Skip to content

Canadian Urbanism Uncovered

Paying for transit in the GTHA: The big four

Read more articles by

The Toronto region is very congested, and if it is going to continue to grow, it needs more and better public transit. At this point in time, most people in the region seem to accept this idea.

The elephant in the room, of course, is how to pay to build more transit. The province’s regional transportation agency, Metrolinx, has a plan called The Big Move that identifies what needs to be built. This plan covers the Greater Toronto and Hamilton Area, referred to as the GTHA.

The provincial government put up a considerable amount of seed money to get this plan started — $11.5 billion across the region, of which $8.4 billion is going to Toronto to pay for the Light Rail Transit lines now going in on Eglinton/Scarborough, Sheppard East and Finch West. But that was just to prime the pump — the rest of the plan will need some $50 billion over 25 years in order to get built, and it looks like that money is going to have to be raised in the GTHA. (Note: all funds are in 2010 dollars, which is what has been used in all discussions of the plan’s funding).

Metrolinx was supposed to have a proposal for raising this money in 2012, but that got delayed until 2013 (after the provincial election, perhaps not coincidentally). Metrolinx has to present a proposal for raising this money in 2013.  The deadline is coming up soon, and it’s time for the inhabitants of Toronto and the rest of the GTHA to talk about what kinds of funding model (read: taxes and fees) they would accept in order to pay for transit.

The delay in the funding plan may have turned out to be useful, in the end, because Toronto’s transit drama of the winter of 2012, when Mayor Ford’s plans for a subway on Sheppard collapsed because there was no reliable funding model, made everyone aware that the city would have to raise money to build transit. Even Ford himself and right-wing members of his executive committee started proposing fees and taxes to pay for transit construction.

The problem with all of the funding plans that have been proposed by members of Toronto City Council is that they are nowhere near enough. They might raise $100-$200 million a year, but Metrolinx’s plans will eventually require $2 billion a year to get built. A single, modest tax is not going to cut it.

The better news is, any funding mechanism proposed by Metrolinx will cover the entire GTHA. For one thing, that means a lot more people contributing. Equally important, it means that one of the primary objections to any tax imposed only within Toronto — that people would drive to the suburbs to avoid it — no longer applies. The new revenue tools will cover the entire GTHA, meaning that any drive to get away from it would be long and inconvenient, minimizing that issue.

In 2010, the civic organization CivicAction released a study, “Time to Get Serious: Reliable Funding for GTHA Transit” (PDF),  that looked at the various revenue options available to Metrolinx (disclosure: I was part of the working group that prepared this study). Over the next few days, I’d like to look at the “big four” — the four possibilities that would raise serious amounts of money — assessing the advantages and disadvantages of each one and providing a forum for discussing them.

The “big four” revenue possibilities are:

In all likelihood, a combination of at least two of these will eventually be required to pay for new transit.

I’ll then briefly survey other possibilities that would raise smaller amounts of revenue.

I’m going to look at each one through four isssues:

1) How much would be charged?

For the big four, I’ll look at how much would need to be charged to raise $1 billion. These amounts will be based on the estimates in the CivicAction report, so they are by no means exact, but they provide a ballpark figure.

2) How much would it cost to implement?

A revenue mechanism that is expensive or complicated to implement becomes a less appealing option.

3) Does it provide a behaviour incentive (positive or negative)?

Since Toronto’s problem is congestion, a tax that helps reduce congestion while also paying to build transit creates an additional benefit. Taxes that increase the cost of driving would encourage behaviour change that would reduce the number of cars on the road and, moreover, increase transit use and revenue. So a behaviour incentive creates an additional potential benefit towards reducing congestion, on top of providing funding.

But some taxes can also create unappealing behaviour incentives that could cause other problems.

4) How politicially viable is it?

No tax is ever appealing, but some taxes are less appealing than others.

The one factor that is a basic requirement for political viability is that all funds will be directed towards transit. Referendums in the United States have shown that new taxes can be politically feasible as long as they are directed explicitly towards funding transit projects (and sometimes other transportation projects).

Since one of the goals of this series is to get a discussion going, I’m going to encourage discussion about each of these options in the relevant post.

Tomorrow: the Commercial Parking Levy

Recommended

20 comments

  1. Looking forward to this series.

    (pretty sure the transit drama was in the winter of 2011, not 2012)

    M.

  2. I support all these taxes except a regional sales tax. This is because a sales tax does not discourage car driving. Also, wherever the border of the region is, there will be stores just inside that border that are at a competitive disadvantage with their neighbours just outside the border.

  3. Thanks for this post. Transport Futures initiated a rational conversation on mobility pricing measures in November 2008 – measures we’ve been calling “the elephant in the road”. Working with 60 global experts and almost 1,000 delegates, we’ve staged seven successful conferences focusing on road pricing, parking fees and gas taxes as part of the answer to gridlock, emissions and other transport-related impacts. In so doing, we have confirmed that mobility pricing policy can be set by government in order to alter driver behavior, raise earmarked revenue for transport infrastructure and assist in making bureaucracies more efficient, transparent and accountable to the public. On the flip side, we have learned that any kind of transport tax will continue to face public acceptance challenges related to technology choices, social equity, investment sources, political leadership and institutional governance. It is this latter issue we’ll be analyzing on November 19th where case studies from Europe, the USA and Canada will allow delegates to consider a range of issues: legislation, board member selection, tax decisions, vertical and horizontal fragmentation, external stakeholders, PPPs and public skepticism regarding new mobility fees. Water and electricity utility structures will also be examined for comparison purposes. See http://www.transportfutures.ca/gov for more details.

    FYI: Everyone would have liked to see Metrolinx’s Investment Strategy be released in 2012 (or before) but provincial legislation, created in 2006, set a deadline of June 1, 2013. See http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_06g16_e.htm#s32p1

  4. @Matt

    Many hands make for light work. With such far-reaching measures, I’d argue that the most politically viable way of enlisting public support is to rely on the broadest possible tax base so you don’t get into a winners-losers dynamic, which becomes easy to exploit politically. Yes, a tax on driving should, in theory, discourage driving and encourage more people to use transit. But no one should be naive about this debate: if one large segment of society feels aggrieved and senses that it is paying a disproportionate share — even if such views may not be grounded in policy and financial reality — then you have all the conditions needed for a backlash of the form we saw with the vehicle registration tax. 

  5. I’ve said it before: where is income tax? It paid for the transit system we have.
    The argument that it doesn’t price car use isn’t very strong. Transportation infrastructure isn’t like grocery shopping. It doesn’t turn on point-of-purchase price comparison. Instead,, it is a social decision about which transportation system we provide. It’s a decision which creates costs and benfits for all of us. Where that is the case the income tax, which is a fair approximator for ability to pay, is the best tool.
    We are only having this argument because the Province is too chicken to tell people what transit costs, and that we all have to chip in. Instead, the Province offers a menu of options which vaguely suggest that good people won’t have to pay anything, which is harmful nonsense. By-the-way, I have no driver’s license. So I am arguing that I shouldn’t get off for free here.

    Gord

  6. @Kevin Love: The double benefit of raising revenue *and* discouraging driving is good, but not necessary. Any tax is going to be unpopular, but a sales tax has this going for it: *Everyone pays it.* This avoids divisive “war on the car” rhetoric. It also means that transit will be funded by people who are primarily public transit users, as well as people who mostly drive (and will also be paying tolls/gas tax/whatever). Everyone is chipping in, so to speak.

    I think the border problem is inevitable, but insignificant. In a region where most people live in/commute to a dense core, less revenue will be coming from the edges anyway.

    Looking forward to getting the hard numbers in the rest of this series!

  7. Councillor Perks –

    It would take the Province to collect it – but I think that they should be encouraged to look at the “New York’s Metropolitan Commuter Transportation Mobility Tax” as a possible model to pay for Metrolinx development in the Golden-Horseshoe.

    New York’s Metropolitan Commuter Transportation Mobility Tax
    Presented by the New York State Department of Taxation and Finance.
    http://www.youtube.com/watch?v=YgT5MCEgfUU

    That’s a YouTube worth sharing.

    Thanks,
    Mark
    ______________

  8. There has to be an adult discussion regarding income and expenses of the TTC. Metrolinx is building light rail transit they will not operate. A private operator will want to make a profit and ridership/taxpayers will be paying for that profit on those lines.

    The city desperately needs a subway relief line to ease the burden on existing lines and a model to pay for that.  Nominal fare are hikes are necessary to avoid a significant shift to a regional “zone system”. Under this system, Scarborough, Etobicoke and Vaughan would pay the largest daily increases.

    We cannot say no and turn our collective backs on this problem.

    Michael Coll

  9. I do support the sales tax, because it would help leverage tourist dollars… assuming it’s for *local* transit projects. Given that 75% of the gov’t seed money to the “region” is going directly to the GTA’s light rail lines, it would be a hard sell to introduce a sales tax in Hamilton where 75% of it is going to Toronto and the other 25% has to be shared by everyone else. That assumes, obviously, that the ratio stays the same (likely it won’t) but really it’s just meant to illustrate one of the hurdles that will be faced in a GTHA regional sales tax.

  10. I’ve corrected my sentence about the 2012 deadline. I do remember discussion about a 2012 deadline, but that must have been just discussion. The 2008 The Big Move document also confirms that 2013 has always been the official target date.

  11. Gord – an argument against using income tax is, precisely, our experience of using it to fund transit over the past 40 years. What provincial governments give, they also take away, either by cutting taxes or reallocating them to other expenses. It’s what has happened already, why we are behind on transit investment, and why we are having this discussion. The advantage with the dedicated regional revenue mechanisms is that they are more likely to provide stable and predictable funding that enables the implementation of a long-term infrastructure strategy.

  12. Automobile use would be considerably reduced if the average journey distance were to decrease to within walking distance if it became more profitable for builders to build upward rather than outward through elimination of height and minimum setback restrictions, requiring integration of commercial and residential use of land, maximum automobile parking of 0, decrease development charges to 0 for infill and increased for low density, basing property taxes on the value of land alone rather than land and building, and eliminate the municipal land transfer tax. I am not certain what the overall effect on public transit would be, but I suspect there would be little change in overall public transit use, but there likely would be less use during peak periods and greater use during non-peak periods, reducing the cost of public transit per passenger, and increasing the demand to replace some suburban arterial road space into surface rail, which has lower capital (fewer vehicles due to larger capacity and longer life expectancy of vehicles than buses), operating (fuel and drivers) and maintenance costs.

    Automobile use would also decrease if on-street automobile parking were eliminated and market pricing of border tolls. The provincial and federal excise taxes on gasoline are based on volume not value, so they are actually declining due to inflation.

  13. Sorry Dylan,

    No sale. There are literally dozens of american cities that collect income tax (even more school boards). It would take Provincial support to do it here, but so would a sales tax.

    It comes down to whether you think we should base taxation for social benefits on the ability to pay (progressive taxation) or not.

    Gord

  14. Two important questions for me regarding any potential revenue source are:

    1. Is it fair and progressive? Payroll/income taxes can be made progressive very easily. Sales taxes, less so. I am also sympathetic to the argument that tolls and gas taxes penalize people who have no alternative to driving.

    2. Does it provide steady, predictable funding? Vancouver relies on a gas tax for transit funding, but revenue is not growing because people are driving less. That’s the flip side of behaviour incentives — what if they work too well? Would tolls or gas taxes be victims of their own success? Regional sales tax or a payroll/income tax come out on top by this measure.

  15. Gord –

    I thought you were referring to an increase in provincial income tax, since you referred to how transit was funded in the past (which was through transfers from provincial revenues). That’s what I was addressing.

    A dedicated regional income tax is a different kettle of fish. It would satisfy the conditions of dedication, regionality and predictability that I was looking for. So yes, a regional income tax dedicated to transit funding is certainly an option that could be considered, perhaps as an alternative to a regional sales tax. It is indeed interesting that it is not really discussed, even though the legislative requirements to implement it would be the same as for a regional sales tax.

    Dylan

  16. Nev/Gord,

    My fundamental issue with car drivers is the lethal poisons in car pollution killing and injuring innocent children and everyone else who breathes.
    Dr. David McKeown, Toronto’s Medical Officer of Health, reports that car drivers poison and kill 440 people in Toronto every year and injure another 1,700 so seriously that they have to be hospitalised.

    Innocent children are particularly vulnerable to being poisoned by car drivers, with children in Toronto being the victims of 1,200 acute bronchitis episodes per year and 68,000 asthma symptom days.

    One of the people poisoned and killed by car drivers was my father, Dr. Robert Love. Three of the people who are victims of poisoning are my three children; fortunately they have not shown any symptoms so far.

    Needless to say, I have Zero Tolerance of anyone administering lethal poisons to my innocent children by driving a car. And I believe that the people who poisoned and killed my father should be brought to justice and held accountable for his death.

    Dr. McKeown’s report may be seen at:

    http://www.toronto.ca/health/hphe/pdf/air_pollution_burden.pdf

  17. Parking tax and tolls on the highways are obvious pay as you use levies people can understand, and can be continuously levied as people switch to low-carbon vehicles where gas tax rates need to be increased – even electric cars can cause pollution if their presence causes congestion and increased fuel burn by the cars and trucks and buses around them. The VRT was NOT a pay as you use tax, was not sold as a dedicated transit tax, was not levied against the 905ers who make up so much of our downtown congestion but double taxed those 416ers who already pay for parking permits on their local streets or their own property (as I do). Place a $1/day/space tax on commercial parking downtown, a similar tax at transit-available locations like Yonge-Eglinton and Yonge-Sheppard, a toll on the DVP and Gardiner, and then let’s see how much more we need to raise.

  18. Of these, I find the Parking Tax to be the easiest sell.

    First off, it discourages something we want less of (endless parking lots and superfluous car trips)

    Second, its been implemented in many places with very little hassle (Vancouver) and definitely had an effect (lower amounts of parking and driving); while raising revenue.

    Like with a gas tax, the price is blended into the price of parking and not stated separately, which makes it easy to raise; and it barely gets noticed over time.

    It also doesn’t stand out as a competitive cost issue (doesn’t typically apply to trucks/commercial vehicles while on business); doesn’t create a higher corporate/property/income tax bill which gets more media notice and top-line notice in competitiveness reports. etc.

    ***

    Tolls should not be underestimated either; though obviously they’re are greater short-term political costs to their implementation; and there is a more substantial one-time cost to their collection (installing 407-style equipment on GTA highways)

    I often thought an interesting political answer would be make a deal with SNC/407 to have them spend the money of building the collection infrastructure AND turn over the 407 to the public (where tolls could be lowered), in exchange for a flat-rate cut of the tolls for 50 years (10c per km, the rest goes to the public purse??)

    ***

    I happen to favour raising the HST provincially, but I’m not a fan of doing so regionally, as we don’t want a cross-border shopping problem at w/e the edge line of the regional tax happens to be. I would also be concerned about the idea that ‘soft’ taxes (progressive) pay for hard services (transportation).

    I like the idea that progressive taxes should be equalizers paying for major soft services like ‘healthcare’, ‘education’ and ‘unemployment benefits’.

    All of which could use some enriching (pharmacare, dentalcare, lower tuition, higher EI payouts) etc.

    I think hard services should rely more on fees or use-based taxes.

    In additional in avoiding ‘moral hazard’ its important to have some correlation between behaviour deemed socially negative and tax (see tobacco and liquor)

    ***

    My thoughts on income tax are largely as above (in reference to HST)

    ****

    Gas taxes are probably near their limits politically, given the HST move on gas a year or 2 back.

    Though as I recollect actual provincial gas tax hasn’t been raised in a number of years.

    Still 1 or 2c a litre will only raise so much revenue in isolation.

  19. All of the above. Having recently moved back to Toronto, after 9 years away, with the last few in Ottawa, what struck me about the recent debate in Toronto is how stingy Torontonians are. In Ottawa, city residents are paying for one third of their LRT through property taxes. In Toronto, the entire debate has been about the use of provincial money. Not a single thought has been given about how much the city could contribute over and above those funds.

    Sheppard could have been a subway if the city were willing to top up the funds given by Queen’s Park for the LRT. There is no discussion at all about road tolls…even to improve roads. For example, why not bury the Gardiner and pay for it through tolls? No discussion on regional taxes to facilitate a proper regional transit system (not just a rush-hour focused commuter service). I have come to the conclusion that my hometown is too cheap to be a real world-class city. Residents of Toronto aren’t willing to pay for world-class infrastructure, despite claiming they want Toronto to be a world-class city.

  20. WRT income taxes. Just look at what happened to many transit agencies in the US during the downturn. That should be warning enough about over-reliance on income taxes.