Cost of Mayor John Tory’s SmartTrack plan could rise, report shows

A city report recommends up to $268 million in additional spending for station infrastructure as part of the mayor’s transit plan. But Tory says the extra costs will be at the discretion of council.

Thestar.com
April 10, 2018
Ben Spurr

The cost of Mayor John Tory’s signature transit plan could increase significantly, and the city will have to draw on an existing fund created through property tax increases in order to finance the project, according to a new city report.

The report, which was released Tuesday and will be debated at the mayor’s executive committee next week, requests council officially commit to funding SmartTrack, Tory’s plan to add six new stations to existing GO Transit lines within Toronto.

Should council endorse its recommendations, it would mark a major milestone for SmartTrack, a more extensive version of which formed the main plank in Tory’s 2014 election campaign.

At a press conference in Liberty Village, a planned station site, Tory said the report marked “a good day for transit riders and the city of Toronto as a whole.”

He predicted the project “will provide real relief, real economic benefits, real choice, and real transit options for a city that has been short of the transit it needed for a considerable amount of time.”

According to the latest estimates, SmartTrack would serve 33 million customers annually by 2041, 6.2 million of which would be new riders on the system.

The mayor highlighted some good financial news for the city in the report. In 2016, council agreed to pay the operating and maintenance costs of SmartTrack, which is being built as part of a wider expansion of GO service called regional express rail. But the new report recommends Metrolinx, the provincial transit agency in charge of GO, pick up the operating and maintenance costs, which have yet to be determined.

A spokesperson for provincial Transportation Minister Kathryn McGarry wouldn’t commit to paying the costs, but said discussions with the city “have been progressing well.”

The mayor also stated the anticipated cost of building the six new SmartTrack stations “remains within the projected budget of $1.2 billion.”

However, while the estimated cost of the stops is slightly less than the $1.25-billion estimate staff provided council in 2016, the new report recommends council authorize additional spending of up to $268 million, which would bring the total cost to $1.46 billion.

The extra money would be for station infrastructure over and above the “base” requirements of a regular GO stop. The additional components were either requested by council or recommended by staff, and are intended to connect SmartTrack stations with the TTC network and surrounding communities.

Examples include a bus loop for TTC service at the planned St. Clair-Weston station, a bridge to connect the East Harbour to nearby neighbourhoods, and entrances at Gerrard-Carlaw to link up with a planned relief line subway stop at the same site.

Tory said council “will have the discretion to either do those things or not do them,” and argued the important point was that the “base case” for the stations remained within budget.

Councillor Josh Matlow (Ward 22, St. Paul’s) said the mayor’s assertion that station costs haven’t risen was “not true.”

“I think he’s being careful with his words to try to sell it better,” said Matlow, a frequent critic of the mayor’s transit plans. “The costs have gone up.”

The report also provides details of the proposed financing plan for SmartTrack. Of the anticipated $1.46-billion total cost, the city expects the federal government to pay 40 per cent, leaving a city contribution at $878 million.

To pay its share, staff propose issuing a 30-year debenture, and then paying it off using a mixture of development charges, tax increment financing, and the City Building Fund council established in 2017 to pay for new transit and housing. The annual debt charges would work out to an average of $53.1 million.

Tax increment financing, or TIF, leverages projected future property tax revenue expected to be generated as a result of a project to pay for that project. Under the plan, the city would designate areas around stations as TIF zones, and then use the incremental property tax revenues from new development in the zones to pay for SmartTrack.

Tory said during his campaign TIF could be used to pay the entire cost of SmartTrack, which was then estimated at $2.7 billion, but staff are now recommending it should only be relied on to raise $292 million over 25 years.

The report notes there are risks associated with banking on TIF because “there is always considerable uncertainty associated with any longer-term forecast” of development, which can be affected by many factors.

On Tuesday, Tory batted away the suggestion that his promise to pay for the entire project using TIF had been unrealistic. He said the important thing for the public is that the money for SmartTrack “is not coming about as a result of a property tax increase being levied on them going forward.”

“What I said of SmartTrack was that it would be built without a tax increase being imposed on the people of Toronto, a property tax increase, and that is the case,” he said.

Councillor Gord Perks (Ward 14, Parkdale—High Park), another frequent critic of the mayor, rejected the assertion that SmartTrack isn’t being built with tax increases. That’s because the City Building Fund staff propose to use to finance the project is made up of revenue collected through annual 0.5-per-cent property tax increases that began in 2017 and are scheduled to continue until 2021.

By that point the fund is expected to generate about $74.2 million a year, an average of roughly $18.2 million of which would go towards financing SmartTrack. The city would continue to draw on the fund until 2055.

Like Tory, Perks supported the creation of the fund, but argued the mayor can’t claim SmartTrack isn’t relying on property tax hikes. “John Tory said today that he’s not increasing taxes to pay for SmartTrack. John Tory increased taxes; he’s using it to pay for SmartTrack,” Perks said. “It’s a fact.”