Updated October 11, 2014 at 12:45 pm:

This article and accompanying charts have been updated to include data from 2010-2013. (A further update was added on October 13 to show the breakdown of declining reserve funds.)

We hear a lot from every government about how much money they shovel out the door to support transit in Toronto, but it is useful to look at just how much they are spending, where it goes, and most importantly whether there are ongoing increases in funding levels.

2000_2013_Subsidy_Summary

There are ten charts in the file linked here:

The first two show operating subsidies in two formats: one with the values stacked to show the total subsidy received by the TTC each year, and one with lines tracking the level of subsidy from each source. In both cases, the section labelled “Ontario” (in red) is for special “one time” subsidies while the gas tax is shown separately.

The gas tax subsidy devoted to operations has remained flat at $91.6-million since it began in 2006. This tax actually arrives at the city in a lump sum for capital and operating, and the city has chosen to dedicate the same amount each year to operating.

Since 2009, the city has absorbed all of the increased operating subsidy of the TTC, although there has been a notable clawback in the Ford years.

The next two charts show capital subsidies in the same two formats. Again, the lion’s share of the subsidy is now borne by the city. The next largest chunk is Ontario subsidies other than the gas tax. These are important because this large share of the overall capital program will dwindle as projects end. Of $301-million in Ontario subsidy for 2013, the breakdown was:

$71.6-million from gas tax

$58.6-million from the “Quick Win” reserve, primarily for the subway resignalling project

$3.6-million from the Ontario portion of the Canada Strategic Infrastructure reserve

$145.3-million from the Spadina subway extension fund

$21.5-million for the new streetcar program

$0.6-million for residual costs on the Transit City program early in 2013.

Over 2/3 of the total provincial capital subsidy in 2013 actually came from reserves, funds that were set up with money from Queens Park years ago when times were good and held in trust by the city.

The amount of Ontario gas tax has fluctuated from year to year between roughly $69- and $75-million depending on the total tax given to Toronto less the $91.6m reserved for the operating subsidy.

Contributions by the Canadian government in 2013 of $257-million were made up of:

$154.4-million from gas tax

$3.5-million from the Canadian Strategic Infrastructure Fund

$99.1-million for the Spadina subway extension

The federal gas tax amount given to Toronto has not changed since 2010. Contributions from CSIF are winding down, and the subway funding is project-specific.

The “Other” category of capital subsidy is almost entirely money from York Region for its share of the Spadina extension.

The fifth chart tracks payments from various sources. In some cases these values are the same as those in the Capital Subsidy chart, but in others the amounts can vary because some money travels to or from reserve accounts.

Those reserve accounts have been dwindling since 2008. When times were good, governments, and especially Queen’s Park, were happy to shovel money out the door as a “current expense” to reduce their surplus, such as it might be, and to sequester the money in accounts outside of the government’s books. Of several funds that were created, the only ones that still have any money in them are the CSIF reserve ($15.3m) and the “Quick Wins” reserve ($133.9m) at the end of 2013.

(The negative reserves accumulating to 2006 were accounts receivable for funding programs that had been announced by Ottawa and Queen’s Park, but not actually implemented. The TTC recouped this money in 2007.)

The reserves are charted in two ways: as total amounts by source government, and as individual amounts within each reserve fund.

The reserves shown on this chart do not include the Spadina Subway fund because money for that project is handled differently by each government. Some made a lump sum payment into a trust managed by the City of Toronto, while others pay-as-you-play making contributions as the project progresses.

Spending on the Spadina subway extension is shared between Toronto, York Region, Queen’s Park and Ottawa based on an agreed formula. The federal contribution is capped, and it is unclear what will happen if the project exceeds its total budget.

Transit City spending was subsidized by Metrolinx up until early 2013 to a total of $248m. Part of this will be the sunk costs of work on the SRT replacement that may be chargeable to Toronto as part of the settlement of the Scarborough Subway project. The remainder relates to the Eglinton, Sheppard and Finch lines. These are now completely Metrolinx projects, and this item should disappear in the 2014 financial statements.

The Low Floor LRV (streetcar) project is funded 1/3 by Queen’s Park, and the amounts shown as revenue are the Ontario share.

A few common threads run through these numbers:

Gas tax revenues at both the provincial and federal levels have been static more or less since these subsidies were introduced.

Reserves created mainly before the financial crisis of late 2008 are now substantially depleted and nothing has replaced this source of funding.

The responsibility for operating and capital funding (except for project-specific accounts such as the Spadina subway extension) falls overwhelmingly on the City of Toronto.

Original article from September 6, 2010:

As a follow-up to my previous articles, I dove into past financial reports from the TTC going back to 2000. Most of these are not available online, but my hard-copy archives go back a very long way.

TTC subsidies are a branch of higher mathematics. Indeed, there are many philosophical discussions about them and competing claims for which governments pay more, or less, or nothing at all. This article is intended to present the information in one convenient place.

You will have to take it on faith that I have not garbled the information here, and you really don’t want the underlying spreadsheet, trust me. It took hours to get all of the year-to-year information to balance. That’s my problem, not yours.

Everyone loves pictures, and so we begin with a set of charts. You may want to open these concurrently with the discussion so that you can follow along.

2000-2009 Operating & Capital Subsidy Summaries

In each of these charts I have used colours appropriate to the political stripe of the source for funds. Toronto is environmentally green, Ontario is Liberal Red, Ottawa is Tory Blue, and the small contribution from others (mainly Waterfront Toronto and York Region) is gray. Gas tax subsidies are shown separately to identify this ongoing program by contrast with one-time, project-oriented funding.

Operating Subsidies

This is the simplest of the charts, and it tracks the gradual rise in operating subsidies paid to the TTC, most of which is borne by the City of Toronto. For 2010, the bar will be higher, and will be entirely green. The sections in red are one-time Ontario contributions to the operating budget. Those in pink are the gas tax revenue diverted to operations from capital. This practice ended in 2009.

Note that this subsidy includes the cost of Wheel-Trans which receives no special subsidy from Queen’s Park. By 2009, this amounted to $77-million.

Looking at this chart, it is important to remember that this is the subsidy, not the total budget, and the percentage change in the budget is different from the change in the subsidy depending on the relative contribution of fares in each year.

Capital Subsidies (As Spent)

The Capital Subsidy chart shows current year spending for capital projects in each year. As we will see below, this is completely different from payments received from Queen’s Park and Ottawa.

In the early years, the City capital spending is high because the last stage of the Sheppard Subway project was paid for with City funds.

Federal and Provincial contributions kick in starting in 2002. As we will see on the next chart, much of this was in the form of announcements, and the money did not actually flow for a few years until the agreements were signed. The City carried these costs on its books and eventually was reimbursed. I have allocated the moneys to the years in which they were spent, not to when they were received, to give a proper historical view.

In 2005, gas taxes came into play. There was a base allocation, and in 2005, a special allocation from Ottawa. The amounts settle down in 2006-2009 (note that Federal contribution outweighs the Provincial one in 2009 because some Ontario money goes to the Operating budget).

What is important in this chart is that the gas taxes come nowhere near the level needed to fund TTC capital spending at a time when the big-ticket projects are only in the early stages. Any move to shift the funding source away from general revenue or reserves to the gas tax will require a large increase in that tax.

A note about the Spadina Subway extension: This project is managed by the TTC and funded by four governments. The proportions of the funding are (roughly):

20% City of Toronto

13% York Region

40% Ontario

27% Ottawa

Ontario’s contribution as well as $75-million from Ottawa sits in a reserve called the “Move Ontario Trust” which is administered by the Province. The total project revenue includes an estimated $189.1-million in interest earnings on this fund, and I have pro-rated the interest to the two governments.

For 2008 and 2009, spending on the Spadina project has been credited to each of the four governments in proportion to their share of the entire project. Whether this is how they actually paid, I don’t know as the financial statements treat the project as a single expense. Total spending on Spadina for the two years was only $107.5m as the project did not enter its main construction phase until 2010.

Capital Subsidies (As Received)

The Capital Payments chart shows a very different picture from the “as spent” chart. The amounts for the City of Toronto and for “Other” are identical because these are both “pay as you play” contributions. However, from 2001 to 2006, governments promised more than they delivered because the paperwork took precedence.

In 2007, Ontario made settlement payments to the City for many of its then-outstanding subsidy programs. This included payments for costs incurred in previous years.

Also in 2007, Ottawa made a large contribution via the “Public Transit Capital Trust”.

Both the Ontario and Ottawa funds have earned interest while the reserves created with them were spent. By the end of 2009, the Ottawa funding was exhausted, and much of the Ontario funding was spent or earmarked for the near future.

In 2008, Ontario made a large contribution under the MoveOntario2020 program that pays a bit toward the Transit City projects, but mainly is intended for the Yonge Subway signal project. Much of this was unspent at yearend 2009, and it is unclear how the accounting will be handled in future years now that Transit City projects are to be owned by the Province.

The two large red bars for 2007-8 on the “as received” chart show how Ontario shovelled money to transit projects and reserves when they had cash to spare, but not as an organized, predictable funding source. By 2009, Provincial spending consisted almost entirely of Gas Tax revenue.

With the move to Ontario ownership of the Transit City lines, it will become more difficult to track all of the funding because payments will not show up on the TTC accounts. For example, Ottawa is paying 1/3 of the Sheppard East LRT, but this transaction is entirely at a Provincial level. TTC work on the project will be billed to Metrolinx, but this will not represent the full cost. For this we will have to depend on the openness, such as it might be, of the Metrolinx financial statements.

Receivables and Reserves

The final chart shows the buildup of subsidies that had been booked by the TTC but not paid by Ontario and Ottawa up to 2006.

In 2007 and 2008, large payments by both governments established reserves against which the TTC will draw.

Note that this does not include the Spadina Subway extension funds because these are held by the Province, not by the City. Moreover, any funding promises that are not accompanied by actual cash are omitted as they do not form part of the TTC’s financial statements. In any event, such promises represent future spending and would have no effect on the proportions or amounts in past years.