Ottawa’s 2015 Budget Transit Funding: Smoke and Mirrors

The federal government has announced a transit fund for coming years and given the impression that this is new money over and above whatever cities might receive today. It’s not, and folks like Mayor Tory who see this “fund” as a way to underwrite their pet projects like SmartTrack will come up short.

The detailed budget paper shows where the transit money actually comes from (jump down to page 187 of the linked pdf), and includes the following chart.


Of the $53b promised over the 10 years 2014-2024, much of this already exists in the budget:

  • Gas tax: $21.8b. Toronto already receives about $150m annually from this source and has built the funding stream into its future capital spending projections.
  • Existing infrastructure funding: $6b. This is self-explanatory, and is not new money.
  • GST Rebate: $10.4b. This is another existing program, and it’s not really a payment to municipalities, merely a foregone source of federal revenue.
  • P3 Canada Fund: $1.25b. This is an existing program, although some of this may be new money. However, it is small change in the overall scheme of transit needs, and is subject to a “merit-based” allocation.

The new “Public Transit Fund” is not a block grant program, but will be based on “merit”, a concept with which Toronto is all too familiar thanks to the machinations of various transit  lobbies and politicians. Moreover, Ottawa looks to deliver projects through a combination of P3s and municipal financing backstopped by federal funding over the life of a project. This effectively defers the cash outlays to future years when a completed project would be paid for like a mortgage. This fund is expected to ramp up to $1b annually, but not immediately, and it is far from clear how much this would actually bring to Toronto or the GTHA.

Whether the private sector actually has the capital and wishes to invest, let alone whether they could do so at a cost competitive with crown borrowing, is a question best not asked. As for municipalities, the borrowing would still be on their books and affect their debt ratios, even with “guaranteed” federal funding to pay this off. To what degree those future debt payments would crowd out net new spending would depend on prevailing economic conditions at the time.

I am more than happy to see money flow from Ottawa to municipal projects, but the budget hype implies a much higher level of new spending than will actually occur. We are a long way from funding the many badly-needed transit projects in the GTHA, let alone seeing a reliable federal contribution on a par with provincial or local governments.