In past articles, I have reported the growth in TTC capital spending and the concurrent problem in funding for the system. Over coming months, the City of Toronto and its agencies, including the TTC, will struggle to create a viable financial plan for 2012 and beyond. This will include a five-year projection on both the operating and capital sides, an exercise that will (or should) frighten those concerned with the survival of public services. However, it should also bring some discipline to year-over-year budgets and project approvals by demanding better accuracy in projections and clear justification for “surprise” projects in the out years.
The TTC capital budget is a formidable document with details in two binders of over 1,600 pages. The summary form is tens of pages long. Parts of the public presentation are so dense that one page brought a laughable comment from Vince Rodo, the TTC’s General Manager — Executive: “You’re not supposed to be able to read that”. A joke, yes, but a sad comment on the level of detail the Commission and the public see when confronted with a multi-billion dollar budget.
I have already written at length about the 2011 Capital Budget, and in this article I will focus on changes to the budget as it passed through the City’s approval process as well as the outlook for 2012 and beyond.
From the TTC to City Council
TTC staff have a long habit of finishing the detailed version of their budget only days before it is considered at Budget Committee, and for 2011 they didn’t even make that deadline. As a result, the City’s own Budget Analyst had nothing to analyze until the report reached the Executive Committee. This leaves Councillors at a huge disadvantage because there has been no chance for an independent eye to look through the budget books. In theory, this should happen at the TTC’s own Budget Subcommittee and at the Commission proper, but even they didn’t have the details when they approved the overall budget.
In response to a motion at the Budget Committee, TTC staff confirmed that their priorities for capital funding were unchanged, but that in anticipation of funding problems in 2012, some work would be put on hold. A Budget Analyst report to Council shows the revisions to major budget lines (the detailed list of deferrals starts on page 4). Council added the proposed second exit at Donlands Station to the deferrals in recognition of ongoing controversy about the design.
Looking at this doesn’t tell a lot about the TTC’s budget at the detailed level, but at the end of the day, Council left the TTC on a very short leash. Only projects that are already “in the works” have funding approval, and many areas of TTC capital spending are zeroed out within a few years. This, of course, is impractical, but Council’s view is that until new funding is obtained, the TTC will not be allowed to make new commitments.
If there must be cutbacks, then Council needs to better understand how the TTC’s budget works and how its many lines and projects intertwine. Delving into this will, no doubt, be part of David Gunn’s mandate when he returns to Toronto in a few weeks. However, it’s worth taking a look at how the budget is organized as a starting point.
The Budget in More Detail
This spreadsheet presents the TTC’s Capital Budget in its original form (before amendments at Council) and is a summary of information in the “Blue Books” (the 1600 pages of project-level detail). My purpose is to give a better sense of what each budget line actually contains, and how the projects are broken down into the five major types of spending. (In case anyone checks, the dollar totals here may not exactly match those in the Blue Books due to rounding or minor transcription errors, but the differences are quite small.)
- State of Good Repair ($7.18-billion)
- Capacity Enhancement ($35-million)
- Legislative Requirement ($358-million)
- Improvement ($106-million)
- Expansion ($167-million)
Note that the figures above do not include the Spadina Subway Extension which has its own budget separate from the main TTC books. That project is jointly funded by Toronto, York Region, Queen’s Park and Ottawa.
“State of Good Repair” sticks out like a sore thumb here, to the point that the other categories don’t really matter. This situation is painted as a “crisis” by the TTC because, they claim, the whole system will fall apart through lack of maintenance if they don’t get funding. However, when one looks at the details, one finds that some projects are inappropriately classified as “SOGR” including:
- Signal projects for YUS and BD: Some expense in this area is directly related to the age of existing systems, but part is due to the conversion to Automatic Train Control. As I have already discussed, there is some confusion about the purpose of various signalling systems now being installed. Funding for part of the ATC project was obtained on the premise that it was essential to support closer headways that would be needed after a Richmond Hill extension. That’s not “state of good repair”.
- Platform Edge Doors: This project has been justified on various grounds, but at its heart is claimed to be a means of reducing or eliminating delays due to fires from garbage blowing to track level and due to suicides. Laudable though this may be, the system has operated for decades without these barriers, and will continue to do so well into the 2020s by the most optimistic projection. This is an “improvement” project, not “state of good repair”.
- New Streetcars: Part of the $1b in this should really be classed as “capacity enhancement” because it relates to a long-standing deficiency in system capacity. Similarly, part of the carhouse costs relates to the expansion of fleet capacity.
- Additional Subway Cars and Facilities: The TTC is expanding its fleet to provide additional capacity ($160m), and this triggers a requirement for more storage space. Some “TR accommodation” costs are due to the existing fleet, but a good chunk of this budget line ($530m) is for expansion. It is unclear whether ATC control equipment is included in the budget for the additional subway cars (it was missed in the original TR order, and the cost was later rolled into the signalling project’s budget). It is ironic that the cost of additional storage space and carhouse modifications to handle the TRs is close to the cost of the trains themself.
- Fire Ventillation and Second Exits: The $263m in this line is not, strictly speaking, for “State of Good Repair”, but to bring stations closer to the current building code requirements than they now are.
My comments are not intended to suggest that this spending is unwarranted, but rather to suggest that we should return to clarity in the budget projections and the characterization of each budget line and project. The sky may still fall if projects reclassified as “capacity expansion” are not funded, but it will be a capacity issue, not one of maintaining what we already have.
This brings me to another topic. Reading through the details, it is striking how many projects relate to ongoing maintenance and replacement of infrastructure. On the subway system, much of the infrastructure — stations, electrical systems, pumps, escalators, roofs, paving — the list is endless — must have major work done or be replaced. That’s part of the cost of owning infrastructure. It shows up in the Capital Budget because that’s how the funding scheme works.
The collective size of these maintenance projects has grown over the years as parts of the subway age to the point where just patching up what’s there will no longer do. In effect, there is a separate part of the capital budget that is the unavoidable cost of ongoing maintenance, and this will grow as the system ages.
Cutting corners brings its own problems as we have seen on the streetcar system where the poor track construction techniques that brought the TTC into the early 1990s led to rapid decline in track and paving conditions. The additional spending needed to get back into “good repair” will finally ramp down in about 2016, at least for tangent track.
When so much is lumped under “state of good repair”, the term becomes meaningless. What we really have is, at a minimum, different classes of projects such as:
- Ongoing capital repairs. These projects will always be with us, although the cycle times for components will vary depending on their useful lifespans.
- Vehicle replacements. For rail vehicles, these tend to be very “spiky” budget lines as large portions of the fleet are replaced in batches rather than a proportionate number every year. Even the bus fleet has this issue as echoes of past procurement boom-and-bust cycles show up in current and future projections.
- Long-lived infrastructure. A similar situation to fleet costs exists with infrastructure such as signals that are generally replaced as one large project, but very infrequently. They do not represent a continual annual cost in the same manner as, say, roof repairs.
- Time-limited repair projects. Some work, such as the backlog of surface track repairs, is certainly “maintenance”, but represents a cost that will eventually decline or vanish in the budget. Similarly, the project to reinforce the North Yonge tunnel deals with a (one must hope) one-time structural condition.
A further problem in understanding budget lines arises from the manner of accounting. TTC budgets are organized departmentally, and into projects within departments. If what we as riders or Councillors/Commissioners think of as a “project” includes work from different areas, then the cost is scattered through different budget lines.
This is best seen in station renovations that will draw funding from diverse lines including fire ventillation upgrades, second exits, station structure upgrades, tile and ceiling replacements, accessibility, fare system upgrades, etc. It is almost impossible to find a total dollar figure for the cost of “Station X”. A similar, but more subtle problem, exists with capacity expansion projects such as the YUS extension to Richmond Hill that triggers many other changes. The difference here is that the effects are spread over a much larger extent than one station, and are also spread out in time as the buildup of demand may not trigger some requirements on “day one”.
Missing from the TTC budget presentations is a “project based” view, where a “project” is an entity meaningful to the outside world. For example, there is an accessibility project budget, but in some cases, the work will be done in conjunction with other station upgrades. Anyone deciding whether to proceed with or defer “Station X” needs to know what this involves.
The TTC’s Capital Needs, as stated in the 2011 Budget, are over $2-billion greater than the borrowing headroom available under the City’s targets, and this does not include spending for projects like the Richmond Hill Extension or a Downtown Relief Line, nor for any “surprise” increases in already-approved projects.
Whether a budget review will yield large savings, especially in the short term, remains to be seen. Council needs to better understand the budget’s components, their priority, and their role in the overall system. Calls for added funding be this from taxes, other governments or the private sector must be well-informed and balanced with parallel schemes for system expansion.