Corp Comm Connects


Transit plan may seem less sweet when the bill arrives: Keenan

Much of the debate about Toronto’s transit plan has revolved around the financial implications of it.
Nov. 9, 2016
By Edward Keenan

There was a point during Tuesday’s debate on John Tory’s transit plan when Councillor Joe Mihevc rose to speak. He was, he said, reminded of an old piece of verse - and then he quoted from Shakespeare.

“A rose by any other name smells as sweet as something like a rose, or whatever,” Mihevc said.

Are you swooning yet? This is the poetry of civic government in action. His point was that if Councillor Juliet Capulet were to direct her nose toward the blossom of Mayor John Tory’s SmartTrack plan, she might think it was something like a rose. Or like former mayor David Miller’s Transit City plan, in some respects. Forget the old drama. He finally laid out his point in prose: “It doesn’t matter what you call it.”

And what is being called SmartTrack now, he said, was a set of pretty good ideas. The Eglinton West LRT to the airport - the most expensive part of the plan - that is revived from Transit City. The frequent GO service from the provincial Regional Express Rail plan. The addition of six local stops in Toronto on that GO line. And as I’ve said before, I think in this respect he has a fair point, with the urgently important qualification that these are good ideas, I think, only if they are considered in addition to the other bigger ideas already listed in reports as transit priorities for Toronto. As a replacement for them, they look less sensible.

Mihevc’s concerns, he said, had more to do with the financial end of the deal, about which the report before council contained less certainty than many could be comfortable with. And it was in this respect, I think, that his mangled Shakespearean allusion was even more on the nose.

Much of the debate about this plan has revolved around the financial implications of it. Much of that - perhaps more than the average person cares to follow - has focused on inter-governmental wrangling about who pays for what. The upshot is that the city government pays for much more than it is accustomed to paying - all the construction expenses for everything labelled “SmartTrack” as well as all the operating costs of that and all the LRT lines that are planned, too. Plus the city will chip in for provincial GO improvements in Toronto, as well. In exchange, the province will allow Toronto to add these things to provincial projects on Eglinton and on GO lines.

This, many have remarked, looks like a bad deal for the city. Perhaps so, though as is always the case, the city is able to negotiate roughly as a good a deal with the province as the province wants to give - Queen’s Park has the power to dissolve Toronto’s entire government and bulldoze the subway lines, if it gets the inkling. That gives it a certain amount of leverage in negotiations. But the conclusion - good deal, bad deal, or otherwise - is that the era of the province paying our transit bills appears to be over, at least for a while. The brief period in which Dalton McGuinty’s Liberal government volunteered to pay for 100 per cent of construction costs on massive new transit expansion, and even seemed prepared to accept paying to operate some of it, always a historical anomaly, is now just plain history. The pendulum has swung. This is bad news for the city government. It also means if we want the kind of transit expansion they’ve been talking about at city hall, there are bills to pay. Construction bills. Operating bills. Big ones, stretching off into the future.

For the SmartTrack bills, Mayor John Tory had said during his campaign that a financing mechanism called “TIF” - tax increment financing - would mean the whole bill could be paid without any tax increase or new taxes. That has turned out not to be possible (as many said even during the campaign), though using TIF is still part of the plan. Mayor Tory has said that for the considerable difference between what TIF can pay and what the things cost, he still plans to avoid property tax increases. A “revenue tools discussion” is in the immediate future.

And here we go, the important realization: a rose is a rose is something like a rose or whatever.

TIFs are taxes. Property taxes, paid by people in the future in certain neighbourhoods, earmarked to pay down debt instead of to the things they normally fund. And how does the city fund those other normal things if the TIF property taxes are going to debt? Usually through taxes and fees collected elsewhere. And if the TIF zones don’t produce the anticipated revenue? The city has to pick up the payments anyway, using taxes and fees collected elsewhere. “It’s important to understand that tax increment financing is not magic,” city manager Peter Wallace told the meeting. Indeed, TIFs are just a credit mechanism you pay back with property taxes.

How about “revenue tools”?

Well, one that seems likely to come up for discussion is asset sales - especially Toronto Hydro, where the maneuvering for a selloff has recently become pretty obvious. But you can only sell the golden goose once, and then you need a new source of eggs.

Most of the others we’d consider are just taxes and fees. Hotel taxes, road tolls, parking taxes, sales taxes: you can call them tools if you want, but they are still taxes and fees. They are us paying for the things we want. The sad truth about revenue tools is that the ones only a small number of people pay - and are therefore uncontroversial among the larger number of people - don’t produce much revenue. The ones that a lot of people pay do produce a lot of revenue, but are unpopular because no one wants to pay them.

Councillor Janet Davis put forward a motion during the meeting to delay the transit decision until after the revenue tools debate, on the logic that if we’re running up the tab, we should ensure we’re confident in our ability to pay it, first. Discussing massive new expenditures without first discussing the revenue you’re willing to raise struck her as imprudent. City council, in the majority, disagreed.

And so SmartTrack, what is now called SmartTrack, was approved. The discussion of key financial and other questions that will determine whether it winds up smelling like a rose, or something, or whatever, was left for another day.