So You Want To Own A Subway …

November 25, 2017: As the Tories have trotted out the same uploading plan as in the last election, I’m reminding folks that their scheme simply does not hold water. The numbers here are from 2014, and in due course I might getting around to updating them with 2017 or 2018 data. But it won’t change the conclusions.

This article was originally published in May 2014.

The madness that passes for political policy in Toronto continues in the provincial election with a proposal that a Tory administration under Tim Hudak would transfer control of the rapid transit system to GO Transit as a regional asset. The conventional wisdom is that the subway on its own would be “profitable”, and that Toronto would be stiffed for the money-losing surface network.

Quite bluntly, any claim that the subway makes a profit and could be uploaded at no net cost to Queen’s Park is pure bunk, and it says something about the quality of Hudak’s advisors that they don’t seem to know this (among many other fiscal facts of life). Just like the operation of a house or a car, two things many voters must deal with day-to-day, there are two budgets:

  • Operating: Here we have the bills that roll in regularly such as taxes, utilities, insurance. Unless we are renting out our homes or vehicles, there is no offsetting revenue, but in the case of the subway, there are fares and other much smaller sources of income.
  • Capital: Now and then, major expenses come along such as a new roof or foundation repairs, a new furnace or other appliances, fixing the plumbing and electrics, building that nice new patio you always wanted. These don’t happen often, and the expense covers an asset that should last decades, but some level of capital spending is unavoidable.

I have omitted mortgage costs here because they do not have a direct equivalent in transit budgets where the cost of borrowed money is not visible. If this were included, then capital-intensive modes like the subway would have a higher operating cost with the debt service charges included.

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