The rubber hits the road on transit funding Tuesday, as Metrolinx releases a short-list of tools it favours to pay for a massive expansion of the Toronto region’s long-neglected transportation system — possibly including such inventive ideas as an employer payroll tax or even GPS-tracked mileage fees.

The list provides the clearest picture yet of how residents and corporations will dig into their pockets to fund a war on the traffic congestion that’s sapping the region’s prosperity.

The list will include traditional ideas such as property taxes, fare increases and parking levies, including parking at GO Transit stations. It also shows Metrolinx is still considering some innovative schemes that might be piloted locally. One — an odometer tracking or GPS-based technology system — would see Toronto area motorists charged for each kilometre they travel in the region.

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Many of the ideas on the list, including highway tolls, sales and gas taxes, have been discussed at length in public roundtables Metrolinx has hosted across the region.

Others, such as a Parisian-style employer payroll tax, and land-value capture along new transit routes, are less widely understood.

A downtown congestion charge, corporate income tax, carbon taxes, a parking sales tax and vehicle registration fees are among more than a dozen revenue tools Metrolinx has already crossed off its list as being too expensive, too punitive or too risky.

The short list is expected to reflect the findings of the regional public discussions and also those of a broad study Metrolinx commissioned of revenue tools being used to fund transit and infrastructure in other jurisdictions.

The report by AECOM KPMG, titled Big Move Implementation Economics: Revenue Tool Profiles , looked at 24 potential money-makers and ranked them by criteria such as their sustained money-making potential, cost of implementation, and whether they might result in positive changes to commuting habits.

Not all the short-listed ideas will make it into the final investment strategy Metrolinx submits to the province in June. That’s when the agency gives Queen’s Park its final recommendations for raising $2 billion annually for the next 25 years — the amount estimated in Metrolinx’s 25-year, $50-billion Big Move regional transportation plan.

But the short-list will form the basis for the final phase of public discussions before then. The provincial agency plans to run its list by more than 100 key community and business groups it will meet with through May.

The Toronto Region Board of Trade also used the AECOM report in forming its recommendations. Its preferred funding tools — sales and gas taxes, a commercial parking levy and high-occupancy toll lanes — are all expected to be on the Metrolinx short list.

The leading business group is taking an unusually supportive approach to taxes and fees to fund transit. The alternative, doing nothing, will drain $15 billion a year out of the economy in lost productivity by 2031, says the board.

Some of Metrolinx’s short-listed tools are likely to draw opposition from politicians in surrounding regions, who say property taxes, already rising much faster than in Toronto, can’t stretch still more to incorporate a dedicated transit fund. They’ve already suggested that a commercial parking levy will disproportionately affect suburban businesses that depend on free parking to draw customers.

In its public discussions, Metrolinx found there was widespread support for new revenue tools, as long as the money was carefully tracked and dedicated to transit improvements.

But participants also expect real value for their money: a summary of those discussions obtained by the Star suggests they’ll demand improvements such as more reliable, frequent service and more guarantees.

Revenue tools Metrolinx short-listed

Some mix of the following revenue tools could be dedicated to a $2 billion annual transit expansion fund.

Development charges : Municipalities already charge fees to developers. But they can be increased on a per-project basis; for instance, a recent bump in fees in Toronto is helping to pay for the Spadina subway extension. A boost of $2,000 to $3,000 per new residential unit would generate $25 million to $50 million per year. If a development charge was applied to several projects in the region, the tool has the potential to raise $100 million. But the increase can’t be so high it drives development elsewhere.

Employer payroll tax : Used in Paris, France, and in Portland, Ore., this tax can be based on the employer’s proximity to transit lines. Based on 2009 employment figures, a 0.5 per cent employer payroll tax could raise between $810 million and $920 million by 2021.

Gas tax : A 5-cent/litre fuel tax could raise $300 million to $400 million a year by 2021. It could encourage motorists to cut fuel consumption, buy fuel-efficient cars and reduce their greenhouse-gas emissions. But it would also boost the cost of moving goods, affecting business.

High-occupancy toll lanes : Vehicles carrying more than one person would still be allowed to use HOV lanes for free. But single-occupant cars could also use them for a fee. Converting existing HOV lanes and those slated to be built this decade could generate between $160 million and $250 million. Implementing HOT lanes would be costly, but less so than tolling the entire highway.

Highway tolls : Tolls would be applied to 400-series highways and some city-owned roads such as the Gardiner and DVP. Completely phased in, they could raise up to $1.5 billion a year at a cost of 10 cents/km. Installing and administering tolling technology on highways would be costly, but could help reduce congestion.

Land value capture : Developers could end up paying more for land in the vicinity of specific transit improvements. Developers or land owners could be required to provide facilities (such as transit stations), cash or infrastructure; they could be taxed on revenue generated by the property; or the property tax could rise to reflect the increased value of the site.

Parking space levy (including transit stations): A charge per day on all non-residential, off-street parking could be based on the total area rather than number of parking spots, much like a property tax. Based on an estimate of 4.1 million parking spaces in the region and a charge of $1 per space per day, it could generate $1.4 billion to $1.6 billion. No new infrastructure would be required, but municipalities would have to do an inventory of available space. GO Transit, the region’s largest parking operator, drew stiff objections from customers when it floated the idea earlier this month. Ontario Transportation Minister Glen Murray has already suggested charging for GO parking could drive some transit commuters back to their cars.

Property tax : Based on the assumption of $7.7 billion in property taxes raised in 2010, a 5.2 per cent increase could raise up to $650 million in 2021.

Sales tax : A 1 per cent sales tax applied to all consumer goods in the region could generate up to $1.6 billion. Because it would be applied to the 8 per cent provincial portion of the HST, it could be complicated to limit the tax to the region and might have to be implemented province-wide, in which case the revenue would also need to be more widely shared.

Transit fare increase : Transit officials fear raising fares to help fund system improvements could drive down ridership. A 10-cent increase on 618 million annual transit trips in the Toronto region could generate up to $45 million, given population growth and the likelihood of some ridership drop-off, according to the AECOM report.

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Vehicle kilometres travelled : Tracked through odometer readings or GPS transponders, this method of road charging would have to go through a pilot phase. Based on total kilometres travelled in the region in 2009, a charge of 3 cents/km might generate up to $1.9 billion by 2021, taking into account the inevitable reduction in trips as drivers adjust their habits. Implementing such a system would be costly but could dramatically affect driver behaviour as well as raising funds.

Source: AECOM KPMG Big Move Implementation Economics: Revenue Tool Profiles

Revenue tools that didn’t make the short-list

Tax on car insurance

$2 per day car rental fee

Carbon tax

Downtown cordon fee similar to London and Stockholm

Corporate income tax

Vehicle registration taxes

New car tax

Land transfer tax

Parking sales tax

$10-a-night hotel room levy

Income tax

Tax increment financing

Utility levy

Driver's licence tax

Note - April 3, 2013: This article was edited from a previous version.

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