Updated December 17, 2019 at 12:00 nn
This item has been updated to reflect actions taken at the TTC Board meeting of December 16 to accelerate decisions on priority projects in light of new funding that will be available through the Mayor’s proposed City Building Fund. The new information is in a postscript at the end of this article.
The link to the “Blue Pages” has been updated to point to a revised version that corrects formatting problems with some amounts in the table, and corrects the names of several budget lines. Among these was a line called “Purch 496 LF 40 ft Diesel Buses”. This has been revised to “Purchase Conventional Buses”. The section on “Buses” within the “Fleet Plan” has been revised to reflect this and include some information from discussion at the meeting
At its meeting on December 16, 2019, the TTC Board will consider its Operating and Capital budgets for 2020. The Operating Budget was my subject in a previous article, and here I turn to the Capital Budget and 15 Year Plan. There are two related documents on the TTC’s website:
- TTC 15-Year Capital Investment Plan and 2020-2029 TTC Capital Budget and Plan
- TTC 2020-2029 Capital Budget and Plan Blue Pages
The TTC has various ways of presenting its capital budget and plans, and navigating these can be tricky for the uninitiated. There are:
- The 15 Year Capital Investment Plan (CIP)
- The 10 Year Capital Plan
- The current year Capital Budget
- Variations on the budget and plan that do not include “below the line” projects that have no committed funding
- Estimated Final Costs (EFCs) for projects beginning within the 10 or 15 year window, but stretching beyond
For anyone making comparisons with the opaque budgets and plans at Metrolinx, that agency does not include inflation over a project’s life in cost projections, while the TTC does. The simple fact is that Toronto borrows real dollars to fund projects at then-current prices, not a some years-old notional cost. City financing plans must be based on future year spending at future prices.
The Capital Investment Plan
The Capital Investment Plan was introduced in January 2019 to bring some reality into capital planning that had been absent at the TTC, City and Provincial levels for years. In an attempt to make its future exposure to large capital expenses and possible borrowing look better than it really was, the TTC and City produced 10-year capital budgets that omitted a growing list of critical and expensive projects essential to the health of the system. The CIP pulled up the rug, so to speak, under which all of these had been hiding, and revealed officially what anyone following the TTC already knew – the difference between available funding and needed investment was an ever-deepening hole.
This arrangement suited many parties because the City could make its future debt problems look less intimidating that they really were, and advocates of big spending on new projects did not have to contend with needed spending on repairs and renewal for funding. At the Provincial level, the cost of taking over the TTC, and especially the subway network, looked manageable, but that myth exploded when the real exposure to system renewal costs emerged. Toronto, now happily back in charge of all existing TTC assets, faces the bill for a mountain of projects that Ontario might otherwise have taken off their hands.
The 2019 CIP showed that there was a $33.5 billion investment requirement over the 15 years to 2033, of which over $20 billion had no identified source of funding. A gap that incoming City Manager Chris Murray though was a few billion exploded by an order of magnitude as he noted at a recent speech at the Munk Centre. This was not something that could be fixed with a nip here and a tuck there in the City and TTC budgets.
We must now have faith that the total amount shown in the CIP really is an exhaustive tally of needed spending. However, this could be subject to upheavals such as changes in policy about renewal cycles for equipment, service levels affecting fleet size, technology selections affecting vehicle costs and the timing of major projects paid for by others but affecting the existing network such as the Scarborough and North Yonge subway extensions.
Until quite recently, future spending on TTC capital projects other than rapid transit expansion faced a big downturn in the mid 2020s corresponding to the point where the City’s ability to borrow net new funds crashed into the City’s debt ceiling. In order to maintain a good credit rating and thereby save on borrowing costs, the City limits its debt service charges (interest) to no more than 15% of the revenue stream from property taxes. Other sources of revenue do not count toward this calculation either because they are earmarked (e.g. TTC fares or targeted subsidies from other governments), or because they cannot be counted on to survive as long as the debt they might pay for (government transfers that come and go with a Premier’s whim).
Mayor John Tory has proposed a substantial increase in the City Building Levy, an extra property tax just like Rob Ford’s Scarborough Subway Tax, that will allow the City to borrow $6.6 billion more to cover its share of transit and housing projects. There is a catch, of course, in that we have no idea what other governments might contribute, if anything. Toronto has already burned through its infrastructure stimulus money from Phase I of the federal government’s PTIF (Public Transit Infrastructure Fund), and the Phase II money will go substantially to a few major rapid transit projects as approved by Council. Asking for more effectively opens up the question of better support nationally for public transit, not just for Toronto. As for Queen’s Park, Ontario’s Ford government, not exactly a friend of Toronto, could well say “we are paying for your new subway lines, but you want more”, and dismiss any request. Both Toronto and Ontario are guilty of wasteful spending on big ticket projects while underfunding basic maintenance.
When the 2019 CIP was approved by the TTC Board, it included a recommendation that the Board:
Direct the CEO to begin steps required to prioritize critical base capital needs in advance of the Board’s consideration of the 2020 Capital Budget [Minutes of January 24, 2019, Item 10, point 3]
There is no sign of prioritization among the various projects as an indication of what any new funding, should it appear, would be spent on.
The 2020 CIP includes a recommendation that the Board:
Direct the CEO to update the Capital Investment Plan on an annual basis based on refined cost and schedule estimates as projects progress through stage gates and to prioritize critical base capital needs in advance of the Board’s consideration of the 2021 budget process
The situation with the budget is too critical, and the need for action now by Council and the TTC to identify critical projects that should be first in line for funding cannot be overstated. Without a priority list that identifies the core requirements, Toronto risks losing at least another year to debate and indecision, hallmarks of the City’s transit planning.
In the intervening year, the CIP has grown by about eight percent to $36.1 billion. This is a troubling development because a good chunk of the recently announced “new” money for transit could vanish into supporting cost overruns, not to building and renewing the system.
This growth is summarized in a chart from the TTC’s report. The top portion shows the original CIP presented in January 2019 with $9.7 billion in funded projects and $23.8 billion unfunded.
The bottom portion shows the changes moving forward one year:
- The project to add capacity at Bloor-Yonge Station has grown by 45% with an additional $500 million above the $1.1 billion shown for this item in the 2019 CIP.
- SAP ERP is a project to replace legacy IT systems with a modern, integrated suite of software. The added $200 million arises from a combination of scope change and higher estimated cost for the work already committed.
- ATC resignalling has grown by $900 million due to a scope change in the Line 1 project, and a rise in the estimated cost of Line 2 ATC from $420 million cited in the 2019 CIP. It is not clear whether this includes funding for the retrofit of the T1 fleet that will, under current plans, continue to operate during the ATC era on Line 2, notably on the Scarborough extension (assuming it is built with ATC from day 1, unlike the Spadina Vaughan extension where this was an afterthought). Line 4 has been added to the scope of this project.
- Lighting in Open Cut refers to the replacement of existing lighting along the above-grade portions of the subway much of which is decades old. This item was included in the 2019 CIP as part of a bundle of subway upgrades, and at a much lower cost.
- It is not clear from the report just what is involved in the $300 million for “Subway Signal System Alterations” beyond the work under other projects to implement ATC.
- The last line moves year 2029, originally part of years 11-15, into the years 1-10 column.
This should be a cautionary example that the full cost of maintaining and renewing the system is not written in stone, and increases are inevitable. This also does not include potential changes related to a fleet plan that focuses on replacing vehicles and expansion rather than making do with rebuilds of existing buses and trains.
The original CIP did not include funding for the major expansion projects such as the Scarborough Subway Extension even though in January 2019 this was a City project not yet assumed by Metrolinx. The reason for this is that the major projects have their own, separate budgets and funding streams and, therefore, they were not part of the CIP to begin with. This can lead to confusion when other major projects such as Waterfront Transit show up in the TTC/City project list, even though they are not in the CIP which, therefore, understates total future funding requirements.
The 10 Year Capital Plan & Current Year Capital Budget
The ten year plan is the format in which TTC capital projects have typically appeared, although there are important differences from earlier years.
Projects in this plan were, in 2018 and earlier, only those which had Council approval to be there, and even these did not all have funding. The grand total of the 2018-2027 plan was $6.54 billion in funded works plus $2.70 billion unfunded. The latter were commonly known as “below the line” projects because they fell after the dividing line in the budget. Of course there were far more projects waiting in the wings, but these were not acknowledged until the 2019 Capital Investment Plan. The 2019 budget and the new CIP came out unusually late (normally it appears in December) because of the 2018 municipal election.
For many years the total of the 10 year plan was in the neighbourhood of $9 billion, but by 2018 the nagging problem that it was not all funded could not be ignored. Hence the CIP.
For 2020, the “Base Capital Plan” corresponds to the old funded part of the 10 year plan. Here is the funding breakdown. The total for 2020-2029 is larger than 2019-2028 primarily because the Bloor-Yonge expansion project has moved into funded status with a commitment from the Federal government, but also it has grown by roughly half a billion dollars.
The full 10 year Capital Plan is shown below. This corresponds to the format used in 2018 and before showing only the funded projects. Note that this page shows the total of the Base Program, $7.4 billion, plus a few remaining expansion projects:
- SRT Life Extension: The province may be building the subway extension, but keeping the SRT running is on the TTC’s dime. Note that funding is shown only to 2026 which was the originally planned opening date for the Scarborough Subway Extension to STC.
- Waterfront Transit: Work is already underway on 30% design for the Exhibition Loop to Dufferin extension, and this budget line also include money for some design work on Queens Quay East.
- TYSSE (Spadina extension): Substantial costs for this extension remain to be settled and the full amount allocated to the project has not yet been spent.
Not included above are the “below the line” projects which are, since 2019, acknowledged to be much more numerous and expensive than previously thought. These total of $19.7 billion over the next 10 years, and taken out to 2034 this grows to $26.1 billion.
That is not all. Many projects have a life beyond the 15 year window of the CIP, and the cost to completion of the entire capital plan is $49.3 billion. That this does not include the cost of actually building projects like the Waterfront line for which only design work appears here.
The bill facing Toronto is still not fully known, and the amount of money that the governments who fund transit in Toronto must find is truly staggering.
This shows the problem that existed for years in TTC capital planning. Projects that could not be funded were either pushed down “below the line”, or pushed out beyond the 10 year plan’s window, or simply went unacknowledged. Toronto could have a Scarborough Subway Tax, but until quite recently, the idea of any additional levy was politically toxic. Generations of Councils, TTC Boards and TTC management have a lot to answer for here. “Willful ignorance” does not begin to describe the situation.
[The snapshot below is adapted from page 3 of the “Blue Pages” detailed version of the Capital Plan. Click the image to expand in a separate tab. Note that there is an error in the chart whose legend claims that the amounts are in $Millions, but in most columns there are in $Thousands.]
Fleet Planning (Updated)
In a truly astounding move, all the spending for acquisition of new vehicles beyond current commitments has been stripped from the 10 year plan because there is no money to pay for any of them. This includes subway cars for service expansion and renewal, buses (including the very large fleet of “green” battery buses the City hopes to see), and more new streetcars to address latent demand and service expansion.
In their place are various rebuilding programs, the very sort of work the TTC only recently got out of claiming that buying new, reliable vehicles was more cost-effective than rebuilding, especially considering the effect on service quality and quantity. We are right back to the point of trying to breathe life into aging fleets. In the short term, this will not hurt the bus and streetcar fleets too much because half of the bus fleet is quite new, and the entire streetcar fleet has just been replaced. The older half of the bus fleet and the subway fleet that operates on Line 2 Bloor-Danforth are quite another matter.
Although I am sure that the TTC has plans for its fleet renewal and service expansion, having published such documents every year in the past, these are not included at more than a cursory level in the capital plan. Many decisions on what service the TTC will be able to operate hinge on these plans lest Toronto fall back to years when, like clockwork, the Board would ask for more service only to be told “we cannot do it, not enough buses, streetcars, trains”.
The Board needs to understand how these plans fit together, assess the options and advise Council on where spending should be concentrated.
At the December 16 Board meeting, the presentation included a chart of new vehicle needs and associated costs over the coming decade. These include:
- 18 subway trains in 2026-27 to increase capacity on Line 1 Yonge-University at a cost of $28 million each.
- 1,575 buses including a large purchase in 2022 to make up for the gap in 2020 and 2021. This is planned to be a mix of hybrid and battery buses with a transition to all-battery buses in the late 2020s. Given the 12 year cycle for bus replacement, this would lead to a 100% battery bus fleet by 2040. The average unit cost would be over $1.3 million.
- 60 streetcars in 2022-24 at a unit cost of about $7 million. Also included here is $85m for renovation of Hillcrest’s Harvey Shops into a streetcar-only facility and carhouse for (at least) the 512 St. Clair route.
Line 1 Service Plan and Fleet (Updated)
Line 1 is operated by the Toronto Rockets which are relatively young and in no need of replacement, only routine overhauls, within the time frame of the CIP. However, the TTC cannot improve service on Line 1 to the level claimed for full Automatic Train Control (ATC) operation with the existing fleet.
Peak requirements today are for 65 TR trains including 4 “gap trains” in the AM peak, and they own 76 trains giving an operating spare ratio of 17%. In effect, for every 6 trains in service there is a 7th train spare for maintenance. ATC plans call for the scheduled gap between trains to be reduced from 140 seconds to 110 seconds, a 27% increase in trains. This would drive the peak service to about 83 trains, and allowing for spares, a fleet of about 97 trains. Even if the gap trains were eliminated and running times tightened up based on ATC operation, this would still bring the requirement to about 90 trains.
Update: From the presentation at the December 16 meeting, we now know that the TTC plans to buy 16 trains bringing the Line 1 fleet to a total of 92 trains.
On top of this, the TTC will require more trains to operate the Richmond Hill extension, although it is not clear whether these will be paid for by Toronto, York Region or Ontario, or if they are included in TTC fleet and budget planning.
The “blue pages” include an unfunded item for future subway car purchases with an Estimated Final Cost (EFC) of $2.76 billion. Nowhere does the plan state how many trains this represents, nor is it broken down to which line(s) would receive the trains. Significant spending is forecast to occur in 2026-27 ($397 million), but $2.27 billion is beyond 2029. This indicates when the TTC expects it would be taking delivery of most of the trains.
An important part of the overall plan is the provision of a yard at the north end of the Richmond Hill extension because there is no place to store trains this extension will require on the existing line. If the Richmond Hill trains arrive before the line is operational, these vehicles will have no place for acceptance and storage on the system as it exists today.
Line 2 Service Plan and Fleet
Line 2 has an older fleet, the T1 trains, of which the TTC has enough to make up 61 6-car sets although they only need 46 in peak service, a spare ratio of 32.6%. This generous ratio is an historical anomaly from a period when some T1 trains were planned to stay on Lines 1 and 4, but instead were replaced with TR’s and became spare. When the Scarborough Subway Extension was under study, there would have been enough trains to run every second train through from Kennedy to STC without expanding the fleet. Full service would require more trains.
A few years ago, while Andy Byford was still CEO, he announced that a plan for the renewal of Line 2 including new ATC signalling, new trains and a new maintenance yard at Kipling (the former CP Obico Yard) was being developed. This plan never saw the light of day, and it was replaced by a plan to renovate the existing T1 fleet for an additional decade of service. ATC fell off of the table, and the need for a new carhouse at Kipling was pushed into the distant future. This might have “solved” some of the funding crunch by deferring major projects, but at the cost of depending on an aging fleet. We have been down this path before with the streetcar fleet, and a major reason for moving from an 18 to a 12 year lifespan for bus fleet planning was to avoid the comparative unreliability of older buses rebuilt at considerable cost for limited service.
Based on the spending pattern shown in the “blue pages”, significant work on Line 2 ATC conversion would get underway in 2023 but would extend beyond 2029. It is not clear how the TTC would take advantage of ATC on the completed portion of Line 2 (by analogy to the staged cutover of Line 1) if their fleet, the T1s, is incapable of using this technology.
There is also the crucial question of the signalling to be used on the Line 2 extension now planned for 2029-30 according to Metrolinx. It is unthinkable that an organization that (wrongly) ridiculed the TTC’s Relief Line for using “obsolete technology” would install conventional block signals on the extension. However, this means that all trains on Line 2 will have to be ATC capable to provide service beyond Kennedy even if conversion of the rest of Line 2 is not yet completed.
The original Bloor-Danforth line opened in 1966, and this will make its signal system 60 years old in the mid 2020s. How long it can reliably operate is an important question, and we know from experience on Line 1 that there is a limit to how long old technology can be kept running reliably.
If the TTC revisits its plans, schedules ATC conversion to be substantially completed by the time the Scarborough extension opens, and commits to a new ATC capable fleet, this will also require that the new yard at Kipling (including the track connection to the existing subway) be moved up in the spending plans. This is currently shown as an unfunded project totalling $2.23 billion substantially completed by 2028.
The time has come for the TTC to blow the dust off of the Line 2 Renewal Plan, now going on four years old, and decide the priority for funding this work. Toronto cannot risk finding out that rebuilding the T1’s was a “nice idea at the time” to reduce spending and borrowing pressure, only to have Line 2 collapse from unreliable trains and signals over the coming decade.
Line 4 Service Plan and Fleet
Line 4 operates with 4-car TR trains that are ATC capable. Conversion of this line is included in the budget for the Line 2 project. Previously published fleet plans show no increase in the level of service on Line 4 for the next decade.
The CIP clearly states the need for up to 100 more streetcars, 60 as soon as possible and a further 40 within the scope of the plan. These are needed to restore rail operation on the full network and to provide for ridership growth. The plan is clear that there is latent demand on the streetcar network that is not being served today, and that a larger fleet is needed just to catch up, let alone to lead growth.
The plan includes a proposal to recycle Harvey Shops at Hillcrest (the original TTC streetcar shops from the 1920s) into a fourth streetcar-only carhouse to accommodate fleet growth. Routes that are close to Hillcrest would shift to that site thereby saving considerably in dead head time to and from service. There is a related plan to build a new bus major repair facility.
Harvey Shops cannot serve the Flexity fleet because it is physically constrained to handling cars of the old 50-foot standard length and buses.
An added fleet consideration will be any new line built along the Waterfront, although that project has been moribund for lack of a sponsor and the sexy attraction of new subways. Some design work on the line continues, however, including the connection west to Dufferin Loop, a new GO/TTC transit hub, and the eastern extension from Bay to at least Parliament.
Updated December 17, 2019: The title of this item in the budget summary has been corrected to “Purchase Conventional Buses” (as opposed to Wheel-Trans buses which appear on a separate line).
The Blue Pages include an item for “Purchase Conventional Buses” at a total cost of $3.5 billion beginning in 2022 and continuing beyond 2029. Originally, the title explicitly referred to 496 diesel buses, but that was only one line within a group of items collected under this heading and the project has wound down with the policy shift to buy only hybrid diesel-electric and battery-electric buses.
The cost of a 10m diesel bus is about $700k, while hybrids are over $900k. For battery buses, the price is $1.2m, but there is an additional premium of $115k/bus because charging infrastructure must be retrofitted to garages. Eventually the price of a battery bus is expected to drop, but the conversion of garages will continue for about a decade as the TTC works through its system.
TTC management has not produced an overall plan showing the capital and operating cost projections for full migration of the fleet away from diesel power. Some of this is not yet known such as the cost, in quantity, of acquiring a new fleet, the reliability of the new buses and their life cycle cost, plus the facilities changes needed to shift to electric power. What might seem comparatively simple for a 60-bus trial (which has only barely started while Toronto awaits delivery of its vehicles) becomes far more complex for a multi-year migration from one propulsion technology to another.
All that said, there should be order-of-magnitude costs and an estimate of the room that must be built into capital plans to implement this change.
Other Capital Budget Details
The “Blue Books” which contain the detailed project descriptions for the Capital Budget are generally not available until after the Board approves the budget. When this information surfaces, I will be able to report about the many components of the budget that exist only at a summary level in the documents available.
Postscript: Acceleration of Approvals for Priority Projects
The expansion of the City Building Fund proposed by Mayor Tory will provide additional money for transit and housing projects, but the allocation to each area has not yet been determined. The taxes to support this will not be in place until after Council approval of the budget in February 2020. The TTC’s Capital Plan does not reflect any new money from this fund and therefore its priorities are based on the money available when the budget was prepared.
Chief among these is the shift of all new vehicle purchases, other than contracts now nearing completion, to “unfunded” status.
At the December 16 Board meeting, a motion prepared by Chair Jaye Robinson (who was absent for medical reasons) was presented on her behalf by Commissioner Brad Bradford, and adopted unanimously:
The TTC Board direct the Chief Executive Officer to report back with an accelerated vehicle procurement plan recommending key investment priorities for subway, bus, and streetcar at the January 27, 2020 TTC Board meeting.
A related motion by Commissioner Shelley Carroll provides the procedure mechanism for the Board to approve the capital plan subject to possible amendment at the January meeting so that a revised version with key projects for the City Building Fund could be included in the final version of the City’s budget in February.
Approve the staff recommended TTC 2020-2029 Base Capital Budget & Plan of $7.4 billion as outlined in Appendix A of this report, subject to the Board’s decision as it relates to the requested report at the January 27, 2020 Board meeting on accelerated vehicle procurement.
These motions advance a process which originally would have held any approval for new vehicle purchase commitment until after the 2021 budget was approved putting any contracts at least in mid-2021 if not later. This ties into concern for the future viability of Bombardier’s Thunder Bay plant and the advantage of ordering equipment as an extension to existing contracts rather than as completely new procurements.
The spending plan for capital is driven by the City’s debt planning, and project timing can be skewed to fit the calendar of funding streams from various governments. The need for capital investment vastly exceeds available funding even with the major subway projects now fully transferred to Ontario. In the chart below, the annual City funding drops from 2020-29 due to borrowing constraints in their budget as it now exists. Provincial and Federal funding is largely from the municipal share of gas tax revenue.
The spending profile 2020 plan shifts the timing of some spending, and adds in $1.5 billion for the Yonge-Bloor expansion project. This is now funded by a one third share from each level of government.
The change in the target for spending can be seen in the following two charts which break out infrastructure and vehicles as separate streams. Infrastructure increases primarily because of the Yonge-Bloor project but even without this is about $250 million higher than in the 2019-28 version.
Note that Infrastructure goes up by $955 million even though the Yonge-Bloor project will cost $1.508 billion. This difference is offset by the large drop, $801 million, in planned spending on vehicles. In effect, the Yonge-Bloor and other Infrastructure projects were cannibalizing the vehicle budget.