The Star’s Jennifer Pagliaro reports that City Council has approved a confidential settlement with BILD, the Building Industry and Land Development Association, to avoid an Ontario Municipal Board hearing that could lead to rejection of the Bylaw implementing the Development Charges intended to pay for the Scarborough Subway. The matter was before Council in confidential session on June 7, 2016.
Staff miscalculations on the ridership of the Scarborough subway will leave taxpayers on the hook for millions more, after city council voted to settle a dispute with developers.
According to a secret report before council on Tuesday, the contents of which were shared with the Star, the city’s lawyers advised councillors to accept a settlement with the group representing developers, the Building Industry and Land Development Association (BILD).
The settlement, which reduces the amount builders will have to pony up to help finance the subway, is expected to cost the city as much as $6 million in lost revenues.
If the settlement is for only $6 million, the City should consider itself lucky because the calculation underlying the DCs is based on flawed ridership estimates and an out of date network design. Moreover, the original authorization appears to double count subway revenue with both a special Scarborough Subway Tax and Development Charges to recover the same costs.
Recent news of a 50% reduction in expected Scarborough Subway ridership from 14,100 to 7,300 passengers in the AM peak hour reignited political debate on the viability of the subway scheme. However, these numbers are not just hypothetical indicators of how the line might perform, they are integral to the calculation of Development Charges (DCs) that would help to fund the City’s share of this project.
See also my previous articles:
The formula to calculate development charges is complex, but at its heart is one key measure: how much of a new transit project will benefit existing properties versus future development. If the primary role of a new subway is to improve the lot of current riders, then only a minority of its cost can be recouped by DCs (and thus from future purchasers of new properties).
Toronto allocates DCs on a city-wide basis rather than assigning each project only to the neighbourhoods it will directly serve. These charges already help pay for many projects as shown in the introduction to the study establishing the level of new charges for the SSE.
The Council of the City of Toronto passed a Development Charges (DC) By-law, By-law 1347-2013 in October 2013, for the recovery of capital costs associated with meeting the increased needs arising from development. The effective date of the Bylaw was November 1, 2013. The recovery of DCs is on a City-wide basis and relates to a wide range of eligible City services:
- Spadina Subway Extension
- Roads and Related
- Sanitary Sewer
- Storm Water Management
- Parks and Recreation
- Subsidized Housing
- Emergency Medical Services
- Development-Related Studies
- Civic Improvements
- Child Care
- Pedestrian Infrastructure
For commercial property, there is some justification to this because increased mobility makes travel to jobs simpler well beyond the location of any one project. For example, the Scarborough Subway might be held out as a way to stimulate growth at the Town Centre, but it would also reduce commute times to other parts of Toronto, notably downtown.
For residential property, especially for the large proportion of new development downtown, this link is less clear, and DCs on new condos can wind up funding transit projects of little benefit to the new residents.
This split is part of the eternal battle between sharing the cost of public services across the city and charging them locally or by user group.
In the case of the Scarborough Subway Extension (SSE), the split between new and existing beneficiaries was determined by the change in ridership projected with the subway project. The benefit was allocated 61% to new development and 39% to existing riders. The ratio is high because, at the time of the calculation, the projected peak hour ridership for the SSE was estimated at 14,100 compared with a base value of 5,500. Both of these numbers are suspect.
The base value was factored up from actual SRT ridership of 4,000 per hour to 5,500 to represent the load the subway would have had were it to exist in 2015. That value of 4,000 is equivalent to a load of about 240 per train when the peak service was 17.14 trains/hour (3’30” headway) as in 2012. However, by 2013 service had been cut to 13.33 trains/hour (4’30” headway) to reduce equipment requirements on the aging line. That is the service operating today, although a further cut to 12 trains/hour (5’00” headway) is planned for June 20, 2016. Some of the demand that would be on the SRT travels via alternate routes, some is packed into fewer trains, and some has probably been lost to the TTC. What the ridership might be today were the RT not capacity constrained is hard to tell, but it should certainly be higher.
The high value for future subway ridership combines with the low value for presumed current demand to load much of the SSE’s cost onto new development.
The situation is complicated by two competing ridership estimates:
- A TTC estimate of 9,500 riders dating from January 2013 (See Response to Commission Enquiry: Service/Technology Choices for Sheppard East and Scarborough RT Corridors at page 13)
- The estimate of 7,300 riders in the recent review of the Scarborough Subway
The contexts for the three estimates differ, and this goes some way to explaining why the numbers are so far apart:
- A line to Sheppard will attract more ridership than one ending at the STC.
- A subway station at Sheppard, in the absence of improvements to the GO corridor such as RER and SmartTrack, will attract ridership from Markham just as Finch Station does from the Yonge corridor north of Steeles.
- Removal of the station at Lawrence East, coupled with new GO corridor services, will reduce demand on the subway.
There is no guarantee that the land use, job and population assumptions underlying the three estimates are the same, especially when the highest number was produced in the context of boosting the importance of STC as a growth centre.
What we are left with, however, is the likelihood that the level of DCs allocated for the Scarborough Subway project were based on the most optimistic scenario for new ridership, and a network configuration quite different from what will actually be built. If the calculation had been done on the basis of lower ridership numbers, the DC revenue available to fund the Scarborough Subway would have been considerably lower.