May 24, 2016: This article has been revised to reflect an inconsistency in my handling of Wheel Trans operating subsidies over the period. Specifically, up to 2009 I had included them in the total subsidy, but from then on, I had excluded them. This has been corrected and the WT subsidy is now shown as a separate component. Also, a one-time provincial WT subsidy in 2008 has been included.

In previous articles, I reviewed the details of TTC funding in the annual financial statements up to 2013. With the publication of the draft 2015 statement, it’s time for an update. This and other reports will be considered by the TTC’s Audit and Risk Management Committee on May 25, 2016.

The full set of charts used in this article is available in the following PDF:

2000 2015 Subsidy Summary_Revised

Caveats:

• This analysis consolidates information from several parts of the notes to the financial statements and is presented in a different manner from those statements to simplify tracking by year and source of subsidies. Although the numbers all come from “official” sources, the arrangement and presentation is my own.
• In 2015, the City’s operating subsidy included a “capital from current” payment of $19.2 million that purchased 50 new buses. Although this was booked as an operating subsidy (for reasons shrouded in the mysteries of that year’s budget fiddling by the Mayor and Council), it is really a capital subsidy and I have counted it in that category for consistency. This one-time subsidy disappears in 2016, but this is not a “cut” in operating funding.

Operating Subsidies

The TTC’s operations are funded primarily through the farebox. In 2015, fare revenue contributed $1.109 billion while other sources (advertising, outside city services, rentals and miscellaneous) brought the grand total to $1.179 billion. The remaining $518.6 million was funded by the City of Toronto and Province of Ontario.

Over the years, Ontario subsidy has been paid primarily through a share of its Gas Tax revenue. Ontario transfers a lump sum to Toronto, and the City splits it between Operating and Capital budgets. The amount going to Operations has not changed for many years.

Ontario under the Harris government killed off all operating subsidies, and they did not return until 2004. The explicit link as a share of gas tax began in 2006, and a special subsidy was paid in 2008 because of the unusual financial circumstances of that year.

The total subsidy grew consistently to 2009 (the last year of the Miller administration at City Hall), but it was cut back under Rob Ford and more or less flat-lined through to the first year of the Tory regime. For 2014, funding rose again to the 2009 Miller level, but of course this makes no allowance for inflation over the intervening years. For 2015, the second year of the Tory mayoralty, there was an increase in operating funding. (Note that the Capital from Current payment has been excluded here and combined with the Capital Budget funding shown later in this article.)

The subsidies are presented in two formats below: total subsidy received, and individual sources. Either way, it is clear that the City of Toronto has carried the lion’s share of the operating subsidies. This is a far cry from the era when the City and Province split this cost 50-50. Over the 16-year period, the total paid by Toronto was $4.85 billion while Ontario paid only $1.20 billion.

The chart below shows the components of the operating subsidy separately. Except for 2008, the City’s funding of Wheel-Trans has grown, albeit slowly even when conventional service funding was cut back. The result is that the “conventional” cuts as a percentage are deeper than when the numbers are presented in aggregate.

Capital Subsidies

Capital subsidies pay for new projects such as the subway to Vaughan (aka “Toronto York Spadina Subway Extension” or “TYSSE”) and for replacement of worn out infrastructure and rolling stock. The money arrives in various ways depending on the political and financial situation when various programs and projects were launched.

• Some money, primarily gas tax, arrives on an annual basis.
• Some money comes from reserves that were funded through budget surpluses when times were good (generally before the 2008 financial meltdown).
• Some money comes from “commitments” by governments that are paid out as the projects they fund proceed.
• A large portion of the ongoing capital program is funded by the City of Toronto through a combination of current revenues and debt.

In the first chart below, the total capital spending shows large growth over the past decade primarily due to the TYSSE project and major fleet updates. The gas tax contributions are broken out here to show how relatively small they are compared to other sources of funding.

“Other” includes money from York Region for its share of the TYSSE and from Waterfront Toronto which is itself funded 1/3 by each level of government.

The amounts here are only for spending through the TTC itself and do not include Metrolinx LRT projects within Toronto.

The second chart presents the same data but with the sources broken into separate columns. This shows quite clearly the increased level of capital spending by the City of Toronto compared to other sources. Over the 16-year period, about 47% of all capital funding has come from the City with most of the remainder split between Canada (23%) and Ontario (26%).

The third chart consolidates gas tax and other subsidies by government, and breaks out the York Region contribution for the TYSSE.

Gas Taxes

Although we hear a lot about contributions from both levels of government through the gas tax, it is important to remember that the actual amounts have been almost flat for several years. In real dollar terms, the amount is declining thanks to inflation. Ontario’s gas tax is split between the Operating and Capital budgets at the City’s discretion.

2005 was a special year for federal contributions because it actually covered more than one year’s revenue. The federal contribution is pegged to Toronto’s share of the national population which has actually been declining. In both cases, the total amount available is based on cents-per-litre. This does not vary with the price of fuel, but it also is linked to actual fuel consumption. As a revenue source, this is not growing and could even be eroded by fuel efficiency, a shift to lower car ownership, and a move to untaxed fuels.

Reserves and Receivables

When times are good, governments have surpluses burning a hole in their pocket that they cannot spend within the current fiscal year. To fix this “problem”, the money is transferred to a reserve usually with a name indicating how the money is to be used (and a political slogan showing how much they care about transit).

During the mid-2000s, several funds were promised, but the cheques did not actually arrive until 2007-2008. Meanwhile, the TTC (actually Toronto on its behalf) spent money in anticipation of reimbursement from other governments. The 2008 financial crisis brought an end to this sort of funding, but many reserves had been created. These have mostly been depleted as of 2015.

The charts below show the situation in aggregate, and broken down into separate reserves.

• CSIF: Canada Strategic Infrastructure Fund. Most of the money in this reserve has been spent, and the fund is supposed to wind down in March 2016, although an extension has been requested.
• PTCT: Public Transit Capital Trust. This federal program was short-lived and the reserve was depleted in 2008.
• ORSIF: This was an Ontario program to give the TTC money for rapid transit infrastructure outside of the standard subsidy channels as Toronto was the only city with this type of transit. The reserve was depleted in 2011.
• OBRP: This was an Ontario program to fund bus replacements, but it no longer exists. Most of the funding came into and out of City accounts in the same year, and so little appears in the reserves.
• TTIP/GTIP: More discontinued Ontario programs for transit improvement. Like OBRP, little of the money stayed in City accounts long enough to show up in the reserves.
• Quick Wins: This is the 2010 Metrolinx program to fund various system improvements. The reserve will likely be depleted in 2016.

Unless there is a major change in funding principles by Ontario and Canada, the use of reserves will likely disappear from transit budgets to be replaced by in-year funding either for specific projects (reimbursing spending as it occurs) or as block transfers (like the gas tax) for use by the City at its discretion.

Project-Based Funding

TYSSE

The Spadina extension to Vaughan is funded by Toronto, York Region, Ontario and Canada. To the end of 2015, the proportions contributed by each level of government have remained the same with only the total dollar amount moving up and down. From 2016 this will change as the cost overruns on this project will not be equally shared with the local municipalities on the hook for the extra spending.

Transit City

Metrolinx took over the Transit City projects from the TTC and reimbursed the City for its costs. Funding continues to show up in the financial statements because of work done on Metrolinx’ behalf by the TTC. Note that any clawback of sunk costs for the Scarborough LRT will require that some of this funding to be reimbursed to Ontario.

Low Floor LRV Project

The TTC is buying 204 new low floor streetcars from Bombardier with the cost subsidized 1/3 by Ontario. As is common in vehicle supply contracts, front-end loading funds the vendor’s startup costs and the remainder is paid out as vehicles are received and accepted. The lack of progress on this project is clear in the low levels of subsidy paid out in recent years.

Scarborough Subway Extension

As of 2015, this is not an approved project because Council has not finalized the route design and there is no approved Environmental Assessment. Toronto has been accumulating revenue from a dedicated SSE tax in its accounts, but this does not show up in the TTC financial statements.