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should consider itself lucky because the calculation underlying the DCs is based on flawed ridership estimates and an out of date network design.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
- Transit
- Roads and Related
- Water
- Sanitary Sewer
- Storm Water Management
- Parks and Recreation
- Library
- Subsidized Housing
- Police
- Fire
- Emergency Medical Services
- Development-Related Studies
- Civic Improvements
- Child Care
- Health
- 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.
The Calculation of SSE Development Charges
The full report on the calculation of new DCs explains the calculation in detail. I will trace through this here only to the extent needed for readers to understand the effect of changes to the underlying assumptions.
Allowable Components of the DC Cost Base
Although the total estimated cost of the SSE is $3.56 billion including inflation to completion, much of this is not eligible for recovery through DCs.
- $2.65 billion contributed by other governments is excluded for the obvious reason that it is not a City cost.
- The SRT life extension is not part of the new line, and so its cost of $78 million is excluded.
- Because the DC study planning period ends in 2022, costs beyond that year are reduced by a net present value calculation to 2022 removing a further $5.5 million.
The remaining amount eligible for the DC cost base is $826.5 million.
- This is suballocated to current and future beneficiaries using the 39:61 split based on projected ridership leaving $501.8 million due to ridership growth.
- A 10% statutory reduction in this allocation brings it down to $451.6 million.
- Costs are then allocated for recovery in the period to mid-2022 (the current DC Bylaw) and after that period (a future DC Bylaw) on a ratio of about 29:71 leaving $130.1 million in the current period.
- Finally, debenture debt service cost is added in bringing the total for 2015-to-2022 charges to $255.1 million.
But What About The Scarborough Subway Tax
When Council approved the implementation of DCs for the SSE project, the report before it contained conflicting goals. Early in the report, the role of the subway tax is clear:
The total estimated cost for the SSE is $3.56 billion (expressed in inflated dollars), with current Federal and Provincial funding commitments of approximately $660 million and $1.99 billion respectively. As a result, the City’s net capital cost is estimated at $910 million, which will be funded through a combination of property taxes ($745 million, with increases of 0.5% and 0.5% approved in 2014 and 2015 respectively, and a planned incremental increase of 0.6% in 2016, for a total increase of 1.6%) and development charges (estimated at $165 million). [p. 2]
At this point, the amount to be recovered from DCs is only $165 million. However, later the report states:
The total estimated cost for the SSE is $3.56 billion (expressed in inflated dollars), with an estimated City share of $910 million (expressed in inflated dollars). After excluding the SRT Life Extension costs, which were determined to be not development-related, and expenditure timing considerations, the eligible City share is reduced to approximately $826.5 million. This amount, along with eligible associated debenture financing costs of $793 million, for a total potential recovery amount of $1,619.5 million, has been included in the development charges analysis. [p. 6]
The DC study was undertaken on this basis, and the contribution of the subway tax appears to have been ignored. In effect, the City appears to be double-dipping through both the special property tax and the use of DCs to recover all of its costs.
The Effect of Reduced Ridership Projections
The table below shows the effect of lower ridership estimates on the allocation of DCs. In this table:
- “Original” refers to the TTC’s January 2013 ridership estimate.
- “Revised” refers to the estimate used during the LRT/subway debate and also as the basis for the DC Bylaw.
- “Jun-16” refers to the new estimate included in recent SSE public presentations.
Over the life of the DC Bylaw, use of the June 2016 ridership forecast would reduce the total revenue to the City from $255.1m to $103.5m, a loss of about $150m. Over the full life of the project financing, the loss is about $525m. The effect of the new forecast is not simply a matter of political football between LRT and subway advocates. It could have a major effect on the Development Charges revenue to which the City is entitled.
The Optimized Scarborough Plan
A further problem for the DC calculation is that it was based on a $3.6 billion project to take the line all the way to Sheppard, but the project now on the table is considerably smaller, and part of the funding has been redirected to the Eglinton LRT. That project is not part of the DC Bylaw study and there is no background on the before/after ridership effects in the corridor.
Similarly, the SmartTrack scheme was touted as a candidate for Tax Increment Financing and no provision was made for this project in the DC Bylaw. Indeed, Council adopted its support of the SSE in October 2013 before SmartTrack was even part of the City’s transportation plans.
To the degree that the SSE actually would cost less than its original estimate, the DCs applicable to it would be reduced proportionately.
Conclusion
It is quite clear that the financial assumptions behind the 2015 Development Charge amendment have changed quite substantially, and the original premise – that the City’s would recover most of its costs through a special property tax – does not align with the base amount used in the DC calculation.
Request for Feedback
Any reader who is knowledgeable about Development Charges is invited to comment on these calculations and observations, anonymously if necessary.
Steve Munro 
Maybe you should do some more studying on how the census actually works and how it’s data affects services. At best, you are stripping funding from small remote communities like Attawapiskat, who would be disproportionately hurt. However, ridership projects are based on transit share of the population and population growth, so a larger base means less proportional growth, thus you are more likely contributing to the perceived underservicing. Beyond this, the census isn’t a direct tally and count of what everyone says, but it’s a statistical basis that “throws out” abnormal data. For example, if your census says you have 20 kids, they can check with the CRA if you are actually claiming 20 kids. Beyond that, the top end data is lumped together to avoid oversized errors caused by a few outliers.
As a side note, Section 8 of the Constitution Act of 1867 (In the general Census of the Population of Canada which is hereby required to be taken in the Year One thousand eight hundred and seventy-one, and in every Tenth Year thereafter, the respective Populations of the Four Provinces shall be distinguished.) requires that a national census be held every ten years. The switch to every five years started in 1906 with the delineation of Alberta and Saskatchewan, and Canada-wide in 1956.
It’s hard to have a constitutional challenge against a founding principle of our union.
Just a random thought, but if there’s still legs under “subways, subways, subways” maybe instead of connecting to Kennedy, they could just do subway STC to Fairview Mall.
At the end of the day, you can specify anything you want so long as you are willing to pay for it and live with the consequences. Looking at the London Docklands Light Rail, which use a customized Flexity LRV, in order to handle the tighter than normal curvature, the wheels have a more angled profile. This results in noisy corners and added vibrations on straightaways.
The other main alteration would be to shorten the length of the vehicle wheel-base. This effectively reduces the capacity per vehicle (more space provided to doors, articulation, etc.) and raise maintenance costs (parts per passenger).
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This isn’t close to the same. The Eglinton LRT, for example, mostly just causes some delays due to lane reductions. There will be some diversions, once we get to station construction, but that’s very different than shutting down nearly all TTC rapid transit in Scarborough for 5-10 years and adding 20+ minutes to thousands of people’s commutes during that time. That’s not to say it’s not doable for the right project, but it’s certainly not something to be so easily dismissed.
You keep saying this, but that doesn’t make it true. They won’t be connected to the zoo, or UTSC, or STC, for example. They’ll be connected to downtown, if they live near this proposal, but for the rest of Scarborough this offers little help. Certainly it does very little for local trips.
And it would do all of these things worse than the SSE plus the SMLRT plus the Sheppard LRT. I’m not saying that plan’s perfect, but it’s better.
So you’re saying that if this project was built, people would ride the subway from south-east in the thousands to get to that business park? Or are they coming from the south-west and riding around the loop, instead of just taking a bus north? Right now, the rocket bus that runs between Don Mills station and STC barely draws 10,000 in a day, but you think a subway could draw that many in a peak hour?
What makes the growth potential of that business park need a subway approach from two directions, but the growth potential of the STC district isn’t worth serving with rapid transit at all?
Steve: I would add that any suburban office park (or wannebe location) worth its salt will already be accessed by zillions of people driving from all over Toronto. Saying that there is “potential” at a location is not the same as saying it would actually develop.
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The funny thing is that the “constraints we face” seem to be created by the very government’s commitments themselves – at whatever level – as a result of:
1. Political shenanigans/interference – i.e., “What’s the easiest way to get votes for me with a great soundbite when the next election rolls around?” whether the decision makes *actual* sense in the real world of *functioning* transit. That can include outright lies by former mayors or city councillors or provincial/federal politicians, massaging of the truth (“truthiness”, I think Stephen Colbert calls it) to calm the angry hordes, or even blatant ignorance of or disregard for evidence-based findings;
2. Requesting studies and then studies of the results of those studies and then yet again studying *those* study results. – We seem to have had a bottomless bag of money for transit studies but somehow we always seem to have insufficient money for the transit infrastructure itself (capital *or* maintenance). Heck, we could build the pole foundations for an elevated swanboat line from Broadview and Danforth out to the Scarborough Town Centre on all the paper that makes up all these transit studies! (See also Point #1 above, factoring political vanity lines into this mess).
3. “Value” is a subjective thing and it seems to be determined by whoever happens to hold political office and/or the purse strings, as opposed to functional value (people served) with regards to financial value (money spent), as assessed by a disinterested party. The more you tell people there can be a chicken in every pot, the more people will expect you to give them not only the chicken but the pot as well!
The Yonge Street subway came about “organically,” because the system in place at the time was deemed insufficient to deal with the growing volume of riders. More recently, subways have been slapped down along Sheppard Avenue, up into Vaughan and (almost) now into Scarborough at great cost but with a less clear functional to financial assessment being made (having been sacrificed on the altar of political expediency).
If there are financial constraints to be considered, then reasonable assessments of all possible options with clear criteria set out beforehand need to be made.
If there are functional constraints to be considered, then geographical and structural restrictions, along with reasonable assessments of the resulting costs have to be considered regarding value for money.
In the world of transit in Toronto, this is a tall order and does not seem to be top of the list.
Steve: Please note that “Swanboat” should be capitalized when used on this blog. 😉
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There are ways to mitigate these issues.
We are conducting a comparative analysis between my proposal and the existing BD subway extension proposal which I don’t believe you can reasonably say satisfies any of your criteria, and in fact provides substantially less value than what I am proposing. As I said earlier we must work within the constraints defined by the political environment. I agree with Dean Girard’s | June 15, 2016 at 12:38 pm statements, we need to be mindful of what can and cannot be built.
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I’m pretty sure I can reasonably say that the existing proposal better satisfies the criteria of serving STC than your proposal.
But sure, if you only consider the subway component, your proposal definitely covers more ground at more cost. But that ignores the funding that was taken from the SSE to direct toward the SMLRT, as well as the funding that is technically still on the books for the Sheppard LRT. Your proposal sucks up the funds for both those projects.
Steve: Ok folks. Can we please stop this tit-for-tat? You have both made your points.
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As I understand, the SSE will extend east under Eglinton from Kennedy Station and the Crosstown LRT is to extend east on Eglinton.
There is no public information regarding the placement of the Crosstown LRT at the Kennedy station but as I understand, it is two levels below grade, on a plane parallel to the subway.
There are no designs showing how the Crosstown LRT will surface to Eglinton while the subway will continue further underground from the Kennedy station. Aren’t they in each other’s way?
Steve: The original plan for the Scarboro-Malvern LRT station put it on the south side separate from the station for the Crosstown, but I don’t know if that continues to be the plan. If the station shifts to the north side, it will make through operations easier (if desired) and transfers between the two Eglinton services relatively simple.
In any event, a lot depends on the subway alignment which will stay relatively deep east of Kennedy Station. The LRT can rise one level (equivalent to the existing ticket mezzanine) fairly quickly and cross over the subway structure if need be. I don’t think this is a problem at all.
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The justification for the Downtown Relief Line (i.e. build first and ridership will come) is classic approach by government authorities of shooting first and asking questions later. The Scarborough subway is a much better bet as ridership already exists.
Steve: Actually the projected ridership for the DRL already exists, and if it is extended north of Danforth, it will carry more people than the Scarborough Subway.
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For your information, I argued hard for the LRT to be placed at the mezzanine level, as the street car at Spadina station. It was rejected because of the height requirement of the LRT, the amount of clearance needed under the GO tracks and the x-crossing needed to be level. This was at the functional specification phase 2013. Metrolinx then closed all public information and went through a secret design bidding process and signed a deal to build the station.
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Here’s a surprise.
It’s going to cost yet another billion to build an unneeded subway to Scarborough. Toronto, of course, does not have the money. There is no money for anywhere else in the City. The only real solution will be for all of us to hang tight with our inadequate transit and pony up another City wide tax increase because, well, Scarborough deserves the gift.
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Citynews: In a release, the TTC said the Scarborough Centre Station is anticipated to be Line 2’s (Bloor-Danforth) “busiest station for boardings in the AM peak hour in 2031.”
Steve: Actually the projected ridership for the DRL already exists, and if it is extended north of Danforth, it will carry more people than the Scarborough Subway.
In other words, you are admitting that the Scarborough subway will carry more riders than the Phase 1 of DRL. The TTC admits it too. So, why on Earth are you still opposed to the Scarborough subway when you support a much more expensive, much less ridership DRL?
Steve: You are misrepresenting my position. I have always supported the DRL as a project going north of Danforth where its ridership would be substantial. Obviously I support a phase 1 to Danforth to get the ball rolling, but it’s really phase 2 to Sheppard that I want to see. Anything that can take over 10k/hour demand off of the Yonge line is a worthwhile investment in my books.
As for STC station, at least half of the boardings there are people who now get on at Kennedy. We could get them over the same distance, slightly slower but with more stops and better access for more riders, with the LRT option and, yes, a transfer at Kennedy. Those who ask for a businesslike approach to transit would see this as the obviously preferred solution.
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Here is what I believe to be the relevant link to the Toronto City Council Minutes of July 17, 2013 where the vote was made to, in effect, scrap the LRT plan and go with the subway option.
I propose that each and every one of those “slim majority of councilors” who voted to scrap the fully-funded LRT plan outright (with no discussion of re-designing or rejigging it) and instead voted for the subway plan with the added tax burden – be brought to a public gathering (torches and pitchforks optional for the crowd in attendance) where they would have to explain, in very great detail, to the voting – and paying-for-a-long-time – public what in God’s name motivated them to favour this decision. Personally, I would want to know how they believed that this undertaking was financially achievable, other than perhaps just wanting to be re-elected during the following term or perhaps claiming that they drank Rob Ford’s Kool-Aid(TM) and were not accountable for their actions. Maybe “subways, subways, subways” just sounded sexier than L-R-T….
(Mind you, you could also haul a number of provincial politicians up onto the same dais and have them perform the same explanatory exercise, with likely the same results). It reminds me of when Highway 407 was sold – er, *leased* off – and nobody said Boo until years later when it finally dawned on people – those paying the bills to drive along the highway – how stooopid and short-sighted the decision actually was – especially given that the provincial coffers were still empty when the Liberals came to power and the income from the sale hadn’t made any real dent.
Crayon-and-Napkin route doodling. Short-sighted “gut-feeling” assessments. Building subway castles in the sky. Giving people what they (think they) want even if there is no realistic or responsible way to realize it in the realms of design or financing.
Welcome to politics and transit planning in the Big Smoke….
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So cutting two stations and a bit of tunnel is not (and was not) going to save the $1,000,000,000 originally claimed. Who saw this coming? It’s still a far ways away from the $500,000,000 more Stintz and company claimed in the days before her stillborn mayoralty. Maybe we could send the bill to her?
Steve: Oh it would save money, still, but against a much higher base cost for the full line.
Absolutely disgraceful that this info comes out after the public “consultation” is finished, and only days before major debates begin at City Hall. And we still don’t know what SmartTrack will cost or do.
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