The City of Toronto and Province of Ontario have published the Terms of Reference [TOR] for the “uploading” of subway planning, assets and funding to the provincial government.

The Ford Conservatives ran on a platform that included uploading the subway to Ontario while leaving day-to-day responsibility for it in Toronto’s hands.

• Assume responsibility for subway infrastructure from the City, including the building and maintenance of new and existing subway lines (the “upload”); and,
• Keep responsibility for day-to-day operations, including labour relations, with the City. [p. 1]

The scheme is intended to confer various benefits:

• Expedited implementation of a greater number of priority regional transit projects, made possible by the Province’s ability to accelerate procurement, permitting and approvals, and to effectively undertake capital construction;
• An enhanced ability to plan a more efficient regional transit network across the GTHA, with improved connectivity achieved, for example, through fare and service integration; and,
• A greater fiscal flexibility to invest in and deliver additional transit projects, and to address essential deferred maintenance needs, which would be effected through amortized provincial capital expenditures on owned assets. [p. 1]

Leaving aside the enmity between Premier Ford and his former colleagues on Toronto Council, this is a classic case of debate over “governance” (who is in charge, who does what) while completely avoiding critical questions about “who pays”. There is a cottage industry in this sort of thing. “Governance” studies replace serious discussion about backlogs both of expansion and maintenance born of a lethal of combination of “we deserve” and “nobody pays”.

“Expedited implementation” has two basic requirements: decisiveness and financial commitment. Neither of these has been present in governments for some time, even without fundamental changes in political philosophy. Indeed, it is difficult to understand how a government so burdened with the need to drive down spending can talk about financing multiple concurrent transit megaprojects, let alone take over the cost of an existing system.

A “more efficient regional transit network” means different things depending on who is speaking. To some, “efficient” means significantly lower costs and is a red flag signalling union busting and privatization. Integration of service and fares has nothing to do with the ownership of transit systems, but rather with the rules under which they operate and are funded. If Queen’s Park wanted to let Mississauga Transit carry passengers in Etobicoke, this could be done with a simple amendment of the City of Toronto Act. The problem of a double fare between 905 systems and the TTC is a question of funding. If the total fare to carry someone from Richmond Hill to Bloor and Yonge is to fall, something has to make up the difference. Who actually owns the services (bus or subway) has nothing to do with it.

“Greater fiscal flexibility” for new transit projects and deferred capital maintenance is certainly available to Queen’s Park whose accounting regimen is very different from the one imposed on the City of Toronto, not to mention provincial access to a wider range of revenue streams. Toronto’s capital plans are hamstrung by two factors: one is the cap on borrowing costs relative to property tax revenues, and the other is Toronto’s decision to use up borrowing headroom on a few major projects. Ontario would simply borrow and leverage this debt against the “asset” of the transit system, or alternately would bury debt in the future cost of a partnership with a private company who would finance, build, operate and maintain provincial assets.

This is a politically motivated takeover, and the real questions lie in just what mechanism will be used, who will own and maintain what, and what potential exists for lasting damage to transit in general.

I have written before about the actual cost of owning a subway system, and the considerable shortfall between the Conservative’s campaign-time rhetoric about how they could handle this and the reality of actual TTC budgets. The Tories claimed that they would incur only $160 million per year for capital maintenance on the existing subway system. The actual cost, including a very long list of deferred, unfunded items is much, much higher.

At the risk of seeming too optimistic, my sense is that Queen’s Park has discovered that the takeover is not quite as simple as they believed, and certainly not as cheap. Scoring a blow against Toronto Council would cost a lot and bring many risks that even a Ford-dominated government may not wish to undertake. Even before the TOR was published, Transportation Minister Jeff Yurek mused that a full takeover might not be necessary, and that Ontario could concentrate, at least for the outset, on new projects. This is reflected in the range of takeover options contemplated in the TOR.

The Problem Statement embraces much more than the Toronto subway system:

The parties jointly recognize the need to pursue alternative approaches to the planning, funding, decision-making and delivery of transit in Toronto, and spanning the broader region as is the provincial interest. This approach would enable, to the maximum extent possible:

• The accelerated implementation of priority expansion projects;
• The integration of transit services across modes and agencies (e.g. TTC, Metrolinx, other 905 transit agencies);
• The modernization and enhancement of the existing subway system, while ensuring the system is maintained in a state of good repair;
• The continuity of safe, reliable service to all residents whom depend on it for mobility; and
• A long-term sustainable, predictable, funding model for the existing transit system and future transit needs. [p. 3]

This includes all transit, not just the subway, and would extend the reach well into the 905 if only for he purposes of “integration” and funding. The last bullet about a funding model takes on a very different meaning if one talks only of the subway system, or of the wider network including rail service in the 905 and beyond (LRT lines and GO Transit). There is no indication that money is about to rain down on local transit services, and the discussion at this point is only about the Toronto subway.

Although I am no fan of “governance” discussions, one point leaps out from the “Objectives and Principles”:

Good Governance: A governance framework that: ensures transparency and accountability to the people of Toronto and the GTHA; reflects the importance of transit users within the region; and, is responsive to the needs of the communities that rely upon the transit network. [p. 3]

The provincial model at hand, Metrolinx, is notorious for its lack of “transparency and accountability” to anyone, with the possible exception of Ministers who want projects approved for their ridings. Unfortunately for Queen’s Park, that is the model we have as a point of reference for how provincial control actually operates. A massive change to the composition and operation of Metrolinx’ Board not to mention much greater “transparency and accountability” are long overdue. Today, that Board is responsible only for a system that carries roughly the same number of riders as a few streetcar lines. It’s a very clubby arrangement where meetings are as much about good news as possible, not real debate, and far too much is carried on in private sessions.

At this point in Stage 1 of the process, the list of possible models is not fixed, but it includes at least the following three schemes:

• The proposed “upload” model, in which the Province would assume ownership of, and responsibility for, subway infrastructure from the City, including the building and maintenance of new and existing subway lines, while the responsibility for day-to-day operations, including labour relations, remains with the City.
• Other options that consider the potential transfer of asset ownership from the City to the Province (e.g., the Province assumes ownership of, and responsibility for, new transit expansion projects only, etc.).
• Options that do not consider the transfer of assets, but include a realignment of responsibilities (e.g., the Province assumes responsibility for the delivery of new transit expansion projects, etc.). [p. 4]

Each of these has its challenges and benefits for both parties.

Option 1, a full upload, brings with it a very substantial increase in provincial cost exposure, especially in the short to medium term when a large backlog of major capital maintenance and upgrades come due. Without question, Toronto would seek a provincial contribution to this work if the subway remains in the City’s hands, but as a provincial operation, Queen’s Park would face a large bill. Indeed, they might even ask for local contributions much as they do for GO’s capital program today.

Option 2, provincial ownership of only new projects, brings a fundamental question: what is a “new project”. The most clean-cut example is the Crosstown LRT which is 100% a provincial project and will be owned and maintained by them (or more accurately by the P3 contracted to build and maintain it). The TTC will operate the line, but only in the sense of driving the trains and dispatching the service effectively as a subcontractor to the P3. However, subway extensions are integral parts of the existing system. Mixed ownership and maintenance responsibility of and for tunnels, stations, yards, fleet could be challenging. Even a Relief Line will share fleet and maintenance facilities with the existing system even though its infrastructure would be substantially a new line.

Option 3, provincial delivery of new projects, is the simplest because it would let Queen’s Park get on with what it claims as its forte – getting new stuff built and operating as quickly as possible. Where exactly “ownership” would fall in this scheme is unstated.

A big advantage for a financially strapped government in only taking on new lines is that there will be no substantial outlay until construction actually starts, and that would be at best in a few years given the state of design work. Most of the capital spending would fall outside of budget years for the current government especially if this was hived off into one or more P3s that wouldn’t actually bill for their work (and financing costs) until the lines begin operation in the late 2020s. The other obvious advantage is that this scheme would punt the whole “TTC takeover” question years into the future, although the problem of who pays for transit in Toronto would remain.

Within these and any other options, the details will include the scope and distribution of assets and liabilities, functional and funding responsibilities. Who plans what. Who operates what. Who pays for what.

The TOR includes the following surprising paragraph:

The Province recognizes that the City/TTC are undertaking multiple initiatives aimed at improving performance against shared objectives and commits to better understanding these in order to inform options. [p. 4]

In other words, Queen’s Park has discovered that they don’t actually know everything about the City and TTC already.

This process will include public consultation:

The parties acknowledge that meaningful public consultation is a required input to effective decision-making. To that end, during the process, the parties will conduct consultation with the public, including other key stakeholders. [p. 4]

Again, we are faced with what passes for “consultation” by provincial bodies where the purpose of meetings can be as much to validate conclusions already reached as to actually discuss and evaluate options with critical eyes, especially if there is a political imperative to implement an already-decided scheme. It is quite astounding how off-hand remarks by a Minister (let alone the Premier) can become unassailable matters of set policy that are beyond debate or criticism in “consultation”.

Whatever comes out of the Stage 1 evaluation will be reported to both the City and Provincial governments, and as the TOR is written, there could still be multiple options on the table at the beginning of Stage 2. It is not clear how or when this would be winnowed down to a single option. The section uses “end state(s)” in both the singular and plural [p. 5], although the apparent intent is that only one option would remain by the end of this stage.

Upon completion of this stage of the process, the parties will discuss next steps, subject to provincial and municipal report-backs and subsequent decision-making. [p. 5]

No timelines are given for this, and yet Ontario intends to introduce enabling legislation in spring 2019. Either this will be prescriptive with a specific model, or it will be very broad with the details to be settled in Regulations that would form the heart of the law. This is a common tactic when a government wants lots of leeway, and Regulations are not subject to debate or approval in the House.

There are conflicting requirements for transparency and confidentiality in the TOR:

Transparency & Communications: The parties shall mutually determine the requirements for public disclosure of information in the interest of ensuring transparency. In addition, the parties will plan and implement joint communications activities marking milestones associated with the ongoing process.

Confidentiality: All persons designated by the parties to partake in the review and engagement process shall be deemed to be bound by the confidentiality obligations contained in TOCCA. Moreover, the public release of information shall be subject to the provisions of the Freedom of Information and Protection of Privacy Act and the Municipal Freedom of Information and Protection of Privacy Act, where applicable. [p. 5]

“TOCCA” refers to the overall agreement between Toronto and Ontario dated May 12, 2016 for consultative processes. This predates the Ford government by two years. A problem will inevitably lie with the exemptions granted for Cabinet and commercial confidentiality. If any paper is deemed to  be “advice to Cabinet” (if only by the ruse of including the document in a briefing note), then it does not have to be released. Any document that could relate to “commercially sensitive information” such as anticipated costs or contractual arrangements similarly could be withheld. We could wind up with a very broad net thrown over the information available for “public consultation”. Although an appeal mechanism exists, it would respond, if at all, long after the time for public consultation had ended.

The process will include a “discovery” process to bring out details of current and future assets and costs. This will include:

… a common baseline/foundation of fact, which includes an objective accounting and technical assessment of the TTC subway network in order to establish a mutual understanding of:

• the fair valuation of the assets and liabilities encompassing the TTC subway system;
• the TTC’s current backlog of deferred maintenance on subway assets; and,
• the costs to operate the subways, disaggregated from the bus/streetcar network.

In addition, the parties recognize that the following undertakings are key components of discovery:

• The TTC’s review of deferred maintenance on its subway system;
• MTO’s procurement – in consultation with the City/TTC – of an independent third party to undertake an open book financial and technical valuation of TTC subway assets, the condition/state of repair of these assets, and the associated liabilities; and,
• The City’s valuation of TTC assets as directed by City Council. [p. 9]

This will make interesting reading, if only because the TTC has been lax about provision of detailed financial data in the past. Without question, their recent report listing a $33.5 billion shortfall in capital maintenance funding for the coming 15 years, of which a substantial portion is related to subway assets, is long overdue. Whether it is exhaustive is quite another matter.

On the split in subway vs surface costs, there are challenges both from shared infrastructure and staff, and in the problem of marginal vs full cost allocation. Marginal costs come into play when someone says “can we run more/less service and how much will it cost/save” because many costs are related more to the size of the system than to the amount of service operated. It costs a lot to own a subway even if you only run a few trains or carry a few passengers a day. Another issue here will be the allocated cost of service and facilities that lie outside of Toronto but are owned and operated by the TTC today.

Political eyes glaze over when faced with detailed budget documents, and yet this will be a central point of debate on any “uploading” model. Queen’s Park could wind up owning valuable assets, including a lot of subway real estate, while leaving the City with the cost of actually running and maintaining it from farebox revenue that everyone assumes makes the subway “profitable”. That fundamental assumption needs to be examined too, although it is almost impossible to disentangle revenues on a line-by-line basis in a fully integrated network like the TTC’s.

Another important issue is service quality. The TTC now has standards both for train loading and for maximum headways. These could prove more generous than Queen’s Park would like to fund if the model includes full operating costs, not just capital. Toronto subway service runs every five minutes, at worst, on most of the network most of the time, even though trains may run with few passengers. Meanwhile, Metrolinx regards ten minutes headways as frequent service. If there is a new provincial line, which standard applies?

The Terms of Reference gives the impression of being an eminently fair document, and statements from both Premier Ford and Mayor Tory make the expected comforting noises. However, we all know that the environment is a poisonous one where one party, the Premier, wants to be “right” at any cost.

Will the discovery process be open and fair, will the evaluation of options be unbiased, will there be real consultation or simply cheer leading for a takeover?

Most critically, how can we ensure that, under the guise of “better governance”, we do not create a monster that strangles the transit system in the name of fighting deficits while lavishly spending on politically-motivated projects?

Without a thorough debate about what transit should achieve, what a transit system should actually look like and what “good” service everywhere entails, there can be no proper measure of how any takeover and ownership scheme meets the goal of improving transit.