No, there will be no Sheppard subway, at least not in the short run, but in Mayor Ford's desperate last-ditch effort to fundraise for his prized project, he raised the notion of new revenue tools to fund transit - and actually there's a lot going for this idea.
The fact that the province intends to bankroll two LRT lines leaves aside the fact that there are at present no funding plans for the completion of Transit City, which includes LRT lines on Don Mills, Finch, Jane, Waterfront West as well as the Scarborough-Malvern line. Neither is cash allocated for the planned Downtown Relief Line, a subway (or underground LRT) from Pape station across the bottom of the city and up to Bloor between Dundas West and Jane. These projects, already endorsed by council, will cost around $16 billion. Note that this is $8 billion beyond the existing commitment from the province.
So where will these public dollars come from? And where does the mayor's call for new revenue sources come in?
In the traditional model, governments of various levels pay for infrastructure by borrowing money over 20 to 30 years at very low interest rates. The city designs the project, either itself or with help from paid specialist consultants and issues calls for bids from the private sector for construction.
But Mayor Ford is pushing public-private partnerships - though much to his chagrin, private firms aren't eager to leap into this locally untested arena. Typically, private firms prefer PPPs that are smaller, less complicated and less risky.
In PPP arrangements, often outlined in documents 10 centimetres thick, companies borrow on behalf of the government, and the government then repays the sum over several decades at higher rates of interest than if they'd borrowed it from the bond markets.
On top of pricier financing, the total cost of PPP projects is usually higher. Because the construction industry is a specialized sector with high market-wage rates, the private sector usually receives no better deal than the public, and any small savings found by private companies are cancelled out by their desired profit of 5 to 10 per cent.
And if the company is slated to actually run the service, since fare revenues never cover the cost of operations, the city has to pay per-rider subsidies to the private operator.
So if the private sector can't be relied on to take the burden off overstretched governments, what can be done?
There are several options, but only a few would bring in close to enough. True, the $60 vehicle registration tax that Ford abolished yielded about $60 million yearly (there are roughly 1 million cars), but this in and of itself wouldn't go far. The parking charges the mayor has proposed would bring in $25 to $100 million yearly, depending on how high they could be set politically. This, too, wouldn't be enough on its own, and neither would a property tax surcharge bringing in $22 million per 1 per cent increase. Even surcharges like TIFs (Tax Increment Financing) on properties that increase in value thanks to new transit could not be expected to raise more than 10 per cent of the cost of the projects. Still, all of the above should be seen as part of a funding package.
But the most important revenues would come from a combo of road tolls and a 1 per cent sales tax surcharge.
To be effective, road tolls would need to be implemented on all series-400 highways in the GTA. According to Metrolinx estimates, they would generate around $1 billion if they were set at Highway 407 levels. Presumably, only half of that would be available for the 416, the rest going to the 905, leaving around $500 million per year for the 416.
An alternative would be a gas tax that would generate around $32 million (T.O.'s share) per 1¢, meaning a 25¢ per litre surcharge would be required to equal proposed toll revenue. This is likely to be hard to sell politically, and it would need provincial approval. It could, however, be implemented quickly and would be cheaper than costly toll collection equipment.
At $500 million, road toll or gas tax revenue still wouldn't be enough. Another problem is that these revenue tools would only tax car users; fairness suggests we need a broader tax to make up the rest of money needed.
One form of tax increase that has relatively little impact on the economy, and for which there is already a rebate system for low-income residents, is the sales tax, or HST.
In 2012-13, Ontario expects to collect $22 bil from its 8 per cent (5 goes to Ottawa) of the HST. Between 20 and 25 per cent of the province's population lives in Toronto, and more of its economic activity takes place here, so we could expect a 1 per cent surcharge on the HST to bring in $500 to $600 million annually.
Everyone agrees that transit expansion is desperately needed, and while finding ways to secure billions of dollars can seem daunting, jurisdictions around the world have the courage to adopt new revenue tools, and we need to do so, too. Maybe the mayor's musings on parking taxes have led the way.