politics Metrolinx Dumps the TTC as an LRT Partner. What Does that Mean for Us?

This week's announcement that Toronto's new light rail lines won't be operated by the TTC leaves us with more questions than answers.

September 19, 2012 marked the end of a long charade by Metrolinx, the Ontario agency charged with building and operating a regional transit system. All pretense of local control and involvement vanished with a Metrolinx announcement that its LRT lines, once part of Toronto’s Transit City plan, would be designed, built, financed, operated, and maintained by a private sector partner, not by the TTC. (For short, this is called the DBFOM model.)

Parts of these projects—underground stations, maintenance buildings, and the reconstructed Scarborough RT—were already destined for the private sector, but the TTC was still at the table as overall designer and project manager, and later as operator of the new routes. No more. The Eglinton Crosstown, Scarborough, Sheppard, and Finch LRTs will now be completely provincial operations. Infrastructure already underway (the tunnels) will become the contractor’s responsibility upon completion.

To regular watchers of Metrolinx, this development is no surprise. Almost since its creation, Metrolinx and its masters at Queen’s Park have favoured private sector project delivery, and exclusion of municipal governments and agencies from meaningful participation. This model is easy to justify for transit projects outside of Toronto, where municipalities operate relatively small bus systems and do not have a professional cadre of transit staff skilled in rail system design and operations. In Toronto, the tug-of-war between local and provincial agencies has been ugly, with each side disparaging the other’s abilities.



What is the rationale for this decision?

From an email we received from Metrolinx representatives today, describing their strong support for Alternate Finance and Procurement (AFP):

AFP is a well-established and innovative way of financing and procuring large public sector infrastructure projects that maximizes the use of private-sector resources and expertise. AFP provides early insight into the cost of all aspects of the project, as well as the certainty of the project schedule. AFP also protects the public from cost overruns and imposes financial penalties on the private sector partner if a project is delivered late. If the project is late, the private sector pays. If project is over budget, the private sector pays. Working in partnership with the private sector, we are confident that we can maximize our resources to build great transit projects, on-time and on-budget, with the least amount of disruption.

This sounds fine in theory, but the problems lie in the contract language. Indeed, one reason for the delay in LRT project delivery is the extra work needed to craft contracts specifying many details and responsibilities—ones that are already the routine function of public bodies like the TTC.

We may, through this process, learn what “value for money” (a touchstone phrase for AFP advocates) actually brings us on design and construction costs. Operations and the benefits private operation might bring won’t even begin until 2020 (with the possible exception of the Scarborough LRT, as it could start up a few years earlier according to Metrolinx).

The political wrangling.

Only yesterday, Transportation Minister Bob Chiarelli spoke of Infrastructure Ontario’s “almost flawless” record compared with “TTC projects that have been long overdue and sometimes much over budget.” Characterizing the TTC as an utterly incompetent organization may play well at Queen’s Park, but the facts are quite different.

If Chiarelli is dredging up the St. Clair right-of-way project, most of the problems and extra costs were not of the TTC’s making. If there are other projects the minister has in mind, he owes Toronto the details. In their absence, one might diplomatically suggest that the minister is badly advised. The alternative is that he knowingly spreads misinformation to suit his government’s agenda. Major policy decisions should not be made on such flimsy evidence.

The ink had barely dried on the Metrolinx announcement this week when both the process and the details came under fire.

TTC Chair Karen Stintz (Ward 16, Eglinton-Lawrence) learned about the announcement the afternoon it came out. She may be reaping the effects of her “One City” plan, announced with considerable, if brief, fanfare in June. That plan included the appropriation of two GO corridors as part of a city transit system—the political equivalent of poking a stick in Metrolinx’s eye.

Stintz’s concerns about a seamless fare structure were hurriedly answered by Metrolinx through interviews and on their website. That such basic details came as an afterthought shows Metrolinx was simply pushing the TTC aside, leaving the difficult bits for another day.

The questions with no answers.

Does this signal a general change in regional transit planning and operations? Will Metrolinx simply appropriate projects in the GTA and other Ontario municipalities as it sees fit? Nobody knows. Toronto will soon launch a review of its Official Plan—and is set to specifically include long-term transit in that plan—but drawing lines on that map has little value if the real decisions will be made at Queen’s Park.

Fares and revenue are always at the heart of transit debates. Metrolinx claims that whatever the prevailing fare is in Toronto when the LRT lines open, that’s what riders will pay. This leaves unaddressed the question of future changes once the Presto fare card is in place, as that will allow options such as fare-by-distance, zones, and other ways of shaking more money out of riders’ pockets.

The financial model for the operation of the LRT lines has not been announced and probably does not yet exist. Will the private operator be paid a fixed amount to provide service, with the revenue going into a pot that TTC and Metrolinx will share? How will we decide which part of a fare belongs to each route (something that is impossible today with a flat fare, free transfer system)? It will remain difficult with smart cards unless we force riders to “tap in” at every leg of their journey simply so the transit system can divvy up the revenue. Try to imagine this at a busy LRT-to-TTC transfer point like Kennedy or Eglinton Stations.

On the capital side, most costs will be borne by the province through progress payments based on project milestones (a common arrangement for all construction work), but the contractor will be expected to finance about $1-billion of the overall cost according to Metrolinx. Further payments would stretch into the post-opening period, although it is unclear whether these would fund operating subsidies or capital maintenance work. These are expected to be from 20-to-25% of the total contract value.

Although there are four separate LRT lines, the likely arrangement is that Metrolinx will wind up with a single operator for service on all lines, and a single provider of common services such as vehicle maintenance and building operations. Whether these are one entity or several separate providers remains to be seen. The more we have, the more complex the management of separate pieces each with its own mandate and goals for cost-effective service provision.

Service quality, long the bane of riders and the focus of Toronto council debates, costs money. How often should LRT services arrive and how many riders constitute a full train? Will decisions be left to the secretive Metrolinx board, or to a private operator looking to minimize operating costs? For TTC operations, council can decide to improve or cut service based on funding and overall system standards. How would Toronto (or any other city with Metrolinx-operated routes) get service above a provincially mandated level, if that’s what it wants, especially if this triggered capital costs such as a larger fleet for peak service?

Karen Stintz rejected the idea that operating subsidies might be paid by the TTC (effectively by riders’ fares or City funding) to operate the LRT lines. This leaves the service and financial models completely in the hands of Metrolinx and its contractor. It is no secret that operating underground systems costs a lot, particularly in later years as the infrastructure wears out. Fares don’t cover those maintenance costs on the TTC—that money comes from a separate capital budget funded by all levels of government, mainly Toronto. Who will pay these costs for the Metrolinx lines?

Metrolinx is fond of saying that they already have private sector partners delivering service on GO Transit, but omits mentioning that the lion’s share of costs are paid by Queen’s Park, GO riders, and GTA municipalities through a Metrolinx chargeback scheme. None of the big ticket costs are borne as a risk by private companies, who are simply contracted to provide services such as staffing trains. There is no equivalent for the scale of responsibility Metrolinx expects in bring the DBFOM model to Toronto’s light rail.

Where do we go from here?

GTA cities are beginning a debate about new revenue tools at the municipal level. How does a model with full provincial control fit with projects that may have funding from local governments? How do cities participate in definition and management of contracts with service operators in the Metrolinx model?

The Metrolinx “Investment Strategy,” under development for years, is supposed to lead to proposals in 2013 for new revenue tools to pay for transit capital (construction of new lines); renewal (ongoing maintenance); and operations. The amounts under discussion are huge. In the rosy early days of the Metrolinx “Big Move” plan, the number was $1 billion a year, but this has grown as realism sinks in about just how big “transit” is in the GTA. A billion just scratches the surface, and even that’s a hard sell when every news story on the subject mentions provincial deficits and spending cuts. The danger is in aiming too low and having a limited new revenue stream—once we convince people they should pay more for transit—that gets soaked up by existing commitments rather than new services. Both need funding, and both may be short-changed.

Metrolinx argues that the DBFOM model is necessary to ensure a continuous responsibility and risk to the private operator. If infrastructure is built by someone who won’t operate the line, then the incentive is to build it cheap, make a profit, and vanish. Only if the builder is responsible for operations, long term, will they deliver robust, reliable infrastructure. That’s the official line, and it ignores decades of public sector projects built and delivered by the private sector, but then operated in public hands.

The private sector is littered with remnants of companies who didn’t care about the long term because they could walk away from unprofitable schemes of their own making. The challenge will be to write contracts placing responsibility on the private operator and enforcing those contracts with penalties up to and including taking the assets back into public control.

On the surface, the argument here pits the TTC against Metrolinx and its private sector delivery model, but the underlying questions are much more important. Who decides what “transit” means in Toronto? What are its goals? What public funding will we provide to sustain and improve mobility at the regional and local levels?

If Queen’s Park could be counted on as a benevolent, if slightly dotty, uncle who believed in transit as a good, important service, we could hope that not much will change as Metrolinx supplants the TTC for some routes. Politics doesn’t work like that though, as we remember from the Harris years—when transit was dumped onto cities, who were left to fend for themselves. What prevents a sale of the Eglinton-Crosstown line to a Highway-407 like entity through a sweetheart deal, with Toronto left to pay the tab to a locked-in private sector contract? With the TTC out of the picture, selling a network of LRT lines would comparatively straightforward, especially if the buyer were already operating them.

Metrolinx is a notoriously opaque agency that conducts much of its business in private. Details of the arrangements for a DBFOM contract are likely to be shrouded by the term “commercial confidential” that conveniently hides private sector agreements. If the TTC screws up, everyone knows about the problems, and the fallout can damage political careers. If a private contract goes awry, we may never know. This is not acceptable for such important public infrastructure that could remain, through a badly written contract, “public” in name only.

Metrolinx owes Toronto an open discussion of its intentions for how the new LRT lines will be built and operated, how the funding will work, and what expectations the city and its transit riders should have of what they’ll be getting. At a regional level, Metrolinx needs to be frank with all municipalities on its future role in transit operations and funding. The Toronto LRT decision should have been a detailed announcement, with the unknowns clearly acknowledged and marked for future discussion. What we got was a two page letter between bureaucrats.