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Ontario Has Yet Another Proposal for Transit Funding

A provincially appointed panel has issued a set of recommendations on which new taxes would be the best for transit funding.

In September 2013, Queen’s Park appointed a Transit Investment Strategy Advisory Panel, chaired by Anne Golden, to review the Investment Strategy proposed by Metrolinx, the regional planning agency for transportation in the Greater Toronto and Hamilton Area (GTHA). The panel included representatives from all political views, business, labour, and public interest groups. Although this move deferred any immediate provincial debate about transit funding, it provided a chance for an arm’s length review of Metrolinx’s work. The panel has now released its recommended strategy for funding the so-called Next Wave of Metrolinx transit projects, including a new relief subway line for Toronto.

The fundamental problem is that the GTHA’s population will grow by 2.5 million people over the next quarter-century, and one million more cars will be trying to use the region’s road network—these developments will not be sustainable with current infrastructure. As the panel’s vice-chair, Paul Bedford, noted when the report was released, no urban region of over 11 million in population (the GTHA in 2038) attempts to operate without a robust public transit network.

We need one, and we need a way to pay for it. Here’s what the panel is recommending:

How Should We Pay

The panel proposes two alternatives for raising the needed money, each of which would involve a mix of revenue tools and a phased-in implementation process.

Option A Option B
Corporate Income Tax 0.5%
(beginning in 2015-16)
(beginning in 2015-16)
Gasoline and Diesel Fuel Tax (per litre) 10¢
(3¢ in 2015-16 and rising 1¢ per year thereafter until 2022-23)

(3¢ in 2015-16 and rising 1¢ per year thereafter until 2017-18)
Existing HST on Gasoline and Fuel Repurposed to transit funding Repurposed to transit funding
Additional HST None 0.5%
(beginning in 2018-19)
Total annual GTHA revenue when fully implemented $1.7 billion $1.8 billion

All of these taxes would be applied province-wide, but the revenue would divided regionally: 54 per cent for the GTHA and 46 per cent for the rest of Ontario (a split based on each region’s proportion of the provincial GDP). This would ensure that money raised in, say, Timmins, didn’t go to paying for transit in Toronto.

In either scenario, although there is an NDP-friendly corporate tax increase, the lion’s share of the revenue would come from existing and proposed taxes on gasoline and diesel fuel.

The most important strategic change the panel has made compared to Metrolinx’s earlier set of recommendations is to include debt as a financing tool. Metrolinx proposed a long-term revenue stream, but hog-tied itself with pay-as-you-play project financing. This would be akin to building a house and paying for work out of your weekly income rather than through a mortgage. Large projects such as a new Toronto subway would either suck up so much of the annual funding they would elbow everything else out of the way for several years, or, if only a slow drip of money from a shared revenue stream were available, take an eternity to build.

The panel proposes that debt be used to accelerate work on transit projects, limited by a debt-to-revenue ratio of 2.5. This aligns with the provincial auditor’s recommendations, and would allow the debt to be retired fairly quickly.

Acknowledging another problem—namely, that project-specific funding gets reallocated as governments change—the panel emphasizes that the funding process must be transparent, with new revenues and project costs tracked publicly, and separate from general revenues.

The panel also rejected, or wants to delay, some revenue tools that Metrolinx had recommended. Among them are road tolls (which are good at shifting people from cars to transit, but depend on transit being in place to accept the new demand); land value capture (a charge on developers who benefit from new transit lines, the revenue from which is hard to estimate in advance); and parking levies (which are politically unpopular and complicated to implement since there are so many types of lots—major malls, local stores, business and industrial areas, etc.).

What Should We Build

Recent debates over the Scarborough subway highlight a major problem: much transit planning right now comes via ad hoc decisions based more on political interference and pandering than on clear-eyed evaluation of projects’ relative merits. The panel was originally charged with looking at the financial question—how we raise the money—but decided also to make recommendations about which GTHA projects are the top priorities, perhaps in an effort to combat that ongoing political struggle.

The criteria transit projects must meet in order to be funded, according to the panel: they must help ease congestion; form part of a network; align with locations of employment, public, and community institutions; be appropriate for their demand, cost, and environment; have a practical timeline; and provide tangible benefits and improvements.

Based on that, the panel extracted a group of projects from Metrolinx’s Next Wave list, the first three of which in particular “are expected to deliver the highest ridership, provide the most congestion relief, create connections to employment in the region, and establish the needed backbone of a region-wide rapid transit network”:

  • The Toronto relief subway line
  • Two-way all-day GO service (already implemented on the Lakeshore line)
  • Hurontario LRT
  • Union-Pearson Express (UPX) electrification
  • Yonge North subway (initially to Steeles, and to follow after the Toronto relief line)
  • Priority portions of other projects in Hamilton, Durham, Dundas, and Brampton

Given all the competing interests at play, even this list will be controversial.

The panel also advises that all transit projects (including the ones on its own short list) should undergo an updated business case analysis (BCA). The challenge for any evaluation scheme is to ensure that it is applied consistently, and that underlying data such as ridership estimates are not fudged to boost credibility. Metrolinx is preparing a more consistent, rigorous format for its BCAs—whether the new format will prevent politicians from freelancing and making changes to established plans at will and by whim remains to be seen.

Money for Local Transit Priorities

A regional transit network is useless without local transit service, just as expressways serve no purpose without local roads. Metrolinx had proposed that 25 per cent of any new revenue be set aside for municipalities, which could use it for either capital or operating expenses. This would not bring provincial funding back to its former level in Toronto (Queen’s Park used to cover half of the TTC’s operating deficit—the difference between farebox revenue and the total cost of running the TTC—and at least half of capital costs), but it is a start.

The panel concurs with this proposal, but adds its own “Kick-Start Program” to allow local systems to upgrade their service in the very near term. No major rapid transit project can possibly yield benefits for a few years at best, given construction timelines, but it is important for the public to see real improvements soon. The panel is therefore recommending that the province create a fund specifically for 2015 and 2016, to correspond with the implementation of new taxes. It suggests the province kick in $150 million per year, with municipalities contributing 20 per cent matching funds. This money could not be used to offset local taxes or fares—the intent is to make visible changes that will produce better ridership numbers quickly.

The one wrinkle with this program would be what happens after that kick-start money is finished, and municipalities need to keep paying for the newly created service entirely on their own.

Planning Ahead

Although The Big Move and the Ontario Growth Strategy are due for review in a few years, the panel urges that these both be brought forward to 2014 and that work on the plans be coordinated so that transit and land-use goals mirror each other.

The panel urges that the federal government (described in the report as “missing in action”) be part of future transit funding, contributing up to one-third of future Next Wave projects. However, the panel does not make this support a pre-requisite for any projects going ahead. If Ottawa comes to the table, this will reduce the burden of the next round of projects, but transit progress in the GTHA cannot be hostage to the political moods of a government with little historical attachment to transit funding.

What Happens Now

The Transit Panel’s recommendations go to the government for review and should inform proposals for the 2014-15 budget—not to mention the almost inevitable provincial election campaign this upcoming spring. The Tories will almost certainly continue to claim that new transit can be funded entirely from internal savings and efficiencies in government, while the NDP will likely press for higher contributions from the corporate sector and much lower ones from taxes that are paid by individuals. The election, however it comes out, will endorse one of three transit funding philosophies.

At the press briefing, Anne Golden was asked if the panel’s report was doomed to sit on a shelf collecting dust, like so many that have come before. She replied that she hopes the diversity of authorship and support will help minimize partisan interference, and that the media will do their part in showing the public the benefits that could flow from the recommendations. That is an optimistic outlook, to be sure, and the public’s jaundiced view of transit plans and political wrangling does not bode well for any plan that doesn’t have sustained support in all quarters.

This is no time for the provincial or municipal governments to drop the ball on transit support. Plans need review and validation, but we cannot afford inaction. The question is quite simple: Does the Ontario government want to build an extensive, modern transit network or not?

As Golden said late in the briefing, “Cynicism is not an excuse to do nothing.”



    Why define a corporate tax hike as “NDP-friendly”? Surely it’s friendly to people who don’t own cars, but still have to get to work. And in that way, it’s actually employer-friendly, because it means employers can draw their labour force from beyond walking distance from their offices, and pay less than is required to be able to own and park a car in the city.

    • TorontoistEditors

      Because it’s the revenue tool they have been specifically advocating for.

      • swen

        Why not?

  • tyrannosaurus_rek

    Other than the slight corporate tax increase, it’s another scheme where the rich pay disproportionately less than everyone else.

    • HotDang

      They need to do away with tax brackets and have a tax asymptote.

    • Patrick_Metzger

      That’s fair; the rich don’t use public transit.

      • tyrannosaurus_rek

        It doesn’t matter where the money is going, the taxes are pegged to driving-related costs, costs which represent a much larger slice of a Rexdale family’s income than a Rosedale family’s.

        User-pays is fair when we’re talking about optional, above-and-beyond services, but public transit is an essential service, one that benefits everyone (even those who can afford to drive everywhere) and critical to the operation of the province’s economic engine.

        • Dinah Might

          But don’t rich people drive bigger, more gas-guzzling cars, and thus buy proportionally more fuel? Not to mention their speedboats! :-)

          • tyrannosaurus_rek

            Hmm – should sail boats be considered a form of tax evasion? ;)

          • swen

            You said well “hungry eyes” but they DRIVE or they are driven, do not use TTC.

            Metropass should cost 200$ that is the real value of it. Me as a driver I have to pay ever month 346$ car payment + 200 insurance + 400$ gasoline + 100$ parking…And I am not rich. Every Cyclist or pedestrian is more loaded with cash than any driver…( I do not own my business so I can claim all this on taxes)…

        • andrew97

          Of course you’re aware, the idea of gas-tax-for-transit is that you make driving more expensive, therefore encouraging everyone to make environmentally friendly choices — including transit, but also other things like walking and living closer to work.

          • tyrannosaurus_rek

            Of course, but guess who can absorb that extra cost and drive as much as they want and live wherever they want.

          • Lee Zamparo

            Lower income families can be compensated with increased HST rebates. Anything beyond cursory work to ensure the proposal squares with the principles of progressive taxation is beyond the scope of this commission; that responsibility lies with government.

          • Testu

            HST rebates don’t do a lot of good if you don’t have the money to spend in the first place. Unless you’re suggesting they use the HST rebate to help pay back the payday loans they had to take out to pay for gas to get to work.

            This is a reality for some people in this city.

          • dsmithhfx

            The catch-22 is that there is no more rider capacity for transit to absorb.

          • swen

            I would not sit on a bike or use clunky TTC that takes me 1 hour to get to work.With car 20 min top.Bike I will not use for one simple reason.THIS IS NOT CALIFORNIA.7 months of winter is not pleasurable to endure…

        • swen

          We need to remove unions on all levels and implement different ways of funding formulas.I do not understand why I have to fund someones pension?This city mentally is stuck in the 60′ties in the time of wealth.Did you know even if we live here we are competing GLOBALLY. We are sinking deeper and deeper with borrowed, money provincial government that does mind spending 2 billion dollars on various schemes and mismanagement and now they are asking me to pay extra 10 cents on the pump???This is beyond shameless! I serously do not think that a cent should be spent on this.But on the other hand from GST we can dedicate 2% of our money and pour it into whatever we need…so lets say PST GST is 15% take 2% of sales tax and use it for transport…

      • Paul Kishimoto

        The rich use the roads, which occupy a far larger share of the city’s land area than does public transit infrastructure. That’s not fair.

        The roads, which the rich use, are less congested in proportion as less-rich people use public transit. It’s fair they should pay for faster travel.

        • swen

          Are we living in Communism or Capitalism?
          What is fair in this life? Enlighten me please.2 billion dollars wasted on “E-health” “Ornge”…cancelled Gas Plants and now they are asking for handouts ??? Cancel a all day daycare.There is some serious money there.

      • Facepalming_Brooklynite

        What is your evidence for this claim? A lot of people who work on Bay Street commute by subway.

  • wklis

    Don’t you know that Lord Voldemort, AKA Tim Hudak, will just conjure up subways by the wave of his magic wand?

  • Paul Kishimoto

    The panel *itself* helps make the items politically viable, because the government can claim to be “adopting the recommendations of an expert panel” instead of “proposing tax increases”.

    Any political opposition can’t resist doing its best to make the latter narrative stick, but now the former is available as a counter-narrative.

  • Paul Kishimoto

    The points about fuel economy, VDT and alternate powertrains are really important—yet seem to be totally missed in the article.

    Not only that, but the taxes are specified in *nominal* cents. With inflation, a 5¢/litre fuel tax brings in a few percent less in *real* terms next year (i.e. buys a few percent less concrete for subway tunnels, or a few percent less of a new LRT vehicle) than it does this year. In the U.S., there hasn’t been political will to raise the federal fuel tax since 1993. Due to inflation during that time, it brings in 32% less per gallon than it did then.

    • Steve Munro

      I did not cover all of the fine details of the panel’s reasoning to keep the article down to size. They are aware that fuel economy and use will drop, but point out that in the short term, the number of cars will rise faster than the consumption/car will drop. In Option A, the level of tax begins at 3 cents and grows to 10 over 8 years, half the period of the program. Similarly in Option B, the gas tax tops out at 5 cents, but then the HST bump is added. Nothing prevents further increases, but to finance the selected projects, they are not required.

  • dsmithhfx

    Which other government? The two opposition parties are no more credible than the incumbents. Each have horrible track records while in power. Tim Hudak is a blithering idiot who couldn’t win an election against a turnip. Horwath has taken to puking “hard-working families” pablum all over her shoes. Neither have fronted a viable transit-building plan or viable-anything plan.

  • Peter

    This report was nothing but a stalling tactic for the governing Liberals. This panel was passing a political football to Kathleen Wynne’s friends, if not a total waste of time.
    Why do I say this? Let’s be honest–we all know politics is king in Toronto and Ontario, no matter what a rational, independent, rigorous external review will suggest. If a politician has his/her neck on the line and wants to win their seat, that’s when things happen.
    We should all admit and accept politics rules transit planning (and lack thereof) in this city and move on from that basis. Enough of the studies, enough of the panels, enough of the pretense of having an informed rational debate and an informed citizenry. Public transportation always was and always will be at the mercy of political egos.
    Furthermore, the Liberals are too chicken to implement new taxes and lose their governing status, as tenuous as it is, the PCs have their heads in the sand and think government cuts are all we need, and the NDP has for some reason abandoned public transit.
    None of the lines recommended in this report nor the Big Move will ever get built and this report will go on the same shelf to collect the same dust as all the other reports on GTHA transit.

  • Peter


  • Don River

    How soon until they appoint another panel to review the findings of this panel?

    • Peter


  • coolioblob

    Increasing corporate tax is not the answer. There’s a reason why Cisco just invested $4B in ontario with 1,700 jobs – thats because the tax rates are not high. Increasing corporate tax rate will just drive away business and investment. Rather… the taxes should all be coming from fuel. It’s a no brainer. It’s done in Europe – and thats how they get their awesome transport system. Increased gas prices provides more funding to develop public transit, and provides additional incentives for people to take public transport, reducing congestion. Simple formula.

    • MER1978

      Right… meanwhile we were told throughout the recession that we absolutely had to go through with corporate tax cuts otherwise there would be dire consequences… fast forward to now and the Bank of Canada has repeatedly complained about Canadian corporations sitting on billions that should be invested in the economy.

    • MER1978

      Our low taxes didn’t prevent Heinz + Kellogg from closing processing/packaging plants recently.

      We need to start expecting actual results from corporations for reduced taxes and handouts… the status quo is not good enough.

  • coolioblob

    0.5% makes a huge difference. There’s a reason why Cisco is investing 1700 jobs / $4B in Ontario. It shouldnt come from corp taxes; it should come from gas.

    • Allan Madan

      A 0.5% corporate increase will not deter companies from investing in Ontario at least based on historical trends.

  • Lee Zamparo

    The economy in Ontario (and Canada, and elsewhere) was being eviscerated by the Great Recession. No government was willing to propose tax increases, no matter how well intentioned or justified.

  • Allan Madan

    we apparently don’t fund consultants and urban planners with any sense of long term vision either…