The SmartTrack Shell Game With TIF

Ever since Mayor Tory’s election campaign, we have been told that SmartTrack is a something-for-nothing project that would bring vastly improved transit service to Toronto at little or new added cost to taxpayers. This would occur through the hocus-pocus of Tax Increment Financing TIF).

For those new to the subject, the premise here is that building a new transit line causes property values to rise and new development that would not occur in the absence of the transit investment. That generates new tax revenue that could be used to pay off the construction debt. However, the city’s staff, who are bending over backwards to make Tory’s transit plans workable, do not see TIF as coming close to paying for Toronto’s share of SmartTrack.

See also:

The election premise was that SmartTrack would be built at a cost of $8 billion, would provide a total of 22 stations and frequent service over a route from Markham to the Airport Corporate Centre (south of Pearson Airport). This would be shared equally by all three levels of government making Toronto’s share about $2.7 billion, if one believes the premise of the campaign.

The situation has changed over the past two years. The Eglinton branch of SmartTrack as a railway operation was never a good idea, and it has reverted to the original LRT proposal from Transit City. Tory takes advantage of the more closely-spaced stops on the LRT to bolster his SmartTrack station count. In fact there would be more new LRT stations than SmartTrack/GO stations as the plan now stands.

GO Transit’s Regional Express Rail (RER) program will see widespread infrastructure and service improvements beyond which SmartTrack will only add six new stations. The projected cost of “SmartTrack” has gone down, but the City’s share remains above $2 billion. (The values below do not include cost of financing and risk transfer under Ontario’s procurement system that could bump these numbers by 20%.)


[Source: Transit Network Plan Update and Financial Strategy, p. 11.]

City staff argue that the benefits available from “value uplift” of existing properties will be low, and they have not included this in their calculations. From new development, the added tax revenue would be $857.1 million over the life of the financing scheme, and to be conservative, staff recommend that only half of this be presumed for SmartTrack financing.

This calculation does not address how the services new commercial or residential development will require would be financed if some or all of their new tax revenues were dedicated to SmartTrack.

The chart below shows the considerable spread between TIF and Development Charges (DCs) revenues and the actual requirements for SmartTrack financing, including the LRT line on Eglinton from Mount Dennis to Renforth.


[Source: Transit Network Plan Update and Financial Strategy, p. 12]

The two percent tax increase would be applied to residential property with only a .67% increase for commercial property. This arises from the City’s policy of rebalancing residential and commercial tax rates, a process that will complete in 2020. Given the timing of borrowing for SmartTrack, one must ask whether the balancing policy should apply in this case, and whether it is time for the commercial sector to pay its full share of taxes that will be collected almost entirely beyond the date when the balancing program completes. (Note that “commercial” includes rental apartment buildings.)

The estimates for TIF and DC revenue arise from projections in a report, Commercial & Multi-Residential Forecasts for the Review of SmartTrack, by Strategic Regional Research Alliance (SRRA) that was commissioned by Council to examine the question in detail. (The SRRA report begins at page 8 of the document.)

To put this in context, SRRA was co-founded by Iain Dobson who was an advisor to Tory’s election campaign. In May 2014, just as the SmartTrack campaign started, he was appointed to the Metrolinx Board during Glen Murray’s final days as Minister of Transportation. The consulting contract was awarded by Council on a sole source basis.

When SmartTrack was proposed, the intent was to improve access to areas of potential development. The following map shows these areas and their relationship to the SmartTrack corridor.


[Source: SRRA study at p. 21. “Nodes” is misspelled in the map title, and the Downsview node is mistakenly labelled “Lever”. How this might reflect on the care taken on the report I leave to the reader’s judgement.]

Several of the nodes lie outside of Toronto or far from the SmartTrack corridor (blue line and circles). These will either not produce new tax revenue within the 416 or they are too far from ST to benefit from its construction.

A vital question, then, is whether the amount of development contemplated in the January 2016 SRRA report and resulting tax revenues will actually flow to the city. SRRA’s analysis begins with a map of the “TIF Zones”, the areas around stations where tax increases could be expected.


Many of the stations are existing or planned GO stops that will see added service without any SmartTrack investment, and ST adds nothing to them (Milliken, Agincourt, Kennedy, Main, Union, Bloor, Mount Dennis). The map also shows a station at Spadina that will not be part of the upgrades planned for the ST corridor.

Although many zones are shown, most of them will not be affected by SmartTrack as it is now proposed, merely the addition of six stations to the GO Transit map: Finch East, Lawrence East, Gerrard, East Harbour (Lever), Liberty Village and St. Clair.

Although the SRRA report discusses the methodology for analysis of the effect of SmartTrack in the TIF zones, it does not provide a dollar value for the actual tax increments this would produce, nor a description of how this might be calculated. Numbers cited in the City report imply that a more detailed breakdown exists for the SRRA data, but that it has not been published.

An important component of the stimulus attributed to SmartTrack is the construction of additional residential units because ST would make jobs in the outlying centres (notably Markham and the airport) easier to reach and thereby allow reverse commuting. However, there is no “ST service” per se, only the provision of stops where riders might board GO RER trains running less frequently than original claims for ST itself.

Projections for employment and residential growth are shown in charts.


The core area remains the primary location for employment growth, although the projection with SmartTrack diverts some of this to other areas, notably the Queen/Carlaw area (i.e. the Lever site) and Liberty Village. The latter is a bit of a stretch because the station would be located at the northeast end of the district while commercial development, such as there may be, will be toward the southwest.

An important distinction here is that in the “secondary zones” (those along transit corridors other than ST) and in the non-TIF part of the city, the projected employment with ST is generally lower than if ST exists. In other words, potential development that might hold these employees shifts into areas where it contributes to projected TIF revenue.

A similar situation applies with residential units.


The city adjusts for this numerically in their backgrounder on City Funding and Financing Strategy.



What is not clear, however, is which of the TIF zones are included for this analysis, in particular those which are at existing GO stops, nor whether the effect of ST’s having no marginal service beyond that provided by GO RER has been take into account. If all zones were included, has the potential revenue due only to SmartTrack been overstated?

A similar problem exists for the calculation of Development Charges because the formula for these, set by provincial law, makes them applicable only to the benefits provided by the expenses undertaken by the City, not to improvements others such as GO might provide nor to improvements existing transit riders might obtain from the new stations/services. This considerably limits the scope for recapture of costs through DCs. (In Scarborough there was was a successful appeal by developers that reduced DCs attributable to the Scarborough Subway. This was based on a higher estimate used for new riders in the DC calculation, and hence the proportion of riders from new development, than in a later estimate.)

There is a more general problem with DCs in that they affect every new building in the city, not just those along the transit corridors. Developers who do not benefit from the projects these charges help to finance are not enthusiastic about building yet more costs into the base borne by would-be purchasers.

Questions for the City

All of this raises many questions about the validity of the calculated TIF revenues available to finance the SmartTrack scheme. I have sent queries about this to City staff, and await a reply. This article will be updated when more information is available.

Council will debate the SmartTrack reports at its meeting beginning on November 8, 2016. Here, in brief, are my questions.

  • The staff presentation to Council expresses commercial growth in thousands of square feet while SRRA uses employment. These can be converted to each other with a ratio, but what number has been used? How do the City numbers relate to the SRRA values?
  • The bar graphs in SRRA’s report do not include actual values making direct calculations such as selective inclusion or exclusion of TIF zones difficult. What are the numbers?
  • Which TIF zones were used for the calculations in the City presentation? Only the six the City is paying for, or zones at all “SmartTrack” stations even though many of these are GO RER locations to which ST will not add any service?
  • What adjustments in projections have occurred between the original SRRA estimates and those used in current City estimates?
  • As with TIF, have DCs been calculated only based on the six added “City” stations, or for all of the ST/RER locations?
  • TIF revenue is projected to grow uniformly and across all included zones. Is this a realistic assumption, how much growth is projected in each zone, and when is this expected to occur?
  • If the SmartTrack tax were implemented at the same rate across all property classes, at what level would the tax be set?


11 thoughts on “The SmartTrack Shell Game With TIF

  1. This feels far more like a trick for Toronto than a treat; and given the scale of the commitment and rather blighting potential impacts if something goes awry or projections unfulfilled, the incredible haste to vote in favour of billions of spending with hardly the time to read the report etc. makes it an even more suspect vote/situation. It comes to either being in favour of transit or not being in favour of transit, (or it could be portrayed as that by some), and to be worried about implications is to be not in favour of transit. Surely better governance mandates having a decent time to read things, as well as getting other reports – like the Revenue Tools and a Suspect Subway Extension report – voted on first, instead of getting a bit pregnant with the Mayor’s fave projects that may do far more for the 905 suburban voters than Toronto ones. We already have a set of issues with mathemagics more than planning in Scarborough; we don’t need to beggar ourselves and prioritize some ideas more than other plans do we?

    I’m glad Steve is able to write dispassionately about details, but it’s sure feeling like the disaster of buy-election schemings in transit just keeps on giving…. and the train wreck is unstoppable with the essentially same majority that backed Ford apparently all OK to support Mr. Tory and his transit agenda. I hate to be so negative, because use of the rail lines from Bloor to Union to Danforth could be a help for a surface “relief”, but that’s not what’s arising.



  2. Steve, Toronto would be worse off without your objective blogging.

    I can see this going sideways very quickly. John John is clinging to fading hope that his pet project will get off the ground. What he fails to realize is that while you can pay for pretty much anything if you authorize it, you still have to find a way to pay back the money. Talk is cheap but if you do not have money coming in you can be screwed really quick.

    TIF is no guarantee money will be made to pay for all this. When you start talking billions things have the potential to go awry very quickly. While there is likely to be development in the area of SmartTrack I doubt it will be enough to pay for this.

    We need to make sure this is paid for, not hope the development is sufficient to pay for it otherwise it will bankrupt the city.

    Personally, I think SmartTrack needs to go. It is clear as day what is going on here. This will all end badly, the city will be on the hook and when it is all said and done it will be up to the next council to pick up the pieces after John flees to prevent himself from being accountable.


  3. The alternative would be much worse. If RER/SmartTrack were reduced to actual funds available, Toronto will face gridlock never before seen by 2027. There simply aren’t enough roads to handle the rapid increase in GTA population. There won’t be any substantial increase in highway capacity, in fact the Gardiner ‘solution’ may actually decrease space for cars.
    So, if you enjoy sitting in traffic every day, for several hours each way, continue to vote for any GTA candidate who sees no need for new funding sources for transit.


  4. I’m surprised that there isn’t more of a backlash from the people living near Lawrence East & Ellesmere SRT stations. I know that I’m stating the obvious, but those near Ellesmere will now be facing a longer commute time (and there are new townhouses built near line 3 because of the proximity to rapid transit). And those living near Lawrence East now either face increased travel times or additional costs for hopping on the GO. I haven’t heard their city councilors share any concerns about their inconvenienced constituents.


  5. I do not understand the concept of “uplift”. I thought that property taxes were rebalanced each year so that the total works out the same regardless of the assessment. If every property went up 15% equally – the mil rate would be adjusted downwards accordingly. If some properties go up 20%and others only 10% and the average increase is 15% – then the 20 properties pay more tax and the 10% properties less and the total remains the same.

    Properties move up or down for all kinds of reasons as neighbourhoods move in and out of fashionability. How does one distinguish “uplift” as a result of a TIF Financed development from a normal increase based on increased demand in the marketplace.

    Steve: That’s another reason staff do not see “uplift” as a worthwhile part of TIF. It is impossible to sort out which of many factors might be “SmartTrack” uplift as opposed to other factors. However, if you read some of the presentations from TIF advocates (including the SRRA report), you will see that they count “uplift” as if it could be uniquely quantified. This really only works for isolated, probably brownfield, projects where no other factor would be present. Applying this to a thriving, built up city is nonsense, but TIF advocates live in a fantasy world.


  6. Harrison wrote: The alternative would be much worse. If RER/SmartTrack were reduced to actual funds available

    I urge anyone, hoping that RER/SmartTrack addresses transit issues, to attend one of the Metrolinx information sessions listed below on Steve’s blog. I attended the Nov 7 meeting. It was clearly stated that RER is 15 minute service on GO lines requiring considerable track and electrification upgrades. Certainly converting single track to double track lines is a big improvement however they said serious service improvement can only come from upgrading signaling systems which are not even on the horizon, possibility starting in 2025. Metrolinx had no representative to answer SmartTrack questions but a City planner stood up and stated that SmartTrack was merely Go trains. I didn’t feel it appropriate to raise my favourite questions — what about Union Station and when are EMU’s scheduled. These will not happen in the lifetime of anyone reading this.

    Steve: Yes! The idea that ST was a major addition to network capacity was a fiction of the Tory election literature, but is not part of what will actually be implemented. Any estimates of ridership diversion depending on very frequent service are interesting theoretical works, but of value only in showing what we will not be getting.


  7. Chris said: I haven’t heard their city councilors share any concerns about their inconvenienced constituents.

    Which just means their councillors are unwilling to publicly admit that they might be (are probably) wrong; it doesn’t mean that people haven’t figured out they’re getting screwed over.

    I’ve thought this before, but I really think that a mayor and councillors who vote for expensive commitments with promises that the funding plans will just work – despite what experts say – should be forced to post a bond in case (when) it doesn’t. Like the fiasco with the M****rC**d Centre, where the city was forced to assume the debt they’d guaranteed, and then write down part of it – all of which was 100% foreseeable, and fully predicted. And it cost Grimsey (local chair sitter and consummate lickspittle) absolutely nothing at all.


  8. How can Tory and his cronies continue on when faced with facts like these? Are they utterly delusional? Or are they just hoping that the people will believe in perpetuity that Tory’s administration making “progress?” At least pyramid schemes pay interest! How long can the con go on?


  9. Giancarlo | November 8, 2016 at 7:49 pm

    “How can Tory and his cronies continue on when faced with facts like these? Are they utterly delusional?”

    Facts, you expect a politician to be swayed by Facts.


  10. The article listed the GO stations serving SmartTrack as “Milliken, Agincourt, Kennedy, Main, Union, Bloor, Mount Dennis”. Should that list also include Scarborough?

    Steve: Scarborough Station is east of the junction between LSE and the Stouffville corridor. It is not clear whether there will be a “Scarborough” station on the Stouffville/ST line. There is no station at this location shown on the RER maps.


  11. Richard L said: Should that list also include Scarborough?

    Steve: Scarborough Station is east of the junction between LSE and the Stouffville corridor. It is not clear whether there will be a “Scarborough” station on the Stouffville/ST line.

    No, Scarborough GO Station is a LSE station, and it’s already very sub-standard. The single track for the Uxbridge subdivision only accesses one platform. The twinned Uxbridge track would go to the north, thus not allowing two-way service. A fourth mainline Kingston track on the south side would/will require demoing the existing station building.

    The more likely long-term solution is a grade separation, which would increase speeds for the Stouffville line, allow the existing fourth track to become a Kingston mainline through the station, and remove the need for a Danforth road closure.

    Either way, no Scarborough doesn’t get Smart Track.


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