Whose Transit System Will Serve Toronto?

The ongoing tensions between the TTC and Metrolinx.

By Steve Munro

Photo by {a href="http://www.flickr.com/photos/jlabove/6940061921/"}joshlabove{/a} from the {a href="http://www.flickr.com/groups/torontoist"}Torontoist Flickr Pool{/a}.

Just over a week ago, the turf war between Ontario and Toronto over control of transit projects spilled into the open, when the Toronto Transit Commission issued a report that was highly critical of provincial plans for the construction of the city’s four LRT projects. TTC management had little faith that Metrolinx (Ontario’s transit agency for the GTA) could deliver those projects on time, or that a procurement scheme shifting more risk and responsibility to the private sector was viable.

The question immediately arose: would the TTC challenge Metrolinx and force a debate on key points of transit project planning and delivery? But no; something odd happened.

Josh Colle and Peter Milczyn, two TTC board members who are often on opposite sides of an issue, scrummed before the formal meeting. They were quite clear that they and other commissioners were happy to have Metrolinx deliver the LRT lines. Management may have its professional opinions, they said, but the Commission makes the decisions.

TTC’s chief capital officer, Sameh Ghaly, presented the report via a 34-page PowerPoint slidedeck, and the commissioners’ lack of attention while he did so was striking (especially to those of us in the gallery more used to seeing public deputations, not staff, treated with scant interest).

TTC CEO Andy Byford all but washed his hands of the report, saying that it was the product of a request “before his time.” That’s a stretch, considering that the Commission asked for this report on January 31, 2012. Byford was already TTC’s chief operating officer, and well-known as a potential successor to then–chief general manager Gary Webster.

Byford tried to have it both ways when pressed on technical details by saying that Ghaly was his “subject matter expert” on engineering matters, but that this report was not about TTC obstructionism. TTC management flagged issues of concern, he said, but whatever the Commission decided, management would get on with the work.

This was not the robust defense of a major report one would have seen from Gary Webster, and the change may signal that the new CEO will sacrifice staff concerns to political expediency.

Commissioner Colle proposed an update to the staff report in key areas. Originally, a long clause detailed the TTC’s many activities in support of transit expansion projects. Gone. It was replaced by a TTC “commitment” to work with provincial agencies on project delivery, and by an acknowledgement that responsibility will now move to Metrolinx with TTC providing assistance. Another clause outlining concerns about alternative procurement methods was softened by a recognition that they were a “viable” way to deliver projects. An added clause directed management to conclude a Master Agreement between the parties by the September 30, 2012 Commission meeting. Where staff warned that ceding control could bring no end of problems, the Commission decided that launching these projects took priority. The problems, if any, could wait for another day.

What is really going on here?

The City of Toronto’s apparent position on transit expansion has been less than consistent for over two years. Even before the 2010 election, no major mayoral candidate endorsed Transit City in its original form, and some change was clearly in the wind for 2011. Rob Ford’s victory brought a switch in focus from LRTs to subways, a change with which Metrolinx colluded despite the absence of Council’s formal endorsement. In those early Ford days, what the mayor wanted the mayor got, and subways were the only thing on the agenda. For its part, Metrolinx preferred an underground Eglinton line because higher speed generates more demand—although the tradeoff for higher cost was never entirely clear. Now, with Council’s endorsement of the LRT network, Toronto is back more or less to the status of fall 2010.

Although Metrolinx used the TTC as consulting engineers and project coordinators, a move to enhance Metrolinx’s role from “oversight” to “implementation” goes back to April 2011. Nothing much seemed to happen for the past year because the City’s transit plans were in chaos. However, the legal authority for a provincial takeover had been in place ever since Metrolinx was created.

The province would fund projects, but would also own them, an arrangement designed to make capital debt vanish with a balancing asset, the new transit network. As owner and funder, Ontario gets to dictate how the lines will be built. That means public-private partnership (P3), now known as Alternative Financing and Procurement (AFP), delivered through Infrastructure Ontario (IO). In theory, this pushes some or all of the project risk onto a private sector builder in a fixed-price contract.

The premise of AFP is that the added cost of private financing and additional work on contract management will be more than offset by the value of the risk transferred to the bidder. “Risk” is a pseudonym for “unexpected changes”, and that “transfer” may pre-empt the opportunity to change designs once the contract is awarded. Whether a very large, complex project like the Eglinton LRT can be fully designed in advance remains to be seen.

Evaluating whether AFP is the right approach for any project will use a “Value For Money” process purporting to show how much AFP would save over business-as-usual procurement. This process is conducted by consultants working for IO, and it is not public. Only the most basic information about it will be released after the contract is awarded. For a government and agency so committed to AFP, it is hard to believe they would ever conclude it was not the best way to go.

(Infrastructure Ontario’s description of the Value for Money Process [PDF])

The AFP process inherently takes longer than the TTC’s because much of the work will be tendered as one big project. Far more upfront work is required on preliminary design and selection of a consortium with financial, engineering, and construction capability for the work.

This pushes the start date for actually building anything out into the future. These projects are already delayed by changes in provincial spending plans and the flirtation with Ford’s subway schemes. However, a hard end date of 2020 is a provincial target. This would compress much work into a shorter period. TTC management, supported by an external review of the plans, believes this is impractical, and that achieving it will launch so many concurrent digs on so many streets that the community effects will be unbearable.

Metrolinx does not agree, although they offer no evidence to support their position beyond the sense that through the magic of AFP, contractors will have the incentive to work faster, harder, and cheaper. They point to past TTC work (without mentioning specifics) and suggest that the TTC projects are chronically late and over budget.

With some or all of the financing cost now on private sector books, Ontario would also avoid paying for a project until it was delivered, or even until decades afterward. The borrowing cost might be higher, but the accounting is attractive, and maybe, just maybe, a private sector deal would be cheaper overall because they will better manage risk and design changes with their own capital at stake.

TTC management argues that the sheer scale of the projects will deter bidders because of the scale of financing required during construction. However, on a billion-dollar project like Sheppard East, half the cost is in vehicles, maintenance facilities, and system elements such as signals and power supply, all of which are separate from the construction contract. This leaves a half-billion or so for the privately financed component, about the size even the TTC regards as a suitable contract.

According to Jack Collins, Metrolinx VP of Rapid Transit Implementation, the Eglinton project is so big that Ontario will fund about 70 per cent of the cost up front, leaving 30 per cent for the private sector partner to raise.

Major interchanges such as Eglinton Station will be taken to 90 per cent design before work is tendered, says Collins, so that the TTC’s detailed input will form part of the contract. The TTC implies that this level of design would not happen until after a contract is awarded, thereby constraining their ability to influence the work within a fixed price and timeline. They cannot both be right.

The TTC wants to maintain control of the much simpler surface right-of-way design and construction because of the complexity of utility relocations. Metrolinx, according to Collins, sees this as work that a contractor could undertake from limited 10 per cent preliminary designs, although oddly enough, Metrolinx wants the TTC to have a role in this work because of their experience with utilities. Metrolinx cannot make up their mind whether they need the TTC’s expertise or not.

TTC wants a staged implementation with work spread over a longer period, but Metrolinx wants as much as possible to go through AFP on a tight schedule. With Ontario calling the shots, ideology will triumph and AFP will win whether it harms the overall schedule for provision of new transit lines or not.

Are you confused? Does this sound like a spin war to put each party in the best light, or do they simply not understand what each other proposes to do? Both agencies have a checkered history of project delivery. Neither has a perfect track record that justifies unquestioned belief in their claims or plans. For the largest transit project ever unleashed in Toronto, all $8.4-billion of it, neither party trusts the other’s motives or competence.

Can this be solved by political direction at Queen’s Park and City Hall? Will TTC and Metrolinx staff work together, and can their differences be reconciled? Will Toronto get a transit network from the best minds collaborating as partners, or years of wondering what might have been?

Metrolinx needs a chance to prove it can build major transit infrastructure, but the TTC’s experience and participation are crucial. Once the lines are built, the TTC needs to show it can actually operate an LRT network with better service reliability than the Queen streetcar. Toronto cannot afford to have either partner fail.

Toronto’s transit, so often wounded by indifference or interference by both levels of government, deserves good projects, well-designed and professionally executed, not a squabble between competing bureaucracies. Both are right. Both are wrong. Compromise and flexibility must rule so that building transit, not just endless talk, is the priority.

The real challenge for Metrolinx and for Toronto lies in the operation of new routes owned by Ontario. Who will repair the vehicles, track, power distribution system, signals and all the other bits and pieces of a transit system? Will fare revenue be split, somehow, between the “TTC” and “Metrolinx” portion of a rider’s trip? Will service standards and subsidy be based on TTC practice with costs shared across the system, or will Metrolinx force Toronto riders to make do with a lower quality of service to achieve a high cost recovery through the farebox? In all this, will Ontario contribute anything to the cost of operation of “its” rapid transit lines?

Metrolinx has a mandate for regional transit, but “regional” seems to mean whatever Queen’s Park feels like. The Sheppard LRT is a Metrolinx baby, but the Spadina subway extension to Vaughan Centre is a TTC operation, and Toronto will carry its net operating losses.

Queen’s Park does not want to talk about better municipal transit subsidies, but its region-wide transit expansion will fail if infrastructure funding is not matched by money for operations. That debate is just as important as whose logo is at the top of the construction signs and whether we paint the vehicles TTC red or Metrolinx green.