Will the TTC See Any Federal Transit Subsidies?

On February 10, 2021, the federal government announced a $14.9 billion plan for transit infrastructure over the period 2021-2028. Spending would start at a relatively low level with $5.9 billion spread over the first five years, but would then ramp up to $3 billion annually in what is supposed to be a permanent program.

The ink was hardly dry on the announcement when there were great huzzahs! from various circles that finally these was going to be federal money in transit. Suspicious soul that I am, I went looking to the backgrounder with more details, but came up dry.

For as long as anyone can remember, there has been a huge problem with the difference between announcements, “commitments” and actual spending. Following the money can be like a game of Three-card Monte where you’re never sure if there was a Queen on the table to begin with. The gullible marks believe that they can follow the Queen and are astounded when she is not there.

Before Toronto starts to spend billions, it is important to understand two things:

  • This is a national program. Assuming that the pot is divided based on population, Ontario will get about 40% of this or $6.36 billion over eight years. Toronto proper (as opposed to the GTA or the Census Metropolitan Area) is about 20% of Ontario. This leaves the City with about $1.27 billion. This would build a few subway stations at current prices.
  • The feds usually defer to the provinces in allocating funding, and so Ontario would control which projects were favoured. Queen’s Park could choose to spend all of Toronto’s share on “Ontario” projects built within the City, notably the Ontario Line and the Scarborough Subway Extension.

Rummaging around in Infrastructure Canada’s website, I came upon an interesting pie chart for an earlier program, the Investing in Canada Infrastructure Program, or ICIP for short. Although about $6.8 billion is earmarked for Ontario, $6.12 billion is unallocated. The basic problem is that the feds cannot approve spending if the province does not make an application.

A not-uncommon problem with funds like this is that they don’t really exist until something is approved, and if they are not spoken for by a drop-dead date (usually the end of a fiscal year), the funding evaporates. Note that according to this chart the cutoff date for intake of projects was in October 2019, and only 16 applications with a value of $651 million are awaiting review.

This led me to download the project list to see where the approved money went. Here is a subset of all projects with an approved value of $1 million or more in descending order. The list includes all projects under the five headings above although the lion’s share of the funding is in the transit group. It also includes two projects funded through the Infrastructure Bank (which is a separate source) for completeness.

The largest allocation is to the GO Transit ON-Corr (formerly RER) program, followed by the Ottawa LRT Stage 2. These are the only two items above $1 billion.

Toronto rapid transit projects are not well represented on this list. The only substantial amount ($333 million) is allocated to the Finch West LRT. Smaller amounts for design work are allocated to the Relief Line, SmartTrack, Eglinton West and Eglinton East. There is a lot of money for GO expansion.

I wrote to Infrastructure Canada asking for clarification of the relationship between various programs and to determine whether any of them overlapped such as funding this week’s announcement with unspent money from an earlier program.

I asked:

  1. Is any of the $14.9 billion already earmarked for previously announced projects such as the Scarborough Subway?
  2. What is the status of the unallocated $6.12 b in the ICIP? Is it still available, over and above the $14.9 b, to fund projects?
  3. Does this announcement have any effect on the federal gas tax which flows to provinces now in support of transit projects?

In reply to the first question, Infrastructure Canada replied (in an email of February 12, 2021) that the $15.9 billion is all new money.

1. The announcement for a permanent public transit funding made on February 10, 2021 provides $14.9 billion for public transit projects over eight years, which includes permanent funding of $3 billion per year for Canadian communities beginning in 2026-27. This funding is separate from funding currently available under integrated bilateral agreements in place with provinces and territories, and will complement the efforts of the Canada Infrastructure Bank.  

In the first five years, $5.9 billion will be made available starting in 2021 to support the near-term recovery of Canadian communities by:

Building major public transit projects and provides dedicated planning funding to accelerate future major projects.

Supporting the deployment of zero-emission vehicles and related infrastructure, complementing the work of the Canada Infrastructure Bank.

Meeting the growing demand for active transportation projects, including by building walkways and paths for cycling, walking, scooters, e-bikes, and wheelchairs.

Helping Canadians living in rural and remote areas travel to and from work more easily and access essential services, by working with rural, remote, and Indigenous communities to identify and create transit solutions that meet their needs.

This is new funding for public transit. Further details on the near-term funding announced on February 10, will be shared in the coming months.

The funding announced also delivers on the government’s commitment to provide $3 billion annually in permanent support for public transit. This funding will become available in 2026.

Over the coming months, the government will seek to facilitate partnerships between all orders of government, Indigenous communities, transit agencies, and other stakeholders to develop an approach to permanent public transit funding that offers the greatest benefits to Canadians.

With respect to the unallocated ICIP funds:

2. Under the existing Investing in Canada Infrastructure Program, which is delivered through bilateral agreements, provinces and territories are responsible for submitting their infrastructure funding priorities to the federal government for funding consideration and approvals.

The unallocated funding under the Investing in Canada Infrastructure Program continues to remain available to Ontario communities for their funding priorities.

Infrastructure Canada continues to work with the Government of Ontario on their priority transit projects.

As for the gas tax allocated to provinces:

3. The recent announcement for permanent public transit funding has no bearing on the federal Gas Tax Fund or communities’ allocations under the Fund.

As part of COVID-19 response efforts, the Government of Canada delivered its full annual federal Gas Tax Fund allocation early this year to provide $2.2 billion quickly to local communities so they have the resources available to start projects now that will create jobs and help revive local economies.

It is good to know that funding from other sources is not affected, but equally important to note that Ontario is still sitting on (in the sense that the money is not yet applied for) $6.12 billion in ICIP, an amount close to all they will received under this week’s announcement over the next eight years.

Infrastructure Canada concluded by saying:

Infrastructure plays a vital role in promoting economic growth, creating jobs and improving our quality of life. This is why we continue to work closely with the Province and ask that Ontario prioritize its projects and submit complete funding applications in a timely manner, so that we can get investment funds moving and get Ontarians working this construction season.

Hint. Hint. Ontario. Apply for this money so that we can actually get people to work.

There is a basic problem with stimulus programs because the desire is to spend as soon as possible to get the effect of new money flowing to jobs. The big projects like new subway lines are still in the design stage, and much construction will not begin for several years. Indeed, Toronto once faced a problem where it could not spend all of its allocated stimulus funding, and the TTC soaked up this money by making a huge purchase of buses. This sort of ad hoc spending does not establish priorities based on need, but simply on the speed at which cash can be shovelled out the door.

There may be $6.12 billion looking for a home, but spending it soon will be a challenge.

The bottom line in all of this is that the federal announcement’s heart is in the right place, but the money that will come to Toronto and the GTHA is small compared to our needs. Every bit helps, but the danger now is that with an announced program, the federal taps will be turned off.

10 thoughts on “Will the TTC See Any Federal Transit Subsidies?

  1. I don’t trust Doug Ford. He may redirect the provincial portions towards the building of highways (IE. 413?). Needs to be watched very, very closely. All fine print has to be examined and interpreted from the legalese.

    Liked by 1 person

  2. Very good digging, Steve! I knew you’d do a piece on this.

    Steve writes:

    Suspicious soul that I am, I went looking to the backgrounder with more details, but came up dry.

    You’re a much more thorough researcher than I, needless to say, but I dug on it too, and came up empty. That you did too means I probably didn’t miss anything. It just wasn’t there.

    What puzzles me is that the Infrastructure Bank (InfraBank) mandate appears to be misplaced for this recent announcement.

    Here’s their mandate, at least in part:

    The Bank will use federal support to attract private sector and institutional investment to new revenue-generating infrastructure projects that are in the public interest. By leveraging the capital and expertise of the private sector, the Bank will help public dollars go further and keep our grant dollars for those projects that are more appropriate for traditional grant funding mechanisms.

    So why isn’t this announced program being channel through regular infrastructure programs?

    Full disclosure: I’ve yet to pore over the enabling Act to see if all the published ‘purposes’ fit with what all gov’t info releases that align with the quote above. Last time I did check, and as a Globe and Mail story by Bill Curry highlighted, the Bank’s mandate was being interpreted to allow it to be a (gist) ‘source of consultation and advice’ on building infrastructure developments and financing them.

    One scenario of many I can think of to fit the announcement and the mandate, but not being publicized, is the *expectation* by the Feds that the province fulfill the finding of private partners to ‘make the deal whole’ to allow the Bank to invest the 1/4 to 1/5 ‘seed’ money of a project.

    Or are the provinces/cities the de-facto ‘private partners’ themselves? Let’s take that one step further, as the Feds have done in a number of instances of Infra Investment: (and Steve hints at this)

    Is this a stealth attempt to *go around* the province to ‘invest’ directly in cities or regions? This is being done with housing projects.

    Very curious…

    Steve: I think that the distinction is that these are grants, not “investments” with any hope of return, and the program responds to the big city mayors’ call for more transit funding. A drop in the bucket.

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  3. Supplementary to previous post, and searching to reference my claims on the InfraBank:

    Globe and Mail
    BILL CURRY
    OTTAWA
    PUBLISHED MAY 18, 2020

    With provincial and municipal governments facing major budget pressures because of the pandemic, that could mean a greater role for the infrastructure bank and its effort to attract large outside investors.
    […]
    The mandate of the bank is to operate “at arm’s-length from government” in a way that encourages large institutional investors such as pension funds to invest in Canadian infrastructure projects that are in the public interest. The premise is that the bank’s involvement could make the difference in whether large investors decide to support a project.

    I’m still searching…there’s something huge missing in the latest announcement as per intent, structure and application. Not to mention “private investment”.

    Steve: If you look at recent pronouncments from Infrastructure Ontario and Metrolinx, you will see that the bloom of P3s is definitely fading and they are (a) finding it difficult to get a big consortium to “invest” in their megaprojects, let alone accept risk transfer and (b) are now thinking that multiple smaller contracts might be better. Political posturing meets the real world of companies hoping to stay in business.

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  4. My apologies, I misread the announcement, and a number of media stories aren’t delineating the separation of the Infrastructure Bank from Infrastructure Canada with this announcement.

    On re-reading Steve’s post, and reading through the announcement, this point is made by both:

    …complementing the work of the Canada Infrastructure Bank.

    Steve’s point on lack of private investment enthusiasm for the CIB model at this time is well-taken.

    However, the ‘confusion’ of IC and the CIB roles might be purposeful as it’s being presented to the public. I suspect we’ll be hearing more on that point, but searching through the CIB’s mandates last night, I did discover this:

    To accelerate the delivery of projects in which the CIB intends to invest, it will also allocate $500 million for project development and early construction works.

    That appears to be a ‘grant’ as per Steve’s comment above:

    I think that the distinction is that these are grants, not “investments” with any hope of return, and the program responds to the big city mayors’ call for more transit funding. A drop in the bucket.

    And the more I read of the CIB’s new “Growth Plan”, the absence of reference to ‘leveraging private investment’ is profound.

    And here’s the “complement” reference again as used in the IC announcement, but from the CIB to IC this time:

    As the Government undertakes Canada’s first ever national infrastructure assessment, the CIB will provide advisory services to help identify needs in Canada’s built environment, particularly with respect to the role of the private sector and investment community.

    This work will complement the Government of Canada’s overall efforts on sustainable infrastructure and building back better.

    Minister McKenna sets new priorities for the Canada Infrastructure Bank

    NEWS PROVIDED BY
    Infrastructure Canada
    Feb 03, 2021, 13:31 ET

    Of the “$35B” the CIB had set aside, much of it unallocated, one has to wonder if Infrastructure Canada now has its hand in the CIB’s funding?

    Steve: I have to return to that word “unallocated”. Money that is not allocated does not have to actually exist. Indeed, it would make no sense to have billions stuffed under a mattress somewhere neither earning interest nor providing any economic stimulus (which has its own payback through other streams). How much are we paying that “bank” and its presumably well-rewarded mandarins to lounge on that pile of cash?

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  5. Steve writes:

    I have to return to that word “unallocated”. Money that is not allocated does not have to actually exist. Indeed, it would make no sense to have billions stuffed under a mattress somewhere neither earning interest nor providing any economic stimulus (which has its own payback through other streams). How much are we paying that “bank” and its presumably well-rewarded mandarins to lounge on that pile of cash?

    Indeed! I gagged using that word, as I was trying to be careful not to write something that would be naive in accounting/budgetary terms. So I chose that word to be vague. What I’m not aware of is whether that “$35B” is in a dedicated, walled-off account, or is just virtual assigned amount from general coffers.

    From Infrastructure Canada:

    The Canada Infrastructure Bank will invest $35 billion from the federal government into infrastructure projects.

    (Date modified: 2021-02-03)

    I admit to being late to the ‘what’s behind the curtain’ story. Macleans has a scorcher from Oct 1, last year.

    And a few days later, a Globe Editorial:

    The other hurdle was the risk of government interference. The federal cabinet has final say over the CIB’s projects, which leaves investors vulnerable to four-year election cycles and partisan agendas.

    The CIB was seen as possibly being useful for some federal infrastructure builds, but was considered a risk for projects involving provincial and municipal governments – which oversee most of Canada’s infrastructure – because of the added layer of political complexity and bureaucracy it would bring to the table.

    Ouch! Add to that the unmistakable direction the P3 model as espoused by the CIB and Ontario (see Steve’s excellent link from above) and the demise of the CIB is all but officially announced.

    And now Infrastructure Canada has become the Siamese infra-twin to CIB, and assimilation is happening in all but name … where does that “$35B” (minus a few) now ‘reside’? And could that be the ‘allocated’ fund that’s now trickling out through IC?

    It’s an accounting question as much as political. Any clarity anyone can add most appreciated.

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  6. How do I get the list of projects for BC? Do you have to go thru all the projects in Canada?

    Steve: Go to this page and select the province of your choice for the list. For the overview, go here.

    If you download the list, it is easy to sort and exclude the parts you don’t want with Excel.

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  7. And lurking behind all of this is Michael Sabia, a well-known Conservative who earned his stripes in the office of Mulroney’s finance minister, Michael Wilson, and then went with Paul Tellier to CN and next to Bell Canada. He’s now ping-ponged from the Caisse de Depot (where he snagged over $1 billion from the feds for the REM fiasco that just keeps growing) to the Canada Infrastructure Bank (where more money flowed to the REM and other dubious projects involving automated light rail technology) to Trudeau’s deputy minister of finance. One curious element in all this is the Caisse’s large ownership share in Bombardier, which has been converted into a stake in Alstom.

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  8. Does this money need to go towards capital expenses, or can it go to operational expenses?

    If it’s only the latter? If it’s only the latter and we’re stuck needing to spend money quickly and don’t have any big projects ready, what “faster” improvements might be good options? BRT type expansions are the only example I can think of.

    What about projects that are unfunded and sitting shelved like Waterfront LRT, EELRT, and (not that I’m a fan) Sheppard Subway Extension?

    Steve: Only capital, not operating. The problem with operating from the fed’s point of view is that it would create an assumption of future subsidies, and a local crisis whenever it was withdrawn. There can be some indirect subsidy depending on how a city structures its financing. For example, Toronto makes a “capital from current” contribution to capital programs as part of its operating budget. This could be redirected to operating. In fact Toronto is doing this in part to fund its covid shortfall. However the flip side is that provincial and federal governments tend to want to see that their contribution is net new money, not simply a way to divert spending to another envelope or, even worse, to reduce taxes.

    There are lots of unfunded projects, but they are not shovel-ready and are only now in the design phase. If the desire is to stimulate employment, we could keep many in the engineering and planning professions busy, but on-site workers, not so much.

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  9. Hi Steve. Thanks for all the detailed articles about our public transportation.

    I work in the energy industry and just got my PMP (Project Management Professional) designation in Nov 2020. I have always been fascinated with public transportation. Is there anything I can help you with? May be research?

    Thanks and keep up the great work.

    Steve: Thanks for reading! As to assistance, my preference for many years has been to be my own voice. That way it is not compromised, nor is there the messy business of co-ordination and consensus. Working together comes in through citizens’ advocacy groups. Find a cause you believe in and a group you can support. After a working life where a lot of time was spent in management, the last thing I want now is “staff”. 😉

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  10. If you want to spend it quickly, you could finish funding the wheelchair access modifications. The only reason these aren’t breaking ground is lack of funding, since what’s needed to be done has been known since AODA passed in 2005.

    Doubt the disturbed Premier will even consider this, of course.

    Steve: Actually all of the AODA stuff is funded. That was some budget shenanigans by the City and TTC attempting to show how lack of subsidy was undermining accessibility. That ploy didn’t work, and they put the money back. The challenge now is that remaining stations are complex and the crunch is on engineering and construction time. Also Warden and Islington depend on plans for redevelopment, or at least have to be done in a way that leaves a footprint around which new buildings can grow.

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