Paying the Piper (3)

Recently, I commented on the gathering held by the Toronto City Summit Alliance at which Metrolinx’ President/CEO (soon to be Chair) Rob Prichard posed a series of questions about funding of transit construction and operations.

Subsequently, as an attendee, I was asked to respond to these questions online.  Why write something for such limited distribution, I thought.  Here are the eight questions and my answers, updated a bit from the “official” version I left of the consultant’s website.

1. Should the Investment Strategy focus solely on The Big Move’s $50 billion capital plan or should it also encompass operating costs – both regional and local?

Most definitely, the strategy must look at all aspects of transit funding. It is pointless to go through all of the upheaval and political grief that will accompany any move for new revenue streams, only to find that what we ask for funds only half of what we need. The current gas tax, about which we hear every time Queen’s Park wants to say how pro-transit they are, does not come close to paying for local transit operations or capital, especially in Toronto, let alone the expansion that will be needed to provide the local counterpart to a future regional rail rapid transit network.

Aim high, and be sure to explain all of the benefits. In fact, if you are able to provide massive support for transit throughout the GTAH, this will probably get more traction, sooner, than waiting 15 years for a handful of rapid transit lines to open.

2. Are we principally raising revenue to pay for what we need to build or are we principally shaping behaviour with incentives to reduce congestion and create a greener environment? If we are to do both, what is the relative importance of the two goals?

This isn’t an either/or question. There is backlog of unbuilt transit to address current shortfalls, but there is also the demand that will come inevitably from population growth. Both the backlog and the growing demand will make it hard just to stay in the same place, let alone get ahead of congestion and pollution issues. Also, because of the development patterns (residential and commercial/industrial), there are areas of congestion that are not easily addressed with transit. We could wind up making central Toronto even more attractive with better GO/TTC services, but still having big problems in the 905.

Metrolinx claims for the future benefits of lines must be recalibrated to allow for backfilling effects. Yes, a new line may avoid x-million new trips and all they entail, but that doesn’t mean that existing volumes will decline. There will be more improvement in emissions through pollution controls and downsizing of cars due to pricing than there will be through reduction in existing traffic volumes.

Don’t overplay the “green card” or give the idea that motorists will speed to work by driving.

If there are congestion problems for commercial traffic, the real problem is to decide which type of traffic is more important on the roads. We provide “high occupancy” lanes for cars, but force trucks to jockey for space with everything else. If trucking is so important, why doesn’t it get priority somehow?

3. How wide should the Investment Strategy net be cast? Are the proceeds just for transit or for transit and roads?

Spend mostly for transit on the simple basis that there is limited capacity for more road space, and even where it is physically possible, you may only shift the bottleneck somewhere else. Widening an expressway won’t improve capacities on local streets.

An attempt at “balanced” spending will result in far too little transit, and road schemes beyond the highway lobbyists’ greatest fantasies.  There are not enough cabinet ministers after whom you could name all of the new roads.

As I asked above, which type of traffic is most important in the competition for road space?

There is an analogy here to the urban problem of making room for pedestrians, cyclists, parking, autos, trucks, deliveries, transit, etc etc. Only when you decide the relative priority of each type of road use (and how this will vary from place to place) can you decide how to allocate road space, and by extension what you should spend your money on.

4. Are we better off to focus on a single tool to produce the required revenue total or should we anticipate a package of multiple tools to produce the total? What are the advantages and disadvantages of each approach?

The amount required lies somewhere between $1-billion and $4b annually, and this will be a big bite to take out of any one revenue stream. Moreover, if only one stream is used, there is a possibility that the affected group will claim inequity in the financing and the benefits (for example, gas taxes going mainly to transit).

Multiple streams spread the take around. Few will be happy until they can see specific benefits, but if the money comes from more than just “those bad motorists” (via a regional sales tax, for example), at least no one group can claim it was unfairly targeted.

There will be the inevitable “no new taxes” brigade who claim we must first look to “efficiency” and, maybe, “the private sector” as a source of funds.

The latter (PPP) has to be exposed for the limitations it presents (we wind up paying one way or another in current spending or future lease/operational payments). As for “efficiency”, the specific cases of spending cock-ups need to be documented and put to bed.

I am tired of hearing about the St. Clair car and a few other projects without a proper accounting that would show which elements of the cost overrun were actually due to bad project management, and which to scope creep.

Infrastructure Ontario likes to crow about its success with “no change order” projects. This is total crap because no project goes forward without the need for changes. The issue is whether all of the requirements are captured up front, how you control scope changes during construction, and how you deal with the overhang of “enhancements” at the end. As long as there is a war of words between Queen’s Park and Toronto, the public perception will be that all transit spending is wasteful.

You need to establish how transit spending will benefit the region, and how projects will be managed to stay reasonably within budget targets. Creative accounting (pushing costs into separate future projects) may make you look good in the short term, but it will bite you later when people see you are not really controlling costs, or when the “as delivered” form of projects don’t meet expectations.

This argument continues in the next question …

5. How do we engage the public in a real conversation about the costs and benefits of congestion and investments in transit? How do we effectively connect a better quality of life and a more prosperous region to investment in mobility solutions?

First, you need to be honest about what you cannot achieve. Some congestion is a fact of life and won’t go away. At best, you can prevent it from getting worse even while demand grows.

Next, you need to identify how you will address those trips where transit can make a difference. Those who can use transit and do so with reasonable travel times will gain the benefit of not sitting in congested traffic (e.g. GO riders who read, chat, Blackberry, etc rather than fighting their way through traffic).

We should not be trying to replace congested auto trips with uncongested auto trips for all current travellers. A major fallacy of much promotional material is the idea that we will get rid of congestion. This allows those who drive today to think of transit as “something for everyone else”. If the same attitude had been applied to the QEW, we would never have built GO Transit, and would have a 32-lane highway today (with no place downtown for all of the cars).

The improved quality of life comes from providing good transit service — not just for commute trips but for a “transit lifestyle” — so that transit is a trusted and reliable alternative to driving, the cost of maintaining a family’s fleet of vehicles is reduced, travel options increase, and the intensification needed to provide sustainable communities is possible without overloading the road network.

Prosperity comes from ease of movement, access to shopping and entertainment, capacity for goods movement (possibly at the expense of other road users as discussed above), and mobility for the region’s workforce.

Central to all of this is that the current model simply will not work. We are not going to spend tens of billions so that everyone can still drive just as they do today. Some may choose this, and some may require it, but the absolute need to drive for want of an alternative must vanish.

6. How do we make it safer or more attractive for candidates for provincial or municipal office to raise the issue of citizens paying for better mobility solutions? Put differently, how do we remove “the third rail” from this debate?

Bluntly, show that transit can actually be successful. Build stuff. Get it operating. Recognize that there is a mix of projects, and that local transit is as important as the multi-billion projects.

For example, we will spend a few billion to bring a subway to York U and Vaughan Centre, but this only addresses a small part of regional demand. People still need to get to the subway. People have trips that the subway won’t serve — it may get them closer to their destination, but the “last mile” is still on a surface route.

People must see a qualitative improvement in transit throughout the region, and it shouldn’t be hamstrung by local budget constraints. How can we convince people to use transit when the regions cut back on their services (which are nothing to be proud of anyhow), and Queen’s Park begs poor?

Stop treating local transit as if it has nothing to do with regional plans.

7. How do we create a positive coalition of drivers and riders to support the Investment Strategy instead of the debate being drivers versus riders? Is it enough to argue that drivers benefit by getting more riders on transit and off the roads?

Don’t treat drivers as the root of all evil and the only potential source of revenue. My arguments above make clear that the benefit to drivers is not to get people out of their way, but to provide an alternative so that they don’t have to drive in the first place.

Use broadly-based tools such as a sales tax so that it’s not an us-and-them argument.

8. In a political environment that makes tax increases and user fees very difficult, if not impossible, should any new revenue tool require a referendum prior to its adoption to legitimize it? Could a referendum ever be won?

Absolutely not. Governments should lead. Holding a referendum implies that even the government doesn’t believe in what it is doing, and wants the voters to save it from the hard decision of killing transit expansion.

Do we have referenda when we increase spending on health care or education? No, we have a press conference.

A referendum will be divisive and could very well lose, especially if the benefits are perceived to be inequitable both for classes of voters and different parts of the region.

Challenge the “no new taxes” brigade to explain what they would do and how they would meet the demand for transit funding. The last time they were in power, they walked away from that portfolio.

That’s my 25 cents’ worth.

9 thoughts on “Paying the Piper (3)

  1. Steve, I would strongly expect there to be a public resistance if these new revenue tools are put towards operations.

    There is a strong, and not baseless, belief that operational costs are a black hole where money disappears to and is never seen again. For example, TTC spends millions on cleaning staff, yet the stations are still filthy.

    At least with capital expenses, we get a physical product in the end which proves to us that the money went to something.

    Steve: One big issue in TTC budgeting is that they talk a good line on cleaners, but when push comes to shove, they are cut from the budget. Changes are in the works, but the proof will be when stations are not just cleaned for the first time this century, but stay clean after the “blitz”. St. George upper level is still a disgrace.


  2. Regarding a referendum. Nowhere in Canada do we have any particularly strong tradition of direct democracy, but many US states do. Several times in Seattle for example they have successfully passed various propositions and initiatives to raise taxes (including the all important municipal portion of sales tax that is possible for cities in many states are able to raise) to pay for expanded transit initiatives.

    While I don’t think we should necessarily (and don’t even know if it’s possible without extensive changes to our system) actually hold any sort of referenda, I think it’s worthwhile to keep the thought in the back of the minds of those making decisions on transit and presenting them to the public. If it can actually convince a majority to such an extent that a hypothetical referendum would be won, then I think we’d have a winner from a public opinion standpoint. If such a hypothetical referendum would be doomed to failure, then we still stand the same risk that some candidate in a future municipal or federal election will channel all that negativity and kill of severely hamper a planned project or one already in progress.

    Steve: My concern is that with the lack of leadership on transit issues, a referendum is one more way for the government to duck the issue. Holding a referendum that you expect to lose, or only fight for half-heartedly, is a complete cop-out. While we are on the subject, many states have procedures for local initiatives that are binding on the affected governments. No such tradition or legislative process exists in Canada.


  3. Towns in the U.S. are ripping up asphalt roads and replacing them with gravel, because the price of asphalt has doubled in the past ten years. Yet we still see politicians and planners here in Canada wanting to build more and more roads to serve what few people there are, where the new roads will sprawl into.

    See this Wall Street Journal article for more information.


  4. Well, W.K., there are plenty of politicians and planners in the U.S. wanting to build more roads to serve what few people there are, where the new roads will sprawl into.


  5. I don’t mean to sound ungracious, but what took so long for these questions to be asked by someone at that level?

    Steve: At the risk of sounding equally ungracious, it took someone being in charge of Metrolinx who actually was willing to listen to the answers rather than trying to manage public opinion. Mind you, the person asking those questions is pretty good at schmoozing himself.


  6. One motivation for Metrolinx to ask the last question (referendum), is the existence of the Taxpayer Protection Act, which was passed, I believe, under the Harris government. It appears to force any tax increase to be subject to a referendum. There obviously are some ways around this — the health fee increase and the recent HST and the eco fees were implemented without a referendum. It would be helpful for “someone” to study this matter further.

    Steve: Reading the legislation is useful.

    Section 1 lists the Acts to which the requirement for a referendum applies, and this list includes the Gasoline Tax Act and the Retail Sales Tax Act. Nothing prevents the government from creating a completely new tax with its own enabling legislation and omitting this legislation from the Taxpayer Protection Act’s list.

    Section 2(7) explicitly exempts the implementation of the new Health Fee. This shows clearly how it is possible to impose a new fee and avoid a referendum at the same time.

    Section 3.1 exempts the implementation of any new powers for municipal taxation. This enabled the City of Toronto Act (and any other future legislation granting taxing powers to municipalities) to be passed without a referendum.

    Section 4 provides for proposals of new taxes to be made as part of an election campaign. If you promise to raise taxes, and you win, then you don’t have to hold a separate referendum.

    No legislation can bind a future government from amending it. This is fundamental to Parliamentary tradition. In the special case of the Constitution, the amending process is very complex and difficult, but the whole country has to agree to make any new law part of the Constitution in the first place. No government in its right mind would attempt to bind its ability to raise funds.

    The TPA was a bit of political grandstanding by the Harris government that has absolutely no power to prevent future tax increases or to require referenda on anything.


  7. In today’s Globe Drive, Michael Vaughan makes the case that “Electric cars could make toll roads inevitable.” It’s not just due to electric cars, but also to fuel efficiency increasing, while the cost of roads and their maintenance don’t go down. In the past, gasoline usage could be a proxy for road use, and gas taxes could amount to road use taxes. This is breaking down. (It could also be argued that heavy trucks do much more damage than they pay for. Unfortunately urban transit buses may be the absolutely worst vehicles for road damage.)

    It would then seem that hoping to get more of the gas tax is not a good long-term approach.

    Sales taxes are widely-based, and I can see an increase in the HST for transit to be a pretty fair way of raising money. While the HST implementation has not blown up in the provincial government’s face, there’s some chance that it will in the next election campaign. An increase in the HST is I think politically unlikely until the government is sure that there are no unexploded bombs lurking within. A Toronto-area or GTA special HST rate would be fair, but until the upcoming round of municipal elections are done, those will be non-starters. Maybe even after them: Miller was damaged by the “more leftist fees and tax-grabs” rhetoric; even sympathetic municipal politicians may be loath to go there.

    If road tolls are “inevitable” even leaving transit out of the picture, then objections about the cost of the collection system would be moot.

    The really bad thing is that the easiest short-term fix (more gas taxes) may not help in the long-term, while the long-term fix of sales taxes may not be politically feasible for a while, and road tolls are still at the conceptual stage. I’m uneasy that any solution that hops from one tax source to another over the short-term future will inspire multiple “more tax grabs!” protests. Ideally, get the right stream for at least the next ten years (surely we can plan that far ahead?), take the political hit, and move on. But is there such a “right stream?”


  8. Seek multiple new revenue streams and reject any call for a referendum on how the money is spent. As examples point to health and education. One hell of a plan you have there.


  9. If gas tax reduction arises from electric vehicles, that should be cause for gas tax to be linked to spending on effects arising from gasoline usage in Canada so that substantial shifts to EVs does not create funding crises in transit agencies or roads departments.

    Since an EV causes as much congestion – a function of car dimensions – and road wear as a IC engined vehicle, give or take, road costs and transit should be primarily funded from registration taxes and road tolls which are independent of fuel type.


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