Finance

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How Much Will $15-billion Buy Us? (Updated)

Updated July 7, 2014 at 9:10am: The table of project costs has been corrected to place some BRT project costs in the first wave, and to include their “next wave” spending that was omitted in error in the original version. Thanks to Divyesh Mistry for catching these errors.

Ontario’s budget will be re-introduced on July 14, and it is expected to include $15-billion for transit projects in the GTHA over the next ten years. What, exactly can we expect to see from this spending? Is there room for additional projects? Will projects once proposed by Queen’s Park or Metrolinx fall off of the table?

From the budget website’s description of the infrastructure plans:

Proceeds from the dedicated fund for the GTHA would be invested exclusively in public transit priorities that address congestion and improve mobility throughout the region. Proceeds would be used to build priority projects included in Metrolinx’s regional transportation plan, The Big Move, and for other potential projects that support economic development and improve mobility, such as the East Bayfront Light Rail Transit (LRT) project on Toronto’s waterfront. This would build on the first wave of projects, such as the Eglinton Crosstown LRT line and Union Pearson Express, and the Bloor-Danforth subway extension in Scarborough.

The government recognizes continued expansion towards two-way, all-day GO Transit rail service as a priority. GO Transit improvements on all corridors would include additional track, grade separations, improved signalling, station improvements and additional fleet, which are all building blocks towards two-way, all-day service. In addition, analysis is underway on a proposal to electrify the GO rail system to deliver service at intervals as frequent as 15 minutes.

The Big Move identifies additional GO service as critical to developing the regional rapid transit network, and all-day, two-way express rail service as part of the solution.

The Province has asked Metrolinx to begin work immediately to examine opportunities to move GO service towards a regional express rail, providing fast and frequent electrified service on all corridors at intervals as frequent as 15 minutes. This would represent a game-changer in how people move about the region, and enhance ridership and efficiency on GO Transit and other projects that connect to the network as well.

The Province will work with Metrolinx and municipalities on how best to prioritize transit investments through the use of rigorous business-case analyses. These analyses will help prioritize Next Wave projects that could be accommodated within the Province’s dedicated fund for the GTHA and provide the best value for Ontarians.

Beyond the existing GO network, priority projects within the GTHA would be drawn from the Next Wave of Metrolinx projects included in The Big Move.

Cost estimates for every project are not publicly available, but we can get a good sense of the financial situation by looking at the snapshots for major projects listed on the Metrolinx site.

20140702_BigMove_ProjectCostSummary

We have heard many times how Ontario has committed $16b to transit for the GTHA, and the “First Wave” contains the projects that money will fund. Published project cost estimates total $15.172b of which $12.766b comes from Queen’s Park.

The most important point about this list is that over half of the money has not yet been spent, and some projects have not even gone beyond the stages of preliminary design and Transit Project Assessment.

That unspent amount represents future spending that must be funded from somewhere, but there has been no discussion of exactly where or how this will be done beyond an assumption that it will come from general revenues.

Notable by its absence from the list is Presto for which a cost estimate has not been published. This project came in for criticism by the Provincial Auditor in 2012.

When we come to the Next Wave, the total estimated cost is $22.6-billion, although two major projects – the Relief Line and the Richmond Hill extension – will at best be started, but certainly not completed during the 10-year window for the next $15b commitment.

The Next Wave includes some electrification projects, but certainly not the complete GO network, nor a system-wide rollout of 15-minute service, a scheme well beyond Metrolinx ambitions when the Next Wave was announced. Note how the budget language refers “expansion towards” and “building blocks” that will lead to service “as frequent as 15 minutes”. This is not the same as quarter-hourly service on all lines, all day.

Regardless of what we actually get, the current “commitment”, one that was discussed quite clearly at the recent Metrolinx Board meeting, was to provide just that: a full buildout of an electrified frequent service network within ten years. This will require substantial additions to spending plans, and will inevitably elbow aside other projects.

Queen’s Park and Metrolinx owe us, the voters and the would-be riders on their network, a clear statement of just what they hope to build with the funds earmarked for the GTHA.

I wrote to Metrolinx seeking clarification on some issues. Here are my questions and their replies:

1. Of the First Wave projects, is the $16b all money that is separate from whatever might come from the IS (or whatever equivalent might be in the budget)?

Yes, the $16 billion worth of current transit projects referenced in our communications is separate and apart from recent provincial announcements.

2. Can you reconcile the $14.7b number with the $16b overall claim for the first wave, notably the missing amount for Presto?

The $16 billion figure refers to an estimated investment in capital projects completed or underway since 2008. Projects included in the $16 billion figure are primarily construction projects with shovels in the ground and as such, PRESTO, Smart Commute and other non-construction programs were not included. While many of the 200 construction projects completed or underway are part of the $16 billion figure, our website only features fact sheets for major projects. The figure also includes many supporting GO Transit projects, such as platform extensions and station upgrades, which play a transformative role in forming a solid foundation upon which to expand GO service across the GTHA.

3. For the Next Wave projects, how much of the total spend is expected to be within the 10-year window of the budget’s $29b?

A significant portion of the anticipated provincial spending will be spent within the next 10 years. Environmental assessments, planning work and an examination of operational needs will more precisely determine the timing of cashflow. We will be reporting our anticipated timelines for new projects at our September board meeting.

4. For financial planning, is there any intent that Metrolinx would produce a project-level projection that will show capital requirements and the degree to which funding has been committed (and from what pool)?

This is part of our 10-year financial planning process, which represents confidential advice to the government and is not available to the public.

This statement confirms that the two pools of funding (first and next waves) are actually separate, and important distinction especially if future budgets attempt to pay for “first wave” work out of revenues nominally earmarked for the “next wave”. That next wave will include some money from the “outside of GTHA” pool of $13.9b (portions of the GO network beyond the Metrolinx planning area), but the lion’s share of that funding should go to other parts of Ontario.

In general, the budget page slips back and forth between projects that are in the first and next wave pools, and projects that have been independently funded such as the Waterloo and Ottawa LRTs and the provincial share of the Toronto streetcar project. Figuring out just how much is to be spent on transit, when and from which funding pool, can be quite a challenge.

The absence of a consolidated list even for Metrolinx – something they consider as confidential information for the government – is troubling. By contrast, the 10-year capital project list including annual cash flows and funding sources is part of the public record for the TTC and informs much debate about the budget shortfall and the growing backlog of work.

Missing from the proposed budget is any mention of the 25% municipal share in the “Investment Strategy” proposed by Metrolinx. Queen’s Park seems content to repeat over and over the support via gas tax revenue:

Ontario provides significant ongoing funding for municipal transit systems across the province by sharing two cents per litre of provincial gas tax revenues. Since 2004, the Province has committed more than $2.7 billion in gas tax funding. This program is now a guaranteed source of funding for eligible municipalities to improve and expand their transit services.

It is now 2014, and that $2.7b doesn’t amount to much on an annual basis spread over the entire province for a decade. Moreover, the revenue stream is not indexed, and that two cents is worth less and less each year with growth, if any, coming from increased consumption that is no longer a sure thing.

Transit infrastructure will be a centrepiece in the coming budget, one that will almost certainly pass the now-majority Liberal legislature. The level of support is worth celebrating, but the party should be restrained, not wild jubilation that Santa Claus has arrived with an overflowing bag of goodies.

$15-billion sounds like a big number, but it is only $1.5b per year over 10 years, still less than the $2b/year spend proposed in the original 2008 Big Move. Metrolinx always quotes projects for a base year with inflation to come, but it is not clear whether the budget will do the same. That $15b could be a hard number that will buy considerably less than the uninflated prices in the Metrolinx catalog.

Queen’s Park owes us many answers on transit funding and financing, not least of which is transparency in their plans rather than assertions of confidentiality.

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Metrolinx Board Meeting June 26, 2014 (Corrected)

Correction July 1, 2014: In the original version of this article, I attributed a comment to Metrolinx Chair Rob Prichard regarding the sharing of information between bidders on rapid transit projects, and expresssed my surprise that this did not match the process I was familiar with from my own public sector experience. In fact, the remark was with regard to sharing information about questions to Metrolinx from candidates in the municipal election.

The procurement process does include sharing of information via addenda to Requests for Information issued to all bidders as mentioned in the Rapid Transit Quarterly Report. I regret this error and frankly cannot understand how I scrambled two very different topics together.

However, the process for dealing with candidate questions at Metrolinx is completely different from that followed by the City of Toronto. Where Metrolinx preserves confidentiality about questions a campaign might ask, the City posts responses to any query online so that no candidate has the advantage of professional advice not available to others. The basic premise is that the staff works for Council, not for an individual member or candidate.

As a public agency, Metrolinx should be providing information to everyone. The discussion (which starts at about 21:10 of the meeting video) emphasizes that Metrolinx has no part in the election, and yet the confidentiality of information exchanges could offer an advantage to a campaign that is unknown to other candidates.

Original Article  from June 29, 2014:

The Metrolinx Board met on Thursday, June 26 in a quite celebratory air. With the provincial election out of the way and the return of a pro-transit Liberal majority to Queen’s Park, Metrolinx sees a rosy future for transit expansion. They wasted no time telling anyone who would listen about the great work now at hand.

Among the items of interest were reports on:

Another burning question about the recently announced funding is just how much money is on the table, especially how much is new money as opposed to funds earmarked for specific projects like RER or previously announced/expected for projects in the “Next Wave” of Metrolinx undertakings. It didn’t take the assembled media long to notice that the GO RER scheme would gobble up much of the $15b earmarked for transit in the GTHA. I will return to this in a separate article.

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TTC Board Meeting June 24, 2014

The TTC Board met a light agenda and little inclination to debate. As events at City Hall wind down toward the October election, there are no major decisions, and Commissioners in the Karen Stintz camp have succeeded in blocking any significant policy discussions until 2015. This leaves the Commission and Council going into the election and next year’s budget process without background information that could be useful in quick implementation of a policy shift in the post-Ford era at City Hall.

If it is any consolation, Stintz currently is polling at 3%, below the “don’t know” category.

Items of interest on the agenda include:

Details on the debate and actions taken, if any, follow the break.
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TTC Service Changes for June 22, 2014 (Update 2)

Service changes to be implemented on June 22 include a large number of seasonal cutbacks in service on a par with what was done in 2013. There is an unusually large amount of construction underway around the city and this is reflected both in adjusted schedules and in a much higher than budgeted number of hours for construction-related service. This activity is one of the constraints on service growth for 2014.

Updated June 18, 2014: With the reopening of Cherry Street south of Mill Street, the 172 Cherry bus will resume its normal routing through the Distillery District (via Parliament, Mill and Cherry) on Saturday, June 21.

29 Dufferin will be formally scheduled as an articulated bus route on weekdays. Although there will be fewer vehicles than at present, the reduction is smaller than the relative size of the vehicles giving an increase in route capacity. This may be offset by service reliability as happened already on 7 Bathurst.

The Queen and King streetcar routes will divert around track construction at Broadview & Queen from June 30 to July 25.

501 Queen cars which are now diverting both ways via Broadview, Gerrard and Coxwell will alter their route to divert via Parliament, Gerrard and Coxwell.

504 King cars now diverting both ways around the Don Bridge constuction via Parliament and Queen will alter their route to divert via Parliament and Dundas.

501/502 bus replacement service on Queen will divert both ways via Pape, Dundas and River. As with the diversion service already in operation for the Queen & Leslie track work, these buses will loop downtown via Church, Richmond and Victoria. There will be no 503 Kingston Road Tripper service to York & Wellington.

2014.06.22_Service_Changes (Updated June 13, 2014)

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TTC Board Meeting of May 28, 2014

I have been remiss in completing my coverage of the TTC Board meeting on May 28 as other issues and activities have drawn my attention.

The big issue was the $47-million so-called surplus in the 2013 operating results which I addressed in an earlier article. Let’s just say it was one of the less well-informed debates I have seen in my years watching the TTC.

Another issue of note was the matter of eliminating stops on the streetcar system, an issue also covered elsewhere on this site.

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What Should We Do With $47-million?

In a breathtaking display of political opportunism, mayoral candidate (and former TTC Chair) Karen Stintz attempted to highjack an unexpected “surplus” from 2013 transit operations to pay for a fare freeze in 2015. This move was not derailed, but at least shunted into a siding by an alternative proposal from the current Chair Maria Augimeri. How did we get from a TTC that is desperate to make ends meet to one that can glibly talk about avoiding a fare increase, conveniently in the run-up to an election?

The May 28 TTC meeting agenda included the audited financial statements for 2013 and a report on the unexpected drop in the subsidy requirement for last year’s operations.

The subsidy requirement was much lower than the budget projection because of one-time changes that benefited the TTC:

  • liabilities for Workplace Safety & Insurance Benefits and the Long Term Disability plan were reduced by $6.3-million;
  • various expenses including depreciation, allocation of costs between the operating and capital budgets, accident claims payouts and retroactive pay were below budget by about $18m;
  • variations in non-labour costs netted out to a saving of $16m relative to budget.

Add in the previously reported $7.3m surplus, and collectively, the subsidy needed by the conventional TTC system was $46m below budget, and Wheel Trans was down $1.7m.

Council’s policy dictates that when the TTC has a “surplus” (i.e. the subsidy requirement comes in lower than expected), the money stays with the city and is allocated mainly to capital accounts, including the large backlog of funding needed for TTC’s 10-year capital program. For 2013, the city’s current plans are to allocate any surplus:

  • 75% to the shortfall in TTC capital funding, and
  • 25% to fund TTC post-retirement benefits and and accident claims long-term liabilities.

(Although the TTC budgets for long-term liabilities in the year they are incurred, the city does not pay out the money through subsidies until the money is actually needed by the TTC. This keeps the working capital in city hands, and the future payouts are funded, if possible, from “found money” like the TTC “surplus” rather than from current revenues. From the TTC’s point of view, they are an “account receivable”.)

Stintz proposed that the TTC ask Council to approve that the money would stay in TTC hands and be used to avoid a fare increase in 2015. Riders have put up with a lot with service problems, and they deserve a reward, indeed they should get some of “their” money back, she argued.

Not only is this an unvarnished election ploy, but it runs directly contrary to positions Stintz has taken at the TTC and at Council.

  • The money is a “one time” windfall from better-than-expected conditions, and there is no guarantee that the TTC will perform similarly in 2014 and beyond. Indeed they are already short thanks to lower ridership and the brutal winter just past.
  • In both public and private sector finance the unfunded liabilities for future unavoidable costs such as pensions, benefits, and accident claims are a serious problem, and it is city policy to reduce its exposure to them.
  • Council debates over budgets repeatedly focus on the difference between “sustainable” and “unsustainable” funding practices. If City revenue is up, and this can reasonably be expected to continue in future years, then this is “sustainable”. The same is true for expense reductions that are permanent, not one-time blips. As part of “team Ford”, Stintz was quite insistent on the need for the City to avoid “unsustainable” funding strategies.
  • Stintz herself pushed and defended cuts to service quality both in hours of service and in crowding standards. These changes also led to the removal of a 150-bus order and the deferal of a new garage project in the Capital Budget. All of this was “for the greater good” of the transit system according to Stintz. Now, rather than improving service, she would rather hobble TTC’s revenue stream with a fare freeze.
  • Chair Augimeri attempted to get a motion through the TTC Board in April 2014 asking staff to report on service improvements to the June meeting with a view to including these proposals in the 2015 budget process. This motion was sidetracked by the Stintz faction on the Board who viewed it as an attempt to support her rival Olivia Chow. Staff will still do the work, but the due date is now conveniently beyond the election. Suddenly, with $47m in her pocket, Stintz wants a fare freeze.

During the debate, the question of creating a stabilization fund came up — “profits” from one year would go into a reserve to offset “losses” in another. This is a bit of accounting trickery because, of course, there is no “profit”, only a reduced subsidy requirement.

Nobody at the meeting, including the TTC’s own finance management, bothered to mention that such a fund already exists. It is listed in Note 17 to the financial statements on page 37 (page 41 of the PDF), and the account held $24.666m at yearend 2013. Oddly enough, during the 2014 budget debates, nobody talked about using this to lower fares or improve service for the obvious reason that the reserve is intended to deal with one-time events, and cannot provide “sustainable” funding for anything.

One member of the Board, Al Heisey, asked why there has been no debate on priorities for any spending of this type with a view either to service improvements or capital projects such as buying buses. This is part of a more general malaise at the TTC where broad policy objectives are not discussed by the Board. This is quite a change from the days of Chair Giambrone whose activist term routinely spawned many policy discussion through requests to staff for discussion papers that came to the public TTC agenda.

It is ironic that the city policy (keeping back any “surplus” from the TTC) arose in part due to Giambrone’s activism. If the money stayed in the TTC’s hands, it could be used to launch new programs without an explicit Council authorization. There was no guarantee against one-time “surplus” money funding a change that would require long-term subsidy funding in future years by Council. Stintz was trying to pull off precisely the type of funding trickery that Council spiked when it stopped putting TTC surpluses in the stabilization reserve.

In the end, the Board moved to ask the city to treat its budgets on a five-year basis so that a surplus from one year could be carried over and used to fund shortfalls the next. Whether the $47m will actually limit a fare increase, or even stay with the TTC, will be a decision for the new Council, one that, if polls are to be believed, will certainly not include Karen Stintz.

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Vanishing Streetcar Stops (Updated)

Updated May 26, 2014:

The TTC has released a report on the removal of streetcar stops that will be discussed at the Board meeting on May 28.

The report claims that there are two goals in the elimination and consolidation of streetcar stops:

  • Improving the consistency of stop placement to provide better safety so that stops are always at signalled intersections or those with pedestrian crosswalks, and
  • Reducing travel time through stop elimination where existing stops are very close to each other.

The question of safety in stop placement is laudable, although it is odd that so few locations are actually proposed for removal. Of the 550 existing streetcar stops:

  • 20 will be shifted from locations nearby traffic signals to be at the signalled intersection.
  • 39 regular stops that are within 200m of a nearby stop will be removed, although some of these are still under negotiation with the local Councillors.
  • Most Sunday stops (about 40) will be eliminated, and a few will be converted to regular stops.

The geographic distribution of stops to be eliminated is rather strange, and has an uneven feel to it at some locations. Oddly, there is discussion of removing the stops at Queen & Victoria, although this is still under review because of St. Michael’s Hospital, and King & Victoria westbound is on the hit list. However, the stops bothways at Dundas and Victoria (a location with problems compounded by traffic signals at Yonge and Victoria that prefer to thwart rather than aid transit) are not mentioned at all.  Ooops! They are.

Broadview Station could become the only place where one can board a streetcar in this neighbourhood as the stop on Erindale is to be removed, and the southbound stop at Danforth is under review. Strangely enough, the sidewalks at both stops were just rebuilt with accessibility ramps. Also, there is no mention of the northbound stop. Also, this stop is not in service during the peak period already, and how its removal would contribute to any peak time savings is a mystery.

There is no discussion of the comparable situation at Main Station, and 506 Carlton is not even included in the table of affected weekday routes.

The stops bothways at Connaught & Queen disappear, and I must assume that Russell operators are now doomed to making that “convenient” walk down the street to a consolidated stop.

It is particularly amusing to see a Sunday stop listed for Kingston Road at Malvern, a location where there is no streetcar service on Sundays.

Other anomalies can be found in the comment from “nfitz” that follows below.

This report has been three months in the making (at least), originally promised for February, finally delivered in May. It has the feeling of a report that argues the case for “faster transit” rather more forcefully than the actual number of stops involved would suggest. Sunday stops have nothing to do with weekday transit speeds, and the actual number of stops removed is trivial ib proportion to the streetcar system.

If the TTC wants to argue “safety”, fine, but don’t drum up another of these bogus claims that transit service will somehow be improved. That’s a task for the quantity and quality of service on the street, and the little matter of line management.

I cannot help remembering a report written years ago by a junior planner about the placement of all-night services that showed a hopeless lack of geographical knowledge of the city including basic obstacles like valleys, rivers and ponds to crow-fly walking distances.

If we were really talking about a major change in the philosophy of stop placement, and were looking at its effect not just on streetcars but also for buses, I might take this report seriously. Meanwhile, this is another of those “we know best” TTC reports that tries to justify a new policy with an oversold rationale.

The original article from May 9, 2014 follows the break.

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So You Want To Own A Subway …

November 25, 2017: As the Tories have trotted out the same uploading plan as in the last election, I’m reminding folks that their scheme simply does not hold water. The numbers here are from 2014, and in due course I might getting around to updating them with 2017 or 2018 data. But it won’t change the conclusions.

This article was originally published in May 2014.

The madness that passes for political policy in Toronto continues in the provincial election with a proposal that a Tory administration under Tim Hudak would transfer control of the rapid transit system to GO Transit as a regional asset. The conventional wisdom is that the subway on its own would be “profitable”, and that Toronto would be stiffed for the money-losing surface network.

Quite bluntly, any claim that the subway makes a profit and could be uploaded at no net cost to Queen’s Park is pure bunk, and it says something about the quality of Hudak’s advisors that they don’t seem to know this (among many other fiscal facts of life). Just like the operation of a house or a car, two things many voters must deal with day-to-day, there are two budgets:

  • Operating: Here we have the bills that roll in regularly such as taxes, utilities, insurance. Unless we are renting out our homes or vehicles, there is no offsetting revenue, but in the case of the subway, there are fares and other much smaller sources of income.
  • Capital: Now and then, major expenses come along such as a new roof or foundation repairs, a new furnace or other appliances, fixing the plumbing and electrics, building that nice new patio you always wanted. These don’t happen often, and the expense covers an asset that should last decades, but some level of capital spending is unavoidable.

I have omitted mortgage costs here because they do not have a direct equivalent in transit budgets where the cost of borrowed money is not visible. If this were included, then capital-intensive modes like the subway would have a higher operating cost with the debt service charges included.

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TTC Service Changes Effective May 11, 2014 (Update 4)

The May 2014 schedules will bring major changes across the system mainly in response to construction projects.  Extra running time will be provided on many routes in response to construction delays.  At some times, the current headway will be maintained, while at others the headway will be stretched.  In two cases (46 Martin Grove and 94 Wellesley), no buses are available to improve PM peak service to compensate for extra running time.

The budget for construction-related service is considerably less than what will actually be required.  Although the total hours operated will be greater than the budget for May, “regular” service will be below budget while “construction” more than compensates.  Some changes in the fleet and in service levels have been deferred until later in 2014.

2014.05.11_Service_Changes

This table is broken into four sections listing miscellaneous minor changes, construction-related changes, one route restructuring and seasonal changes.

Updated May 17, 2014:

Effective Tuesday, May 20, the diversions for the Queen & Victoria track project will be changed.

  • All westbound 501 Queen cars will divert via Church-King-York.
  • 501/502/503 shuttle bus services will terminate at Church Street.

The details are on the TTC service advisory page (scroll down to see the portion effective May 20).

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TTC & Unions Ratify Four-Year Contract

The TTC and its various union groups have ratified a four-year contract that will carry through to March 31, 2018. This mediated settlement avoids the need for arbitration which would occur given that the TTC has “essential service” designation, along with the danger for each party that an imposed settlement might not be to their favour.

Coming during both a municipal and provincial election campaigns, this is sure to spark comment, if not outright hostility, in some quarters given that the bulk of the employees in ATU Local 113 will receive 8.25% over the four-year span of the contract. The new agreement provides improved job security and limitations to contracting out, but the details were not included in the TTC’s announcement. According to the ATU’s website, the ban on contracting out is 100%.

The TTC projects that the cost of this agreement will be about $196-million over the four-year term.

The big challenge now for the TTC is to improve the quality of service it provides on the street. This will touch on policy issues at the top of the TTC and at City Council, as well as on planning and management, including a much more open and honest discussion about how service actually runs today and what can be done to improve it.

Note: I am leaving this post open to comments, but will delete any abusive material or polemics.