Rummaging in financial reports can lead to interesting discoveries, although we usually read about them when some financial hound exposes dubious accounting practices and drives down the value of a company’s shares. Indeed, the Globe’s David Milstead had a long article on just how pervasive the use of non-standard accounting has become in corporate reports.
In the public sector, various mechanisms are used to reduce apparent debt and exposure to future costs. Some of these involve judgements about just when bills and revenue will roll through the door, or of exactly who will pay these bills as they come due.
In a previous article, I wrote about the TTC’s newfound mechanism called “Capacity to Spend” which reduces future funding requirements by roughly as follows:
- Project estimates show that the TTC will need about $9 billion to fund its “Base Capital Program” over the next ten years. This does not include special projects such as subway extensions, nor does it include a long list of “below the line” projects that have not yet matured to “approved but unfunded” status.
- Yearly capital spending by the TTC is typically lower than the budgeted value, but the main reason is that work took longer than expected, or projects were rescheduled into future years. Only a few of the underspent accounts arise from actual savings thanks to lower than expected costs or project cancellations.
- Nonetheless, the TTC has decided that its real funding requirement for 2017-2026 is now almost a billion lower than has been claimed for many years running.
This is a basic case of revaluing the exposure to future costs to make long term funding (including borrowing) needs appear lower than they really are. This year brings an extra incentive with federal funding that requires matching municipal contributions, money Toronto does not have. But hey, presto!, if we reduce the future spending, at least on paper, we have “found” money with which to pay the local share of the fed’s new program.
Meanwhile up the road at Queen’s Park, a lovely myth for the past near-decade is that there is a “municipal share” to the GO Transit capital program. Most people don’t know about this, and Toronto has refused to actually pay into that pot for several years.
The mechanism was set up back when GO Transit was a separate agency, and it has been passed down through successor organizations to its current home, Metrolinx. The amount of money outstanding is not trivial.
By the end of Metrolinx’ fiscal year March 31, 2016, the accumulated balance of deferred municipal contributions totalled $1.1 billion. The proportions owed by each municipality are set by regulation, and Toronto’s share is just under half a billion. The proportions assessed to each region have not changed since this charge was instituted although one could argue that population shifts and the focus of GO expansion would suggest a different ratio is in order.
Toronto does not carry an account payable for this amount on its books. Meanwhile, in every financial statement, there is a note in this format:
Metrolinx realized a shortfall in municipal funding related to its capital program. The Province has provided funding to bridge the shortfall in the current year in the amount of $141,097 (2015 – $171,111) and the cumulative amount is $1,114,484 (2015 – $973,387). The Province will work with its municipal partners to address the funding shortfalls. [Note 12 to Metrolinx Draft Financial Statements for the year ended March 31, 2016]
What is unclear is whether Queen’s Park will ever call this debt due, or if it will simply be written off as a provincial contribution to GO expansion.
This charge is intended to recover costs for general GO expansion, and it does not include:
- Chargebacks for works undertaken as part of a provincial project that improve municipal assets such as replacement of water mains or provision of improved streets. This was a major issue for Toronto on the Georgetown South project.
- Charges for the abandoned Scarborough LRT project engineering.
Missing from all of the annual reports is any indication of just which GO projects these contributions aided. Indeed, the amounts are intended to go into the general subsidy pot at GO without being tied to its work with the assumption that everyone benefits from “more GO” in the end.
An ongoing problem with provincial funding is that there are various ways that the gas tax grants now paid to municipalities are clawed back. There has been almost no change in the level of gas tax provided, and the amount coming to Toronto has been sitting at about $160m for many years. (Toronto apportions this partly to capital and partly to operations.) The effective value of this contribution falls due to inflation. If Toronto had actually paid their Metrolinx assessment in recent years, this would have wiped out half of the gas tax grant.
In 2017, the TTC is making provision in its budget for additional costs related to Carbon Taxes. This will further erode the contribution from Ontario.
The combined effect of all this will be that, at some point, all of the provincial contribution via gas tax will be consumed by paybacks under various levies and fees.
In an attempt to illuminate this issue, I posed a series of questions to the Minister of Transportation:
Which projects now underway or planned will trigger additions to this outstanding balance including, but not limited to, such things as:
- Ongoing GO improvements (non-RER)
- GO RER
- LRT and BRT projects
In other words, although Ontario has not actually collected on the receivable, will it continue to grow and, in effect, will municipalities be expected to eventually contribute to “provincial” projects, and at what level?
Many projects do not fit into the classic GO Transit model of serving downtown Toronto. For example, York VIVA BRT, The Hurontario and Hamilton LRTs, and the Toronto Crosstown and Finch LRTs serve a very different travel demand from GO’s rail network.
Will the formula for allocating these costs be changed to reflect the service territory and areas benefiting from the projects where municipalities are expected to make a contribution?
Although Ontario makes significant investments in transit, its budgetary effect at the local level will be offset by chargebacks including:
- The deferred Metrolinx receivable above
- Future costs for Presto which is expected to become self-sufficient and will require increases in service fees to local providers to do so
- Future costs for LRT operations
Starting in FY 2011-2012, there was a large increase in the annual charge added to the receivable, an average of $183m/year over the last five years, of which Toronto is responsible for $81.6m/year. What projects contributed to this charge and what was their total value (in effect, my question is what proportion of these projects was back-charged to the municipalities)?
When I receive a reply to these questions, I will update this article.
Steve Munro 
Here’s the latest TTC ridership numbers per station. Put this in your tool kit and use it to accurately support your arguments or suppositions.
Steve: Not quite sure to whom this is addressed or the point you are trying to make.
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@Bob – I think that Bob’s comment was addressed to you Steve as you have a habit of opposing any suggestions to close the ultra-low ridership subway stations and the Sheppard sTubway.
Steve: Well, in case Bob didn’t notice, I do read a lot of the TTC’s stats, probably far more than he does. The difference between Summerhill Station and the not-off-the-drawing-board SSE is that we have not built the Scarborough subway yet, and can use the huge capital costs by redirecting the money to a better network in Scarborough. It’s worth noting that there are ultra-low ridership stations on the SRT too. Maybe we should convert it to a Kennedy to STC shuttle just like the subway will be.
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Not only that, but having a possibly-questionable station somewhere along a busy line is a completely different order of possible foolishness than building an entire extension that is known to be unjustified. Not that I consider Summerhill unjustified — I don’t really know. But even if it is, it’s nowhere near as bad a waste of money as the Scarborough extension.
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Steve said: The curve radii are a function of intersection geometry and the properties used for loops. Yes, it would be possible to switch to double-ended cars, but this would require creation of layover spaces in the middle of the street, difficult with four-lane roads.
Well, *actually*, no.
The sequencing should work like this:
(1) Buy double ended cars. Don’t actually use them as double-ended cars. You don’t have to use both ends, you know.
(2) During reconstruction, replace a number of the terminal loops (which are generally off-street) with reversing sidings, and start using the other end of the cars *there*. Eventually you replace all the tight-curve loops with reversing sidings and you can start buying cars with more normal wheel configurations.
Of course this is quite irrelevant for curve radii if the intersection-geometry curves like Queen and Broadview are actually sharper than the curves in the loops. I don’t know about that, I’ve never checked.
It should probably be done anyway simply because it is easier to find space for an off-street reversing siding than for an off-street loop, and as a result it will be easier in the long term to get streetcar extensions built. It does lose you a small amount of capacity in the cars (for the second cab). You can also pack more streetcars into a streetcar barn if you don’t have to feed every track into a reversing loop.
But we are getting off topic.
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(Me:) I guess the real issue is switches. A loop actually takes up more space than a set of terminating tracks (even four or five of them, to lay over four or five streetcars at once), but you have to have functional automated switching to pull trains in and out of the terminating tracks, and the loop can be “brainless”. So that’s the real difficulty in switching.
Steve: Don’t forget that a large part of many loops is not off street, but rather made up of on street trackage. Neville is a good example of this. The number of storage tracks that could be fitted on the Neville property is quite small. As you mentioned in your previous comment, the intersections pose more of a problem because buildings determine the maximum curve radii. And, yes, this is getting very off topic.
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There are many extra benefits to having dual end cars beyond flexibility in terminal placement (Park Lawn Wye anyone?) such as having storage sidings to store extra cars or disabled cars without blocking the main line and still end up using less space than the existing loops. (Don’t get me started about TTC procedures with disabled cars)
But like my personal issue with them not putting in dual switches at turns (which would relax requirements on future car orders) if there’s one thing I’ve learned from the TTC over the past 20 years of watching is they won’t spend a dime to do anything if there is no immediate payoff or even if there is… (like putting in the proper turns on York when they rebuilt it).
What I do wonder about with the Metrolinx order is why they went with the same layout as the TTC cars when they could have gone with the 6 door version.
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I saw a group of eight people enter using the same Presto Card at Dundas station. One person entered using tapping at northbound platform and came out with a transfer for each person including himself and they claimed that they accidentally entered the southbound platform and so everyone was able to enter the northbound platform using the transfers. Fare evasion is vastly higher than TTC expects. If most people were honest, then we would not need TTC collectors, inspectors, etc.
Steve: This is not specific to Presto. Once someone is inside the paid area, they can take a fistful of transfers. Only when paper transfers vanish would this stop.
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I agree that this happens with every kind of fare media. The problem is that there is no jail time for fare evasion and no jail time if one simply puts their infraction ticket in the recycle bin in the rare event that one gets caught in the first place. Many years ago, I saw a man get a ticket who simply ripped it up in front of the inspectors but there was nothing that they could do as he did the right thing by putting it in a recycle bin as opposed to littering. We need to either have mandatory jail time for fare evasion or just accept that fare evasion will always remain widespread.
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Surely a single-ended car can use the wye. It just needs a reverse movement. On the other hand storage in the wye becomes first-in last-out, whether the car is double-ended or not, which would require more complex layover scheduling. To implement a loop like flow with a wye you’d need several additional tracks.
It occurs to me just now that this Park Lawn Wye is perhaps a matter of jest.
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If the TTC would switch to time-based transfers, then they would be forced to restrict the issuance of transfers to one per fare and only at the point where fare is paid (Presto, collector booth, automatic turnstile, or bus).
Sure, people would baulk at the though of not being able to get a “fresh” transfer at a subway station so using it won’t be questioned later in a journey (why are you boarding this streetcar at Ossington with a transfer issued on the McLevin bus?!?), but that’s the whole point of a time-based transfer system – it’s good for 2 hours anywhere on the system.
If the TTC believes time-based transfers would cost $20M per year, I wonder how many millions in fare evasion would be eliminated that is not taken into the $20M?
In other threads, Steve has opined that the $20M is overstated by about 100%, so $10M is more realistic. I believe that close to half of that are fares they are currently NOT receiving revenue for due to “creative” use of transfers. I also believe that a similar amount of revenue is lost for short out-and-back trips that are not worth the cost of two fares, but would be new paying fares if time-based transfers allowed the return to be done on the transfer. Based on what is in this paragraph, the cost of time-based transfers is ZERO.
Then, when the “take a fistful of transfers for my friends at the subway” procedure is eliminated, as well as the “keep every transfer you ever got because there will eventually be another Monday October 3” procedure is also gone, it would seem to me that the TTC would end up with a net gain from time-based transfers.
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Dear Steve, thank you for your “kind” words and “support” for the Scarborough subway. And you wonder why we don’t support Downtown pet projects like the Downtown Relief Line, Waterfront East LRT, Waterfront West LRT, Rail Deck Park, etc?
Steve: The DRL and Waterfront projects are not “pets”, but that is a distinction lost on you.
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I would like to point out, how Steve did not deal with the Rail Deck Park. There might just be a reason for that. Like it is very expensive, does not seem mission critical, and falls well behind other projects required around the city.
Steve: It’s also not a transit project, but seems to have a lot to do with John Tory creating a “legacy”. Worthwhile in concept, but dubious in cost and overall priority, rather like SmartTrack.
Also note, the DRL is a question of load. There are a couple of issues with regards to SSE, one, coverage, in that it does a poor job of serving most of the demand in Scarborough which is within Scarborough. The demand that it will serve well is riders headed west, and a great deal of that load is headed to the core, that is through Yonge/Bloor, and south, the one area on the subway that today does not have capacity. Note the current projections show this subway line will be overloaded shortly, north of the Bloor station, which would in effect mean, riders coming from the east would be unable to transfer.
I would note Steve seems to like transit that makes sense. He has expressed reservations with regards to most subway extension. Does not seem excited about the western leg of a DRL, and seems to support LRT where possible in the downtown to serve new areas, that is, the same basic notions that he supports for Scarborough, and Etobicoke. The city planners, have in effect admitted the demand was cooked by including Markham demand that would likely be RER, in order to support the idea of a Scarborough subway. The debate should be about service, not mode. Scarborough needs service and today that requires new infrastructure, which should be designed to provide the largest improvement in service to the most people.
The plan for the SSE, does not include crossing the 401, a major bottleneck, it involves very few stops, it provides a single location of service only which means all those bus routes need to go out of their way, greatly degrading service for the majority of would-be in Scarborough trips. Also much of the presented issues around LRT, focus on a transfer, as though it will continue the existing RT transfer. Please note the existing RT design, was based on making it impossible to use another technology, and Kennedy in its current form is, and is taken to be, a strong example of what not to do. If the SSE attracts the load suggested, and it is headed where most believe it to be, it requires a DRL, although that is required anyway. Steve has repeatedly made the point that the reason a DRL would need to be subway is the lack of a viable route for any alternative. The province projects loads even for one ending at Danforth to be at the high end of LRT anyway.
I would make a more potent argument however in all this. The initial plans for service for Scarborough by City Planning was for LRT, before politicians got in. That is the people whose profession it is proposed LRT not subway for SSE, proposed LRT for Waterfront east and west. Also given the proposed development on the Waterfront, this is a clearly tax positive situation and additional development, along with its tax base which will clearly pay for it, depends on it. Where city staff suggested LRT and caved in Scarborough, they have pushed light LRT on the waterfront, and were prepared to make such comment around their political masters, in a City Hall climate that clearly did not support it. So the professional planners, and financial managers thought East Bayfront was important enough to the city coffers and well being to actually take their chances on it.
I would also note the professional planners, are now talking about the DRL as a requirement to other projects (including the SSE), not as a nice to have. I personally have no issue spending $3.8 billion or more in Scarborough, it needs however to insured that a real network results. The only issue in my own mind to support the SSE over an LRT network is how the province behaves with funding and changes in mind.
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Mike,
Are you from Scarborough or York Region? Or are there two people called “Mike”?
You call the “Rail Deck Park” a “downtown” pet project, but the Executive Council that voted to make it a project was only made up of a quarter of “downtown” councillors (Wards 17, 18, 32), if you are willing to stretch the traditional definition of “downtown”. If fact, there were more Scarborough councillors that voted in favour of the project (as well as North York councillors).
Council Item
The issue for anyone else is: does the project have the greatest public benefit for the use of public money? It shouldn’t matter where a white elephant stands.
From the Transportation Tomorrow Survey (TTS2011), of 1,586,500 trips, 43.6% of all trips involving Scarborough were intra-Scarborough trips and 14.7% were Downtown-Scarborough or vice versa. However in the AM Peak, of 200,200 trips 23.7% involved Downtown and 20.5% were only Scarborough. Thus, the question is if $3.2B is better spent serving the slim plurality of the morning rush or the larger whole. Unless you live within 300-500m of Scarborough Town Centre, the ideal of a “one-seat ride” won’t be realised. At this point, I’m about ready to throw in the towel on trying to make people see sense and call it a regrettable decision, but one we will have to live with.
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The subway extension to Vaughan isn’t entirely irrational. The extension was always going to go to York University because there are always many huge queues for buses at all times of the day there. Highway 407 is the best place for a park and ride, and it’s the major GO Transit bus corridor for the GTA. Extending the subway there will save all the regional GO bus riders 5-10 minutes as they go from Hamilton/Mississauga to Markham/Richmond Hill/New Market because the buses will no longer need to detour to stop at York University. Once you get to the 407, it’s only a short distance more to get to the Highway 7 BRT, which is also the primary east-west transit corridor for all residents north of the 407. So in terms of regional connectivity, the extension to Vaughan is really useful. That short extension multiplies the number of destinations you can reach by a huge amount. It also simplifies a lot of other transit routes that would otherwise involve large detours.
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