TTC 2011 Budget Preview — Part II: Capital

In my previous article, I reviewed the TTC’s preliminary information regarding its Operating budget for 2011.  Here I turn to the Capital Budget — the one that pays for major repairs, replacement vehicles and system expansion.

Following this budget from year to year can be challenging.  For the better part of a decade it has been clear that there would be a funding crisis as project deferrals accumulated, and now the dam has finally burst and big-ticket schemes are underway.  The early years of such projects tend to have low cash-flows because they are mainly design work and progress payments on smaller preparatory steps (such as the utility relocations and grade separation on the Sheppard East LRT).  Now, as spending builds on Transit City, the Spadina Subway Extension, replacement subway trains and streetcars, the demand for capital will grow.

During the 2010 Budget Cycle, many projects were deferred beyond 2019 so that they would not appear on the City’s or TTC’s books.  This made the depth of the budgetary hole appear more shallow than it really was.  If that were not bad enough, the TTC has created a new group of projects aimed at Yonge Subway capacity problems and, in the process, is partly pre-judging the outcome of a Downtown Relief Line study.  The combined result is that the funding shortfall shown as $1.344-billion in the 2010 budget papers for the years 2010-2019 has grown substantially, and there is now a funding shortfall of $2.8b for 2011-2020.

The staff budget report does not include a detailed breakdown of the projected funding sources.  Much more information was presented in the September 2009 report in the previous budget cycle.  (Note that the 2009 report does not exactly reflect the budget as it was eventually approved by Council.)

For the 2011-2020 budget planning, the TTC is taking the approach that it should show what spending is required, not just which projects fit within the available envelope.  This puts both Council and various funding agencies on notice about the true scope of future needs.  Council may not like the level of spending, but at least a debate is possible on the relative merit of transit programs.

In theory, this is a welcome change as it avoids the “surprise” factor when unplanned spending requests appear out of thin air.  However, there will be some debate about how critical some “required” projects might be, and what additional projects are still hidden out of sight.

The TTC estimates that restoring previously omitted items as well as new additions will raise the capital requirement by $3-billion over the next ten years.  That is a gross number, but the degree to which it will attract subsidies depends on the generosity and enlightenment of other governments. Continue reading