On April 2, 2013, Metrolinx released a list of the preferred “revenue tools” in its forthcoming “Investment Strategy”.
Public consultation until today featured a longer list, and several of the options fell off of the table thanks to public and political feedback. The complete list and a detailed analysis of each option can be found in a 225-page report “Big Move Implementation Economics Revenue Tool Profiles” produced by AECOM and KPMG in March 2013.
At a press conference, Metrolinx CEO Bruce McCuaig emphasized that the duty of his organization is to make recommendations, to offer advice, but that the final choice on tools and the amount of revenue to be sought will be up to the politicians at Queen’s Park. This neatly shifts the focus of detailed questions, but avoids the question of just how much detail will be included in those recommendations.
A handout we are sure to see during the next round of consultations outlines the general philosophy and gives details of what might be achieved with each short-listed tool.
The most important statement here is that
An Investment Strategy is about more than just raising revenues for transportation; it’s about implementing mechanisms that grow a more livable, prosperous and sustainable region.
To this I would add that a “strategy” also includes important components such as the staging of projects and discussions about the speed (or lack thereof) with which the full Big Move network is implemented. Today and in the past weeks leading up to the announcement, we have heard a lot about new revenues, but little about how they should be “invested”.
This is not a situation where Metrolinx should sit back and wait for Queen’s Park to act. They should present alternative construction and implementation plans, financing, and the implications for revenue needs in the short and long term.
The $2-billion/year figure has been the standard number cited by Metrolinx going back to the release of The Big Move. Five years ago, this was a $50-billion project with a 25-year implementation plan. At the time, the price seemed to be low-balled, and in any event it did not include inflation. McCuaig wants to maintain consistency in the revenue target in part, I suspect, to avoid frightening voters and politicians with the spectre of runaway costs. However, the Next Wave funding scheme includes giving $500m (25%) annually to the municipal sector, and this slice comes off the top of what would otherwise have gone to Metrolinx. The combined effect of inflation and the municipal share will cut substantially into Metrolinx’ ability to deliver its program.
Changing the tools that would be used or the amount raised might be the subject of a legislated review period to allow adjustment up or down, or to rebalance income streams. This would give an option to raise more in the future, presuming that politicians of the day had the stomach to propose such actions.
Oliver Moore from the Globe asked if Metrolinx had a “hierarchy” of preferred tools. McCuaig replied that the large revenue generators are needed in any toolkit simply to get to a $2b total, but that policy considerations such as land use or influencing transportation decisions might also bring in the smaller tools such as Land Value Capture, Development Charges and High Occupancy Tolls. This was not a convincing response, but those three tools are beloved in some political circles, and they are unlikely to drop off the list without further study.
Newstalk 1010 asked about drivers feeling that they are unfairly targeted by the proposed tools. In fact, most of the proposed tools have nothing to do with motorists. McCuaig missed this obvious rebuttal, but talked about how the investments would not just be in transit but also generally in transportation. Metrolinx hopes to double the regional share of trips by transit from 16% to 33% in the next 25 years, and this will require an integrated view of transportation of whatever kind.
Mike Crawley from CBC asked about the tools that were not included in the recommended list. McCuaig repeated his position that the larger revenue generators are needed plus key tools to influence land use and travel choices, but that Metrolinx would “take input” on others. Royson James from The Star asked why tools such as the Vehicle Registration Tax were not included. McCuaig replied that Metrolinx preferred to use consumption-based rather than user-based tools.
Ben Spurr from NOW asked what municipal reaction have been to these proposals, and how much buy-in does Metrolinx need to go forward with them. McCuaig replied that the decision to implement any of the tools is up to Queen’s Park, but obviously Metrolinx wants to get municipal input. Much later in a scrum, when asked about the reaction of Mayor Ford, McCuaig emphasized that he would look to Council for its position. This is the same approach Metrolinx has taken to decisions on transit technologies and priorities.
A reporter from CHCH asked about timelines–when could transit riders expect to see improvements, and what would happen with promised improvements such as all-day service to Hamilton. McCuaig replied that $16b worth of projects is already underway (this is the oft-mentioned first wave to be funded from provincial general revenues, but which was stretched out to 2021 to reduce year-by-year financing needs). What may happen with an implementation schedule after June 1, McCuaig could not comment as this would be up to the province and municipalities. All-day Hamilton service to James Street Station will begin in 2015.
In speaking of the “Next Wave”, McCuaig hinted that the project list is not cast in stone, and that feedback from interested parties and municipalities could bring changes.
CP24 asked about the implementation and enforcement costs for some tools. McCuaig replied that sustainability of revenue, ease and cost of implementation, economic impacts, social equity, and the effect on travel choices would all be considered in the detailed evaluation of potential tools.
In the case of a sales tax, if it were implemented province-wide, then revenue from areas outside of the GTHA would have to go back to them, but that the implementation details (whether to tax only inside the GTHA and how revenue might be distributed) would be left to Queen’s Park.
A fundamental issue for McCuaig is that any revenue and spending proposals be seen as fair on a geographic basis. This may be challenging considering that the benefit from projects built in one municipality may flow to their neighbours. Metrolinx has not produced any breakdown of the revenue that might be generated for each tool in each municipality. This background will be essential to understanding how any basket of revenue tools will raise money, and by implication how the money will have to be spent through the GTHA.
Hamutal Dotan of the Torontoist was the first of several to ask about operating costs. This is not a trivial problem for Metrolinx because there are at least three different sets of costs:
- The cost of operating new lines built as part of The Big Move
- The cost of operating existing services (mainly GO rail) as all-day, 2-way operations
- The cost of upgrading municipal transit systems to act as feeder/distributor networks to the core GO services
Some of this will be offset by new revenue, but none of the GTA systems including GO breaks even today, let alone with greatly expanded service.
When the Investment Strategy was before the Metrolinx Board back in June 2008, the base scenario was for $3b/year, and possible values ranged up to $9b/year including capital costs for system growth, operating costs and ongoing renewal of the system. Needless to say, this number has fallen considerably thanks to sticker shock, but it gives some idea of what was considered at the time. This amount did not appear to include provision for local transit costs, only for those of the Metrolinx network.
On the bigmove website, another view of the Investment Strategy appears showing the evolution of the capital, operating and renewal costs over a 50-year period. This information fairly clearly shows that there is no thought for the second and third cost categories shown above, and moreover that the revenue stream is “spoken for” in the out years, and is not available for additional projects. When this chart was drawn up, it presumed construction of the entire Big Move 25-year plan, something that appears well beyond the capacity of current revenue and spending proposals.
How Metrolinx will achieve its aims with only $1.5b/year (after the municipal share is sliced out of the pie) is quite a mystery. As for the municipal sector, Toronto’s likely share would not even bring the city back to a 50% share of subsidy by Queen’s Park enjoyed in the pro-transit days of the 70s and 80s.
Notable by its complete absence from the discussion is any mention of accessibility or the operation of para-transit services such as Wheel-Trans. This is yet another area where the responsibilities are left to the municipal sector to muddle by as best they can.
I asked about the staging and delivery of not just the “Next Wave”, but the “Third” and “Fourth” waves beyond. When would Metrolinx start to spend its new revenues on projects such as the DRL or on other as-yet unfunded schemes. McCuaig replied that the DRL still must go through a great deal of analysis and design before actual construction, but this dodged the more general question about less complex projects and the ability to move forward with schemes that require less work to become “shovel ready”.
One reporter asked whether municipalities would be forced to implement intelligent traffic systems including speed limits and signal controls to improve traffic flow (downtown Toronto is already under study by the City). McCuaig replied that funding for such work would come out of the five percent (itself part of the 25%) set aside for local transportation improvements. More to the point, the question perpetuated the downtown focus of the “congestion” debate even though the worst problems lie in the outer 416 and beyond.
Finally, the question of transit fares as a funding source came up. McCuaig noted that the “user pay” principle is a common sentiment, but that fares are not sensitive to a rider’s ability to pay. Part of the toolbox evaluation will be to ensure that those of lower income will not be disproportionately affected.
I would also point out that the suggested $0.15 fare surcharge would disproportionately fall on Toronto riders who are far-and-away the majority of travellers in the GTHA. Such an increase, relative to roughly $2 average fare for all TTC trips, would be a 7.5% bump and this would likely preclude any concurrent increase in the base TTC fare structure putting them even further behind on funding operations and service. If anyone thinks of imposing a fare surcharge, this should be on a percentage basis so that GO Transit riders don’t get a “free ride” with a trivial increase in their much higher fares.
Fare revenue should be reserved for operating costs, not as a source of capital, so that people can get more of what they are paying for–service.
The press conference ended with a recognition by McCuaig that ongoing review and adjustment of the revenue tools would be needed, and that the need for investment will not stop with the “Next Wave”. There will be a constant debate about recalibrating the plans, and adjusting the speed of implementation.
The Metrolinx list is notably lacking in an Income Tax for individuals or for corporations. Indeed, only a Payroll Tax would be specific to the corporate sector, and it could fall unevenly depending on how labour intensive a company might be. The philosophical question must be whether the corporate sector, which stands to gain from increased mobility for employees and for goods, should help to fund the infrastructure and operation of the transportation network.
This option was dismissed in the background study because of concerns that any income-based taxes would affect Ontario’s (or the GTHA’s) competitiveness. This entirely missed the point that the lack of transportation infrastructure is itself a drag on the local economy, and is a common problem cited by the very businesses whose distaste for new taxes is well-known.
If we are going to give the impression that “everyone should pay”, this is a good place to start.
Two other fundamental problems are the funding of local transit services at a level sufficient to be a real alternative to driving, and the question of how quickly new lines will come into operation.
Without local transit, most trips will remain dependent on the private auto, and the urge to simply stay in your car rather than parking at a transfer station (even if there is room) is hard to fight. My impression is that Metrolinx has given this problem only the most cursory examination, and yet it is a central issue raised in the roundtable discussions held with GTHA residents. People recognize the importance of local service to get them around their own areas, and to connect them with the trunk routes. They also demand fare integration that treats the network as one entity without artificial tariff boundaries. Any consolidation of fare structures will require greater subsidy, but this is yet to appear as a major item for public discussion at Metrolinx.
As for construction schedules, Metrolinx must somehow escape from previous claims that the construction sector could not possibly take on more work. If this is to be believed, then it will simply not be possible to spend all the money we collect with new revenue tools as fast as it rolls in the door. Any discussion of project staging and the speed with which The Big Move can be implemented must have a credible understanding of industry capacity. This would likely have to be subdivided for major types of work such as tunnelling as opposed to less specialized work such as road construction and the creation of LRT/BRT rights-of-way.
Finally, Metrolinx has not included any discussion of financing options such as whether to go “pay-as-you-play” and limit construction (and later operations) to what can be achieved with $1.5b/year, or if the revenue stream would be seen as a long-term tool to service debt that would be raised to accelerate construction to the earlier part of The Big Move’s 25-year planning horizon.
In short, this is a “revenue strategy”, not an “investment strategy”.
There is a lot still to do, and the real decisions, as always, will come from the political level. If the minority Liberal government survives long enough, we might even see the beginnings of major transit upgrades, but this will require resolve, stamina and leadership to counter the facile populism of the no-new-tax brigade.