TTC needed ‘sleight of hand’ to get extra federal cash, says board member

Matching funds for Ottawa’s offer meant moving numbers around in a way that raises at least one councillor’s eyebrows.

TheStar.com
Sept. 6, 2016
By Ben Spurr

The TTC is employing some fancy financial footwork in order to access federal infrastructure money and cut down on the transit agency’s backlog of unfunded capital work.

TTC chair Councillor Josh Colle called it a “good news story” for the cash-strapped transit commission, but one member of the TTC board warned that the agency is engaging in “sleight of hand” to make its finances appear healthier than they are.

Last month, Ottawa announced that under its Federal Public Transit Infrastructure Fund, the federal government would pump $360 million into the TTC to pay for much-needed capital work including bus, subway and streetcar repair, track rehabilitation, station renovations, and new elevators.

The announcement was a boon for the TTC, which is expecting up to $1.5 billion from the infrastructure fund in the coming years.

Ottawa has offered to pay up to 50 per cent of transit projects eligible under the program. That posed a problem for the TTC, according to agency CEO Andy Byford, who said that the city was unable to come up with matching funds on its own.

But TTC was able to find the cash using an unorthodox accounting manoeuvre. Staffers reviewed the TTC’s spending in recent years, and determined that the TTC historically hasn’t spent all of the money it has allocated to previous capital budgets.

That’s because factors like vendor delays, drawn-out procurement processes, and the short time-frames during which the commission can undertake work like subway track repairs means that the TTC can’t complete projects as quickly as it would like.

The review found that between 2006 and 2015, the TTC’s annual spending on capital work was, on average, only 80 per cent of what it had budgeted.

On Tuesday, the budget committee approved TTC staff’s request to reduce its spending projections over the next ten years to reflect the agency’s “capacity to spend,” which would free up about $850 million from the transit agency’s 10-year capital plan that can be reallocated to match federal funding.

Byford said most large agencies have difficulty spending their entire capital budget on schedule, and the bookkeeping change would more accurately reflect the transit commission’s spending. “It is responsible stewardship of scarce capital dollars,” he said.

Councillor Colle (Ward 15, Eglinton-Lawrence) agreed, calling it “sound, honest budgeting.”

“If there’s money we cannot spend, with all good intentions, on a capital project, why would we not want it to go into a federal infrastructure fund matching project, or another priority project?”

Councillor Joe Mihevc (Ward 21, St. Paul’s), who sits on the committee, criticized the accounting procedure as “sleight of hand.”

He questioned whether the federal government would accept the TTC’s contribution as matching funds because he said it wasn’t new spending. “If nothing else, let’s be clear with Torontonians that this is where the money is coming from,” he said.

The TTC had about $9.4-billion worth of capital work planned for the period between 2017 and 2026, including purchasing new buses, streetcars, and subways; overhauling old vehicles; upgrading signal systems on its two main subway lines; and building and maintaining storage facilities for its fleet. The figure doesn’t include the cost of building the Scarborough and Yonge-University-Spadina subway extensions.

There was already funding available for roughly two-thirds of the $9.4 billion. Taking into account federal infrastructure funding and the “capacity to spend” reduction, the transit agency is projecting a $1-billion backlog of unfunded capital work over the next 10 years. That’s dramatically less than the $2.7 billion the TTC projected just last year in its 10-year plan.

The capital budget is separate from the TTC’s operating budget, which the TTC budget committee is expected to debate at a separate meeting in the coming weeks. Mayor John Tory and city council have stirred controversy by asking the transit agency to cut its operating costs by 2.6 per cent next year.

A final council vote on the TTC budget is expected in February.