Updated August 30, 2016 at 5:00 pm: The TTC has responded to questions regarding the relationship of new federal funding to their budget. See the end of the article.
With many Huzzahs! the federal government announced the details of funding for many projects in Toronto and other parts of Ontario under its new Public Transit Infrastructure Fund. This first step concentrates on “state of good repair” (“SOGR”) projects, especially as they relate to the TTC whose capital budget has been constrained by Toronto Council’s willingness to raise new revenues for only a few pet projects.
Press reports, together with the usual tub-thumping from Mayor Tory, imply that we are about to see a huge leap in work on TTC infrastructure upgrades. This sounds good, but the truth is not quite so simple, or as photo-op worthy.
The TTC’s Capital Budget can be a forbidding document, even in the short version that is online. The full version, with detailed descriptions of every project, fills two large binders. A fundamental problem, as we have heard every year for some time now, is that the total value of the ten-year Capital Plan is not completely funded, and there is a shortfall over that period of close to $3 billion. This does not include projects with their own earmarked funding such as the Spadina Subway Extension (aka “TYSSE”) or the Scarborough Subway Extension (“SSE”).
The main issues facing the City of Toronto and the TTC are:
- Almost all ongoing funding for Capital spending has dried up at both the Provincial and Federal levels with only the Gas Tax flowing on an annual basis. This amounts to about $160 million from Ottawa and $70m from Queen’s Park (an additional $90m in Provincial funding goes to the Operating Budget).
- City borrowing is constrained by a debt ceiling target such that no more than 15% of the Property Tax income is required to service the City’s debt. Major projects added to the budget in recent years, notably the Gardiner Expressway, have pushed the City right to that line leaving no headroom to finance additional projects until the early 2020s.
- City Council has not been willing to raise additional revenues either through the property tax, or other mechanisms allowed by Queen’s Park, to service new debt beyond the 1.6% Scarborough Subway levy, and Mayor Tory’s proposed 0.5% levy to help fund some other capital needs.
- Queen’s Park announces a lot of transit funding, but this focuses on areas outside of Toronto. Even within Toronto, it flows mainly to Metrolinx, not to the City and TTC. All of the new funding is for Capital projects, not for day-to-day operations.
The City of Toronto reacted to the discrepancy between the overall Capital Plan and available funding by requesting cutbacks in the planned budget. The effect is back-end loaded, in the sense that the higher cuts come in the later part of the plan, in part with the hope that the Tooth Fairy will arrive to bail out the funding crisis before these cuts actually have to be made. However, the cuts did start to kick in for 2016 with the City asking that the TTC pare $53 million from its Capital Budget. Of this, about 60% came from a “Train Door Monitoring” project that is intended to provide subway operators with the ability to view the entire train from their cabs, and thereby allow one-person crews on subway trains. The remaining 40% came from track, power, bridge and tunnel projects.
For the line-by-line requested cuts, scroll down to page 54 of the “short version” budget linked above. Note in particular the large value of cuts from 2020 onward.
Requested cuts for future years are $42.6m in 2017 and $78.3m in 2018 (with higher amounts beyond). This is the context in which “new” money comes to Toronto. Where the TTC is concerned this funding does not generally spawn new projects, it merely backfills the funding level provided by the City.
In the short term, Ottawa is funding SOGR projects because (a) that’s where the budget shortfall really is and (b) large scale new projects simply cannot be fired up quickly enough to absorb significant funding in the two year period (April 2016 to March 2018) that this phase of the PTIF will be available. Those large projects are expected to show up in the next round of funding to be announced, probably, in early 2017.
Ottawa’s List and the TTC Capital Budget
To make life simpler for people trying to make sense of the announcement, I have consolidated information from the Federal news release with information from the TTC’s Capital Plan. In the following table:
- The columns “Federal Project Name” and “Amount” are taken from the announcement itself.
- The “TTC Project Number” is taken from the budget details which appear on pages 34-53 of the TTC Capital Plan. This is provided mainly as an indication of the source of project descriptions and values.
- The “TTC Project Amount” shows the spending for 2016-2018 included in the plan. Note that there are three lines for each item in the plan showing the previous year budget, the proposed version for 2016-2025 and the change since last year. The values in my list are from the second (current budget) line.
- In a few cases, the Federal line item actually embraces more than one line in the TTC plan, and I have broken these out.
- A few of the Federal items have no matching project in the TTC’s 2016 plan (which dates from late 2015), and I believe that these are new projects created going into the 2017 budget cycle.
The Federal contribution generally does not line up with the TTC numbers for a few reasons:
- Federal budgets run from April 1 to March 31 of the following year. TTC/City budgets run on a calendar basis. A project may have funding over three calendar years, but not all of the spending will align with the two year window of the PTIF program.
- Some TTC programs appear to have changed in scope since the 2016 budget came out as the Federal allocation is substantially larger than the TTC’s planned spending. This shows up notably in a project for the Automatic Passenger Counters project which appears to have been expanded to embrace the entire fleet, not merely a subset of vehicles that would be rotated among routes. (Why this is needed considering the onset of Presto and its available data is something of a mystery.)
Media reports have spoken of the new funding accelerating the provision of accessibility at subway stations. This is an odd claim because the City removed its request for the TTC to reduce the “Easier Access III” budget in the 2016 round, and planned work is already funded out to 2020. Unless the TTC can fire up more construction in very short order, it is hard to understand just what is available to be “accelerated”.
The primary effects of the new funding are:
- The City will be able to remove, at least for the next few years, some of the reduction requests against the TTC’s plan because Federal Money will be available to fill the gap.
- Some projects that the City had expected to fund largely with its own revenue will now be shared making City funding available for other line items (assuming that old “commitments” actually stay in the transit budget and don’t migrate to other non-transit projects).
The project list linked here shows two pages of TTC projects with a total of $360 million in Federal Funding (out of $1.671 billion the TTC planned to spend on these items over 2016-18) on the first two pages. The last page shows all of the other projects which fall under various City department budgets totalling $114 million. The grand total of new Federal funding here is $474 million.
What we do not know yet is the level of City funding that will be provided against the various areas of TTC capital needs.
Pending Updates
I have asked the TTC to confirm details of this announcement and how the monies will be used, but do not expect a detailed response until more is published on the 2017-2026 Capital Plan. This will likely happen at the September 6, 2016 TTC Budget Committee meeting, assuming it actually takes place. As additional information becomes available, I will update this article.
Clarification
In my version of the project table, I have shown planned TTC spending only for 2016-2018, but the full project costs for these can extend well beyond 2018 (details are in the TTC budget report). The Federal contribution in these cases is a lower percentage of the total than might appear to be the case because the “out year” TTC costs are not shown.
This is most strikingly shown in the project to purchase 99 new buses where Ottawa is partly funding only 4 vehicles. The total project cost for 2017-2021 is $75m (see page 44 of the budget pdf), but Ottawa is only funding $1.3m, about half of the planned spending in 2017. The remaining 95 buses would be acquired after PTIF ends and they are not funded through this program.
Updated August 30, 2016 at 5:00 pm
I posed several questions to the TTC and have received the following replies.
Q1: The federal announcement looks to be mainly for existing capital projects. Is this being used to backfill city cuts?
A: This particular program is designed to be primarily for state-of-good-repair projects that are “shovel ready”. So what the TTC put forward through the City of Toronto were just that.
The 10-year 2016-2025 TTC capital budget had a funding shortfall of something in the order of $2.7B. These are not city cuts. The TTC actual 10-year needs exceed known capital funding (gas taxes, city debt, etc.). These funds will be used to help solve some of that shortfall.
Q2: There were several broad reductions in parts of the capital budget this year and for future years to bring spending within city debt limit. See the 2016 TTC Capital Budget Report at page 54 of the linked pdf.
A: The broad reductions included in the current 10-year capital budget were designed reflect expected spending levels based on historical spending trends. They too are not cuts. The TTC is undertaking a more detailed look at this as part of our current budget process.
I challenged the TTC on this statement. There is always a difference between proposed and actual spending due to changes in project schedules and scope. However, the amounts involved, particularly in the later years of the budget, are well above the usual gap. The TTC clarified their response.
A: “Historical spending” is just that and some amounts have been factored into the individual projects to account for that. “Unfunded Budget Reduction” is the budget shortfall between the TTC’s 10-year capital needs and the funding that’s available from City debt, gas taxes and other existing funding. It happens that in the first few years of the 10-year budget, there is sufficient funding. But as you note, over the long run there isn’t. The shortfall grows to be a very substantial number of about $2.7B over 10 years. If we don’t get that funded, that would be a huge capital budget cut.
That’s precisely why the federal funding announcement was so welcomed by us. It doesn’t wipe the shortfall out entirely, but it really helps over the next 3 years.
Q3: Am I correct in saying that the new money does not spawn new projects, only replenishes funding for those already in progress?
A: The TTC does an annual 10-year capital forecast, so most state-of-good-repair needs are reasonably well spelled out in that plan. New things may crop up, but in large measure this money is to pay for those on-going rehabilitation, refurbishment, improvement or replacement needs on existing assets.
Q4: There was talk of accelerating the subway elevator program but I don’t see the dollars in the announcement.
A: Staff have been reviewing the elevator program and the results of that review will be incorporated into the 2017-2026 TTC Capital Budget presented to the TTC Board in the Fall.
Steve Munro 
I wonder if any of this money will be used to rebuild some of the more problematic stations in terms of the AODA such as Warden and Islington?
They have always been listed as unfunded and now this. I doubt they could be made shovel ready in the required time frame without designing it on the back of a napkin while bulldozing.
Steve: Both Warden and Islington were originally planned for major reconstruction as part of development schemes. Both of these fell through. If Ottawa comes to the table on these, it would be part of the second phase of PTIF which will support “new” construction rather than ongoing maintenance. There is nowhere near enough money associated with AODA in this announcement to pay for even one of these two sites.
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I am very glad to hear Ottawa coming to the table on the state of good repair stuff. The funding of things that do not bring photo ops, is a sign of looking at governance, and not glory. However, I am concerned that the city will see this as an opportunity to reduce not increase its funding. The city would be well advised to show a real willingness to raise money as required, and start looking across the board at its priorities as to what is required to make the city basically function, and what is a nice to have. The things of daily life, like getting around and garbage collection need to be at the top of the heap, and placing them there, and making more dollars available to match those federal funds, and make the senior government look better, will help keep that critical funding flowing.
Adding an additional $100-200 dollars a household in tax, in order to make more money available to make sure the most critical projects to basic operations are carried through would be a worthwhile investment. People need to appreciate, the TTC needs to be maintained, in a better state, and have more modern equipment, simply to ensure things do not get worse.
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A: Nowhere.
The feds are the worst level of government to fund local matters, because they are the furthest from understanding local needs. Federal funding of local transit leads to local government depending upon federal largesse and federal vote buying whims, rather than raising the local taxes needed to fund capital and operations. When local transit is paid for federally, financial accountability becomes clouded, and electoral accountability for transit is diluted to the point of being meaningless.
Shorter: the feds are letting local councils off the hook, and everyone suffers for it in the long run. Local services should be delivered locally and paid for with local taxes.
Steve: If the feds really were dictating what was to be built, I might agree with your argument. However, in this case, they have come to the table with money and said, basically, “how can you spend this”. The bigger question will come in phase two of the program when big ticket projects will vie for attention. These will be at least as much subject to local political pressures and the idea that “my borough deserves respect” as they might federally, and so I am not sure it much matters where the money comes from. The best we can hope is that at least some of what is really needed is built, not just monuments to various political egos.
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If Presto lets you count everyone that’s paid (elimination of cash fares or manual counting of these), then you could combine the two sets of data to find peak fare-evasion locations and distribute enforcement more effectively. If you assume 0.1% of 545M rides are converted from ‘fare-free’ to ‘fare-paid’, then you could collect around $1.36M ($2.50 per ride) in fare revenue. That’s about a 4.5 year return on investment.
Steve: You forget that there must first be fare inspectors with the will to ticket to actually produce this effect, and both the TTC Board and Council and loath to spend money on more staff.
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One curious element is that the feds have decided to fund the early works of Finch West, and the design of Eglinton West, Eglinton East and the Relief Line, but only put $125,000 into design of the SSE. I wonder what the technical and political calculus behind that was.
Steve: Don’t forget that the Feds already have money in the SSE project and it is, in theory, “fully funded”. Ottawa has been quite firm (albeit under Harper) that Toronto isn’t getting more money for this project, and given Council’s love to spend recklessly to make Scarborough feel wanted, it would be just as well that Ottawa keep their chequebook closed. Also, this phase of PTIF is supposed to concentrate on short term work. All that said, $125k does not go very far.
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Will the 2.6 % TTC budget cut demanded by Scrooge Tory still required? Or will they still have to cut, cut, cut? My guess, there will still be cuts to make Tory happy.
Steve: The new funding is only on the capital side, not operating, and the 2.6% cut and all it implies are still very much with us.
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Agree with Malcolm N. The Feds have to ensure that the city doesn’t react to all this largesse by simply paring back its own spending, as Tory and others are clearly wont to do. The idea of the Federal infrastructure plan is to boost the economy, and that won’t work if other levels of government cut their own spending.
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The Feds are doing a reasonable and sensible thing. Get the money spent quickly but on necessary infrastructure that will provide benefits for many years.
I never quite understood the 15% ceiling thing. Does “servicing” mean both interest and capital or just capital? Isn’t the ceiling itself just another council decision as in it is not a COTA or other provincial dictate. Why is the 15% applied only against property taxes and not all city revenue?
Steve: The 15% applies to interest and capital. Yes, it is a Council decision, but within two considerations. First, there is a provincial limit of 25% which the City cannot exceed. Second, the City opts for a lower cap because this is beneficial for their debt rating which, in turn, affects the interest rates they pay.
Property taxes are about 1/3 of total City revenues. The remainder are associated with specific services and are not available to be used for debt service. Examples of these are TTC fare revenue (over $1b) and transfers from other governments linked to specific programs. From a long term point of view, property tax is based on a dependable source of income. The situation is loosely parallel to home ownership. A lender is happy to mortgage a house because there is a real asset, but they will not (usually) loan an amount if your income cannot handle the repayment.
The City gets substantial revenue from Land Transfer Tax, but this is more a function of the hot market in Toronto than income that can be counted on long term. Therefore it is not part of the base used for the debt ratio calculation.
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After where the money is spent, where the money comes from is nearly the only thing that matters.
If local politicians knew they could never get handouts from other governments for local services, then they would have no incentive to avoid local taxation by getting others governments to provide handouts. There would be no waiting until the stars align at 3 levels of government, and having to trust that they remain aligned for the decade or more it can take to build major projects.
This would leave only Toronto responsible for its local services. If Toronto decides to raise the revenue required to pay for the TTC service that is needed, then Toronto would have what is needed. When Toronto fails to provide what is needed, voters can hold their councillor and their mayor – and only them – to account.
The approach we have today is far worse: an inept Metrolinx planning local transit services, subject to the whim and vacillating budgets of Queen’s Park, waiting for stars to align with the feds. When this approach builds good rapid transit, it’s only through luck. We haven’t had any luck in the last 40 years.
Single level funding works, and it would work in Toronto until, of course, a subway is extended over the border to Vaughan.
Steve: I thought that remark might provoke a response. Of course local politicians are good at spending other governments’ money, but the reality of the situation is that both Queen’s Park and Ottawa take substantial funds out of Toronto with their own tax streams and there is good reason to demand some of this back. Why should Toronto property tax support schools in rural Ontario (which is what actually happens with Ontario’s education tax)? Why should sales tax paid in Toronto be used in other parts of the country? Toronto and other economically well-off areas should not be just a source of support for the rest of the country. Your model only works if all of Toronto’s income stays in Toronto. That’s not going to happen, and the issue then is to get the best funding for the most appropriate projects back from other governments.
As for routes over the boundary, that line was crossed 50 years ago with the creation of GO Transit. Should this be funded only from municipal revenues, and how would this be accomplished given the competing and conflicting priorities of the many municipalities it serves?
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The sad part of this is that while the city could still likely improve management and effective efficiency within the TTC, this would require some investment, and better support from other city departments, and since the TTC is in a position where it needs to increase service more than 10% this should be a question of buckling down, and expanding service in the most efficient manner possible. The city will get more fiscal bang from better supporting growth, than growth eating away of the basic ability to operate of the TTC. This is a question of focusing exclusively on one side of the table, and not looking at the other. Supporting increased revenue growth, needs to be part of the equation, and not on a single year basis.
Steve: A key word in your comment is “efficient” because this term means different things to different people. Giving some groups of riders discounted fares is considered “inefficient” in some quarters. Running buses that are only half full is considered “inefficient” even though the presence of service in many cases takes precedence over filling every space on the vehicle. Building subways and running trains frequently until 2:00 am is also “inefficient”.
Transit needs to just “be there”, not be something that is doled out parsimoniously as if the city does not deserve it. Yes, that service should be delivered “efficiently”, but quality is an essential part of defining what our city should look like.
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Yes, I was thinking in terms of cost of real service delivered. The real efficiency being enough capacity, in properly spaced service that is frequent enough to be truly useful and attractive. So yes, reducing service to ensure buses are full, is not truly efficient, but managing to keep service spaced without short turns, and where space is always available, while reducing indirect persons is improving efficiency. Increasing run speeds with better help from signals etc, is also improved efficiency. If we had the vehicles to run it running a flexity every 2 minutes instead of a CLRV every 2 minutes on King would also be efficiency, as you could still fill the flexity, and you would improve the passengers per driver/run.
I agree the definition of efficiency cannot be about reducing service to simply fill vehicles. Running a train every 5 minutes is not an undue hardship, and at 1:00 am they will not run full. However, this represents better service than making every 10 minutes to get better loading, and well, in reality, since the other costs of increasing the number of drunk drivers etc is so high, running every 5 minutes is more efficient on the whole than every 10 minutes.
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I understand and agree with having a borrowing cap of some sort and understand why the income base should exclude one-time income but there is always going to be SOME land transfer tax revenue so I do not quite understand why they ignore ALL of it. Could they not take average of last x years or 50% of previous year or ??
Steve: The problem is that if it goes down, so does the ceiling and suddenly Toronto faces a hard stop possibly even on refinancing existing debt without taking a big hit on interest rates.
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The jobs need to be sold to council as “spending money to make money”. An interesting twist might be to use “anti-quotas”. Rather than Enforcement having a set number of tickets to give out, have them “enforce” a maximum level of fare evasion…
This is one of those, good in theory, limited uses in application fixes. Here is the full history of land transfer taxes budgeted…
Now, the 2015 budget had $3,796.4M in “property taxes” meaning the 15% debt servicing ceiling is $569.5M. While the 10-year Capital Budget is $19.654M, only $4.376M is debt financed. Thus, you have an income to debt ratio of 7.6845.
So 50% of the long-term average would allow $1,055.1M in more debt and 100% of the max value would allow $3,316.0M. That gets you somewhere between half and two mega-projects.
As for funding the Operating deficit with it, you’d need ~100% of the long-term average or ~50% of the 2015 value, plus you’d need to replace that money elsewhere in the budget.
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Thanks for detailing and navigating the many complexities of multiple allocations of this federal largesse, which is basically welcome and good news. However, there is a sense of it may well be used to diminish overall spendings in favour of other less useful things, as we know this can occur eg. the lack of will to have a simpler Vehicle Registration Tax as a first step in tackling the subsidies of cars, which are buried in multiple budgets unlike the transit ones (and yes, it’s a big budget and if we used political will instead of billions, we might have more transit and less transit cost).
I’ve not thoroughly explored the details of all of this, but there was also to be some federal help to biking things, quite a few millions. This is maybe misguided, like our big transit plans, in that it’s off-road and complex, and not of so much use to urban commuters wishing to have a safer trip in workday trips, which are often dangerous, and in consistent ways, like the east-west main roads of the central core. It’s a shame in 2016 that we can’t insist that there be a clear embracing of principled sustainability ie. we measure centre line bike lane kilometers vs. lane line kilometers, a neat trick that basically doubled the Toronto on-road bike network, and we should do that for subways. Or that we actually insist on connectivity vs. a project here and a project there so that the functionality of any projects enables long, safe trips, and thus the bike network also can be a transit relief network, eg. Bloor/Danforth or an extended to west Richmond/Adelaide bikeway for the Queen and King cars. For many of us near-core, the bike is a very competitive way to travel, and maybe that’s part of the problem, it is competition, and the TTC makes money from the core to help subsidize suburban transit more. It is very cheap to paint and repaint lane lines: it’s c. $25,000 for old-style painted lines which are way better than nothing, so the remnant bits of Bloor from Dundas St. W. to Sherbourne might eat up $125,000, to put that $125,000 for the SSE work in perspective. And for a lot less, I’d do a redesign of the SSE to use the Gatineau Hydro corridor via Thorncliffe Park to the Don Valley parkway or surplus rail corridor to the core, but squeezing billions to get people moving done faster isn’t necessarily part of the package of buy-elections, sigh.
Steve: Ottawa has been quite clear that it is not directing funding to specific projects, but to municipal governments who decide where it should go. If you have a problem with funding going to off-road bikeways, this is an issue for Council, not for the feds.
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OK, who’s proposing cutting the budget for door monitoring, so that the labor costs on the subway will be persistently twice as high as they need to be? Penny wise, pound foolish.
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This additional money can be used to fund the Scarborough Subway cost increase as well as to construct a subway station at Lawrence Ave East in Scarborough.
Steve: Ottawa already has money in the SSE project, and has been quite clear that Toronto isn’t getting more. There are other projects that need funding, and at some point the bottomless pit that is the Scarborough Subway “budget” cannot go any deeper. Or maybe we should try getting yet another subway tax through Council?
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On-street bike lanes are important, but the RailPath is a pretty good route, if you live on the west side. The issue should be that it’s not complex, giving you sufficient options to jump on and off to another route as needs be.
We’ll see how you feel about it when Metrolinx RER comes along and says they need part of it back for the 6th track through Bloor Station.
“Surplus rail corridor”? Is that CN Leaside and Scarborough Pit Spur? You don’t like the RailPath, but you’d use the Gatineau Hydro Corridor?
Beyond what Steve said, this money is for projects that will start in the next 6-8 months, so a Lawrence Station for the SSE is beyond the scope. Maybe Toronto can ask for some study money to see what the SSE ridership will actually look like with the latest round of system planning.
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