Updated January 22, 2014 at 5:30 pm:
In the original TTC Capital Budget report, Appendix A, which summarizes the 10-year spending by department and major project group, was based on an earlier version of the budget than was actually presented. It showed a 10-year total that was roughly $500-million lower than the total actually presented to and voted on by the TTC Board.
A revised version of this appendix has now been issued.
The body of this article has been updated to include this version with the other previously published material.
Updated January 15, 2014 at 5:15 pm:
In the discussion of capital budget shortfalls, the magnitude of the gap between available funding and planned projects may be misinterpreted because a few megaprojects dominate the “funded” portion of the budget.
In its original form, the ten-year budget from 2014-2023 totalled about $9.0-billion (see Exhibit 3 of the budget report). This includes some very large items. (The numbers below include only spending from 2014 onward, not the full project cost.)
- Spadina Subway Extension: $1.1b
- Purchase of streetcars: $1.0b
- Purchase of subway cars: $780m
- Purchase of buses: $757m
- Signal systems: $756m
A very large area in the budget is called “Facilities and Structures”, and it accounts for $3.0-billion. Major items within this category (listed in the order that they appear in Appendix B of the budget) are:
- Roofing: $147m
- Escalator overhauls: $79m
- Subway pump replacements: $52m
- Bus hoists: $65m
- Paving: $135m
- Streetcar network upgrades: $53m
- Structural paving: $73m
- Bridges & structures: $84m
- Tunnel & station leak remediation: $56m
- Structure rehabilitation: $209m
- Fire ventilation upgrade: $276m
- Easier Access Phase III: $426m
- Leslie Barns: $308m
- TR/T1 rail yard accommodation: $392m
- LRV Carhouse renewals: $63m
- McNicoll Garage: $181m
That’s about $2.6-billion of the total within this category. Some of these represent “one time” costs such as adapting the streetcar network for new cars and building the new carhouse, or adapting the subway to meet new fire and accessibility codes, while others are for ongoing capital maintenance work. (For those who are wondering, streetcar and subway track are a separate major line in the budget totalling $649m over the ten years.)
A major problem for anyone who attempts to understand the budget is that projects that are really ongoing maintenance with an annual component are mixed together with projects that are one time events. Moreover, projects that are related (new subway cars, carhouse expansion, and other changes for increased capacity) are reported separately under different budget lines.
There are also, as discussed in the main article, several projects that are not even in the $9.0-billion version of the budget even though they may affect other projects that are included in the budget.
There is a $2.7b shortfall in funding for the decade leaving the net, funded, budget at $6.3-billion with many of the items listed above with either partial funding, or no funding at all. Although a 30% shortfall is bad enough, the percentage is even higher when some of the major, fully funded projects such as the Spadina extension are not included, and the problem is worst in the “out years” of the budget.
The TTC faces a severe crisis not just because many of the standing funding programs from Ottawa and Queen’s Park are winding down, but because so much debate and Council attention has focussed on a handful of megaprojects. All the effort goes into finding money for a Scarborough Subway, for example, while other projects go begging and have no advocates or prospects as fodder for election campaigns.
The original article from January 9, 2014 follows below.
The TTC’s Capital Budget can be challenging to understand not just because of its size (the line item project descriptions fill two large telephone-book sized binders), but because capital projects take many forms. Everyone thinks of the big ticket items such as the Spadina Subway extension to Vaughan because it is quite visible (at least to those affected by construction activities). Many have dreamed of riding a subway to the northwest within their lifetimes. At $2.6-billion, it’s not a cheap project either, but it accounts for only a few pages within those two volumes of the budget.
The budget is subdivided into four categories:
- State of Good Repair (“SOGR”)
- Legislated Work (e.g. Building Code, Accessibility)
- Improvement (doing existing things better including improved service)
This breakdown was introduced many years ago so that priority could be given to repair work. However, as things have evolved, this distinction is almost meaningless because the vast majority of projects – 92% – are classified as “State of Good Repair”.
Adding to the confusion, with the entry of Metrolinx into the local transit realm, there are projects with 100% provincial funding in the expansion category at the same time as several other funding streams for SOGR capital have dried up. (See Exhibit 1 on pp 3-4 of the TTC report.) These are not included in the chart above because they are no longer part of the TTC’s capital budget.
Leslie Barns and associated works is treated as SOGR because it supports the replacement streetcar fleet. The introduction of that fleet includes a wide range of projects associated with system upgrades to track, power distribution and carhouse facilities, but this is a one-time, generational change. Work such as the long overdue shift from trolley poles to pantographs, or maintenance facility changes to handle roof-mounted equipment will not be repeated. Routine track and overhead maintenance, on the other hand, will be a steady-state annual project once the backlog of repairs and changes is out of the way later this decade.
On the subway fleet, the TR fleet that will eventually take over operation of the YUS line is listed as SOGR, but so are 10 additional trainsets to support ridership growth and a move to automatic train control and shorter headways, something that clearly should be classed as an improvement (by analogy to a planned bus fleet expansion that is only a few lines away in the budget). Similarly, the proposed 60 additional streetcars (beyond an initial 204) are listed as SOGR, not as an improvement. In some cases, improvement-driven fleet expansion triggers other work such as provision of carhouse space and maintenance capacity, and this is not SOGR.
Two more groups of projects are:
- Below the line: projects that have no funding
- Below below the line: projects that have no funding and are so remote as to not make it into the main list
One project that has disappeared from the capital list is the proposal to install platform doors at all subway stations. This billion-dollar project (about $15m/station) was classified as SOGR although quite clearly it lies in the realm of improvements. It is part of the “below below the line” group. These are discussed later in the article.
It could be argued that responding to growth is part of the TTC’s basic job, but mis-classification of projects risks confusion of the truly necessary, “day-to-day” capital requirements with those needed to support growth and expansion.
The budget is summarized in three appendices to the main report:
- Appendix A gives a 10-year summary of projected spending organized by department and major project area. This is a rollup of Appendix B (the project detail) which I have omitted here.
- Appendix C states the budget numbers in terms of source of funding.
- Appendix D shows the proposed cuts to the budget to bring it in line with city debt-based funding targets.
This may appear to be something that only the detail-oriented budget nerds would follow, but there is a larger context.
Discussions of TTC funding in years past went roughly like this. Our 10-year program is too big for available funding, but the pressures come mainly from large-scale expansion projects and the financial crunch is in the “out” years. For the short term, all is well. That is exactly the position taken in 2013, and also in the initial version of the TTC’s 2014-23 budget (See Appendix C – Sources of Funding). The budget shows a “surplus” of available funding over planned spending in both years.
However, the 2014 “surplus” presumes a considerable increase in City funding from $60m in 2013 to $252m in 2014, money taken from “reserves” and “asset monetization”. In other words, the presumption is that the City has assets to sell that can be used to fund TTC requirements. This continues for many years to a total of about $1-billion. That is a lot of assets, and a big presumption that the City would choose to spend the proceeds on TTC capital projects. Moreover, to the extent that this would fund ongoing capital work rather than one-time projects, this is not a “sustainable” mechanism to fund the budget. You can sell the furniture to pay the roofers, but eventually you have an empty house.
In its original version, the Capital Budget reacted to the City’s debt targets by placing a number of projects “below the line”, in effect zeroing out their funding, but leaving them visible as future needs for discussion. However, when the budget reached the City, further reductions were requested that cut into the SOGR lines, in some cases quite deeply.
Compare Exhibit 5 in the main TTC budget report (the TTC’s list of affected below-the-line projects) with the cuts proposed in Appendix D of the same report (the version which includes the City Budget Analyst’s recommendations).
From the planned 2014 budget of $1.171b, the City proposes to strip $77.6m leaving a balance of $1.094. The size and scope of the cuts grow in future years. Below are the details for 2014.
|60 new LRVs||$51.7||Down payment for add-on order|
|Train door monitoring||$13.8||Start of project to enable shift to 1-person subway crews|
|Surface track||$10.0||From $28m proposed|
|Traction power||$10.0||From $31m proposed|
|Equipment (in buildings)||$5.0||From $25m proposed|
|Bridges & Tunnels||$5.0||From $48m proposed|
|McNicoll Garage||$8.0||Note 1|
|Bus Rebuilds||$7.2||Note 2|
|Fire Ventillation Upgrades||$2.8||Note 3|
|Net Cuts||$77.6||(Figures do not add due to rounding)|
Note 1: The garage requirement for McNicoll is affected by the planned fleet size including the proposed service improvement buses in 2019. As these have been cut, part of the garage project is also dropped in the out years.
Note 2: TTC had proposed moving to a 15-year bus life cycle which would have eliminated the need for a second mid-life overhaul. However, this would have triggered a greater need for bus purchases as vehicles would be eligible for replacement sooner. The City Budget Analyst did not agree with this approach and recommended that the TTC revert to planning based on an 18-year cycle. The effect for 2014 is to reintroduce rebuilds that would not have been required for the 15-year cycle.
Changing the presumed lifespan of a bus is a major policy decision, but this floated through the TTC Board without comment.
Note 3: Although there is a small increase in 2014 related to work already in progress, years 2015 onward see considerable cutbacks as this work has been moved “below the line”.
The City takes the position that the TTC historically underspends on its capital requests, and that it is not necessary to plan for funding 100% of their budget as submitted. This is referred to as the “ability to spend”. In many cases, the question is one of timing driven by external events such as delays to track projects. The need does not vanish, it simply shifts to future years through deferral. This gives the City a fig leaf behind which it can make a generic budget cut, but does not address the much more fundamental questions of how the TTC’s Capital needs will be funded in the medium and long term. Moreover, the specific budget lines that have been cut are not necessarily those where an “ability to spend” is at issue.
The City’s Analyst Notes include a chart (page 19) of the SOGR backlog which would grow from zero in 2013 to $338m by 2023. This is an example of the problem caused by listing almost every project as SOGR. We do not know the degree to which projects that are really for system improvement (relating to growth) are elbowing aside projects related to ongoing basic maintenance.
The chart shows a large bulge in SOGR spending in the next few years related to major fleet replacement projects. In the short term, the hit appears to be concentrated on the surface bus and streetcar systems, but in the out years of the budget, cuts appear in subway maintenance project lines as well. The details and effects of these cuts are not discussed in the TTC’s budget report.
This situation has very serious implications. Just as happened in the 1990s, the TTC faces a crisis in funding, but management assures everyone that we can “get by”. The details of what we must fund are muddled by a lack of understanding of work that is necessary just to keep the existing system running, work needed to respond to growth, and work needed to improve the quality of the transit system. Meanwhile, Council imposes a cap on City debt on the premise that the tax base cannot handle a greater load, but the same Council is prepared to fund a new subway project with a special tax increase.
In past years, Councillors and members of the TTC Board have been told that, yes, there is a funding problem, but it is in the future and it relates primarily to system expansion. From the look of the TTC Capital Budget this year, that statement is no longer true, and Council must face the need for additional funding.
If the budget backlog were not bad enough, there is a further list of projects that are not even included in the budget (from page 39). These are the items I call “below below the line”.
|AODA accessibility requirements||$182.354|
|Station Modernization Program||$111.1|
|Yonge – Bloor Capacity Improvements||$112.0|
|Yonge North Subway Extension||$4,292.0|
|Platform Edge Doors – YUS Line||$231.109|
|Wheel-Trans New Bus Garage||$150.0|
|Purchase of 112 (Growth) Future Wheel-Trans Buses||$53.112|
|Downtown Relief Line (depending on scope)||$3,200 to $8,300|
Some of these may, in the end, be funded substantially or entirely by other governments, but there are no guarantees. It is entirely possible that something like the Yonge Subway extension could find its way back “above the line” and compete with other projects for limited available funding. By analogy to the Spadina Subway project, Toronto might be on the hook for one third of the cost of getting the line to Steeles Avenue or for capacity-related work elsewhere on the existing network.
The TTC has proposed a task force to seek new money from the Federal and Provincial governments, and this is echoed by the City Budget Analyst:
[…] there is an urgent need to identify long-term, sustainable and predictable funding sources for the TTC capital plan. This would allow the TTC to proceed with appropriate and timely capital investments in a planned fashion in order to meet the needs of the City and its customers to ensure that the transit system, infrastructure, vehicles and equipment are maintained in a state-of-good-repair and allow for additional required expansion projects, such as the Downtown Relief Line.
It is recommended that staff create a special task force, comprised of the TTC Chair, the TTC CEO, the TTC CFAO, the City Manager and the City CFO, to prioritize, seek and secure funding for the $2.5 billion of unfunded TTC Capital Projects.
It is recommended that the Special Task Force pursue a tri-party partnership between the Federal government, Provincial government and the City of Toronto for a dedicated, long-term, stable funding plan to address its rolling stock, SOGR, capacity building, service improvement and growth needs. (P37)
At the very least, this requires a much more detailed understanding of project needs than simply lumping everything under “State of Good Repair”. Moreover, it requires an acknowledgement by Toronto that burning through funding sources to address vanity projects like the Scarborough Subway takes money from the pot that might fund basic maintenance.
Although the details have not been formally announced, estimates of the next stage of the federal economic stimulus package put Toronto’s share at around $1b. Over half of this ($660m) is now earmarked, presuming formal agreements, to the Scarborough subway. How exactly this is supposed to “stimulate” the economy in the short term is anyone’s guess, but when there are votes to be paid for, the rules for funding allocation can be flexible. In any event, that money will not be available for other Toronto capital/stimulus priorities.
Queen’s Park may send new money Toronto’s way through the transit “Revenue Tools”, whatever they may be, that could show up in the 2014 budget. That has to be passed, not a likely prospect given statements from the opposition parties, and we would then be into an election. Best case for transit? The Liberals get in again and reintroduce the revenue tools. Don’t expect any money until 2015 at the earliest and then Toronto’s share is at best a few hundred million annually. Not peanuts, but it won’t pay down all of the TTC’s capital shortfall.
At some point, Toronto is going to have to recognize the need to spend more of its own money on the TTC, and on routine capital projects, not on big ticket, ribbon cutting extravaganzas that do nothing to help with current problems of system reliability and service quality.
The TTC must do a much better job of subdividing its capital needs to identify the basics – just keeping the lights on by renewing existing infrastructure – and clearly showing the pressure from requirements for growth and better service so that these can be explicitly funded. “Lumpy” funding requirements caused by timing effects such as large-scale fleet replacements or generational replacement of long-lived infrastructure must be split out so their effect on year-to-year funding can be understood. Projects cannot languish so far “below the line” that they are not even shown in the budget. When these projects do gain political support, they can threaten the stability, such as it is, of the entire package.
Toronto needs a great deal more honesty and openness about its transit funding needs. We cannot hope to understand and plan to deal with our requirements if we simply plead poor and hide costs from view. Priorities cannot emerge out of thin air, but should be derived from a full understanding of the effects and tradeoffs involved in choosing what we will build, and what we will choose to ignore.
The Ford/Stintz era at the TTC is coming to an end. We have lost three years pandering to a subways-subways-subways mentality that diverted all transit debates into technology wars about a handful of lines while the basics – having enough vehicles to serve routes and providing reliable attractive service – got no political attention. Too much “improvement” at the TTC focussed on the superficial – are the trains and stations clean – and on living within artificial budget constraints from a skinflint Council. The hard work, the advocacy for real improvements in day-to-day transit quality, has been left for a new Commission, a new Council.
Links to documents cited here