This series of posts about ways to pay for new transit infrastructure in the Greater Toronto and Hamilton Area is only a start to what is a big conversation about a complex set of issues. The City of Toronto has already joined that conversation with this week’s Transportation Funding Strategy report (PDF), and local civic leaders group CivicAction will be starting a conversation of its own next week.
There are lots of further questions. What about a regional income tax? After we build the infrastructure, how do we pay for the operations? How can these fees be implemented politically — should we have a referendum?
Regional income tax
After my first post, Councillor Gord Perks asked why a regional income tax dedicated to transit funding isn’t a big part of the discussion. It would require the same legislation as a sales tax and would raise a similar amount of money. Regional income taxes exist in the United States, but according to the City of Toronto report on funding options (p. 8), none of those taxes are dedicated to transportation infrastructure. It may be that an income tax is not considered in these discussions of dedicated revenue because it’s so strongly associated with general revenues, although that’s really the same situation for the sales tax as well.
Does a regional income tax dedicated to funding transit make sense?
It’s great to build infrastructure, but once it’s built you need to run it, and transit generally requires public subsidies in order to run. Metrolinx’s The Big Move plan estimates that, by the time the project is completed, it will need $1.5 billion a year in operating costs.
We could imagine that whatever revenue tool is used for capital costs will simply continue, transitioning over to fund operations. But for most of the 30-year build-out period, operating costs will be growing even as $2 billion a year is spent on capital funding. How to pay for those costs at the same time is still very much up in the air (e.g. that could be the role of a regional income tax).
If we do build extensive new transit, how do we pay for the operating costs?
As John Lorinc pointed out this week, the idea raising taxes is politically toxic, and the current provincial government is a minority that is trailing at the polls, making political risks unappealing. One way the provincial government could try to distance itself from responsibility for raising taxes could be to have Metrolinx and the regional governments hold a referendum in the GTHA on whether to implement transit infrastructure funding options (or, alternatively, abandon any major new transit infrastructure). In the United States, referendums have generally been the way in which local taxes have been raised to fund new transit. The results are mixed — some have succeeded, others have not. It often depends on how coherent the transit infrastructure plan is, and how much backing there is from both local politicians and civic leaders.
Given that the current Liberal provincial government holds a majority of its seats in the GTHA, a referendum that passed narrowly could still generate enough opposition to lose them crucial seats, so even this strategy might not be appealing. On the other hand, given the serious need for improved transportation in the region, doing nothing could also be politically dangerous.
What do our readers think about the idea of a GTHA referendum to approve or reject funding mechanisms for new transit?
photo by Rick Harris