Toronto’s 2014 Budget & The TTC

On January 30, 2014, Toronto Council passed its 2014 operating and capital budgets.  In earlier articles, I discussed details of the TTC budgets and won’t repeat that info here.  However, a few details from the City budget debate are worth mentioning.

Scarborough Subway

Three Councillors attempted to sideline spending on the Scarborough Subway project by redirecting the planned $14-million in the 2014 budget either to a reserve or to other projects.

All of these motions were ruled out of order by the Speaker based on advice from City Legal staff who argued that since Council had already passes a special tax to fund the Scarborough Subway, they would be open to a lawsuit if the money were not spent for the intended purpose.  This ruling by the Chair was challenged, but the Chair was upheld by a vote of 23-22.  This is the same margin as in a previous vote on the issue, although a few Councillors switched sides.

I feel that attempts to derail this project are counterproductive at this time for several reasons:

  • Like it or not, Council has approved the Scarborough Subway project and its associated tax.
  • The issue is very contentious and in the current political environment quickly becomes a “Scarborough against the world” debate.
  • The cost estimate for the project is barely beyond the back-of-the-envelope stage, and this cannot be refined without further study that will occur in 2014 as part of the lead-up to the Environmental Assessment.  This will include comparative costs and effects for the City’s McCowan alignment and for Minister Murray’s “SRT” alignment.
  • If the cost of the subway proves substantially higher, this will certainly trigger a further debate at the 2015 budget sessions under the newly elected Council who must approve the next stage of the subway tax increase.  Any increase must be paid for with 100-cent City dollars because the commitments by Queen’s Park and Ottawa are capped.

Other related issues include:

  • The projected demand for the Scarborough Subway must be seen in the context of other regional plans that are under discussion.  These include substantially better service on the GO Stouffville Corridor.  An EA for double-tracking this line is already underway, and the corridor is part of the “Big U” that is under study as part of Yonge subway capacity relief.
  • The claimed shutdown period for the SRT for conversion to LRT has been inflated from the 2.5 years anticipated by Metrolinx to 4 years and beyond by subway advocates.  Any discussion of the LRT alternative must include a review of how long a shutdown really needs to take, but we are unlikely to see this given that the only authorized work for 2014 will be on the subway options.  Any work to make the LRT option more palatable would be viewed as backsliding by subway supporters.

The whole project will be back at Council again in 2015, and that is the time for a well-informed debate on alternatives.

Operating Subsidy

When the TTC Board approved its 2014 operating budget, there was a $6-million unspecified reduction in the expected subsidy based on a recommendation from the City Manager.  At the time, both TTC Chair Karen Stintz and CEO Andy Byford said that they would fight for the missing $6m, although we never found out exactly what the effect would be if the TTC didn’t get it.

The original 2014 subsidy proposed by management in the budget (November 2013) was $434m, up from a budget level of $411m for 2013. The Board passed a budget with a $428m subsidy.

The CEO’s report for November also predicted a $411m subsidy requirement for 2013, but probable actuals reported in January show that the system came in $7.3m below this number, at $403.7m.  Whether these savings are one time effects or sustainable into future years is a matter of debate (one unexpected source of revenue was the sale of retired subway cars).  The TTC does not distinguish between regular and extraordinary revenues, and some savings or costs (such as the actual vs budgeted cost of diesel fuel) vary with market forces.

In any event, for the second year running, the TTC’s actual subsidy requirements have come in below projections.  This makes the increase from previous year’s actual to current year’s budget bigger than simply a budget-to-budget comparison would show.

In case anyone is tempted to ask why the TTC cannot do “a better job” of budgeting “accurately”, that $7.3m is less than half of one percent of the total 2013 budget of $1.541-billion.  If your own personal finances operate at such a level of accuracy or better, then maybe you have a right to complain.  However, given that even a small percentage variation for the TTC turns into what, for Councillors, is a huge amount of money, debates about the TTC budget often turn on the minutia.  $6m represents 0.25% on the property tax rate.

Among several budget adjustments proposed by Deputy Mayor Norm Kelly and approved by Council, the TTC received an extra $3m for a new budgeted subsidy of $431m.

Council also passed a motion asking staff:

… to develop an intergovernmental campaign to advocate for a Provincial operating subsidy in line with pre-1995 levels.

$70m of Provincial subsidy now goes to the TTC operating budget as part of the City’s subsidy.  This is well below the formula instituted by Premier Davis in the 1970s of a 50% Provincial share.  A catch-22 here is that slavishly holding to a percentage allows Queen’s Park to dictate the size of the total budget by specifying an absolute limit to the dollar value of the subsidy.  This can artificially constrain the growth in TTC service.

Capital Budget

The Capital Budget was passed including over $2-billion in cuts (shifts of projects and funding to “below the line” over the coming 10 years.  Some of this lies in large projects that have yet to be approved, but a substantial amount comes from purchase of new vehicles (buses, streetcars and subway cars), garage/carhouse expansions and facilities maintenance.  $10m per year has been cut from streetcar track maintenance in 2014-18, and from subway track maintenance in 2019-2023.  In the out years, this is accounting hocus-pocus designed to make the capital spending fit within available target levels, but in the short term, this threatens some necessary TTC work.

The City and TTC will continue to beat their drums for added support at Queen’s Park and Ottawa even though, at least in the short term, this is likely to be more wishful thinking that productive lobbying.

Toronto has a self-imposed debt limit that arises from a desire to keep debt servicing costs at an affordable level relative to tax revenue.  Of course, if Council wants to raise taxes, they can also raise the amount of debt as they have done for the Scarborough Subway.

Affordability of Transit Fares

Council passed a motion asking several City departments and agencies, including the TTC:

… to report in advance of the rollout of the Presto Fare Card system and prior to the 2015 budget process, on options related to a fare media policy that addresses affordability issues of transit fares for low and moderate income Torontonians.

This topic comes up regularly at TTC Board discussions, and the common TTC response is that social benefits are not in the TTC’s purview.  With the move to smart card fare collection, there is an option to build fare subsidies into a rider’s account and to allow such subsidies to be tracked.

The question, as always, will be whether TTC funding should go to improvements in service and/or fare structure for all riders, or be targeted to those who receive some other form of social assistance.