Metrolinx Math

In a recent comment, a reader questioned the disparity between the $34-billion cost of the Metrolinx “Next Wave” projects and the sum of the individual projects listed on the website.  These projects are:

Brampton-Queen BRT     $  600 million
Dundas BRT                600
Durham BRT                500
GO Expansion            4,900
GO Lakeshore Express    1,700
GO KW Electrification     900
Hamilton RT             1,000
Hurontario LRT          1,600
Downtown Relief Line    7,400
Yonge North Subway      3,400
Total                 $22,600 million

A big chunk of the difference between these two numbers can be explained by a factor which is new in the “Next Wave”, a provision of 25% of whatever funding is available for local transit, regional highways and other smaller projects.  This would eat up $8.5b out of the total leaving $25.5b for the next wave of “Big Move” projects.

I wrote to Metrolinx asking for an explanation of the remaining $2.9b, and this is their response.

Transforming the transportation network in the Greater Toronto and Hamilton Area is similar to any renovation project, and $50 billion was a planning number that was developed in 2008 for the Regional Transportation Plan, also known as The Big Move. As we move through assessments and delivery, we will have harder numbers, so that figure will change.

However, prior to the assessments and delivery, we’ve built a contingency into the $34 billion cost of the Next Wave projects, which accounts for a difference in numbers.

It should be noted that more than $16 billion from all three levels of government has been allocated to the “first wave” of projects drawn from The Big Moves list of top priorities. This is the largest financial commitment to transit expansion in Canadian history. [Email from Metrolinx February 5, 2013]

I will take at face value the statement that the $2.9b is “contingency”, but note that this was not mentioned in any of the presentation materials nor on the website.  To me it looks more like an “oops”.

This is not simply a question of catching Metrolinx out on an incomplete or inaccurate presentation.  We are now engaged in a debate about regional transportation and funding, and it is vital that this take place in a fully informed context.  An amount of $2b/year is commonly used as a reference point for the amount of funding that must be delivered by any new revenue tools.  This was in the original “Big Move” budget of $50b delivered over 25 years, and shows up most recently in the City of Toronto’s “Feeling Congested” outreach program.

That original number was in 2008$ and it included some provision for future operating costs.  However, it did not include inflation, nor did it include the recently added provision for local transit and road projects which would take 25% off the top of any new revenue stream.

The $50b was supposed to finance 52 separate projects listed in The Big Move, but between the “first wave” and “next wave” list, many still remain outside of funding plans.

If the Investment Strategy report expected from Metrolinx late this spring is to have any relevance to the discussion, it must include current estimates of capital and operating costs to be funded from new revenues, and must provide for inflation.  Either the capital provisions must be escalated to future dollars, or the future revenue from new tools must be discounted to present day.  We cannot discuss our long-term funding needs with a mixture of dollar values spanning decades.

Public transit projects have a long history of coming in over budget for various reasons.  Some of this is bad planning and some is scope creep, although it could be argued that these are often related.  There is always the issue of unexpected circumstances, not to mention the treatment of large public transit projects as an opportunity for every nearby utility to have their plant upgraded at the project’s expense.  Past funding for Metrolinx projects has always been announced as $x-billion plus inflation so that a $16b or $34b “commitment” may actually be much larger in as-spent dollars.

A further wrinkle is the use of private sector financing, construction and operation through “AFP” (Alternate Finance and Procurement), a methodology now in favour both in Ottawa and at Queen’s Park.  In this scheme, part of the capital cost of a project is assumed by a private partner, and this can reduce the capital outlay required during construction by the public sector.  However, that money has to be paid someday, and the payments show up on the operating budgets through mechanisms such as leases and revenue guarantees.  That will be a future call on the new revenue streams, and it must be built into the long range Investment Strategy.

Finally, some transit costs have been borne through non-Metrolinx budgets including various transfers to municipalities (now mainly the gas tax, although the infrastructure fund may be revived in a future budget) and a clawback to GO transit via a tithe to help pay for its capital program ($20m from Toronto this year).  All of these funding streams need to be sorted out and presented in one place so that a rational view of what is needed going forward is available for everyone to see.

Metrolinx should take greater care with its announcements and fiscal plans so that its credibility is not undermined by simple questions about arithmetic, and so that the funding they seek will actually match the funding they will need.

Step Right Up for the Miracle Cure! (Updated)

For those readers here who do not follow the Torontoist website, I have an article there commenting on the City of Toronto’s outreach program for the new Official Plan.

Toronto seeks the opinion of its residents on the purpose and priorities of a transportation network, and on how we might pay for this in coming years.  The City’s heart is in the right place, but the planned consultation has its problems.

Updated February 3, 2013 at 8:00 am:

Toronto City Planning’s website seeking feedback on priorities and revenue tools has been live for a few days now.  It operates in a somewhat different fashion than I had assumed from the presentation by Jennifer Keesmaat at a recent Planning & Growth Management Committee meeting.

The site allows participants to select among a set of priorities, choose their favourite revenue tools and build a budget showing how each tool would contribute to a $2b/year target.

The priorities are a bit wooly and don’t necessarily reflect the linkage between the options and the type of spending that might occur.  For example, the “affordable” priority is described as relating to the cost of using transit, not to the cost of building it.

On the budgetary side, the potential revenue from various sources is given (this was missing from the PGM presentation), but there is no discussion of the ease with which any of the tools could be implemented nor of issues such as fairness in who would pay the new revenue.  A few examples:

  • Congestion charges are aimed at downtown where, ironically, the level of road traffic relative to total travel is very small.
  • A payroll tax charges businesses based on the size and cost of their labour force, not on the level of economic activity they represent.
  • Charges assigned per unit (e.g. utility levies) fall disproportionately on those with the smallest units and low usage (typically poorer family units).
  • Charges related to property value are keyed to notional value (CVA) rather than ability to pay.  Value capture schemes, like CVA, would tax an asset that the owner could not monetize unless the property were sold.  The effect is completely different for residential and commercial uses.

I will examine the various revenue tools in a separate article consolidating the discussion with the recent proposals from the RCCAO (Residential & Commercial Construction Association of Ontario).

Finally, there is no discussion of how the money would be used.  From the Metrolinx “Next Wave” proposal, we know that 25% ($500m/yr) would come to the municipal sector, roads and active transportation options.  This is actually small change beside the ongoing needs for local transportation funding and the backlog of infrastructure repairs.

The consultation does not include any discussion of what, at a local level, the new revenue might fund although this could affect the selection of tools.  Responses do include the selection of where broadly speaking money should go (transit, roads, etc) but with no examples of the implications or needs for each sector.

As I write this, the ranking of responses so far places highway tolls, congestion levies and development charges at the top of the list although even the first ranked gets a score of only 2.46 suggesting that many respondents ranked it in 3rd place or lower.  Some scores are tightly clustered indicating that responses are picking a variety of options.  It is unclear whether the ranking system assigns a value to “not selected” and is assigning scores only to the five items which each participant selected.  No value of “n”, the number of people selecting an item, is given.

How useful this survey will prove in the next stage of the consultation remains to be seen.

New Premier, New Policies? (Updated)

Updated February 2, 2013 at 12:30 am:  The costing for Next Wave projects has been corrected to reflect that spending for local projects and roads is included in the total of $34-billion rather than as an additional cost on top of that number.

The Ontario Liberal Party has a new leader, and soon the province will have a new Premier.  Although I am not a Liberal supporter, I am extremely pleased by Kathleen Wynne’s rise to head our provincial government.  She represents the progressive wing of the party, and a fresh outlook after the increasingly frustrating reign of Dalton McGuinty.  A change of focus is already evident with social services, education labour relations, job creation and transportation infrastructure getting prominent mention.

Transportation is not first on the list, but it is vital to the GTHA.  Mobility has many benefits for business and for individuals.  Transportation infrastructure, especially transit, has far too often been treated as a cost to be avoided, to be offloaded, to be deferred while we strangle in congestion.  That congestion isn’t just on roads, plugged highways and arterials, but on the very transit systems we keep telling drivers can be our way out of the mess of 21st century gridlock.

The scope of what we need is enormous.  Within Toronto, we are accustomed to annual ridership figures now over half a billion, although this is well below half of all the journeys in the city.  Elsewhere in the greater Toronto area, transit does well to carry 10% of all travel.  The GTHA requires much, much more investment in transit infrastructure and in service to attract a larger share of the market.  Making transit a credible alternative to the automobile will not be easy, and reaching a target of 1/3 of work trips by transit in 2031 requires far more than a few trains and buses.

“More of the same” is not an option for a new government, especially one with a tenuous minority in the legislature.  Transportation problems are too big and have been set aside for another day for far too long.

Later this year, we will see the long-awaited Metrolinx “Investment Strategy”, a document that should have been published at least two years ago.  The necessary background information has been available for some time, but nobody at Queen’s Park wanted to talk about new “revenue tools”.  This lack of political fortitude and leadership, coupled with project funding delays and scope changes, cost the GTHA more lost time and compounded the deficit in transit building.

Fortunately Ontario now has a Premier-designate who is willing to talk about raising the money necessary to improve transit.  The challenge will be to actually go from talk to implementation and the creation of a funded transit plan.

We are at an important time in the political and economic cycle for the debate and real progress to begin.  Too many big announcements came just at high points when the economy boomed, only to lose the momentum to a downturn, retrenchment, and a shift of focus away from transit expansion, let alone changes in government. This pattern stretches back to the early 1970s and the Davis government’s aim to build cities for people with transit rather than with cars.

We are having the difficult, “mature” conversation about new taxes (whatever we might call them) when times are tougher.  Building transit funds into the base of government spending rather than as good-time baubles will be a major change, if it happens.

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