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Metrolinx Issues Short List of Transit Funding Tools

The region needs at least $2 billion a year in new money to build transit infrastructure; today we got closer to a specific proposal for how to raise it.

The regional conversation about transit—our lack of infrastructure, and how to pay for building more—kicked into higher gear today as Metrolinx (the provincial agency that oversees transit planning in the Greater Toronto and Hamilton Area, or GTHA) issued a short list of new funding tools it is considering to raise the needed money. That list will be further shortened over the coming weeks, with a final proposal being announced on May 27.

On today’s list: a wide range of tools, including everything from a sales tax increase to a rise in transit fares.

Metrolinx arrived at its short list after studying the implications of 25 potential tools, and holding public consultations across the region. In those consultations, president Bruce McCuaig summarized, residents emphasized four principles that needed to guide any decision: new revenue tools need to be dedicated specifically to transit projects; they need to be fair, “so there’s a link between how much people are contributing and the kind of benefits people receive;” they need to be regionally equitable, so that municipalities receive benefits that are “commensurate” with their contributions; and there needs to be complete transparency—people need to know how the funds are being managed and how projects are being delivered.

Metrolinx’s short list includes the four tools endorsed by the Toronto Region Board of Trade a couple of weeks ago; of those four, three were also the “clear preference of a majority” of participants in the public consultations. This gives us the beginning of a consensus: there are three tools which right now are out in front in terms of support. Those three tools are:

  • Parking space levy: this would be charged to property owners for non-residential, off-street parking (think malls and commercial lots). At a rate of $1 a day, this would raise $1.4 billion a year.
  • Sales tax: This would be an increase in the HST that we all currently pay at the register. At a rate of 1 per cent, it would also bring in $1.4 billion a year.
  • Fuel tax: Added at the pump, a five cent per litre tax would raise $330 million a year.

Those three tools, in total and at those rates, would raise about $3.1 billion a year—more than the $2 billion a year Metrolinx is aiming for. (Many transit experts think that is a low-ball number, however, and that we won’t be able to build and operate all the transit that we need with the $2 billion alone.)

The tool that is both on the Board of Trade list and Metrolinx’s list but which didn’t receive public support was a toll on HOV (high occupancy vehicle) lanes for drivers who are alone in their cars but want to use those less-busy lanes anyway. That would raise only a relatively small amount of money—an estimated $25 million a year at 30 cents per kilometre—but is an example of the kind of tool Metrolinx has on its list because it satisfies another policy objective: correlating revenue tools with changing behaviour.

The other seven tools on Metrolinx’s short list—

  • Payroll tax: this could be levied either as a percentage of employees’ pay or based on the number of employees a company had. Estimated revenue at 0.5 per cent: $700 million a year.
  • Property tax increase: this was widely rejected at public consultations. From Metrolinx’s report: “Across the board, GTHA participants agree that property taxes are already maxed out.” Many were also concerned that this would be unfair, since different municipalities pay different property tax rates. Estimated revenue: $670 million a year.
  • Vehicle kilometres travelled fee: this would be an entirely new kind of mechanism, which would see drivers charged for each kilometre they travel within the region, or a designated portion of the region. At three cents per kilometre, it would raise $1.6 billion a year, but there are many questions about how it would be implemented, and what the costs of creating such a new system might be.
  • Highway tolls: in contrast to the HOV lane tolls listed above, these would be tolls on all lanes, applied on designated highways. These were also widely rejected at the public consultations. At 10 cents a kilometre, tolls would raise $1.4 billion a year.
  • Development charges: this is a one-time charge that a developer would pay either on new construction or in some cases on redevelopment as well; at a 15 per cent increase, it would raise a relatively modest $100 million a year.
  • Transit fare increases: probably the most surprising item on the list—TTC Chair Karen Stintz expressed concerns about this specifically because transit agencies like the TTC need fare box revenue to pay for operating costs, to cover the drivers and fuel and maintenance they need to keep the infrastructure that’s been built actually running. A 15 cent per ride increase would yield $50 million a year.
  • Land value capture: this would be a mechanism that allowed the government to collect more money from properties which go up in value due to their proximity to new transit lines. No specific estimate was provided as to the revenue it might raise, but McCuaig said it would be at the low end of the tools under consideration.

The City of Toronto has been conducting its own public consultations on transit funding; the results are expected to be released in the coming weeks. City council will debate this issue, and come up with its own set of recommendations for Metrolinx to consider, possibly as soon as its May 7–8 meeting. At a separate press event that took place at the same time at the Metrolinx announcement, Mayor Rob Ford was asked for his reaction to the short list of funding tools. His response? Pretending to vomit.


  • Luckysod

    Sorry to see that congestion charges didn’t make even the long list, let alone the short list. It would not only raise $$ for transit, it would improve air quality and the quality of life in the downtown areas.

    • gg

      Are there estimates at how much it would raise?

      My guesstimation is that it wouldn’t raise much money, but would raise a lot of ire.

    • HamutalDotan

      Actually, it did. The long list is the set of tools discussed in this report – – starting on page 35. According to that estimate it would raise $100-200 million a year (so not very much, given the range of options). It wasn’t supported in public consultations, according to Metrolinx’s summary, with people “see[ing] it as expensive to implement and…having an adverse effect on the economy in downtown Toronto.”

  • tyrannosaurus_rek

    A company-wide payroll tax doesn’t make sense to me, but a commuter payroll tax (where municipality of employer and residence do not match) does.

    • Testu

      Why not company wide? Every business in the GTA benefits from improved transit, whether it’s their employees being able to get to work or the company being able to get their products and supplies shipped more quickly or customers being better able to access the places their products are sold.

      It’s interesting that the Toronto BOT neglected to include a payroll tax in their list of recommendations. Their members stand to benefit the most from improved transit and reduced traffic congestion. Of course it would come at a cost to their members as opposed to externalizing the cost to the consumers/employees while they reap the benefits.

      • tyrannosaurus_rek

        Because it comes at the expense of the employees rather than the company: either it’s withheld from your pay cheque regardless of your mode of transportation, or it’s a disincentive to give raises (or hire more staff). A commuter payroll tax at least recoups some transit/road-use-related expenses nonresidents don’t pay for in their property taxes, but which they personally benefit a great deal from.

        • Testu

          And what prevents companies from withholding raises and/or docking pay for a commuter only tax?

          If a company is going to pull those kind of outright anti-labour shenanigans they’re going to do it regardless of how the tax is applied.

          And a payroll tax is not any more of a disincentive for raises than any other kind of corporate tax.

          • tyrannosaurus_rek

            Nothing prevents them, but it wouldn’t effect non-commuting employees (which are probably the majority in most places) to the same degree.

            And withholding a raise because it isn’t in the budget is par for the course, especially over the last 5 years.

          • Testu

            I’m aware that it’s a common reason for avoiding raises, what I’m saying is that the same could be said of absolutely any corporate tax. So you’re stuck with never adding to the corporate tax burden to avoid a situation that has been fabricated by people with an interest in not paying any more corporate taxes.

            If what you say is true and a commuter-only tax would cover significantly fewer employees in the average GTA business then it would massively reduce the effectiveness of the payroll tax for revenue generation.

          • tyrannosaurus_rek

            Yes, it wouldn’t be as effective at generating revenue as a flat payroll tax, but I haven’t suggested it is the only revenue generator we should be using.

          • Testu

            Absolutely, we should be using every method available to help raise funds for transit infrastructure. However, I also believe that we shouldn’t hamstring a potentially effective (and arguably fair) revenue tool for the sake of appeasing “job creators”, so that they don’t start withholding raises.

          • tyrannosaurus_rek

            Appeasing “job creators”? My opposition to it is concerned with the potential impact on employees, not currying favour with their bosses.

          • Testu

            If you’re willing to deny your employees raises because a relatively small payroll tax puts you “over budget” then you’ll do it whether or not it affects only the commuters because it’s a good way to cut down on raises in general.

            Besides, what happens to the people who commute from out of town in your scenario? Are they discriminated against when hiring or selecting for advancement because they would bring an additional tax burden to their employer? (hint: Yes, if the tax applies only to them)

            My point is that any organization willing to act in such poor faith over a payroll tax is going to do it for any and all taxes.

          • tyrannosaurus_rek

            … in which case they already are doing it. This still leaves us with the recouping and user-pays-preferred fairness points.

          • Testu

            Yes, it does. And as pointed out earlier the commuters are not the only users. If “user-pays-preferred fairness” is your goal then it still makes sense to apply the tax to all payroll because the everyone in the business is benefiting. You could balance the fairness aspect by adding tolls to the major commuting routes and/or distance based fares.

          • tyrannosaurus_rek

            Every resident in the business is already paying for the benefits of transit via their property taxes, and will pay again if a sales tax is implemented in the city, while nonresidents will continue to pay less than their share.

  • david

    Hurry up already. Every city but this has a major transit plan already rolling out. Thanks for nothing Rob Ford and your gang.

  • iSkyscraper

    If you read the report, they made some pretty glaring errors in leaving out context. For example, a fare increase is an easy way to raise more money, and sure, it has been done before. “Baltimore did it!”, the report says. Well, yeah, except it costs $1.60 to ride the subway there, or $64 a month, so they clearly had some room in their pricing. You can’t say the same about the TTC, which is the most expensive transit system to use already and pays the highest percentage of costs from the farebox of any system. It is fundamentally wrong to ignore this context.

    Commuter tax sounds nice, but NYC had theirs found to be illegal. Yes, yes, different countries, different judicial systems, but I suspect a commuter tax for the GTA would face legal challenges.

    Go with a blend of payroll, fuel and sales taxes. That’s how most cities do it.

    • tyrannosaurus_rek

      I suspect half of the suggested tools will face (or be threatened with facing) legal challenges by various special interest groups.

      New York City may have had to give up their commuter tax, but New York state implemented one for non-residents. Toronto also doesn’t have any/a significant number of commuters coming from outside the province, and the cross-border taxation problems that presents.

    • Paul Kishimoto

      I’m still reading, but how does one get from a critique of leaving out context to a suggestion to just do what most cities do—i.e. to ignore the GTA context? Of the top 3, why do you omit the parking space levy?

      —The idea of “room” between the current and some “maximum” transit price doesn’t make sense. Demand changes continuously with price, all the way down to free fare and up to zero riders. This relationship differs from city to city. Choosing any maximum price besides “zero riders” involves a public debate: “it’s too expensive when X is paying Y% of their income as fare”; “it’s expensive *enough* when Line/Route Z is not over capacity”, etc.
      —Far from showing a fare increase is “easy”, the report’s numbers are ammunition against those who say transit users should pay. We can reply, “Sure, jack the price up 15¢, but we still need another $1950 million per year. Or add $1.50 if you like, but that’s still only a quarter of what’s needed. What *else*?”

      • iSkyscraper

        Any solution must be a solution that has been already tried and tested and deemed successful elsewhere. We are not smart enough, nor do we have the time, to reinvent the wheel on this stuff. But any solution also must take into account the local conditions to determine if that proposed solution is in fact applicable to Toronto. In the case of fares, it is not.

        The “room” of which I speak was the difference between highly subsidized systems like Baltimore (<30% farebox recovery ratio) and cities like Toronto, SF, DC, NYC (~60-70%). All cities are unique, yes, but there are also many similarities. The experience of dozens and dozens of cities suggest that there is an upper limit to what you can charge people to ride. If you are far below this limit you might justly re-examine your policies of how much to subsidize and how much to charge in fares. But Toronto is maxed out based on the experience of every. other. city. in. the. world. (Japan and Hong Kong excluded, obviously.)

        I do agree that at least the report points out that there is not a lot of money to be had in a fare increase. But I worry about the uneducated Ford trolls wanting the blood of transit riders and requiring a fare increase if they have to pay any more taxes or fees. If the TTC was the 5th or even 3rd most expensive most expensive system in North America I could maybe buy into it. But when you are already #1 in fares (monthly, most cash fares, senior fares, etc) it is not appropriate to suggest further increases. Something is broken, look elsewhere.

        • Paul Kishimoto

          I understand what FRR is, but you cited Baltimore on absolute price. It seems that wasn’t what you meant. It is still non-obvious to me that either demand or revenue peak at and decline beyond some threshold FRR which is constant across _____. I did some poking around for research on such a relationship, but couldn’t find any.

          Excluding Japan, Hong Kong and Singapore goes with “we are not smart enough”—the curse of low expectations. Even while being realistic and pragmatic, I think it’s important to point out the best-case scenario in a positive tone. Innovative ideas should still be explored but not, I agree, at the expense of delaying the actions most certain to work.

          Again, I see the report as neutering the argument for fare increases. If they were not mentioned at all, it could have undermined the perceived credibility of the report. Some people will still raise the idea, but—if journalists do their part and cite the report after such quotes—they will do it at the expense of their *own* credibility.

          Anyway, back to reading!

          • iSkyscraper

            The quoting of absolute price was a ploy to make the concept easier to understand for any uneducated Ford trolls reading the comment. They are not ones for complicated financial details.

            I reject wholly your argument that excluding Japan, Hong Kong or (thank you) Singapore makes for low expectations. Toronto is absolutely not those cities geospatially or in any other way. It is a comp to North American cities like Chicago, New York, maybe Philly, Boston and SF. I usually try to ground my arguments in a North American context but could not resist the near-global data on FRR.

            I suspect you are not trained as an engineer. I am. We tend to look for practical, empirical data to apply along with the theory. That’s why I’m so wedded to best-practices concepts.

            Now please excuse me while I go fight the good fight beating up Ford trolls on the Sun comment boards.

          • Paul Kishimoto

            Actually, I am a trained engineer. I must have I missed the class where they taught how to use that fact to end arguments.

          • iSkyscraper

            Well then, I apologize sincerely for the mischaracterization.

  • Eric S. Smith

    I kind of like this “toll lottery” idea:

    Seems less ethically dodgy than slot machines — how broke can a compulsive gambler go on road tolls?

    • dsmithhfx

      On the 401 you gamble with your life.

  • Steveinto

    We can guarantee that transit fares will rise. No politician is afraid to admit that. But they all skirt around the idea of revenues coming from drivers.

    • Walter Lis

      The TTC and GO are the LEAST subsidized public transit agencies in North America already.

    • Eric S. Smith

      The worst part is that the transit fare increase only gets you $50 million. That’s the lowest yield of any of the options, and against a $2–3 billion target. Development charge? Twice as much revenue. Gas tax? Six times. But we know which option will be considered first.

  • Peter Clarke

    Wait a minute here! The majority of these preferred new tax revenues are directly aimed at the auto industry and car drivers! Parking and fuel tax. A payroll tax on banks, corporations and unions in Ontario alone could raise close to $3 Billion annually compared to a 1% sales tax of $1.4 Billion a year?

    • OgtheDim


      Like almost every single business in this province?

      Look, at least when you throw out that word, be real. A corporation tax is a tax on every business in this province.

      And that money is going to come from users.

    • Point Made

      Private autos are responsible for 99% of all traffic congestion.

      • Yuck

        Did you also know that the sprawling parking lots around malls and other big box type developments are not taxed at the same commercial rates as the stores that they are attached to?

    • Paul Kishimoto

      —”A [unspecified, but probably 2%, given the numbers above] payroll tax [increment]…”
      —Are banks not corporations?
      —Are unions not tax exempt? How is ending the exemption connected to transit?
      —Nothing is aimed at the auto *industry*. People can buy all the cars they like; it will just cost more to fuel them and to use roads and parking spaces.

      If this is the kind of reasoning on offer, no one is going to click your link.

  • torontothegreat

    Yay, equalization payments fucking us over!!! Thanks Trudeau!

  • Phil

    Wow the projected amount that could be raised from a tax on parking spaces is $1.4 billion? If it was up to me I would pick the sales tax, but a parking space tax strikes me as politically appealing since it would be relatively small for individuals and a larger percentage would be paid by large property owners like office towers and malls. Aren’t parking lots given a break on property taxes in Toronto already? I remember hearing that, but I can’t find a reference.

  • rick conroy

    I’ve heard of outsourcing jobs to other countries, but I’m not sure I want Metrolinx to be “the provincial agency that overseas transit planning”!

    • Torontoist

      Ha! Thanks for pointing this out to us. We’ve made the correction above.

  • yorkcountygirl

    In the last two tax years I paid an average of 2300.00/year to travel
    the 407. Yup folks that’s what we have to pay to get around in York
    Region. 407 charges 27 cents per kilometer to and from work, plus 70
    cents to get on each direction, plus $3.50 per month for the joy of
    having an account with them. Then of coursed GST is added to all those
    fees. Metrolinx proposed 10 cents a kilometer looks like a bargain to
    those of us living in the 905. I wonder if the new rates will apply to
    us? Not a chance!

    • Paul Kishimoto

      “The shareholders of Cintra, Macquarie and SNC-Lavalin thank you for your patronage for the next 80 years, but respectfully decline to give up any part of their profits on your $2300 for transit improvements in York region.”

  • matt

    I think the till is the best idea because:
    1. people who use it would only have to pay
    2. won’t have to worry about any added taxes on stuff and
    3. No fare hike

  • matt