The Mythical Private Sector Subway

The Ford Administration and its followers at City Hall would have us believe that transit developments in Toronto can be had essentially free of public cost and that the private sector, whatever that means, will pony up the investment to build the subway.

Almost as soon as the scheme for a privately financed Sheppard Subway was announced, the wheels started to come off the plan.  Actually, “come off” assumes that it had wheels to begin with, and statements by the Fords showed clearly that they had not worked through the details.

Oddly enough, their hands were out for any public sector funds that might be available including $330-million or so originally earmarked by Ottawa for the Sheppard LRT, up to $650m in “left over” funding that might not be needed for the Eglinton tunnel project by Queen’s Park, and whatever investment could be pried loose from Ottawa’s “PPP Canada”.  Additional money might come from a quick sale of waterfront lands by the City to would-be developers.

The scale of the Sheppard project may well shrink to only the eastern leg from Don Mills to Scarborough Town Centre so that the total cost stays in the $2-billion range.

Recently, I learned that Queen’s Park had offered $2b toward the Sheppard Subway provided that the Fords would allow the eastern part of Eglinton to remain on the surface, but this was turned down flat.  So intransigent is the Mayor on the subject of incursion by transit into road space that the possibility of substantial funding for his pet project was not an option worth embracing.

You may have noticed by now that there isn’t a lot of private sector money in this story, except for the buy-out of waterfront lands, and that’s a sale of public assets, not a private sector investment in transit.

Meanwhile, we hear a lot about private sector investment elsewhere, usually with little context.  Vancouver’s Canada Line comes up now and then, including in comments on this site, and some people think it’s a private sector show all the way.  In fact, various public agencies have over $1-billion in the project, more than half of the total cost.  Even the “private” partner, a joint venture, includes investment agencies that manage public funds including pension plans.

Probably the most successful example of investment-supported transit is in Hong Kong, but this must be seen in the context of local conditions.  Not only is Hong Kong an extremely dense city, it is one in which the land ownership and planning are firmly in public hands.  Private buildings abound, but they sit on land leased from the public sector which reaps the benefit of land development.  (For an extensive look at the Hong Kong system’s financial and planning development, see Rail+Property Development by Cervero and Murakami [14MB]).

Leaving aside whether Toronto would ever support densities such as those found in major Asian cities like Hong Kong, there are important issues that do not get discussed here.

  • Who profits, and how soon?  If land is held in the public sector, the profit from  appreciation thanks to transit construction remains there too.
  • Will the City simply hand over land to developers to do with as they please, or will there be a recognition that city building involves us all?
  • Will new neighbourhoods to be planned both as attractive, pedestrian-friendly spaces where people will want to live even at high densities, or will we see a continuation of the tower-in-a-parking-lot so common in many developments?
  • Will we build car-oriented suburbs, generating even more congestion, along what is supposed to be a major transit corridor?
  • Will the Sheppard line be funded only with development along its corridor, or will other parts of the city, such as the waterfront, have development revenues siphoned off leaving them bereft of transit?
  • How much of the scheme depends on the City fronting the initial construction cost in the hope of future development revenues to pay the capital and operating expenses?
  • Will Council be allowed to perform, in public, a full review of the terms of any arrangement, or will we sell our transit system’s future in a back room deal?

PPPs are notorious for requiring careful structure of contracts, performance criteria, penalties and ongoing management.  Toronto’s political culture prefers to walk away from such responsibility in the public sector.

One way or another, Toronto will commit a pot load of money to a Sheppard subway of dubious value, and force Queen’s Park to bury the entire Eglinton line at great cost.  Billions will disappear into these projects while other parts of the transit system beg for funding.

The private sector may wind up funding some portion of the Sheppard project, but transit overall is still very much a public issue.  Long term funding will depend on public revenues.  We cannot avoid the debate on fares, tolls or taxes, with the assumption that magically money in the private sector will build, operate and maintain our transit system.  Somewhere, the public will spend more, or sell assets, or give away benefits as a tradeoff.  Nothing is free.

20 thoughts on “The Mythical Private Sector Subway

  1. Nothing is free.

    Somehow the simplest comments are often the best ones.

    I’m interested to read that the Provincial Government was ready to offer $2billion for Sheppard in return for keeping the eastern leg of Eglinton above ground from Laird to Kennedy.

    Maybe they really have no intention of building ICTS – because the linking of Eglinton-Crosstown to the SRT and putting it all underground (except for Scarborough) was just a bit scary.

    Methinks (as I’ve said before) that the Ontario Government (and those currently in power) are really more committed to LRT than they want to let on. Pre-election strategy, I supposed.

    Regards, Moaz Ahmad


  2. One way to cut down on the cost of the pointless Sheppard Subway extension is to build simple and utilitarian stations, but oh no, Toronto nowadays likes to overbuild the new stations, hence the spadina extension.

    I wonder, why couldn’t the Vaughan extension be a part of the Sheppard line instead of an extension of a gigantic mega-line that has more than 30 stations already? It just puzzles me how Toronto’s subway network is 2 oversized lines with a little tiny stub that has that many stations on them. Plus, if the Vaughan extension was part of Sheppard instead of Spadina, it would finally give the line more use by ferrying commuters to and from Vaughan and York University, therefore increasing ridership.

    Steve: For all that there is a fetish for through routing Sheppard and Spadina, the folks in Vaughan would prefer to go downtown, not across Sheppard.


  3. Here’s my prediction for what will happen:

    Step 1:
    Rob Ford will do lots of dubious deals with private sector developers to approve ultra-high density development along Sheppard. This, of course, costs the City zero. It does involve running rough-shod over all the locals who may not want to live in an ultra-high density neighbourhood. But running rough-shod over people is Rob Ford’s key competency.

    Step 2: It will become obvious that private development money will not come anywhere near paying for the subway. So in Step 2, Rob Ford shills, cap in hand, to other levels of government.

    Step 3: It will become obvious that there still isn’t enough money to pay for the thing, as neither Ottawa nor Queen’s Park feels inclined to fall into the role of “Magic Subway Fairy Godmother” and shell out a few extra billions.

    Step 4: A fire-sale sell-off of City property and assets, in which the accumulated savings and public acquisitions of 200 years are mindlessly squandered and blown away.

    Step 5: There is still not enough money to pay for the thing, but Rob Ford will start construction anyway with the cash raised in Step 4, praying that a miracle will come along and save his pet project.

    Step 6: The one thing that the private sector can do is make bucks with the ultra-high-density development. So a gazillion condos will go up – and no subway.

    Step 7: All the new people in the gazillion condos certainly cannot get around by car. Local roads and the 401 are already packed to capacity with massive gridlock. So all these people are all now stuck with no way of being able to get around.

    Step 8: The gazillion people who are all now stuck with no way of being able to get around scream to Ottawa and Queen’s Park. Who bail out the project started in Step 5.

    Step 9. Rob Ford takes full credit for the completion of the newly-bailed-out project. He crows about it being a “triumph of the private sector.”

    Yes, my crystal ball is perhaps a bit cynical. But let’s see my predictions being right.

    Steve: What will be interesting to watch will be what happens if we are at, say, the 3 year mark in Ford’s term, and the electoral love affair is over. If it’s clear he may be forced out of office, will he try to ram through stuff as his “legacy”, or just give up, or pretend it’s business as usual and try to bull ahead regardless?


  4. Steve:
    Have you ever noticed how “running a government on sound business principles” often involves selling assets for a fraction of their value?

    (TBH, I don’t know if Ford ever used this expression.)


  5. Hi Steve:-

    Re Kevin Love’s logical surmising up to step 7, “So all these people are all now stuck with no way of being able to get around.” R F’s answer has been heard before, ‘but they have buses!’ Finch East and West have buses too! Too bad those who want reasonable transit in all corners of the city are not real suburbanites like you Rob, with cars eh?

    And Steve, your question, “Will we build car-oriented suburbs, generating even more congestion, along what is supposed to be a major transit corridor?” Isn’t that the endgame of all of this wastefulness! And he was elected as the one and only guy looking out for our wallet! Hmmmm, methinks this Emperor has no clothes!



  6. Too bad they stopped the Sheppard East LRT- but now that it is stopped can they combine the two plans and keep this project alive. The Sheppard East LRT was to be underground at Don Mills Station in the west and then travel on the surface- could they keep that portion of this plan alive up to Agincourt GO station, (which could be moved down off of Midland I heard from Devon at the Sheppard East LRT office on Glen Watford Dr.). Then from this Agincourt Station the Sheppard East LRT can head south, possibly buried, to Scarborough Town Center. This would leave the east portion of Sheppard Ave (from Agincourt GO Station and east) to be served by buses. The reason that I think buses would be good from there is because the density is fairly low and their is a really good piece of infrastructure in the Malvern Bus Garage that might be not needed as much if there was an LRT on that part of Sheppard. The bus garage is a good piece of infrastructure and it would be a shame to see it go to waste. Maybe this modified plan would still get funding from the three levels of government to keep it alive…


  7. If Rob is looking for private sector money to build the Sheppard subway he can always ask Deco Labels and Tags.


  8. Again another example of RoFo governing by diktat – why should he alone get to turn away $2,000,000,000 in Onatario funding. Ridiculous!


  9. “Car oriented suburbs along what is supposed to be a major transit corridor” – definitely this is a big problem on the existing Sheppard subway between Yonge and Don Mills. The major problem is that unlike most other parts of the subway system this part of Sheppard runs through post war suburbia. There are too many parking lots here e.g. the parking lots of Bayview Village and Fairview Mall and the IKEA/Canadian Tire. Also there is too little pedestrian friendly retail here and the sidewalks are narrow in places. I hope that this can be gradually remedied though with new developments. Though if you really want this to happen the subway needs to be extended to make it more useful as an alternative the 401, obviously this needs public money because raising $3 billion from development fees is impossible. The Sheppard subway isn’t nearly as much of a white elephant as critics make it out to be.

    Steve: This argument brings us to the larger debate about the rapid transit system. Is its purpose to serve and to develop demand along the route itself, or to carry people through neighbourhoods? Redevelopment, intensification, reorientation of a street to higher pedestrian and transit activity, all of these are fundamentally different from the way our suburbs, and a good chunk of the “old city” have developed. We cannot expect to pay for subways through redevelopment if we don’t really want to let that happen, and any such development must be truly part of making the suburbs friendly to pedestrians.

    That’s what The Avenues and Transit City were about, flawed though those plans may have been. Oddly enough, there does not seem to be much recognition among the Ford subway advocates of the degree of change needed to pull off the scale of redevelopment needed, or of the planning and, yes, government intervention required to do it properly.


  10. I see only one main reason for extending the Sheppard Line as a subway – it was already started as a subway, and currently is nothing but a stub line. Better to complete it as started (i.e. as a subway) and be done with it.

    Steve: By following this logic, we should convert the Viva Newmarket service to an extension of the Yonge Subway. The proper discussion is to decide where the Sheppard East subway should have its terminus, and build to there. That may be Victoria Park, or it may be STC, but we don’t build miles more subway just because we already have one on that street.


  11. Steve writes, “We cannot expect to pay for subways through redevelopment if we don’t really want to let that happen”

    It has not been unheard of groups to embark enthusiastically on expensive schemes while ignoring their own serious misgivings — they unconsciously oppose their own projects.

    Will Gordon Chong have the ability — and mandate — to assess not only the market for development along Sheppard, but the potential for community opposition?

    SOS — both St. Clair and Sheppard versions — may look meek in comparison.

    You know potential developers and investors will be considering such factors…


  12. Steve says:

    “By following this logic, we should convert the Viva Newmarket service to an extension of the Yonge Subway. The proper discussion is to decide where the Sheppard East subway should have its terminus, and build to there. That may be Victoria Park, or it may be STC, but we don’t build miles more subway just because we already have one on that street.”

    My question is what would the ridership be on the Sheppard subway if the line was built to its full 28.6 km length from Albion Rd. to Markham and Sheppard? Wouldn’t there be enough riders to justify a subway along this corridor? Of course there is the problem of how to pay for it. Ford is having trouble finding $2 billion for his pipe dream to Scarborough Town Centre so it’s hard to see $8.3 billion magically appearing to build the remaining 23.1 km of this line.

    The Pembina Institute states that if the Sheppard subway ran from Sheppard-Yonge to Scarborough Town Centre (a total distance of 13.5 km), then the ridership would be 5,500 passengers per direction per hour. This is well below 10,000 passengers per direction per hour needed to justify building a subway along this route. If we get anything at all along Sheppard this is what we would most likely end up with if Ford somehow manages to pull a Houdini and find $2 billion + under a couch cushion at City Hall.

    However, if all 28.6 km of the line were to get built, would the ridership reach 10,000 passengers per direction per hour?

    In regards to VIVA, I believe Metrolinx, the Province of Ontario and VIVA/YRT want the Yonge line extended up to Richmond Hill Centre which would eliminate the section of the VIVA blue route between Richmond Hill Centre and Finch station.

    (Footnote: I saw a City of Toronto Transit Map that showed the Sheppard line running from Albion Rd. to Markham and Sheppard so this is where this idea came from).

    Steve: There are two points about a city-wide Sheppard line. First, we need to find out where people are actually trying to go. If a substantial number from the corners (Malvern and Rexdale, generally speaking) want to go downtown, they would be much better (and more cheaply) served by improved GO services. Right now, the GO fare policies discourage inside-416 trips, but this is increasingly counterproductive as GO evolves into a regional, all-day rapid transit network. Second, it’s important to figure out where the 10k peak riding would come from. We may be carrying a comparatively small number of people a very long way to consolidate their demand into the central part of the Sheppard line.

    These riders will eventually reach the Yonge Subway which has no capacity free to take them downtown. This ties into the Richmond Hill subway proposal. My joke about going to Newmarket stems from the “obvious” idea that a line that only goes to Richmond Hill would be somehow incomplete. Never mind that GO has plans for frequent all day service to the north. City Council has asked the TTC to study the problem of subway capacity into the downtown, and the response to date has been focused on capacity additions to the Yonge line itself (I won’t go into the details as this has been extensively discussed in other articles). There is strong opposition within the TTC to a “Downtown Relief Line” that would bleed traffic off of the Bloor-Yonge interchange and provide a new route into downtown that does not depend on the existing subway lines.

    A combination of a DRL with improved GO service to the corners of the 416 would make a huge difference in travel to downtown, and would provide important connection points with any new east-west rapid transit lines. The foot-dragging on this by all agencies and governments is extremely annoying and short-sighted.


  13. You said that the province offered to help pitch in for Sheppard if Eglinton could be on the surface, but what about elevated? At the very least, the section between Victoria Park and Birchmount could be elevated since the only properties which would have their views blocked would be some parking spots, grade separation would be kept, and no traffic lanes would have to be removed as well. Any increase in density in the area could be designed around the line as to minimize any “ugliness.” If Ford turned this option down, then he is hypocrite (more so…) as going underground through this stretch is the exact kind of waste he campaigned against – and there is no way I can see him justifying or defending against this accusation.

    As for a Yonge North extension, the long-term plan is for it to connect to the GO 407 BRT line, so one could argue that the line HAS to be extended to remain useful from a network standpoint. Granted, the odds of either of these two projects being completed in our lifetimes remains slim, however I predict we will see them long before anything on Sheppard east of the 404 or west of Yonge is built.


  14. Richard writes: (Footnote: I saw a City of Toronto Transit Map that showed the Sheppard line running from Albion Rd. to Markham and Sheppard so this is where this idea came from).

    Sheppard Ave. ends at Weston Road. I know that area has been redeveloped, but I’d be very surprised if it justified a subway terminal. The problem with Sheppard is that there’s little density or demand west of Yonge, and that’s even worse west of the Allan. Keele and Jane are the only intersections worthy of note.

    I guess it’s inevitable that if an extension to the west takes place, it goes at least as far as Downsview. But west of there, given that the Spadina line will serve Keele and also funnel in buses from the NW corner, I don’t see any use in running further west along Sheppard. Meandering the Sheppard line northwards makes no sense unless we interline it on the Spadina extension; meandering the lins southwest still lands it in the low-density area generally west of Wilson and Jane.


  15. Well, there is the wacko idea of running the Sheppard to Jane and then south down to Jane Station – I’m surprised none of our politicians who love drawing intuitive lines on maps have brought that idea up yet.

    Steve: We’re probably safe because Jane Station is in the old City of Toronto, and nobody wants to spend any money there.


  16. Over and over we hear, the TTC requires a 30% subsidy, but transit in Hong Kong pays for itself. I was fascinated to read in the report Steve provided a link to that:

    “Over the 2001‐2005 period, property development produced over half of MTRC’s revenues. By contrast, railway income, made up mainly of farebox receipts, generated 28 percent of total income.”

    It sounds like even in Hong Kong the fare box doesn’t cover transit expenses!


  17. On the subject of MORE Sheppard expansion, beyond STC and Downsview what I’d be watching for is talk of taking the thing to Pickering GO station, possibly instead of the BRT they’ve been talking about on Hwy 2.


  18. The Province is expecting to have $650 million left over after building the Eglinton-Scarborough line from Black Creek (or Jane) to McCowan. If the Federal Government’s $333 million is still on the table, we still have enough money to build the Sheppard LRT between Don Mills and Morningside. Ford will never let this happen as it’s subway or nothing but it’s interesting to note that this project could still happen if there was the political will. An alternative is to extend the Eglinton-Scarborough line from McCowan to Malvern Town Centre with the expected left over funds.

    Steve: By the time the Eglinton/Scarborough line actually opens, let alone is extended, I hope that Mayor Ford will simply be a bad dream in the transit system’s history.


  19. Will Council be allowed to perform, in public, a full review of the terms of any arrangement, or will we sell our transit system’s future in a back room deal?

    Given how the 407 was sold right at the beginning of the 1999 provincial election (in one of the worst government deals in history), I think that the back room deal is the road that the Ford administration will take in regards to the TTC. It still puzzles me as to why the 905 suburbs still vote Conservative after Mike Harris sold their most important transportation asset at pennies to the dollar.


  20. Listening to Ford’s reasoning for his endorsement of Harper the other day, I think we can say that Ford is starting to realize that a private sector subway is unobtainable and now he’s quietly looking for handouts.


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