With the release of Ontario’s budget for 2017, City Hall launched into predictable hand-wringing about all the things Toronto didn’t get with the two big-ticket portfolios, transit and housing, taking centre stage. Claims and counterclaims echo between Queen Street and Queen’s Park, and the situation is not helped by the provincial trick of constantly re-announcing money from past budgets while adding comparatively little with new ones.

There was a time when budgets came with projections of three to five years into the future, the life of one government plus some promise of the next mandate, but over time the amounts included within that period simply were not enough to be impressive. Moreover, in a constrained financial environment, much new spending (or at least promises) lies in the “out years” where “commitment” is a difficult thing to pin down, especially if there is a change in government.

Toronto has “out year” problems, but it has even more pressing concerns right now, today and for the next few years. Very little in the provincial budget addresses this beyond the authority to levy a hotel tax, and a gradual doubling of gas tax grants for transit over the next five years. These add tens, not hundreds, of millions to a City budget that runs at $12 billion.

The transit tax credit for seniors will cover eligible public transit costs beginning in July 2017 with a refundable benefit of 15 percent. Whether all seniors actually deserve this credit is a matter for debate, but an important difference from the soon-to-disappear federal credit is that Ontario’s is “refundable”. This means that even if someone does not have enough income to pay tax, they can still receive the credit. The devil is in the details, however, and the degree to which this will be available to casual, as opposed to regular transit users remains to be seen. The term “eligible costs” is key. (The federal credit includes restrictions on eligibility.) In any event, a tax credit does nothing for transit budgets because it adds no revenue either directly to the transit agency or to the City which provides operating subsidies.

There are two major problems with both Ontario’s support for transit and Toronto’s politically-motivated budgets:

In both cases, the focus is on capital projects, building and buying infrastructure, with little regard for the cost of operating new and existing assets.

Past decisions on transportation spending have locked billions of dollars into a few projects for short-term political benefit at the expense of long-term flexibility.

Toronto perennially assumes that there will be new money somewhere to backfill the shortage in its capital budget. The Trudeau economic stimulus plan was the most recent magical relief Toronto expected, but it came with dual constraints: Toronto gets a fixed amount over the life of the program, and Ottawa will not contribute more than 40% to any individual project. Toronto had hoped that Ontario would chip in, possibly at the 30% or even 40% level, leaving the City with a manageable, if challenging, task of finding money to pay its share for the backlog of projects. The Ontario budget is quite clear – Toronto is already getting lots of provincial money and at least for now, there’s nothing new to spend.

Ontario is hardly innocent in this whole exercise having meddled for years with Toronto’s transit plans, most notoriously in Scarborough where the whole subway extension debate was twisted to suit political aims. After leading Toronto down the garden path on the SSE, Ontario has capped its project funding leaving Toronto to handle the cost of its ever-changing plans.

Queen’s Park loves to tell Toronto how much provincial money is already spent for Toronto, if not in Toronto, and the distinction gets blurry. GO Transit improvements, for example, will bring more service into Toronto benefiting the core area business district, but they will also improve commuting options for people outside of the City itself.

Before the fiscal crash of 2008, when Ontario was running surpluses, the typical way to handle project funding was to hive off surplus funds at year end into a trust account. That is how the provincial share of the TYSSE was handled. By contrast, Ottawa operates on the pay-as-you-play basis, and only turns over subsidies after work has been done. Each approach suits the spending and accounting goals of the respective governments. In a surplus situation, one wants the money “off the books” right away, but in a deficit, the spending is delayed as long as possible. Further accounting legerdemain arises by making the assets provincial to offset the debt raised to pay for them.

To put all of this into context, here is a review of projects proposed or underway in Toronto.

Toronto York Spadina Subway Extension (TYSSE)

The extension to Vaughan is planned to open in December 2017. Funding comes roughly one third from each level of government, but the provincial and federal contributions were capped based on the original project estimate. 100% of the cost overruns are charged to Toronto and to York Region on a 60/40 basis reflecting the portion of the line in each jurisdiction.

One reason for the overrun was that the project contingency budget, an amount intended to handle unexpected conditions during construction, was substantially consumed by scope creep when bids for the stations came in above the budgeted level.

As a result of budget problems on the TYSSE, Toronto has instituted a new process that requires sign-off by Council at various “stage gates” corresponding to increasingly detailed levels of design where certainty of project costs is improved. That process, now underway for the Scarborough subway extension, is partly responsible for cost increases we have seen recently. Issues that might have been dealt with after the fact now face Council up front.

Union Station Renovation

The renovation of Union Station and very substantial expansion of GO Transit facilities is a joint project of the City of Toronto, Metrolinx and the federal government (a comparatively minor player through heritage funding and Via improvements). The project will finish in 2019, but future demand projections show that Metrolinx will be out of capacity by about 2031 if not sooner, and alternate ways to get riders from GO corridors into downtown will be needed.

Eglinton Crosstown LRT

This line, part of the original Transit City Crosstown line from STC to Pearson Airport, is under construction by Metrolinx with full provincial funding. This project is the most commonly cited by Queen’s Park when people complain that Toronto isn’t getting enough transit dollars.

An intriguing difference between funding “commitments” can be seen with provincial projects. The spending is announced as an estimated value, plus inflation to completion. As a totally provincial project, there is no choice but to eat any overruns, and there is a strong incentive to avoid them. When Queen’s Park has “committed” to provide funding for some municipal projects, they have included an inflation factor, but more commonly they promise a set amount. It is up to the municipal project sponsor to manage their project within the funds available. Similarly, federal contributions are for a set dollar value, and unanticipated costs are on the municipality’s dime.

For the central part of Eglinton, the cost is all on the provincial books, but the situation is different on the outer portions.

Eglinton East LRT

This line, originally dubbed the Scarborough-Malvern LRT, would run from Kennedy Station to UTSC campus. (In a much earlier version, the line ended in Malvern, hence its original name.)

This project was claimed to be fundable as part of the deal including the Scarborough Subway Extension, and Toronto would see both the new subway and an LRT to UTSC as a package. This was not to be, and it was quickly clear that the Scarborough “package” funding would barely pay for the subway, let alone for the LRT line. That subway, remember, was originally advertised as costing only a few hundred million more than the Scarborough RT/LRT replacement proposal, and therefore cheap at the price.

Scarborough, and City Council, were conned on that, and will now be lucky even to see the subway extension if its cost estimates keep climbing. Meanwhile, the LRT is in limbo. Mayor Tory had hoped that a combination of federal and provincial money would save him, and the feds may well come in for their 40%, but that leaves a big gap. He hoped that the provincial budget would include a commitment to help pay for the Eglinton line. Nada. Not a penny.

In effect, the province has turned off the tap for Scarborough, and this puts the entire collection of projects in danger. Whether they will have second thoughts closer to the June 2018 election is a mystery.

Eglinton West LRT

The western branch of the Eglinton Crosstown was revived after the proposed SmartTrack mainline rail operation proved impossible. As such, this extension is entirely a City project, although they hope for assistance from both the federal government (on account of the airport), and from Mississauga for the portion of the line beyond Toronto’s boundary. Of course when SmartTrack was that mythical beast, a self-funding transit scheme, nobody worried about where the money would come from, but now, this is an issue between three governments.

Expecting Queen’s Park to chip in here would show great chutzpah on Toronto’s part considering that this segment was a signature part of Mayor Tory’s campaign.

Scarborough Subway Extension (SSE)

The ongoing comedy which is the “planning” for Scarborough has brought us from a substantial LRT network, to a subway with stations between Kennedy and Sheppard together with, possibly, an LRT line to UTSC, to finally an “express subway” stopping only at the Scarborough Town Centre.

The cost of this scheme continues to rise, and with a 30% detailed design over a year in the future, there is no way to know what the eventual cost might be. Toronto is out on a limb here because both the provincial and federal contributions are capped. There is even a disagreement between Toronto and Queen’s Park about the inflation factor that should be applied to the original “commitment”.

Recently, Toronto Council opted to increase the project cost with a partly underground bus terminal to facilitate property development at Scarborough Town Centre. That cost will be borne by the taxpayers generally across Toronto, not as a “local improvement” chargeable to STC’s owners.

Sheppard East LRT

It is no secret that plans for an LRT on Sheppard have been stymied both by Rob Ford during his term, and by a cabal of Scarborough politicians at City Hall and Queen’s Park would would prefer to see the Sheppard Subway extended further east. As an LRT, the line could have been open by now, but it sits with an indefinite future and no funding.

Finch West LRT

This is a Metrolinx project fully funded by Queen’s Park, and it is now in the procurement stage. If this project is not derailed by a change of government in 2018, or by municipal obstructions, it is intended to open for service in 2021 between Finch West Station (at Keele) and Humber College.

Waterfront Transit

Toronto is conducting a “reset” of past studies of waterfront transit, with some proposals dating back to 1990 and then-Premier David Peterson’s transit scheme that didn’t win him the election. For many years, the focus of studies has been in the eastern waterfront with development along Queens Quay and, eventually, into the Port Lands. An eastern branch of the Harbourfront line ran aground, so to speak, thanks to low-balled costs from the TTC and a general antipathy to LRT expansion during the Ford era.

Recently, political attention has shifted to the western waterfront thanks to the condo developments at Humber Bay, and the western LRT extension planning is back in view. Even though projected demand from the eastern waterfront is well above that from the west, the west has political support from allies of Mayor Tory and could actually displace the eastern line in priority.

There is no funding anywhere committed to either branch of the waterfront line, and the Ontario budget was silent on an important related project, the realignment of the Don River to provide flood control and to open the eastern waterfront for development.

Waterfront Toronto keeps hinting that they expect a funding announcement for the Don River project later in 2017, but there are no details about who would pay or in what proportion. It is unlikely that we will see anything definite on a Waterfront East LRT until the matter of the river’s realignment is settled and timelines for development are clear.

“Downtown” Relief Line

The DRL has progressed into the level of a detailed review pending a Transit Project Assessment, and $150 million was provided by Queen’s Park for detailed study of the route. From a political point of view, the line faces two major challenges. First, it continues to be portrayed by many politicians as a sop to “downtown” even though the primary beneficiaries will be those from the inner suburbs now jammed onto the BD and YUS subways. The benefit will be particularly strong if the route goes north to at least Eglinton, if not beyond to Sheppard.

However, work on this line, even if it can overcome political hurdles, won’t start until well into the 2020s and this is beyond the scope of any funding promises we might see in current budgets.

GO Transit / Regional Express Rail / SmartTrack

The key item in Ontario’s regional transit planning since the last election has been the Regional Express Rail program and the electrification of a substantial portion of GO’s trackage (the parts Metrolinx already owns). This will allow GO to improve service frequency, although the results will not be fully seen until 2024-25. Ontario is on the hook to pay for all of this, but it is not clear how a new government will approach the project, substantial portions of which have not yet gone beyond the study stage.

SmartTrack was supposed to be an overlay on GO with much more frequent service, but it now consists of six new stations on the combined Stouffville/Weston corridor (plus two on the Barrie line), as well as the Eglinton West LRT as noted above. This is a 100% Toronto project although some money may come in from Ottawa’s infrastructure program. From Ontario’s point of view, they are already contributing through the expansion of GO corridor capacity, and there will be no additional funding from them.

This begs the issue of whether the combined cost of the new StartTrack/GO stations plus the Eglinton West extension will rise above original estimates triggering a crisis similar to that in Scarborough. Both projects have not yet advanced to sufficiently detailed cost estimates to be sure on this.

The Big Move

Metrolinx is reviewing its regional plan, “The Big Move” with a view to publishing an update in fall 2017. In a major change from past practice, the province did not pre-announce services that might show up in the revised plan, and saved Metrolinx the embarrassment of rubber stamping what the Minister of Finance had already announced.

The budget does include reference to a “High Speed Rail” link to southwestern Ontario, but details have not been announced. If Ontario sticks with its original scheme from the last election of an express route that avoids portions of the high-tech corridor from Kitchener-Waterloo to Toronto, the HSR will be dead in the water. An announcement with more details is expected soon, but like many projects there is no funding for a major improvement to that rail corridor (or to building a new one).

Another vital piece of rail infrastructure is the proposed “missing link” that would divert CN rail traffic off of the KW corridor and CP traffic off of the Milton corridor. This would allow for increased service on both lines, but the freight railways might be excused for their skepticism. This is a proposal that requires a long-term commitment, something that Queen’s Park has little of these days.

The opposition parties, both the Tories and the NDP, have yet to give any indication of a transportation policy either at the municipal or provincial level. As an issue, transportation has slipped behind health care and education, a not unsurprising situation given that even with megaprojects underway, there is little to actually show as an improvement, and further funding would only address schemes for the medium to distant future, not for today’s problems.

Summary

Ontario’s budget is a disappointment in what it does not do for municipal transit in Toronto, but I have to take the contrary view that if this forces some real examination of priorities, the result might not be entirely bad. Ontario is spending elsewhere, although on a handful of high-profile projects, and large chunks of the province can reasonably wonder what they will see beyond the already announced gas tax bump.

The real challenges for Toronto lie in shifting local spending priorities from capital to operating budgets, and in the danger that a new provincial government could turn off the tap permanently as happened twenty years ago with Mike Harris.