A political tremour ran through the transit world in Toronto recently with the TTC’s release of a 15-year projection of capital spending requirements at $33.5 billion. This does not include funding for most system expansion projects beyond the already-approved Scarborough Subway.
That number is big, but it’s no surprise to those who have been following TTC budgets for years. A major issue has been that “unfunded” or “below the line” projects don’t get the attention they deserve and are deliberately kept off of the books to reduce the apparent size of the City’s financial problems. Common tactics included omitting projects from the overall budget, or projecting their spending in a period just beyond the rolling ten-year horizon of capital planning.
Transit planning in Toronto and at Queen’s Park is reckless when it downplays the backlog of spending and associated subsidies facing public agencies. New spending and the inevitable photo ops for grinning, back-patting politicians are easier to fit into plans when you can ignore the transit system crumbling in the background.
Several budget reports will be before the TTC Board (and later at City Council) at its next meeting on January 24, 2019.
- 15 Year Capital Investment Plan and 2019-2028 Capital Budget
- Making Headway – Capital Investments to Keep Transit Moving
- 2019-2028 Capital Budget “Blue Pages” [Line Items]
- 2019 Operating Budget for TTC Including Wheel Trans
There is far too much material here to review in a single article, and so I will break this up over multiple posts. Some of the details behind individual projects will not be available until I obtain the full version of the Capital Budget known as the “Blue Books” which expand the line items from the “Blue Pages” into project descriptions and schedules.
A vital part of the new reports is a shift to a longer time frame (15 years) and the inclusion of all projects in the Capital Plan whether they have funding or not. The extent of the problem is quite evident in the following chart. The purple hatched area shows the requirements for coming years while the sold areas show known funding amounts in the medium term and hoped-for income thereafter.
The big drop in the City’s funding share in the early 2020s arises from the lack of borrowing headroom in the overall City budget. A big problem here is the crowding by major projects such as the Scarborough Subway Extension and the Gardiner Expressway rebuild within the overall borrowing plan. Current City policy dictates that the average debt servicing cost should not exceed 15% of City tax revenue over a ten year period. Planned spending in the next few years will eliminate the headroom for additional borrowing. This exactly coincides with the bulge in TTC capital requirements beginning in 2022. To put it another way, if funding continued at 2019 levels across the chart, there would still be a shortfall, but against a much higher base.
Even this chart does not tell the full story because the Capital Plan continues to push major projects beyond the ten-year line, and the financial pressures from system expansion are not fully accounted for here. As things stand today, less than 30% of the ten-year program is funded. Beyond 2028, the level of assumed funding is still well below historical levels.
|($ billion)||2019-2028||2029-2033||Total 2019-2033|
System expansion projects will add a further $3.8 billion over the first ten years of the plan:
- Line 2 Extension (formerly known as the SSE): $3.4 billion (subject to revision when an updated cost report is presented to Council in April 2019).
- “While the 10-Year Capital Plan includes $3.360 billion in funding for this project (between 2019 to 2028), this project has an overall budget of $3.560 billion. This estimate, which includes $132 million to extend the life of the SRT until the Line 2 East Extension commences operation and a further $123 million to decommission and demolish the SRT, was based on 0% design. The project budget and schedule will be re-baselined in Stage Gate 3 report to City Council in April 2019, factoring in delivery strategy and schedule risk analysis.”
- Relief Line South: $385 million will be spent in 2019-20 to support early works on this project. Some of this is already funded, but $325 million is being advanced into the current ten-year budget. Of this, the City proposes to provide half and looks to other levels of government for a contribution. The actual RL construction project is a separate entity which is not yet in the budget.
- “The 10-Year Capital Plan includes funding of $385 million to complete current work only, which includes completing the preliminary design and engineering to between 15% and 30% complete, including developing a project budget and schedule.”
- Waterfront Transit: The ten-year budget includes only $27 million in 2019-21 for design work on the planned extension from Exhibition Loop to the Dufferin Gate. Design work on any other Waterfront projects, let alone any construction, remains beyond the ten-year window.
- Spadina Vaughan extension: Outstanding work on this project including close-out costs amount to $60 million in 2019, but this will be funded within the existing project.
[Quotations above are from the 15 Year Capital Investment Plan and 2019-2028 Budget, pp 12-13.]
The Relief Line work includes tasks such as property acquisition, utility relocation and design for the tunnel boring equipment. Now that the line has political support, spending sooner rather than later is on the agenda, and about two years can be shaved from the original project schedule by doing the preliminary work now. This is a major change from the position taken by Mayor Tory during the election campaign, and the need to “do something” as soon as possible is now evident.
The change of magnitude in the Capital Plan – a jump from $6.5 to $33.5 billion – comes from two factors. One is the inclusion of the previously unfunded or unacknowledged projects, and the other is the extended time frame from 10 to 15 years.
In the table above, $6.1 billion worth of “unfunded”, “future consideration” and “deferred consideration” projects make up nearly half of the $12.6 billion total acknowledged in the 2018 Budget. Some of these have costs in the additional years totalling $3.3 billion.
An equally large collection of projects is shown as “Plan Changes” above.
- Line 1 Capacity Enhancements: This is a collection of changes including completion of the Automatic Train Control (ATC) installation, acquisition of additional trainsets to expand service once ATC is fully activated, and station capacity improvements.
- Line 2 Capacity Enhancements: The amount here looks small, but that is because related items are broken out within the table. The Western Yard (at Kipling Station), the T-1 Life Extension, and some of the “Other Changes” will contribute to the overall Line 2 costs.
The funding for the ten-year plan, such as it is, is broken down by source in the table below. This assumes the current funding arrangements with other governments and makes no provision for whatever costs Ontario might assume. As I write this, the provincial focus appears to be more on construction of new lines rather than existing facilities, and so the degree to which a budget that is largely for “state of good repair” might change is hard to determine. A worst case situation would be for Ontario to walk away from maintenance and renewal related funding to concentrate on system expansion.
Explanatory note: “Capacity to Spend Adjustments” are a piece of accounting magic introduced in recent years to reduce the apparent spending needs based on historical evidence that the TTC never spends all of the money it asks for. This is subject to two caveats. First, the underspending is often linked to project delays and the money is needed eventually, usually in the following year (note the 2017 carry forward below). Second, it is common to shift planned spending between projects as the details of their costs become evident. Underspending on one item might have a compensating overrun on another.
There is a table showing the details of the unfunded projects in the Capital Plan and Budget Report at p. 11. The table is not well organized into categories, and it mixes together three types of item:
- The Capacity To Spend reductions described above.
- Items that were part of the 2018 Base Budget but were unfunded. These showed up as a “Reduction” on the 2018 budget, and they are restored here. Any item below including “Reduction” falls in this group. These total $4.35 billion over the 10-year plan.
- Items that are net new to the project list. These total $12.39 billion over the 10-year plan.
This table is not organized by mode. Some items, such as Capacity to Spend, shared facilities and administrative costs, cannot be assigned to a specific mode. The breakdown is:
- Subway $11.04 billion
- Bus $2.44 billion
- Streetcar $1.70 billion
- Unallocated $2.31 billion
Note that these are only the costs within the first ten years, and some of these projects have future costs to 2033 and beyond.
There have been a few significant changes to plans for the subway and streetcar fleets.
On the subway, the TTC has decided to attempt a ten-year life extension for the T-1 trains on Line 2 BD. Those who were hoping for new trains in the mid-2020s will have to wait somewhat longer. This brings up several related questions that will not be addressed until the Line 2 Renewal Plan (now over two years late compared to its original announcement) to be presented later in 2019:
- The current fleet of T-1 trains (370 cars or 61 6-car trains) compares to scheduled service on Line 2 of 45 trains. Allowing for a 20% spare ratio, a 61-train fleet can support a scheduled service of about 51 trains. This gives enough trains to run every second train through to STC from Kennedy, but not enough to provide full service at the current 2’20” subway headway. Full STC service will require at least 10 more scheduled trains, or more if stops are added or the line is extended to Sheppard.
- Additional trains will be required to reduce the current 2’20” service to every 2’00” and to run full STC service. This would bring the line 2 fleet to about 77 trains including spares.
- The TTC fleet plan shows an increase in available trains in 2026 for the extension, and again in 2031 for a two-minute headway. This sets the time lines for procuring additional trains, a project that would likely continue with the replacement of the T-1 fleet.
- The T-1 fleet was not designed to run with ATC equipment, and the complexity of retrofitting this has not been addressed. It is not clear how much preliminary design or investigation has gone into such a retrofit. Alternately, the T-1 fleet could operate in manual mode on the extension provided that a basic level of signal protection is included. This needs to be designed into the extension as opposed to the situation on the Spadina extension where ATC was not included in the original design.
- Because all of the T-1 fleet is now housed on Line 2 (contrary to original fleet plans when some of these trains would have remained on Lines 1 and 4), there is a shortage of storage space today, and this will get worse if more trains are delivered. However, the Western Yard at Kipling is shown in the plans in 2031 long after the first of the new trains would arrive.
The relative timing of the Line 2 renewal component projects continues to be a challenge within the TTC capital plans, and correcting this will likely add to the “bulge” in medium term capital requirements.
On the streetcar fleet, the TTC acknowledges the need for more cars, but the fleet buildup beyond the 204 cars now on order does not begin until 2024 completing in 2028. This would require 100 more cars (the currently proposed 60 plus 40 additional) all aimed at improving capacity on the system. Bus operation on some parts of the streetcar network would continue to the mid 2020s.
Again, the problem may be of timing with spending on more cars. Ideally, production would continue on with the Bombardier production line in Thunder Bay which will complete the current order in late 2019. A delay to 2024 implies an entirely new procurement cycle and raises the possibility that this expansion will never occur. The TTC’s plan pushes significant spending on new streetcars (and on additional shop facilities at Hillcrest) beyond the peak financing crunch in the mid 2020s.
Bus fleet planning is complicated by a few factors:
- The transition to an all-electric fleet will substantially increase the unit cost of vehicles. The 15-year plan contemplates 2,300 “low/zero emissions buses at a total cost of nearly $3.7 billion”, or over $1.5 million per vehicle. This may be offset by lower maintenance and operating costs yet to be determined, as well as the benefit from shifting away from fossil fuel vehicles.
- Charging infrastructure will be included at McNicoll Garage now under construction, and at a future Ninth Garage slated to open in the mid-2020s, but it must be retrofitted to existing garages. There does not appear to be a line item in the 10-year Capital Budget to cover these costs.
- The fleet projection assumes that buses will continue to supplement streetcar service until the mid-2020s even though it would be possible for the TTC to acquire the added cars it needs sooner as discussed above.
As new rail lines such as Eglinton Crosstown, the Line 2 Extension, the Finch LRT and the Relief Line open, they will displace buses from routes that can be reallocated for improvements elsewhere without the need to buy more vehicles. The fleet projection in the 15 Year Plan does not include reductions in bus requirements co-incident with most rapid transit openings. According to plan, the new bus requirements for growth are 15 vehicles per year. This is less than 1% of scheduled service, and clearly growth in service will only be possible through a combination of buses released by rapid transit routes and purchase of more (or larger) vehicles.
The capital budget reports present a long-overdue 15-year view of projects and reveal the magnitude of the “below the line” items which now account for five times the spending in the approved, “funded” portion of the budget. The TTC Board and Management, and City Council have been derelict for many years in keeping the true needs of the transit system from view. What has been missed: planning and decisions that should have informed transit’s goals, realistic financial plans and calls on other governments for both contributions and revenue tools.
The backlog of basic system maintenance gets longer and longer while we crow about being “responsible” with taxpayer dollars.
The $33.5 billion does not include any provision for:
- Cost escalation on the Scarborough Subway
- Construction of the Relief Line
- Construction of the Yonge North extension
- Construction of the Waterfront streetcar network from Etobicoke to the Don River
- Construction of the Eglinton Crosstown extensions
Some of these might be viewed as Metrolinx projects, and some may be inherited by Queen’s Park as part of a subway upload, but one way or another all of them will compete with basic maintenance and renewal for funding.
Although there are many rapid transit schemes in the works, the status of the surface network is less definite, and spending appears to be focused more on technology change than service improvement.
There is no analysis of the operating cost effects of the evolving system, new costs that will compete with existing operational funding and with other City programs.
Project scheduling is dominated by the funding and financing crunch of the mid 2020s. This problem must be solved to avoid putting much of the TTC in a deep hole of deferred maintenance from which recovery would be long and difficult. Service expansion, ironically at a time when there is call for transit to do more, is hamstrung today and could be impossible in the future.
The need for very substantial transit funding is critical, and the effect of a choice to not pay, to make do, leaves the City vulnerable to a long-term decline of its transit system.
In following articles, I will review the 15 Year “Making Headway” report, the Operating Budget and issues regarding provincial subway upload. Stay tuned.