transit financing advocates — how to convince those who would be taxed to pay for transit expansion that the spending is in their interest.

That problem is central to my view that we must avoid demonization of motorists by taxing only those facility which they use through gas taxes, tolls or parking levies.  These may be part of the overall revenue scheme, but transit is a general good just like schools and hospitals, and it should be funded out of a broadly based tax stream such as an earmarked regional sales tax.

When we implement these taxes, whatever they may be, everyone must be quite clear on what they will buy, and what they will not buy.  If we settle on $2b per year as a revenue stream, we must understand that this will not fund the scope of transit improvements (and any spinoff benefits claimed for them) needed in the GTA.  Indeed, that would barely pay for the Metrolinx capital program, and would leave nothing for Metrolinx operations or the funding of local transit systems.

Metrolinx developed The Big Move through various iterations, and the final version was thought to be aggressive at $50-billion over 25 years.  Those were 2008 dollars, and we have only just begun to spend them.  Early versions of the Metrolinx network were even more costly at over $80b, but this level of spending failed the political acceptability test before it was even out the door.

Any networks and services we consider for The Big Move 2.0 must not be constrained by considerations of affordability, at least in the planning stage.  Put everything on the table, including alternatives, rather than filtering proposals to fit within a pre-determined budget.  Only then will voters and politicians in the GTA be able to understand what new funding might, or might not, be able to buy.

9 thoughts on “Paying the Piper

  1. How nice to see yet another member of the “Usual Suspects” lucratively retreading ideas they’ve previously sold to various government agencies, including Metrolinx. The late Clyde Gilmour was obviously corrected when he advised me that a good freelancer should be able to sell the same story to at least three different outlets. Somehow, I don’t think this is what he had in mind.


  2. It’s not only Metrolinx that is avoiding the funding issue — it’s our mayoral candidates, most of whom either seem to be silent on funding (or assume it will come out of the sky), or have said “over my dead body”. Clearly they are trying to play it safe and avoid saying anything that their opponents could attack them with from the populist angle. But the fact that within a space of a couple of months we have had two major private groups — and relatively right-wing, business-friendly groups at that — arguing for (clamoring for) several significant new funding measures for public transit suggests that they should have some pretty sizeable political cover. George Smitherman could have said, “I know no-one likes the idea of [insert new revenue tool], but here’s the situation, and it’s not just me saying this, it’s a variety of groups including the BOT and the TCSA.” Instead we have business groups making these recommendations and the mayoral candidates appear to be timid or having their heads in the sand.

    Regarding this statement from the TCSA:

    New funding instruments, or at least some of them, need to do more than simply provide the quantum of funding required for the Big Move; they need to also help to moderate increasing congestion, and possibly achieve stable or reduced congestion levels in some corridors.

    I gather you interpret this as meaning that some funding from these new revenue tools may go toward highway expansion. I look at it differently; I believe their point is that various revenue tools have different effects, and, for example, tolls can lead to decreased demand (or, if variable by time of day, moving demand to less congested periods). Bern Grush has an interesting article on road pricing / congestion fees and how they might be implemented differently depending on the particular motives (as a revenue generator, as a congestion fighter, as a benefit to the environment).

    Steve: I worry less about new highway construction than that motorists may eventually notice that nothing much is changing in their daily trips and congestion levels.


  3. I was a little bored when I read TCSA’s report on Monday for the very reason that you pointed out- the report simply rehashed the ideas presented earlier by the BOT.

    The positive element that I took from the report was the more credible sources that argue for new funding sources for public transportation might actually result in such measures being implemented.

    I think Steve, that you can tie the two goals suggested in the report with your own, in that everyone must pay for transit. We do need some kind of road toll or gas tax that provides an extra incentive for drivers to leave their cars at home but a regional sales tax should also be used. The only thing with a RST is that it needs to be implemented province wide and not just in the GTHA as an example.

    With traffic getting worse all the time and the need just to try to keep up, if not actually get ahead- my fingers are crossed hoping that just maybe enough pressure can be mounted to get on with TBM 2.0, see what we want and what we are willing to pay for and start funding it so we can built it and run it. Would it be too much too hope for that all this can be done before the end of 2011?


  4. I wonder how much in depth studying the TCSA has done of funding models for transit systems elsewhere in other major population centres…

    Steve: There are references in the report to which of the proposed systems is used in some form in other jurisdictions. The problem in the GTA is that nobody wants to pay more for anything, but wants the sun, moon and stars in services. Some politicians run on that sort of platform because lying to voters never cost people much support.


  5. Given that some of the gas tax already goes towards transit, I think an increase in gas tax would be more politically palatable (and easier to impose) than a general sales tax. However, I think the level should be set at a the local operator level (municpal, or regional in York and Durham), for either local operating support or local capital investment (as they see fit). It would also mean people in Hamilton wouldn’t feel their extra tax was being used for an upgrade in York.
    Upgrades to GO aside, most Metrolinx projects are contained within the boundaries of one transit operator. Any cross-boundary projects would require both parties to invest, just like now.

    Hmm… maybe there is a need for a regional gas tax (for GO’s projects) and a local gas tax (for local projects).


  6. Of the new revenue tools, a parking levy and/or regional fuel tax are likely to be the most useful while having the least negative impact on transit operations. I’m not talking about a negative response to these, which will always exist in varying degrees, but negative effects on the operation of the transit system, which I believe get forgotten when people think of new schemes. These two revenue tools are ways to directly charge those who contribute to congestion in the region to pay. I would go so far as to say that a parking levy should not simply be a surcharge, a tax if you will, on paid parking, but a levy on ALL parking. Employers who have ‘free’ parking around their buildings might have to pay something like 10 cents per spot per weekday, and this cost could either be paid by employees or they would be taxed on this as a taxable benefit. I suggest this as someone who currently uses one of these ‘free’ parking spots.

    My issue with road tolls on freeways is that doing so on existing freeways will dump a small percentage of traffic onto arteries that form part of our transit network, thus costing us more to provide more buses on those streets to meet the capacity needs due to the slower travel times from the added congestion. Implementing a ‘congestion’ charge that applies to all traffic entering an area helps to alleviate this issue, but one must be willing to accept slightly higher peak fares on transit to go along with this – something that is often forgotten when London is cited as an example for congestion charges.

    I have mixed feelings on a regional sales tax. This usually involves a half to one percent sales tax within the transit region, which is pretty common in a number of jurisdictions in the US. Denver comes to mind in how various areas around the city have different sales tax levels. Anywhere within RTD’s operating region, there is a 1.0% sales tax for transit. If you are in the district near the football stadium, another 0.1% is levied, and the same goes for the “Cultural and Festivities District”. The city and county add a sales tax of 3.62% on general sales, but 4% on immediate consumption food. Of course, this is all in addition to the state sales tax, but in Colorado, that is only 2.9%! I’m not so sure that adding a percent here or a bit there will be so acceptable when it’s in addition to 13%.


  7. I think a regional sales tax dedicated to transit is insufficiently linked to the object of the revenue. The Toronto Sun will drag out a senior living in a farmhouse in Caledon who never visits Toronto but is now paying 2% more for his cat’s litter or something.

    I hate the Vehicle Registration Tax because it punishes possession rather than use and does not impact 905ers who drive downtown, but at the very least it should be taken from general revenue and the proceeds sent directly to transit – a huge mistake by Miller and Pennechetti not to have done this when it was introduced.

    The difference between a VRT or a parking tax and a sales tax is that you can’t avoid the first two with weekend trips to Buffalo.


  8. Central to this matter of paying the Piper is the question of the mode of public transport. It is obvious that groups like the Toronto City Summit Alliance are not just calling for a line along e.g. Eglinton Ave. They are calling for an overall transit network, dare I say it, a transit city. But the decision as to whether to go with subway or LRT will determine how extensive a network actually gets built and at what cost.

    From the beginning it has been apparent that LRT would give by far the best bang for the buck but we are hurtling towards an election in which all but one of the mayoral candidates are prepared to sink the entire concept in favour of one or two subway lines (which will provide service to far fewer suburbanites at far greater price) in order to pander to the suburban vote.

    Groups like the TCSA tend to be made up of somewhat conservative business types who, one would think, would be far less likely to be ruled by tunnel envy and more concerned with the best business case.

    Surely it’s time such groups spoke up!


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