In an article I wrote last week, I suggested in a spiteful and humourous way that the Toronto Transit Commission be privatized. The suggestion was intended to serve primarily as a punch line to end the piece. But, more importantly, since many readers have asked, here's why it should and how it could be done.
It should be noted that Don Drummond himself recommended that Ontario "not hang on to public assets or public service delivery when better options exist," and "consider privatizing assets and moving to the private delivery of services wherever feasible."
So what is feasible when it comes to privatizing TTC-related assets? And why should these assets be privatized?
Although the province could make a claim for some of the revenue from privatization, it's the City of Toronto that would likely take the lion's share of the pie. Moreover, Ontario wouldn't reduce regular expenditures through selling the TTC, seeing as in 2011 it contributed nothing to the transit system's operating budget (versus 30 per cent contributed by the city).
However, there still remain two principal reasons why the province should consider privatization: (a) unconventional savings and revenue boosts and (b) increased productivity.
For instance, Ontario's government was set to contribute $8.3 billion toward building Transit City -- a system of light-rail and rapid bus transit in Toronto. Although the future of the plan remains unclear, the figure serves nonetheless as an example of how much the province would have to invest in order to commit to much-needed TTC expansion. It should be noted that there are plans to extend TTC subway lines as well: For instance, the Spadina extension alone will cost $2.63 billion.
As a pilot project, why not let private enterprise build and operate some or all of these new lines? Regulated competition could be introduced in order to keep prices down for consumers while the province would save the money. Fares could be lightly taxed in order to generate revenue for the province. The results of these attempts would give the province a good indication on how to procede in the ensuing years with the rest of the transit system.
Moreover, seeing as some of the proposed construction goes beyond the borders of Toronto and into York (and possibly Peel) Region, Queen's Park could sell the issue as one of provincial -- and not simply municipal -- importance, and hence have the legitimacy to sell the airspace above newly built subway and/or lightrail transit stations to developers.
Beyond the challenges of cutting costs and generating revenue, there remains the question of efficiency. The fact the 70 per cent of the TTC's operating budget comes from fare collection, it is reasonable to say that the transit system could survive without government funding if it learned how to get a better bang for its buck.
There is precedent for this at both the provincial and federal level. For instance, columnist Thomas Walkom in his book Rae Days: The Rise and Follies of the NDP wrote about Ontario Hydro's ability to shed 7,000 of 28,000 jobs in preparation for an eventual privatization while his counterpart Sean Silcoff has determined that a privatized Canada Post could operate with as many as 27,000 fewer employees from the approximately 72,000 employed there in 2007.
There is also global precedent when it comes to privatizing rail and metro. One notable example is Hong Kong's MTR corporation, which has grown steadily after privatization in October of 2000, becoming one of the few profitable transport systems in the world in the process.
Private businesses have more of an incentive to operate efficiently than public ones, especially when competition -- such as selling bus lines to several different companies and regulating against merger or collusion -- is introduced into the equation. In addition to the reduced costs and increased revenue for government generated by the sale alone, the more efficient, wealthy, and less spending-averse economy produced by privatization of transit over the long run allows for more revenue to eventually reach the government's hands.
It should be noted that this isn't a Liberal or Conservative issue. Ontario's Liberal budgets of the years to come are bound by mere necessity to be harsher than anything introduced by Mike Harris's government.
A demographic shift in which baby boomers retire en masse paired with unreliable economic growth over the years to come in the wake of a severe recession means that any government is going to have to find creative ways across the board to generate revenue and reduce expenditures. This is a clear challenge that needs to be met with pragmatic solutions. Developing a long-term plan to privatize part or all of the Toronto Transit Commission can be part of that solution.