Updated August 30, 2016 at 5:00 pm: The TTC has responded to questions regarding the relationship of new federal funding to their budget. See the end of the article.

With many Huzzahs! the federal government announced the details of funding for many projects in Toronto and other parts of Ontario under its new Public Transit Infrastructure Fund. This first step concentrates on “state of good repair” (“SOGR”) projects, especially as they relate to the TTC whose capital budget has been constrained by Toronto Council’s willingness to raise new revenues for only a few pet projects.

Press reports, together with the usual tub-thumping from Mayor Tory, imply that we are about to see a huge leap in work on TTC infrastructure upgrades. This sounds good, but the truth is not quite so simple, or as photo-op worthy.

The TTC’s Capital Budget can be a forbidding document, even in the short version that is online. The full version, with detailed descriptions of every project, fills two large binders. A fundamental problem, as we have heard every year for some time now, is that the total value of the ten-year Capital Plan is not completely funded, and there is a shortfall over that period of close to $3 billion. This does not include projects with their own earmarked funding such as the Spadina Subway Extension (aka “TYSSE”) or the Scarborough Subway Extension (“SSE”).

The main issues facing the City of Toronto and the TTC are:

Almost all ongoing funding for Capital spending has dried up at both the Provincial and Federal levels with only the Gas Tax flowing on an annual basis. This amounts to about $160 million from Ottawa and $70m from Queen’s Park (an additional $90m in Provincial funding goes to the Operating Budget).

City borrowing is constrained by a debt ceiling target such that no more than 15% of the Property Tax income is required to service the City’s debt. Major projects added to the budget in recent years, notably the Gardiner Expressway, have pushed the City right to that line leaving no headroom to finance additional projects until the early 2020s.

City Council has not been willing to raise additional revenues either through the property tax, or other mechanisms allowed by Queen’s Park, to service new debt beyond the 1.6% Scarborough Subway levy, and Mayor Tory’s proposed 0.5% levy to help fund some other capital needs.

Queen’s Park announces a lot of transit funding, but this focuses on areas outside of Toronto. Even within Toronto, it flows mainly to Metrolinx, not to the City and TTC. All of the new funding is for Capital projects, not for day-to-day operations.

The City of Toronto reacted to the discrepancy between the overall Capital Plan and available funding by requesting cutbacks in the planned budget. The effect is back-end loaded, in the sense that the higher cuts come in the later part of the plan, in part with the hope that the Tooth Fairy will arrive to bail out the funding crisis before these cuts actually have to be made. However, the cuts did start to kick in for 2016 with the City asking that the TTC pare $53 million from its Capital Budget. Of this, about 60% came from a “Train Door Monitoring” project that is intended to provide subway operators with the ability to view the entire train from their cabs, and thereby allow one-person crews on subway trains. The remaining 40% came from track, power, bridge and tunnel projects.

For the line-by-line requested cuts, scroll down to page 54 of the “short version” budget linked above. Note in particular the large value of cuts from 2020 onward.

Requested cuts for future years are $42.6m in 2017 and $78.3m in 2018 (with higher amounts beyond). This is the context in which “new” money comes to Toronto. Where the TTC is concerned this funding does not generally spawn new projects, it merely backfills the funding level provided by the City.

In the short term, Ottawa is funding SOGR projects because (a) that’s where the budget shortfall really is and (b) large scale new projects simply cannot be fired up quickly enough to absorb significant funding in the two year period (April 2016 to March 2018) that this phase of the PTIF will be available. Those large projects are expected to show up in the next round of funding to be announced, probably, in early 2017.

Ottawa’s List and the TTC Capital Budget

To make life simpler for people trying to make sense of the announcement, I have consolidated information from the Federal news release with information from the TTC’s Capital Plan. In the following table:

The columns “Federal Project Name” and “Amount” are taken from the announcement itself.

The “TTC Project Number” is taken from the budget details which appear on pages 34-53 of the TTC Capital Plan. This is provided mainly as an indication of the source of project descriptions and values.

The “TTC Project Amount” shows the spending for 2016-2018 included in the plan. Note that there are three lines for each item in the plan showing the previous year budget, the proposed version for 2016-2025 and the change since last year. The values in my list are from the second (current budget) line.

In a few cases, the Federal line item actually embraces more than one line in the TTC plan, and I have broken these out.

A few of the Federal items have no matching project in the TTC’s 2016 plan (which dates from late 2015), and I believe that these are new projects created going into the 2017 budget cycle.

20160823_ProjectList

The Federal contribution generally does not line up with the TTC numbers for a few reasons:

Federal budgets run from April 1 to March 31 of the following year. TTC/City budgets run on a calendar basis. A project may have funding over three calendar years, but not all of the spending will align with the two year window of the PTIF program.

Some TTC programs appear to have changed in scope since the 2016 budget came out as the Federal allocation is substantially larger than the TTC’s planned spending. This shows up notably in a project for the Automatic Passenger Counters project which appears to have been expanded to embrace the entire fleet, not merely a subset of vehicles that would be rotated among routes. (Why this is needed considering the onset of Presto and its available data is something of a mystery.)

Media reports have spoken of the new funding accelerating the provision of accessibility at subway stations. This is an odd claim because the City removed its request for the TTC to reduce the “Easier Access III” budget in the 2016 round, and planned work is already funded out to 2020. Unless the TTC can fire up more construction in very short order, it is hard to understand just what is available to be “accelerated”.

The primary effects of the new funding are:

The City will be able to remove, at least for the next few years, some of the reduction requests against the TTC’s plan because Federal Money will be available to fill the gap.

Some projects that the City had expected to fund largely with its own revenue will now be shared making City funding available for other line items (assuming that old “commitments” actually stay in the transit budget and don’t migrate to other non-transit projects).

The project list linked here shows two pages of TTC projects with a total of $360 million in Federal Funding (out of $1.671 billion the TTC planned to spend on these items over 2016-18) on the first two pages. The last page shows all of the other projects which fall under various City department budgets totalling $114 million. The grand total of new Federal funding here is $474 million.

What we do not know yet is the level of City funding that will be provided against the various areas of TTC capital needs.

Pending Updates

I have asked the TTC to confirm details of this announcement and how the monies will be used, but do not expect a detailed response until more is published on the 2017-2026 Capital Plan. This will likely happen at the September 6, 2016 TTC Budget Committee meeting, assuming it actually takes place. As additional information becomes available, I will update this article.

Clarification

In my version of the project table, I have shown planned TTC spending only for 2016-2018, but the full project costs for these can extend well beyond 2018 (details are in the TTC budget report). The Federal contribution in these cases is a lower percentage of the total than might appear to be the case because the “out year” TTC costs are not shown.

This is most strikingly shown in the project to purchase 99 new buses where Ottawa is partly funding only 4 vehicles. The total project cost for 2017-2021 is $75m (see page 44 of the budget pdf), but Ottawa is only funding $1.3m, about half of the planned spending in 2017. The remaining 95 buses would be acquired after PTIF ends and they are not funded through this program.

Updated August 30, 2016 at 5:00 pm

I posed several questions to the TTC and have received the following replies.

Q1: The federal announcement looks to be mainly for existing capital projects. Is this being used to backfill city cuts?

A: This particular program is designed to be primarily for state-of-good-repair projects that are “shovel ready”. So what the TTC put forward through the City of Toronto were just that. The 10-year 2016-2025 TTC capital budget had a funding shortfall of something in the order of $2.7B. These are not city cuts. The TTC actual 10-year needs exceed known capital funding (gas taxes, city debt, etc.). These funds will be used to help solve some of that shortfall.

Q2: There were several broad reductions in parts of the capital budget this year and for future years to bring spending within city debt limit. See the 2016 TTC Capital Budget Report at page 54 of the linked pdf.

A: The broad reductions included in the current 10-year capital budget were designed reflect expected spending levels based on historical spending trends. They too are not cuts. The TTC is undertaking a more detailed look at this as part of our current budget process.

I challenged the TTC on this statement. There is always a difference between proposed and actual spending due to changes in project schedules and scope. However, the amounts involved, particularly in the later years of the budget, are well above the usual gap. The TTC clarified their response.

A: “Historical spending” is just that and some amounts have been factored into the individual projects to account for that. “Unfunded Budget Reduction” is the budget shortfall between the TTC’s 10-year capital needs and the funding that’s available from City debt, gas taxes and other existing funding. It happens that in the first few years of the 10-year budget, there is sufficient funding. But as you note, over the long run there isn’t. The shortfall grows to be a very substantial number of about $2.7B over 10 years. If we don’t get that funded, that would be a huge capital budget cut. That’s precisely why the federal funding announcement was so welcomed by us. It doesn’t wipe the shortfall out entirely, but it really helps over the next 3 years.

Q3: Am I correct in saying that the new money does not spawn new projects, only replenishes funding for those already in progress?

A: The TTC does an annual 10-year capital forecast, so most state-of-good-repair needs are reasonably well spelled out in that plan. New things may crop up, but in large measure this money is to pay for those on-going rehabilitation, refurbishment, improvement or replacement needs on existing assets.

Q4: There was talk of accelerating the subway elevator program but I don’t see the dollars in the announcement.

A: Staff have been reviewing the elevator program and the results of that review will be incorporated into the 2017-2026 TTC Capital Budget presented to the TTC Board in the Fall.