The Scarborough Subway and Smart Track are about to collide

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Anyone who thinks they can read between the lines of the two sets of council votes this week — about the Scarborough subway and Smart Track — should remember that what we’re seeing now at City Hall is merely political foreplay.

The four quick votes against Josh Matlow’s administrative inquiries into the Scarborough subway cost/corridor questions tell us nothing about council’s ultimate intentions with regards to that $3.4 billion-and-counting monument to Glen de Baeremaeker’s insecurities. Nor does the impressive 42-2 vote in favour of the Smart Track studies reveal evidence of unity of purpose.

Rather, what really matters is that point off in the middle distance where these two sets of transit mega-project proposals, and their respective price-tags, intersect. Because they will, and that collision will likely occur approximately a year from now – a kind of supercollider for Toronto’s latest transit ambitions.

City and Metrolinx officials will spend much of the rest of 2015 analyzing the various configurations, how the two routes interact with one another, and how Smart Track fits into the province’s $15 billion Regional Express Rail plan. At the same time, the Scarborough subway scheme will be subject to an accelerated approvals process that will look at corridor configurations, lengths, stations, etc.

But the crucial money/financing questions won’t hit council until next spring, at the earliest, and that’s when the bonfire of the vanities will begin in earnest.

As an aside, one of the reasons Torontonians are chronically confused about transit is that transit reports wash up on council’s agenda so frequently, and repeatedly, that it’s often difficult to identify genuine decision moments. As the councillors well understand, those moments occur when they agree to spend or borrow money, and vote on motions that end in phrases such as, “authorize city officials to enter into agreements…” We had one of those moments in the fall of 2012 – when the City, the TTC and Metrolinx signed a master agreement to build the four LRT lines. We’re now facing the $75 million consequence of reneging, which is how you can tell it was a real decision.

Problem is, it’s not always easy to determine where in the process the money vote will occur. Sometimes, what feels like the ninth inning is actually only the seventh inning (Exhibit A: the Scarborough subway vote last spring). But as I said, the councillors all know.

While city officials laid out a process and rough time-table at council this week, several externally-imposed financial imponderables could derail the process – most notably the federal contribution to Smart Track. No one, including John Tory, has the foggiest idea how that one will play out. Until we all know the answer to said riddle, the rest is up in the air. After all, the quantum of the provincial contribution to Smart Track is obviously a function of the size of the federal investment. As long as we don’t have answers, sit back and watch for more foreplay.

Amidst all those question marks, my sources tell me that city staff, once they turn their attention to the money issues, will make sure that council is presented with the full financial picture. After all, the combined price tag for Smart Track and the Scarborough subway could easily exceed $12 or $13 billion — a substantial, though undetermined, portion of which will come from property taxpayers, development charges and city-issued debt.

Given that the city’s debt-service ratio will be perilously close to the mandated 15% ceiling by 2020 (the current level is 12%), it’s clear that decisions on the two lines can’t be made independently, both for financial reasons and also in terms of transit effectiveness.

Another piece of analysis we won’t see until next spring is city staff’s take on the revenue potential for Tory’s tax increment financing (TIF) scheme, which involves borrowing funds for infrastructure investment and paying down the debt using taxes generated by increased property assessment. During the election, candidate Tory claimed TIFs along the Smart Track corridor would bring in $2.6 billion.

What City officials will do, over the next year, is develop various scenarios for what kinds of revenues the City can actually expect, based on low, average and high-growth development projections on the corridor. They’ll also quietly canvas the bond markets to see whether TIF notes will sell, and for how much.

The politically expedient move for Tory and his backers would simply be to believe the most optimistic revenue scenario, and choose accordingly. But the reality is that the capital markets will have to absorb a massive release of City of Toronto debt, which is secured against investment decisions that may not happen for decades and are subject to macro-economic unknowns. Indeed, investors have never seen City of Toronto TIF bonds before. The markets will price accordingly, but it’s safe to assume the City will pay a premium – i.e., higher servicing charges on the operating budget — because it will be pushing out so much speculative debt on top of all the other borrowing the City does in normal course.

Bottom line: if council wants to limit the City’s exposure to costly debt charges, it may have to consider additional revenue tools to finance Smart Track.

All the while, more granular cost estimates on the Scarborough subway will come into sharper focus, and I fearlessly predict those numbers will go up every time de Baeremaeker and Scarborough’s newest grievance-monger, Jim Karygiannis, open their mouths.

In the past, council has tolerated project budget inflation due to mission creep or unexpected complexities, e.g., St Clair right-of-way, Queen’s Quay, Union Station. But the foregoing mega-projects pale in comparison to the Scarborough subway, raising the spectre of mind-boggling budget overruns.

Consider the yelling about the Union Station revitalization, which has seen its cost jump by $80 million, to $795 million. But a 10% increase or overrun on the Scarborough subway budget, a figure that is significantly less than the contingency on the Queen’s Quay revamp, could top $350 million or more, enough to pay for half the Queen’s Quay East LRT. And that number may only be part of an equation that includes additional outlays for Smart Track due to higher borrowing costs, lower-than-expected federal transfers, etc.

Point is, the financial uncertainties associated with one will affect the viability of the other.

About a year or so from now, council will be asked to cast votes on reports that include numbers with dollar-signs, and they’ll likely be requested to make choices about how to mitigate those very large costs. Among those choices will be service scenarios generated by the city’s expert transit advisors that reveal the redundancy writ large on these two parallel sets of rapid transit schemes.

So ask yourself this question: if Tory and the rest of council have to choose between these two megaprojects in order to mitigate the city’s long-term financial risk, which one will they throw overboard?

From where I sit, it seems almost inevitable that we’re barreling down the tracks towards a political either/or moment.

7 comments

  1. In the last Mayoral election, I did not back any candidate, but was willing to work with Olivia Chow, John Tory, or David Soknacki, if they were elected Mayor, but not Doug Ford.

    Similarly, I have never declared in favour of either a Scarborough LRT or Subway, nor commented on or criticized SmartTrack’s technical & financial feasibility.

    John Tory, however, was elected Mayor of Toronto on the promise to build SmartTrack in 7 years at a cost of $8B by securing matching 1/3 contributions from both Queen’s Park & the Feds.

    It is a daunting task, particularly the federal contribution which I believe would be larger than any previous total annual contribution to public transit in Canada. I’m not optimistic of his chances of success, but, God Bless the Mayor if he manages to pull it off.

    As John Lorinc writes, the real money discussions will begin in a year and I hope it won’t again be a simplistic, totally irrelevant #Stops/Capex cost/km comparison driven by partisan election/re-election considerations.

    I’ve frequently commented that this is silly. If the Scarborough decision was based solely on #Stops & Capex cost/km as was argued in last year’s debates, the TTC would be running an all bus network. Clearly there are other considerations, such as: whether the trip is local or long-distance, the total trip travel time, the cost, projected demand, etc.

    The planning has to consider the network role & implications of the expansion. It makes no sense to waste scare tax dollars on duplicate, redundant RT routes.

    See this astute Toronto Star Opinion piece “Toronto should stress transit networks, not just subway lines” by Murtaza Haider & David Crowley from Jul.23.14 http://www.thestar.com/opinion/commentary/2013/07/23/toronto_needs_to_stress_transit_networks_not_just_subway_lines.html

    This was Metrolinx’s inaugural Mission (GTA Public Transit fare & service integration) which has all but disappeared as its mandate.

    Without Metrolinx stepping up to provide real leadership in setting GTA Public Transit fare & service standards, which includes stepping on the TTC’s toes & autonomy, particularly routes travelling the 416/905 transit barrier (100% double fare penalty).

    It’s not just the Toronto TTC Network that must be considered with SmartTrack, but how to integrate the entire GTA local public transit network with rationalized service, that eliminates service redundancies, allows universal passenger pick-ups and let’s passengers travel where the want to go, regardless of municipal boundaries or transit systems on one 2-hour time based fare.

    Royson James’s Jan.17.15 Saturday Star column “Transportation 2015—Follow the Facts to Transit Heaven” stated MTO’s 2011 TTS study indicated 85% of GTHA trips end somewhere in the City of Toronto! http://www.thestar.com/news/gta/transportation/2015/01/16/road-to-transit-heaven-will-be-paved-with-facts-james.html

    This means that Metrolinx MUST step up (next month marks 8th anniversary from their first Board meeting, March, 2007) and finally set GTA local public transit fare & service standards, not just push out “Strategic Communications” on how wonderful the world will be thanks to GO & soon UPExpress that along with other RT will reduce GTA congestion & gridlock!

  2. Royson James’ article in the Star 6 Feb 15, “Our neglect of Scarborough RT is shameful”

    http://www.thestar.com/news/city_hall/2015/02/06/our-neglect-of-scarborough-rt-is-shameful-james.html

    Proposes that the existing SRT is viable with some investment; considerably less than that for an LRT and incredibly less than that for a subway. Quoting a person who worked for Lavalin, he said that the TTC management were less than enthused with the technology imposed by the province and let the system fall into disrepair. This is the same information I was told by my late father-in-law, who told me that the TTC actively put barriers in the way of the project.

    The system was designed to run driverless as it is in Vancouver, but TTC insisted that there must be drivers. The current cars are older than the subway cars we are replacing.

    You should read the column to see how ideology trumps practicality.

  3. “So ask yourself this question: if Tory and the rest of council have to choose between these two megaprojects in order to mitigate the city’s long-term financial risk, which one will they throw overboard?
    From where I sit, it seems almost inevitable that we’re barreling down the tracks towards a political either/or moment.”

    The sad thing is that this inevitable collision did not have to happen. Toronto had an LRT plan which saw full funding for Metrolinx but one politician (the chair of the TTC) decided that it would be better for her future mayoral campaign to turn the Metrolinx LRT project into a “city” project…making it necessary for the city to pay 1/3 of the capital costs.

    Similarly, we had a Regional Express Rail project as part of the Big Move that was given a firm deadline by the Liberal government. That was a “Metrolinx” project that again would have been funded by the province. But one politician (the current mayor) decided that it would be better for his future mayoral campaign to turn the Metrolinx LRT+RER project into a “city” project…making it necessary for the city to pay 1/3 of the capital costs.

    I would not be surprised if, upon learning that the Eglinton West corridor of SmartTrack is not feasible we will revert to the railway (RER) alignment…but because it will be called Smart Track the city will still be forced to pay 1/3 share.

    So…1994-2004 was the “lost decade” for transit operations. 2006-2016 will be remembered as the decade where Toronto had a promise of two transit networks (the LRT and RER) which would be funded by the province…bbut threw that away because some politicians thought they had a better idea and others thought that we’d be better off if we paid 1/3 share so we could “have a say” in the discussion.

    Cheers, Moaz

  4. Very interesting commentary (as always from John Lorinc). As for the potential winner in such a contest, I find it hard to imagine a scenario in which Scarborough Centre is left without a higher order transit station (the apparent outcome if the subway extension is scrapped in favour of Smart Track). The current SRT station has been an anchor for residential and commercial development in the precinct, and the OP clearly speaks to expanding (not reducing) access to higher-order transit as critical to the success of Scarborough Centre.

  5. In June 2013, Metrolinx determined that the best solution for transit in Scarborough was the connected SRT/Eglinton line. Unfortunately, at that time, Mayor Ford was at the start of his historic fall. He just lost a major transit vote on Council (cancelling the Sheppard subway) and the crack scandal was just beginning. If a report showed that the Ford (actually Ford-McGuinty) plan was the best, it may have re-invigorated the Ford supporters and increase his popularity once again.

    So Metrolinx and the Province decided to bury this report. Without this report, Council decided in the Fall of 2012 to re-instate the Transit City version of LRT. Still without this report, in 2013 Transportation Minister Murray began to encourage City Council to explore the subway option. The Liberals even won a significant by-election in August promoting the subway. Only after a Freedom of Information request from Michael Schabas did the Metrolinx report finally get released. However, it was released very quietly and by that time the subway hysteria had already been deeply rooted with the public and in many political reputations.

    The following obvious questions need to be asked:
    1. In light of the facts, should the province be the ones who are responsible for any LRT cancellation costs because they withheld critical information from Council?
    2. When will we tell the truth to the public and tell them that neither the Subway nor the Transit City LRT is the best solution?
    3. When people say that we should do fact based transit planning, are they really saying that they support this connected SRT/Eglinton line?
    4. When can we start using the connected SRT/Eglinton line as the base case and look for ways to improve it and lower its cost – after all, it will only help in terms of benefit-cost and make the option even better?

  6. Technically Bob, that’s 85% of transit trips ending in Toronto, which is about what I expected. Only 45% of all trips (including those by car) end in Toronto.

  7. If funding becomes a problem, we might see Scarborough Subway shortened and terminating at STC, instead of going to Sheppard.

    The subway will not be cancelled completely. This project had become too prominent and its cancellation would be too unpopular in Scarborough.

    In addition, the LRT option would compete with SmartTrack for space in the Uxbridge rail corridor. The corridor is wide enough for 2 pairs of tracks, but not for 2 pairs of stations.

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