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05/22/2014 12:32 EDT | Updated 07/22/2014 05:59 EDT

How Hudak's TTC Reform Could Work

Three principles would need to govern the new transit agency: 1) Decision-making should be vested with management rather than politicians; 2) Capital costs should not be financed by general government revenue; 3) Fares should cover 100 per cent of operating costs.

Flickr: Peter Broster

The Ontario PC Party has pledged that, if elected, they would transfer the Toronto Transit Commission's subway and light rail transit operations to GO Transit in order to create a single regional rail provider. While the details thus far are sparse, such an ambitious undertaking would present challenges. With so many moving parts, fine details could be the difference between success and failure. While the payoff from success could be immense, failure could be Toronto's worst cataclysm since amalgamation.

Political paralysis has prevented necessary transit expansions. Mayor Ford's decision to abandon the Miller Administration's Transit City plan in favour of building more suburban subways is the latest example of the municipal government's inability to expand rapid transit, even with funding commitments from the federal and provincial governments.

It seems the only time anything ever gets built is when there happens to be an electoral stake. The Wynne government's decision to fund a questionable Scarborough subway line during a by-election in Scarborough they just happened to be in danger of losing is a prime example.

Meanwhile, there is no plan to fund the Downtown Relief Line, which would take pressure off of the near capacity Yonge-University-Spadina Line. Most neutral observers rank it as a top expansion priority. Yet, dysfunction at city hall has prioritized marginal projects in favour of necessary ones. Uploading responsibility for rail projects could lead to smarter transit decisions, given the right reforms.

Transferring the rail component of the TTC to GO Transit is one of many potential reform paths. It may not be the ideal in a perfect world, but it's the one on the table. Like all reform proposals, there are trade-offs. It could ensure that the most important transit projects get built, and it provides an opportunity to create a transit system that's efficiency is unparalleled in North America. However, it could shift decision making over public transit in the hands of non-Toronto politicians, and shift financial responsibility from Torontonians to the rest of the province unless the right model is chosen.

Three principles would need to govern the new transit agency: 1) Decision-making should be vested with management rather than politicians; 2) Capital costs should not be financed by general government revenue; 3) Fares should cover 100 per cent of operating costs.

Politicians love micromanaging. When politicians attempt to insert their own personal or electoral agendas into transit planning, bad decisions get made. Hence, the provincial government should legislate that all capital projects are initiated by the new transportation trust, rather than the legislature. The white paper mentioned that the transportation trust would be governed by independent trustees. Hopefully they are serious about that independence.

As an arms-length entity, the new service should have operational autonomy so long as it met customer service benchmarks and remained financially solvent. This would also allow for politically difficult restructuring such as automating ticket taking and even train operations. Performance incentives could be provided to both staff and managers for exceeding benchmarks. That would give them a strong incentive to find efficiencies within the system.

The capital financing mechanism the PC white paper proposes is a new transportation trust. Funding details are sparse, which is common for campaign promises. Some smart proposals include using proceeds from land sales and encouraging Canadian pension funds to invest in transit projects. The rest appears to rely on re-prioritizing funds. That would be problematic.

Taxpayers from across the province shouldn't pay for GTA transit expansions. Instead, those whose property values appreciate as a direct result of new transit infrastructure should pay through land value capture. That entails taxing away property value increases resulting from transit expansions. Otherwise capital expenditures are windfalls to those who happen to own land in the right places. The white paper did mention "capturing increasing land value along new subway and LRT routes," which is encouraging. Land value capture, while infrequently implemented, is supported by organizations as diverse as the Ontario Home Builders Association, the CD Howe Institute, Metrolinx, the Manning Foundation, and by former Green Party leader Frank de Jong (who gave a talk related to the subject at a Frontier Centre event). It may seem exotic, but it is a very mainstream idea.

By sequestering capital funding from general revenue it would also allow for the new provincial government to further reduce debt and taxes. Moreover, since the new agency would need to remain solvent, it could only undertake financially viable expansions.

Finally, farebox revenue should cover operating costs. World class public transit cannot operate like a social program. People who can afford to drive don't choose transit solely because it is cheap. It must be convenient and attractive. Holding fares below operating costs simply means that transit agencies scrimp on quality. The TTC and GO currently collect roughly 80 cents per dollar of operating costs through fares annually. They could likely eliminate those subsidies through efficiencies without fare increases.

Not every rider should have to pay the same cost. Ideally, there would be distance based pricing that charges more for farther trips (see Washington Metro's pricing structure for an example). Additionally, the Ministry of Community and Social Services could subsidize low income passes. But it is crucial that it be a payment on behalf of low income riders rather than a general operating subsidy. Otherwise the agency would slip back into dependency on subsidies. Lines must be draw. The provincial government should only pay for transitional costs such as redundant staff buyouts and early retirement packages out of general revenue.

Mr.Hudak would have to approach transit reform with caution. The last time the PCs formed government they created the Toronto Megacity to achieve efficiencies, with the opposite outcome. But following the above principles, Mr.Hudak could put GTA transit on the right path. Deviating from that path could be calamitous.

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