Over the past three decades, the greatest challenge facing transit in Canadian cities is the lack of an on-going source of funds for new capital projects. Each time a transit need is identified, the inevitable debate ensues on how the project ought to be funded, and how much the province is willing to contribute. The ad-hoc nature of funding has slowed progress to a crawl. Here in Ottawa, the debate for the LRT dragged on for over 20 years, partially due to the uncertainty of available funding.
Other jurisdictions in North American have found innovative solutions to fund transit. In Los Angeles, the county introduced Measure R, a half-cent sales tax, with 35% of the revenue going towards new rail and bus-rapid-transit (BRT) projects.
It seems Ottawa’s provincial cousins down the 401 seem to have also found an innovative solution. This may set a precedent for Ottawa moving forward. Councillor Karen Stintz, the Chair of the City of Toronto’s Transit Commission has proposed One City, an ambitious $30 billion plan that will add 6 new subway lines and 10 new LRT lines over 30 years. Some of the lines are already under construction, while the other lines were already introduced to City Council in previous transit plans that never panned out.
These types of ambitious plans seem to be a dim a dozen in Toronto. What makes this plan unique is that it includes both a forecasted expense projection and a long term funding solution. With respect to funding from the province, One City is designed to be consistent with Ontario’s Big Move, which has already earmarked funding for transit in Toronto.
How will the city fund such an ambitious project?
While funding for this project will come out of property tax, the property tax rate (%) will NOT increase. Instead, Councillor Karen Stintz has proposed funding this project through the Current Value Assessment (CVA) Up-lift. The CVA is an assessment conducted every four years that estimate the value of each real estate property. In Toronto, property value is projected to increase at a rate of 4.7% each year, this is known as the Up-lift. Under normal circumstances, this mechanism would not provide the city with additional revenue thanks to a provincial requirement that the CVA Up-lift remain revenue-neutral.
What this means is that the tax rate (%) on property value is actually reduced, so that the property owners do not see an increase in the actual tax paid to the City. To illustrate this point, the municipal residential tax rate was 0.562% in 2011. Assuming property value increases by 4.7%, the tax rate would actually reduce to 0.537% (0.025% decrease). The end result is that the actual tax for the average home owner whose home value increased by 4.7% should remain unchanged, as long as Council didn’t approve a separate property tax increase.
What Councillor Stintz wants to do is to seek an exemption from the Province on the revenue-neutral clause, so that the City can capture 40% of this up-lift in property value. For the average home owner in Toronto who sees an increase in property value, this will effectively increase actual tax paid to the city by 1.9% in each of the next four years. Since only 40% of the up-lift is being captured, the property tax rate (%) will still be reduced from 0.547% (0.015% decrease).
The McGuinty Liberal’s have given every indication to the City that they are willing to cooperate with Council to help Toronto fund transit. This is consistent with his pledge to work with Mayor Rob Ford on what to do with the Provinces $8.2 billion investment through the Big Move led by Metrolinks. However, the Ontario Minister of Transportation and Infrastructure Bob Chiarelli had indicated that the Province is not supportive of the One City Plan. Councillor Stintz will continue to seek support from City Council. If approved, the Province may find their position at odds with previous commits they have made to the City of Toronto and we may see a change of heart.
What are the consequences?
Opponents of the One City plan, including the Mayor have expressed concerns about the affordability of the CVA up-lift. Of particular concern are senior citizens who live on fixed income, many of whom have been in there homes for decades. This plan can have significant consequences, especially with more people retiring in the coming decade. In 1966, the average cost of a home was $21,360. By June 2011, the average price of a home was a whopping $512,879. That’s 24 times the cost of a home 45 years ago. If property tax was tied to the cost of a home during that 45 year period, families would not be able to afford the property tax and would literally be taxed out of their homes.
However, the One City plan will only capture 40% of the CVA up-lift and the increase will only occur once. That is, we will not have a scenario where the City collects more taxes each time the CVA is conducted. The 1.9% might be difficult to swallow for some low-income Seniors, yet, the benefits of public transit are particularly important for this demographic.
As seniors age, their ability to drive will slowly erode. The only way seniors in Toronto can travel around the city, after they lose their ability to drive, is through public transit. A strong transit system that includes a network of accessible subways and LRT’s will ensure that this growing demographic can maintain their independence as long as possible in the different corners of the city.
What makes this plan more practical than any other?
Unlike previous iteration of Toronto’s transit plan, this plan provides a realistic funding road map. The uplift is expected to generate approximately a third of the total cost of the One City Transit Plan. Whether this revenue stream is approved or morphs into another revenue generator, such as road tolls or other funding proposals is not necessarily the point. The credibility of this particular plan is in its recognition that the city would need a long-term mechanism to fund transit infrastructure.
While $30 billion capital funding seems like a lot of money, it is money stretched over three decades with an on-going source of funds. The remainder of funds may come from senior levels of government. On the other hand, with a significant chunk of money committed by the city, the private-sector would be in a much better position to help design/build/finance/maintain the remaining short-fall. This is in stark contrast to Rob Ford’s plan to involve the private sector, with little up-front investment from Government, very little investor confidence would be generated.
It is also in contrast to Mayor Miller’s Transit City, which relied heavily on funding from senior levels of government, all while the cities share of funding was uncertain. The current Mayor has already indicated that he does not support this plan. However, Councillor Stintz has support from the Transit Commission. If Council approves this plan and gains support from the Province, the Mayor’s opinion of the matter is nothing more than a formality.
As far as buy-in from the Public, an Angus Reid poll commissioned by the Toronto Star demonstrated that 80% of Toronto residents support One City. Perhaps more important, 68% of Toronto residents who voted for Mayor Rob Ford (who ran on an anti-tax, anti-LRT platform) support the One City Transit Plan.