How Much Will $15-billion Buy Us? (Updated)

Updated July 7, 2014 at 9:10am: The table of project costs has been corrected to place some BRT project costs in the first wave, and to include their “next wave” spending that was omitted in error in the original version. Thanks to Divyesh Mistry for catching these errors.

Ontario’s budget will be re-introduced on July 14, and it is expected to include $15-billion for transit projects in the GTHA over the next ten years. What, exactly can we expect to see from this spending? Is there room for additional projects? Will projects once proposed by Queen’s Park or Metrolinx fall off of the table?

From the budget website’s description of the infrastructure plans:

Proceeds from the dedicated fund for the GTHA would be invested exclusively in public transit priorities that address congestion and improve mobility throughout the region. Proceeds would be used to build priority projects included in Metrolinx’s regional transportation plan, The Big Move, and for other potential projects that support economic development and improve mobility, such as the East Bayfront Light Rail Transit (LRT) project on Toronto’s waterfront. This would build on the first wave of projects, such as the Eglinton Crosstown LRT line and Union Pearson Express, and the Bloor-Danforth subway extension in Scarborough.

The government recognizes continued expansion towards two-way, all-day GO Transit rail service as a priority. GO Transit improvements on all corridors would include additional track, grade separations, improved signalling, station improvements and additional fleet, which are all building blocks towards two-way, all-day service. In addition, analysis is underway on a proposal to electrify the GO rail system to deliver service at intervals as frequent as 15 minutes.

The Big Move identifies additional GO service as critical to developing the regional rapid transit network, and all-day, two-way express rail service as part of the solution.

The Province has asked Metrolinx to begin work immediately to examine opportunities to move GO service towards a regional express rail, providing fast and frequent electrified service on all corridors at intervals as frequent as 15 minutes. This would represent a game-changer in how people move about the region, and enhance ridership and efficiency on GO Transit and other projects that connect to the network as well.

The Province will work with Metrolinx and municipalities on how best to prioritize transit investments through the use of rigorous business-case analyses. These analyses will help prioritize Next Wave projects that could be accommodated within the Province’s dedicated fund for the GTHA and provide the best value for Ontarians.

Beyond the existing GO network, priority projects within the GTHA would be drawn from the Next Wave of Metrolinx projects included in The Big Move.

Cost estimates for every project are not publicly available, but we can get a good sense of the financial situation by looking at the snapshots for major projects listed on the Metrolinx site.

20140702_BigMove_ProjectCostSummary

We have heard many times how Ontario has committed $16b to transit for the GTHA, and the “First Wave” contains the projects that money will fund. Published project cost estimates total $15.172b of which $12.766b comes from Queen’s Park.

The most important point about this list is that over half of the money has not yet been spent, and some projects have not even gone beyond the stages of preliminary design and Transit Project Assessment.

That unspent amount represents future spending that must be funded from somewhere, but there has been no discussion of exactly where or how this will be done beyond an assumption that it will come from general revenues.

Notable by its absence from the list is Presto for which a cost estimate has not been published. This project came in for criticism by the Provincial Auditor in 2012.

When we come to the Next Wave, the total estimated cost is $22.6-billion, although two major projects – the Relief Line and the Richmond Hill extension – will at best be started, but certainly not completed during the 10-year window for the next $15b commitment.

The Next Wave includes some electrification projects, but certainly not the complete GO network, nor a system-wide rollout of 15-minute service, a scheme well beyond Metrolinx ambitions when the Next Wave was announced. Note how the budget language refers “expansion towards” and “building blocks” that will lead to service “as frequent as 15 minutes”. This is not the same as quarter-hourly service on all lines, all day.

Regardless of what we actually get, the current “commitment”, one that was discussed quite clearly at the recent Metrolinx Board meeting, was to provide just that: a full buildout of an electrified frequent service network within ten years. This will require substantial additions to spending plans, and will inevitably elbow aside other projects.

Queen’s Park and Metrolinx owe us, the voters and the would-be riders on their network, a clear statement of just what they hope to build with the funds earmarked for the GTHA.

I wrote to Metrolinx seeking clarification on some issues. Here are my questions and their replies:

1. Of the First Wave projects, is the $16b all money that is separate from whatever might come from the IS (or whatever equivalent might be in the budget)?

Yes, the $16 billion worth of current transit projects referenced in our communications is separate and apart from recent provincial announcements.

2. Can you reconcile the $14.7b number with the $16b overall claim for the first wave, notably the missing amount for Presto?

The $16 billion figure refers to an estimated investment in capital projects completed or underway since 2008. Projects included in the $16 billion figure are primarily construction projects with shovels in the ground and as such, PRESTO, Smart Commute and other non-construction programs were not included. While many of the 200 construction projects completed or underway are part of the $16 billion figure, our website only features fact sheets for major projects. The figure also includes many supporting GO Transit projects, such as platform extensions and station upgrades, which play a transformative role in forming a solid foundation upon which to expand GO service across the GTHA.

3. For the Next Wave projects, how much of the total spend is expected to be within the 10-year window of the budget’s $29b?

A significant portion of the anticipated provincial spending will be spent within the next 10 years. Environmental assessments, planning work and an examination of operational needs will more precisely determine the timing of cashflow. We will be reporting our anticipated timelines for new projects at our September board meeting.

4. For financial planning, is there any intent that Metrolinx would produce a project-level projection that will show capital requirements and the degree to which funding has been committed (and from what pool)?

This is part of our 10-year financial planning process, which represents confidential advice to the government and is not available to the public.

This statement confirms that the two pools of funding (first and next waves) are actually separate, and important distinction especially if future budgets attempt to pay for “first wave” work out of revenues nominally earmarked for the “next wave”. That next wave will include some money from the “outside of GTHA” pool of $13.9b (portions of the GO network beyond the Metrolinx planning area), but the lion’s share of that funding should go to other parts of Ontario.

In general, the budget page slips back and forth between projects that are in the first and next wave pools, and projects that have been independently funded such as the Waterloo and Ottawa LRTs and the provincial share of the Toronto streetcar project. Figuring out just how much is to be spent on transit, when and from which funding pool, can be quite a challenge.

The absence of a consolidated list even for Metrolinx – something they consider as confidential information for the government – is troubling. By contrast, the 10-year capital project list including annual cash flows and funding sources is part of the public record for the TTC and informs much debate about the budget shortfall and the growing backlog of work.

Missing from the proposed budget is any mention of the 25% municipal share in the “Investment Strategy” proposed by Metrolinx. Queen’s Park seems content to repeat over and over the support via gas tax revenue:

Ontario provides significant ongoing funding for municipal transit systems across the province by sharing two cents per litre of provincial gas tax revenues. Since 2004, the Province has committed more than $2.7 billion in gas tax funding. This program is now a guaranteed source of funding for eligible municipalities to improve and expand their transit services.

It is now 2014, and that $2.7b doesn’t amount to much on an annual basis spread over the entire province for a decade. Moreover, the revenue stream is not indexed, and that two cents is worth less and less each year with growth, if any, coming from increased consumption that is no longer a sure thing.

Transit infrastructure will be a centrepiece in the coming budget, one that will almost certainly pass the now-majority Liberal legislature. The level of support is worth celebrating, but the party should be restrained, not wild jubilation that Santa Claus has arrived with an overflowing bag of goodies.

$15-billion sounds like a big number, but it is only $1.5b per year over 10 years, still less than the $2b/year spend proposed in the original 2008 Big Move. Metrolinx always quotes projects for a base year with inflation to come, but it is not clear whether the budget will do the same. That $15b could be a hard number that will buy considerably less than the uninflated prices in the Metrolinx catalog.

Queen’s Park owes us many answers on transit funding and financing, not least of which is transparency in their plans rather than assertions of confidentiality.