[EDITOR’S NOTE: On January 28, 2014, Anne Golden spoke at SFU Vancouver as part of the Rethinking Transportation: New Voices, New Ideas series. Her insightful talk was called Breaking the Political Gridlock to Address the Transportation Challenge: Lessons Learned from the Greater Toronto and Hamilton Area and we are happy to give our an edited transcription of her full presentation, attained via Gordon Price. This is the second of a three part series. You can read the Part One here, if you missed it.]
A New Revenue Stream for the Next Wave
How to pay for the transit we need was, of course, the crux of our mandate. Because new transit infrastructure benefits all of society, costs should be shared – by business, drivers, and transit users. But in tough times, no group should have to pay too much. Transit riders, for example, already contribute through fares that rise regularly with inflation, so the Panel chose not to ask more of them.
Our report offers one innovative revenue model, with two variations. Both involve a mix of corporate income tax, gas and fuel taxes, and HST:
- Option A – calls for: a phased increase of gasoline and fuel taxes, starting with 3 cents per litre in year one and rising by one cent per litre to a maximum of 10 cents in year eight; as well, a modest increase of 0.5 per cent to the general Corporate Income Tax rate; and finally, a re-deployment of the GTHA portion of the provincial HST charged on gasoline and fuel taxes.
- Option B – proposes less from gas and fuel, more from HST.
The combined revenue of $1.7 to $1.8 billion would then lever the additional borrowing to both build Next Wave projects (three-quarters of them in the first swath) and retire the resulting debt.
The revenue stream also provides for investments in local transportation improvements: $400 million annually ($440 million in Option B), when fully implemented; it even includes a two-year Kick-start Program for local transit improvements to coincide with the introduction of new taxes.
We did extensive research and analysis to select these tools, and the rationale is detailed in our report. I will go into a bit of detail here because I know that creating a sustainable revenue stream is a front-burner issue for you.
We favour the gas and fuel taxes because they match usage, affect travel behavior, are simple to administer, raise a lot of money, and, unlike in BC, haven’t been raised in more than 20 years.
Even with Option A, they will still be below other jurisdictions like Montreal or consistent with Vancouver. And the impact on households is very tolerable – about $80 per household in year one, just $260 per household after eight years. Compare that to the cost of the gasoline wasted due to stop-and-start commuting for 32 minutes on a daily roundtrip if we don’t remedy the situation. This amounts to $16 every week or $800 per year.
Amazing how most of the media focused on one side of the equation. The choice is obvious: We can all pay a little now, or a whole lot later. Ironically, few have noticed that the cost of gas in Ontario has gone up 5 cents since we released our report!
It’s a fair solution for business, too, as employers will benefit from employees who are more productive because they can get to work faster. Business benefits too from a bigger job pool that transit access provides. While the Corporate Income Tax does not influence travel behaviour, a viable strategy must demonstrate a direct business contribution, and CIT has less negative impact than employer-paid payroll taxes that could hurt job creation. Even with a 0.5 per cent increase, Ontario’s general CIT rate would still remain in the bottom half of the provinces.
We also think highway tolls have a place – but not right now, due to the high cost and long lead time to implement. Road pricing will undoubtedly be needed down the road. It’s the norm in major global city-regions today, and we live in one of those.
Both recommended options share the burden among the beneficiaries, and for each we have included a proof of concept – we stress-tested it -showing how the dedicated revenue stream plus the required amount of borrowed funds align with implementation of the proposed Next Wave project portfolio.
The borrowing ratio (amount borrowed relative to amount raised) used Because the tax sources are provincial and would have to be raised across the province, we state clearly that funds from outside the GTHA must not be used to support GTHA transit projects, a commitment already made by the Province – and studiously ignore by journalists outside Toronto.
Building Public Trust
The most common and forceful message that emerged from all of our public meetings and consultations is that the public has very little trust in how transit decisions are made, in how money is managed, and in how projects are delivered. When it comes to funding transit, the public told us: “Dedicate it or forget it.”
We address this concern head-on and our recommendations, when enacted, would:
- Ensure that new revenue is held in a stand-alone Fund, within Metrolinx, to be spent solely on funding transit expansion and renewal in our city-region;
- Guarantee accountability and transparency for how the funds are collected, spent, and reported on; and
- Encourage the de-politicizing of decision-making by insisting that elected officials do not approve projects until and unless they are validated through solid, thorough business case analyses.
Some politicians may not like this point, but we must all learn lessons from experience (with Toronto’s existing Sheppard and proposed Scarborough lines). We cannot afford to waste billions of dollars on projects that use inappropriate types of transit for the situation, generate insufficient ridership, fail to address congestion, or don’t contribute to an integrated network. This is a big part of building trust.
We wrestled with governance questions. Some say that one way to de-politicize decision-making would be to expand the authority and mandate of Metrolinx to give it “the teeth” to have the final say over project decisions. We need to proceed with caution here, and not be simplistic.
Metrolinx, our regional transit authority, is not an elected body, nor does it have the power to tax. Moreover, we count on local municipalities to represent the local community perspective. This is an important principle in our system of governance. The challenge in metropolitan regions is to strike a reasonable and workable balance between local responsiveness and regional coordination.
That’s why we supported the Metrolinx recommendation to add six municipally appointed board members, but chose not to recommend the TransLink model of a Mayors’ Advisory Council.
Capturing Land Value Created by New Transit
We also looked at the potential of land value capture – recouping from developers part of the value uplift created by new investment. While we can’t count on it for reliable revenue, it can contribute to reducing the capital costs of building transit.
Properly planned, transit investments can encourage development around transit stations and transit routes. The existing 118 km London Crossrail project in the UK is an excellent example of applying Land Value Capture. Almost one-third of all costs for this £14.8 billion project was contributed by business.
Metrolinx has started to work on this concept. Our recommendations support Metrolinx in asking that the agency adopt a proactive and collaborative approach in working with the private sector to take advantage of the increase in land value created by the Next Wave of rapid transit projects.
All Governments Have a Role to Play
A common theme at all our public meetings was that all orders of government have essential roles to play in funding transit. The federal government, in particular, is seen as “missing in action”. Federal funding today is ad hoc and does not support long-term planning, which is key to quality investment decisions.
The famous urbanist Jane Jacobs observed that “…the large cities… are Canada’s major economic assets. Without Vancouver, Calgary, Toronto, Montreal, and Winnipeg…Canada would be so poor that it would qualify as a third world country.”
Cities such as Toronto and Vancouver don’t need to apologize for asking the federal government to participate. The Toronto city-region contributes about 20% of Canada’s GDP, and Vancouver’s share is 6.5%. For Canada to achieve its potential, the Government of Canada must become a full partner with a fair and reliable contribution to the funding of transit expansion where it’s needed.
Municipalities should also play a stronger role by ensuring that planning policies encourage new development that supports transit ridership through appropriate intensification. They can also make greater use of their borrowing capacity to finance local transit improvements.
Communicating and Engaging With the Public
For me, the most rewarding part of the Panel’s work has been showing it’s possible to have a mature conversation about transit.
I have been saying publicly that transit should not be about ideology. It shouldn’t be about drivers versus riders, subways versus light rail, or city versus suburb. This is an issue where we can all be on the same side.
Now that the Panel has fulfilled its mandate, we need new champions who will continue to communicate the importance of investing in transit, and sustain an ongoing, long-term program of public education; champions from governments, business and civil society.
We thought about the title of our report. Making the Move: Choices and Consequences is both a call to action and a warning that failing to act has consequences, too.
In our report we focused on the benefits – the countless personal, micro- and macro-economic, and quality of life benefits of building the region-wide network we need.
We argued that our strategy is not just about transit; it’s about transportation, and it’s about economics. It’s pro-driver, pro-rider, pro-business, pro-economy, and pro-region.
Stay tuned for part 3.
About Anne Golden
Anne Golden, PhD, CM, has been president and chief executive officer of The Conference Board of Canada since October 2001. Previous to that, Dr. Golden served as president of the United Way of Greater Toronto for 14 years.
She gained national recognition for her role in the public policy arena through chairing two influential task forces: one in 1996 for the provincial government on the future of the Toronto area, and another in 1998 for the City of Toronto and the federal government on homelessness.
Also noteworthy is her work on The Canada Project, the largest public policy project undertaken by The Conference Board of Canada, for which she co-authored Volume III: Mission Possible: Successful Canadian Cities.