Ontario government assumed it would pay for LRT operating costs: Internal document

Internal document calls new transit deal that saddles city with costs into question

TheStar.com
Nov. 8, 2016
By Jennifer Pagliaro and Robert Benzie

The provincial government was not only willing but assumed it would have to pay operating costs for the now-cancelled Scarborough LRT under a deal to fund a series of light-rail projects.

A 2013 internal document obtained by the Star calls into question a newly-proposed deal to be debated Tuesday that would see the city shouldering operating costs for all remaining LRTs - which will likely cost the city almost $100 million annually.

Critics on council have questioned those terms, after they were made public last week, saying the city is being made to pay what was meant to be provincial costs in order to move ahead with Mayor John Tory’s plans for SmartTrack.

“I am appalled that Mayor Tory would sell out the future of transit in Toronto just to keep SmartTrack attached to something, anything at all,” said Councillor Gord Perks. “Losing provincial funding for light rail operations sets the city’s transit future back decades and we get almost nothing in return.”

At Queen’s Park, an aide to Transportation Minister Steven Del Duca emphasized how much the province is doing for Toronto transit.

“The agreement in principle included in the city of Toronto’s report is the result of a strong working relationship between two levels of government focused on delivering much-needed transit investments in Toronto,” said Andrea Ernesaks late Monday, noting the city paying operating and maintenance for the LRT projects is “reflective of a partnership” where the province is funding all capital construction costs and other transit projects.

“A three year old document would have zero bearings on these negotiations,” the mayor’s spokesperson Amanda Galbraith said in an email. “We are confident the agreement negotiated is the right deal for the city.”

“The LRT operating and maintenance costs were a central issue in the negotiations, and the proposed terms represent those required for Provincial agreement,” city spokesperson Wynna Brown said in an email, noting the 2013 document does not speak to the other LRTs.

“The City is not privy nor has any insight to provincial cabinet documents.”

In an August 2013 submission to the Treasury Board/Management Board of Cabinet, the Ministry of Transportation wrote that under a 2012 master agreement between the city and the province, an operating deal was to be negotiated that would “address the issues of the sharing of the operating subsidy (net costs).”

“However,” the report reads, “It is unrealistic to assume that Metrolinx would have been successful in negotiating contributions by the City/TTC for net operating and maintenance related to the Scarborough LRT.”

The master agreement also outlined how three other LRT lines would get built and paid for: The now under-construction Eglinton Crosstown LRT and the Finch West and Sheppard East LRTs, which have yet to be built.

But under a new deal council is being asked to approve, the city would be responsible for all operating costs.

The total operating costs for those remaining lines are estimated at $182.4 million annually (in inflation-adjusted dollars). When fare revenues are applied and operating costs for existing bus routes removed, the net cost is expected to be about half.

At City Hall, staff have acknowledged there was an assumption the province would pay for operating costs, but said the province never accounted financially for being responsible.

The internal document does outline that the province’s “net operating and lifecycle cost obligations related (to) the Scarborough LRT project,” would have been $1.2 billion over 30 years - $750 million alone for operating - starting from when the line was meant to be in operation, in 2020.

At the centre of the new proposal is the province’s agreement to build a heavily-revised version of Tory’s campaign promise - now just six new stations on the Stouffville and Kitchener GO lines and an LRT instead of new heavy rail along Eglinton Ave. West. The estimated costs for construction alone are $3.7 billion. The city is responsible for total unknown operating costs.

City staff said the legal interpretation of the earlier agreement is that they cannot compel the province to pay for operating costs and that this is the best deal the city is going to get.

“As a matter of fact and as matter of law, the interpretation of the agreement is very, very clear,” city manager Peter Wallace told the mayor’s executive committee last week. Wallace only came to the city in 2015. He was the most senior bureaucrat with the province from 2011 to 2014.

Wallace told executive that “obviously it would have been my preference to have the province absorb operating and maintenance costs,” as part of the new agreement, noting a pattern of the province downloading costs onto the city.

The master agreement was reopened in order to remove the Scarborough LRT from the list of projects after council controversially voted in 2013 to flip-flop on the fully-funded Scarborough LRT and build a three-stop $3.56 billion subway instead, under pressure from mayor Rob Ford and Scarborough councillors.

While the province publicly agreed to fund only $1.48 billion (in 2010 dollars) toward the subway and refused to pay any operating or maintenance costs, it appears there was room for negotiation there as well.

“If net operating and maintenance costs become critical issues in coming to an agreement, some flexibility will be considered to fund additional related capital costs,” the document notes, including specifically mentioning needed upgrades for automatic train control and improvements at Bloor-Yonge station.

The city is now moving ahead with a $3.2 billion, one-stop subway plan backed by Tory for which the city will pay all operating and maintenance costs.

“Why is the city of Toronto seemingly working against its own interests?” asked Councillor Josh Matlow, who has repeatedly questioned the city’s position on who is responsible for paying operating costs.

“This revelation should raise concerns for every Toronto resident. It’s time for Torontonians and city councillors alike to finally get some real answers. What happened here?”