Two weeks ago, I wrote about the receivable on Metrolinx’ books for supposed “municipal contributions” that have not been paid, but instead have been funded temporarily by Queen’s Park. This has been going on for roughly a decade and the bills are piling up, now over a billion dollars.

I posed a series of questions to the Minister of Transportation’s Press Secretary, and received a friendly, sunny, but utterly uninformative reply.

Firstly thank you for your e-mail and questions – it is nice to e-meet you! I saw your blog piece from earlier this week and the Qs you submitted to Patrick re: the existing framework for municipal contributions to GO Transit growth and expansion capital costs, potential future municipal contributions to major transit initiatives in the region and the Province’s Dedicated Gas Tax Program. There are two Regulations under the Metrolinx Act, 2006, which are intended to assist the Regions of Durham, Halton, Peel and York, and the Cities of Toronto and Hamilton, to collect development charges (DCs) to help offset their respective contributions to GO Transit growth and expansion capital costs: 1) O. Reg. 528/06, which sets an expiry date for GO Transit DC by-laws; and

2) O. Reg. 446/04, which prescribes the allocation of the expected municipal share of the GO Transit growth and expansion capital costs amongst the municipalities. The municipal contributions to GO Transit growth framework were put in place to establish a fair and balanced approach to support GO capital expansion in communities across the region. All municipalities in the Greater Toronto and Hamilton Area benefit from an effective GO Transit network, and the Province remains committed to working with all of our partners to expand and deliver this network. Given the transformational $13.5 billion investment that the Province is making to strengthen the GO network through the 10-year GO Regional Express Rail initiative under the Moving Ontario Forward plan, we recognize that this commitment to working together with all of our partners to build and optimize an integrated, regional transit network is even more critical. As you note in your email, the two Regulations permit GO Transit DC by-laws to help the municipalities offset their expected contributions – per the allocation formula set out in O. Reg. 446/04 – to Metrolinx for their share of GO Transit growth and expansion capital costs. The contributions made by municipalities are not directly linked to any specific expansion projects, but, rather, they are applied against the GO Transit growth and expansion capital program, as a whole. With respect to your questions related to the Dedicated Gas Tax Program, the funding of two cents per litre of gasoline sold across the province was made permanent through the Dedicated Funding for Public Transportation Act, 2013. The Ministry of Transportation allocates these funds through the Dedicated Gas Tax Program based on a formula of 70% ridership and 30% population for eligible municipalities. All of the factors, including the funding envelope, ridership and population, are updated annually for each program year. The funding envelope for the 2015/16 program was $332.9 million, up from $321.5 million in 2014/15. The Province has provided the City of Toronto with more than $1.75 billion through the Gas Tax program since 2003, including $169.2 million for the 2015/16 program. Thank you again for your questions. [Email from Andrea Ernesaks, Press Secretary and Issues Manager, Office of the Hon. Steven Del Duca, Minister of Transportation, September 30, 2016]

Despite the reference to an “expiry date” for GO Transit Development Charge by-laws, this date has been changed every few years and currently sits at the end of 2016. Based on past experience, one might reasonable expect this will be extended again. The municipal allocations have not changed since this charge was introduced despite substantial shifts in population balance around the region and a change in the type of journey that the Metrolinx network serves, especially with planned expansion.

The concurrent mention of the $13.5 billion to be spent on GO RER and “working with all of our partners” suggests that Queen’s Park might include RER in the cost base for calculation of future contributions from the municipalities. If this is so, then the Minister should say so, and all announcements should have a little side bar, an asterisk to a footnote saying, “oh, by the way, your municipal taxes will help pay for this photo op”.

Nothing in the legislation (acts and regulations) explains how “capital requirements” are calculated, which projects would be included, nor how the proportional allocation should be assessed against municipalities. It just appears out of thin air as part of the GO (now Metrolinx) budget. The amount is a not linked to specific projects, but somehow it gets calculated.

The info about the Gas Tax program is not news, but the concern municipalities have legitimately is that an increasing portion of this grant might be clawed back by charges to support Metrolinx rather than their own local programs. This is complicated by the fact that Queen’s Park threatened to withhold the Gas Tax from municipalities that didn’t play ball with the selection of Presto as their fare card. Going forward, we know that back charges for operation of the Metrolinx LRT lines to the municipal level are likely, but the amount has not yet been settled.

The basic point here is that the provincial largesse and support for transit comes at a price, and that will be carved out of money that nominally flows to municipalities for their own use on transit. Toronto’s $169.2 million is now split between the operating and capital budgets. Other monies do flow from Queen’s Park for TTC projects, but they are earmarked to those specific works such as the subway extension to Vaughan.

Moreover, given the state of provincial finances, will this billion dollar “debt” become payable by the municipalities? Toronto’s half-billion share would take a huge bite out of the city’s budget, and an ongoing charge of roughly $90 million could more than halve the value of the gas tax grant.

The Minister might contemplate some of the background information to the Metrolinx Investment Strategy reports which includes a history of GO Transit development charges, a description of the wide gap between the amounts actually collected and the amount anticipated (25% of GO’s capital program). Specifically the Metrolinx Review of Development Charges at pages 6-7. Note that this report dates from January 2014 and therefore does not reflect all of the charges that have accumulated to date. It also speaks of $100 million in revenue from municipal development charges, but the chart below clearly shows that this is far short of the “expected” contribution.

These are not trivial questions, and so I have asked, again, for an explanation. To date, nothing has come to my mailbox. My latest query follows below.

1. Which projects now underway or planned will trigger additions to this outstanding balance including, but not limited to, such things as:

Ongoing GO improvements (non-RER)

GO RER

LRT and BRT projects

In other words, although Ontario has not actually collected on the receivable, will it continue to grow and, in effect, will municipalities be expected to eventually contribute to “provincial” projects, and at what level?

It takes some digging through the statutes to figure out where the authority for making any levy against the municipalities actually exists because of the successor organizations down the years. This appears to lie in the Greater Toronto Services Board Act which contains language respecting both operating and capital costs (sections 66 and 68 respectively).

However, there is no information in this act about how the “capital requirements” are calculated, that is to say which projects are included, nor the proportion of the total to be assessed against the municipal level. This amount is being calculated each year and appears as a growing balance in the financial statements, now standing at over $1 billion. The amount has not actually been collected for years and has instead been advanced by the government.

It is also intriguing that s.68 of the Act contemplates a 100% recovery of GO’s net operating cost from municipalities, but this does not appear to be done currently.

And so I reiterate my questions:

How is the annual amount that is added to this outstanding balance calculated? Is it prescribed anywhere, or simply set by an annual Metrolinx bylaw? Where is this published?

To what degree will the projects listed above be back-charged to municipalities through this mechanism? (GO, RER, LRT, BRT)

Given that this receivable has been outstanding for close to a decade, does the government have any intention of attempting to collect this from the municipalities?

Can you confirm that there is no authority existing today for Metrolinx to recover the net operating cost of GO from the municipalities?

2. Many projects do not fit into the classic GO Transit model of serving downtown Toronto. For example, York VIVA BRT, The Hurontario and Hamilton LRTs, and the Toronto Crosstown and Finch LRTs serve a very different travel demand from GO’s rail network.

Will the formula for allocating these costs be changed to reflect the service territory and areas benefiting from the projects that where municipalities are expected to make a contribution?

The formula apportioning the capital levy between the municipalities has not changed over the years, only been extended by various regulations. Meanwhile the population of the regions has changed substantially, and the types of service now in operation, and particularly those under construction, are very different from the peak period commute to downtown Toronto that was GO’s function a decade ago. Depending on which projects will be included in the calculation of future levies, the proportions in the regulation may unfairly assess costs among the regions.

Will the formula be updated to reflect population shifts?

Will the formula be updated to reflect the different services provided now and in coming years?

3. Although Ontario makes significant investments in transit, its budgetary effect at the local level will be offset by chargebacks including:

The deferred Metrolinx receivable above

Future costs for Presto which is expected to become self-sufficient and will require increases in service fees to local providers to do so

Future costs for LRT operations

Starting in FY 2011-2012, there was a large increase in the annual charge added to the receivable, an average of $183m/year over the last five years, of which Toronto is responsible for $81.6m/year. What projects contributed to this charge and what was their total value (in effect, my question is what proportion of these projects was back-charged to the municipalities)?

At the same time, there has been almost no change in the level of gas tax provided, and the amount coming to Toronto has been sitting at about $160m for many years. (Toronto apportions this partly to capital and partly to operations.) The effective value of this contribution falls due to inflation. If Toronto had actually paid their Metrolinx assessment in recent years, this would have wiped out half of the gas tax grant.

In 2017, the TTC is making provision in its budget for additional costs related to Carbon Taxes. This will further erode the contribution from Ontario.

The combined effect of all this will be that, at some point, all of the provincial contribution via gas tax will be consumed by paybacks under various levies and fees.

My questions repeated:

Why did the levy against the municipalities change so dramatically in FY 2011-2012?

Does the government have any plans to increase the gas tax allocated to municipalities at least to offset inflation?

Does the government have any plans to recover a portion of the operation of transit service by Metrolinx/GO from the municipalities served?

Why is public transit, itself a major contributor to reduction of pollution, to be charged with Carbon Tax, yet another means by which the province will claw back the gas tax allocation?