SETWAY Funding and Finance Workshop

Posted on by Shane Keating

SETWAY FAST FACTS

Length: 26 km

Number of stations: 18

Number of tunnels: 5

Number of bridges: 15

Park and ride stalls: 4,000

Population increase in the SE (projected) over the next 25 years: over 100,000

My Notice of Motion in March, 2013  initiated an innovative Funding and Finance Workshop. On December 09, 2013, I sat down with city officials, consultants and members of the private sector to talk about the future of the Southeast Transitway.

I opened the discussion by talking about the barriers to funding and financing SETWAY. If we run into a wall, we have to figure out how to climb it or work around it in order to find an answers.

The workshop reviewed several innovative financing options as well as potential revenue tools. I’ve outlined a few themes below.

  • People are starting to recognize the relationship between employment and transit and that the destination, itself, is a critical reason for transit use.
  • The cost of having transit in bottlenecks (Glenmore and Anderson on Deerfoot Trail) is starting to outstrip the benefit of having transit there.

There was a lot of discussion about P3’s, Community Revitalization Levies (CRL) and BOOT (Build Own Operate Transfer).

Here is a review of these funding methods:

CRL – The City borrows money to pay for the construction of SETWAY or a segment of it.  Once built, the project attracts and increases local activity, investment and development.  Property values rise creating additional tax revenue for the City and Provincial government.  The City uses the growth in taxes to pay back the borrowed funds.  Only the tax growth within this specified area is dedicated, leaving taxes from other areas unaffected.  Once complete, the taxes dedicated to the CRL return to civic and provincial general revenues.  This leaves the City and Province in a better position.

The key point raised about this option is that it is difficult to get the Province to forfeit over the property tax within the specified area in order to pay for the money borrowed. But, this could be used as a tool to do smaller segments of SETWAY using land already owned by the City.

P3’s – Public-private partnerships are long-term, performance based contracts which transfer risks to the private sector partners and provide some private financing.  Under a P3, the contractor will finance SETWAY on the City’s behalf, however, they need to be paid back with interest. The PPP Canada Fund and Project Development Fund are cost-sharing programs that work with lower levels of government to promote the effective use of these partnerships. This could work in a manner where the Province and Federal Governments match the funds raised by the City to pay for SETWAY and/or the Southeast LRT.

Boot – is a financial arrangement wherein a private company designs and builds a transit project or a facility at little or no cost to the City, and owns and operates the facility as a business for a specified amount of time with the prime goal of recovering the costs of investment and maintenance.  Once the contract has reached maturity, the private company transfers the asset to the City. Consultants raised the point that this financing option places all the risk squarely on the developer. Consultants advocated for a modified version of BOOT wherein the City makes payments on the capital costs during the lifetime of project to help reduce this risk.

Former Vice President, Investment Strategy and Project Evaluation of Metrolinx–a transit authority for the Greater Toronto and Hamilton Area (GTHA) talked about potential revenue tools.  Metrolinx recently prescribed a major investment in transportation to the tune of $50 billion over the next 25 years.  The goal of their ambitious plan is to bring 80 per cent of the region’s population within 2 km of rapid transit (LRT or BRT).

Growth in GTHA’s suburban areas has made the “hub and spoke” pattern no longer sufficient, as it cannot service decentralized employment in suburbanized areas.  Historically, many regional transit systems were designed to move residents to  a single high-density employment centre, however, only 4 per cent of Toronto’s population in its downtown district.  The “hub and spoke” system doesn’t work because it cannot efficiently service low-density and dispersed employment centres (Quarry Park and Seton come to mind when thinking about this in Calgary). Transit is unable to effectively connect workers to their place-of -work and this may result in reduced ridership, contribution to increased congestion, negative impacts to the economy, environment and quality of life ( approx 12 percent of Calgary’s population works downtown).  Metrolinx has calculated that the approximate cost of congestion in the GTHA was over $3 billion per year to the economy.

Metrolinx propsed a series of 25 recommendations as part of a funding plan to improve transit in the GTHA.  While the purpose of this was to develop a Tool Kit of options for funding the City’s investment strategy.

  • Auto Insurance Tax
  • Car Rental Fees
  • Carbon Tax
  • Cordon Charges
  • Corporate Income Tax
  • Development Charges
  • Driver’s License Tax
  • Employer Payroll Tax
  • Transit Fare Increases
  • Fuel Tax
  • “High Occupancy Toll” Lanes
  • Highway tolls
  • Hotel and Accommodation Levy
  • Income Tax
  • Land Transfer Tax
  • Land Value Capture
  • New Vehicles Sales Tax
  • Parking Space Levy
  • Property Tax
  • Sales Tax
  • Tax Increment Financing
  • Utility Levy
  • Vehicle Registration Fee
  • Vehicle Kilometers Traveled Fee

Shane Keating