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Sinking Dreams of a Privately-Funded Subway in Toronto

» Mayor Rob Ford’s claim that he can build new subway with little public financing looks increasingly unlikely. But value capture remains one of many funding devices that should be considered seriously by transit agencies.

Last fall’s mayoral election in Toronto was a watershed moment for Canada’s largest city; in electing conservative Rob Ford to the top post, the public essentially rejected the approach that had been taken by former Mayor David Miller. For transportation, the change was particularly dramatic. Whereas Mr. Miller had advocated a network of surface-running light rail lines called Transit City, Mr. Ford lambasted this approach as a “war on cars” and declared that the only public transportation projects he would pursue would be in subways.

In March, in an agreement with the Ontario provincial government, he got what he wanted. The planned surface line on Eglinton would be replaced with a subway sponsored by the Province. The light rail line on Finch West would be put off to a later date, as would an extension of the Scarborough RT. And the Sheppard East light rail line — then already under construction — would be substituted by an extension of the Sheppard Subway, to be funded by the city.

That project now appears fiscally impossible.

The Mayor, pursuant to his electoral promises, said that the Sheppard Subway could be done with the commitment of no new city funds; rather, he claimed, private investors interested in development rights around stations would produce an increase in area property values. The city would be able to sell off enough station-area land and collect a large enough amount of new taxes to be able to pay for the project. The idea was that Toronto, like Hong Kong, would be able to build better transit through private development.

This week, the wildly optimistic proposal fell apart. Gordon Chong, the man appointed by Mr. Ford to head up Toronto Transit Infrastructure Ltd., the group meant to pioneer this public-private partnership, said that even with significant upzoning around stations, the private sector would be able to contribute a maximum of only 40% of the line’s C$4.2 billion estimated costs. And in a city where neighborhood groups have fought hard to prevent such zoning changes in the past, the prospect of 30-to-40 story towers in the backyards of single-family homes was not likely to be easily accepted by local residents — so that 40% was probably a high estimate.

Though federal funds could aid a bit, lacking provincial aid, the rest of the line’s costs would have to be paid for by other funding devices, such as road tolls, according to Mr. Chong. Mr. Ford, who made his campaign work on the basis of his predecessor’s supposed hated of cars, rejected the idea hastily.

While Toronto appeared in early 2010 to have four transit lines ready to go, it now is down to just one and a half — the Eglinton Corridor and the replacement of the Scarborough RT. Unless Mr. Ford makes a quick turnaround on the use of municipal funds for his Sheppard Subway (or provincial or national governments fly in for the rescue), the project will be dead in the water.

In some ways, that’s a pity: The financing scheme being considered — using value capture on surrounding properties to fund the project’s completion — is a reasonable one that should be used much more frequently in cities funding new transit lines. That is, to pay for a portion of total costs, since for now most cities will not be able to raise the kinds of funds from property development that Hong Kong has. Fortunately, its adoption by cities in the U.S. and abroad appears to be gathering steam.

In Paris, the just-approved 125-mile metro network will be partially financed through the sale of land around stations. And in North Texas, the development of a new 68-mile commuter rail line called the Cotton Belt is moving forward thanks to a tax-increment financing district that is being proposed for neighborhoods around stops.

In a talk at the Congress for the New Urbanism in Madison today, Mike Krusee of the Partnership for Livable Communities suggested that this new route between Fort Worth and Northern Dallas County could cover about $380 million of its $1.54 billion in total construction costs — and all of its operations costs — through value capture in the towns through which the line would run. In short, increases in property tax collections over a few decades would be used to subsidize the creation and maintenance of the new transit offering. Though the proposal has yet to be adopted (and the remaining $1.16 billion in construction costs has yet to be found), it demonstrates the potential of integrating private investment into what is otherwise a public project.

Most American transit system capital programs are financed purely through federal and state grants and municipal sales tax income.

It is indicative that in the first request for proposals for constructing the Cotton Belt, investors in Dallas apparently hoped that the private sector would be able to step in and pay for the whole project, said Mr. Krusee. Facing revenue shortfalls, the metropolitan area had abandoned full government financing for the program. Of course, just as in Toronto, that was not possible: 55 replies from companies provided no solution to the overall lack of funds. Only since Mr. Krusee’s Partnership proposed the value capture system have private developers become seriously interested in working to raise funds to pay for construction. Major transit-oriented developments are apparently planned around many of the stations.

Increasingly, transit systems across the country looking for expansion opportunities may have no choice but to look for similar deals: Agree to use tax revenues from property value increases on transportation corridors to the area, and development will follow. No such deals could mean fewer new transit lines in the future.

Image above: Subway station at Sheppard-Yonge, from Flickr user Kenny Louie (cc)

27 replies on “Sinking Dreams of a Privately-Funded Subway in Toronto”

“While Toronto appeared in early 2010 to have four transit lines ready to go, it now is down to just one and a half”
All because of a so-called “war on cars”. The LRT lines on Sheppard and Finch were to be combined with road widening so that the number of lanes for cars remained the same. Most of the funded porrtion of Eglinton was going to be underground, and hence a subway in all but name.

Oh, and the province offered Ford $2 BILLION towards a Shepard subway if he stuck to the original plans for Eglinton with surface running at the ends… Ford turned down that money.

This is the part that should really outrage Toronto’s voters. That plus some sort of private sector support would have gotten at least a decent extension. Instead, well, we have the mess that we see now.

I wonder if the neighbourhood groups who were saying the Sheppard LRT was going to be “disruptive” feel the same way about dozens of new condo towers going up through the corridor?

I think value capture could work better if neighborhoods that will be benefit from new transit would accept some blocks of high-rises and other high-density around stations.

“And in a city where neighborhood groups have fought hard to prevent such zoning changes in the past, the prospect of 30-to-40 story towers in the backyards of single-family homes was not likely to be easily accepted by local residents — so that 40% was probably a high estimate.”

Single-family homes get buses – at the most. If a train is going to work it needs to originate and head to dense areas (or parking lots).

+1 to this; though surface rail may work, depending on the density.

But grade-separated rail without density ought to be a non-starter.

Density is function of far more variables than just the type of construction. Many of the single family home neighborhoods less than 5 miles away are nearly twice as dense as the multi-family multi-story apartment complex where I currently live.

Height matters, but so does length, width, residents/unit, SF/Unit, and non-residential area/unit (can be parking, but it can also be roads, parks, etc).

In the case of the neighborhoods I’m talking about, there are no garages or driveways, yard space is typically a smaller footprint than that of the home itself, the streets are narrow, residents/unit is nearly 3x that of my complex.

I have seen several single-family home neighborhoods that have higher density than some of the “TOD” neighborhoods that everybody here loves to love.

What Danny said. If there are no or small setbacks, and the lots are closely spaced, then density can be fairly high. For example, Cambria Heights, at the eastern margin of Queens, has 6,000 residents per square kilometer.

It’s interesting that you note that neighbourhood as I was a former resident for nearly twenty years. Compared to other areas in Queens, it certainly doesn’t seem dense and a lot of the housing stock isn’t much different when compared to that in neighbouring sections of Nassau County. Admittedly, I suspect some of the density is inflated due to illegal apartments and multi-generational housing for Caribbean immigrants.

As you noted, the small lot sizes allow for more homes, but I’d imagine that for some the privacy afforded is questionable. And despite the somewhat high car ownership rates, it’s actually not that bad in terms of living car free as there’s “over saturation” of bus service, and there’s a small commercial strip along Linden Blvd with convenience stores (bodegas), hair salons, and doctor’s offices.

I tend to use a neighbourhood like that as descriptor for what I call “small density” in which there’s lots of single family homes, but it’s still walkable.

And as jane jacobs pointed out about half a century ago, stacked 2×2 townhouses yield urban densities ~ even at substantially larger sq. ft / residence than the old pre-WWII interurban and railroad suburbs.

Indeed, that can give urban densities with a 1car lock up garages on an access lane behind the stacked townhouse (though 4x2car garages starts to be hard to put out of sight).

So the notion that there has to be 40ft towers to get to urban densities is a false dichotomy.

Ford, unusual for a mayor, strongly endorsed the Conservative Harper government and a bunch of Conservative candidates at the recent election. The Conservatives got their absolute majority due to a bunch of seats in the Greater Toronto Area – even though they lost some in Quebec.

Maybe this’ll allow him to go to the feds and get some money now. Maybe this was the hope all along. Although really he really just seems to be part of that strange regressive Conservative movement who wants to change Canada into something we won’t recognize after they’re done.

There’s an interesting correlation between this post and the last post about privatization of the Northeast corridor. In both cases, the politicians involved need to be reminded, quite strongly, that wishing really hard and muttering “private sector” as an incantation will not solve the transportation problems facing their respective constituencies.

You write:

… in electing conservative Rob Ford to the top post, the public essentially rejected the approach that had been taken by former Mayor David Miller.

In Canadian elections with 3+ strong candidates and no provision for a runoff or ranked-choice voting, it’s not necessarily true that the election of a candidate has anything to do with the voters’ intentions.

For example, from one election to the next, a losing candidate can become a winning candidate without a single additional vote, simply due to the way votes are divided among her multiple rivals.

To conclude voter intent from an election outcome, you need either a clear majority victory or some form of ranked-choice voting or proportional representation.

There’s also a problem in saying “the public” when you mean “the voters.” That’s only true in countries with mandatory voting such as Australia.

While what you say is true for Canadian elections in general, in Mr. Ford’s case he garnered 47% of the vote in a field of 40 candidates.

In addition, there was a record voter turnout of 53.2% in Toronto in 2010, up significantly from previous elections (39% in 2006, and 38% in 2003). Unlike provincial and federal elections in Canada, there are no official party affiliations at the municipal level, thus each of those votes was directly for Mayor Ford himself.

So while what you say is generally true, in the case of the 2010 election Mayor Ford’s victory comes as close to representing voters ‘intent’ as one can get in Canadian political elections.

However, it is also generally said that Canadian elections are frequently as much or more about throwing out the previous lot of ‘creeps and bums’ as they are about voting for any particular candidate. It would seem these election results were as much (or more) about a wholesale rejection of Mayor Miller’s &/or Dalton McGuinty, &/or the Federal Liberal party’s ideology and backroom players (Joe Pantalone, George Smitherman, Rocco Rossi respectively)than they were about endorsing Ford.

That said, the wholesale rejection of Miller’s policy DID equate a rejection of Transit City.

If Ford’s opponents were all to his left, then it still doesn’t equate to an endorsement of Ford. Under plurality vote, if the opposition has more than one viable candidate, you can coast to victory (as Thatcher did throughout her tenure as Prime Minister, and as Harper just did last month). 47% should only be thought of as real endorsement if the opponents were all over, or were located in different directions away from Ford on the political map.

I think the planning problems in Toronto run far deeper than that, and there are several.

First of all, in the City of Toronto the Urban Planning Department is completely separate from the Transit Planning Department. I attended a Planning Department presentation on the City’s Planning/Growth document and processes. Although they made reference to optimizing growth around transit & major corridors, when the question was asked what the links were between the two departments there was a long silence. Finally one brave soul admitted “They are a separate department.” Further questions re: whether or not specific planned intensification on major thoroughfares were paired with corresponding transit initiatives were met with silence
&/or bafflegab. (It goes deeper than that: there are also frequently no (or at best very weak) links to other major infrastructure considerations such as sewers and water.)

Toronto is, notoriously, a ridiculously ‘developer-friendly’ city. This has been true for mayors and councils of all poltical persuasions; this is not a right/left issue. The blights on our urban landscape due to bad development are many (e.g. the wall of condos at Waterfront and Lakeshore West which cut off the downtown from the lakefront, which are btw notoriously underserviced by public transit).

Furthermore, even if all those departments were working and planning cooperatively together and there was appropriate pushback to inappropriate development, the OMB (Ontario Municipal Board – a provincial quasi-judicial body) can, and usually does, override any planning decisions/approvals made by City Council &/or neighbourhoods. The OMB is so notorious for siding with developers against neighbourhoods that examination of that common perception was the subject of a Master’s thesis. The paper’s conclusion was that the perceptions of bias in favour of developers was indeed warranted.

One would think that, for any development &/or planning initiative, transit, transportation, sewer, water, emergency services, schools, parks, community services, etc… would be considered in tandem. Sadly, not in Toronto.

So, while the approach you’re advocating here “using value capture on surrounding properties to fund the project’s completion” is in theory sound, unless all a City &/or Regions policies, regulations and departments are working in tandem it is unlikely to succeed.

A friend of mine is telling me that ‘using value capture on surrounding properties to fund the project’s completion” in Toronto is (to borrow our grandparent’s phrase) asking developers to buy the cow when they already get the milk for free.

this is part of the argument for the ‘seed money’ approach, where an initial development is built with public capital subsidy and with zoning easements, and incremental property tax on the property allowed to be built due to the easement used to finance further extension.

if the permission to build above car-only densities and with fewer than car-only parking requirements is only legally due to the existence of the transit, then they do not get the cow for free.

the American disease spreads…..

transit cannot capture in direct funds all of its benefits. any model that relies on transit being ‘profitable’ and ‘self-funding’ is designed to fail. show me a single instance of a road being forced to follow the same rules, and I may change my mind……..

value capture can not try to capture all of the property value benefit. Unless there is net new private benefit created, how can it expect to build a coalition to support it? value capture must aim at a share of the net value created.

however, note that the subsidy to roads in the North America is often so extreme that there are projects that would be viable with the field tilted against them, just not so extremely as a present.

obviously, the more capital-intensive the approach, the more level a playing field it is likely to require ~ relying on value capture alone to fund a subway requires a quite impressive incremental value per m^2 from provision of the subway.

Value capture alone funded the initial lines of the NYC Subway. That value came in the form of demand for fares.

Yes, if you do not heavily subsidize ‘private’ motor vehicles, there is are more common carrier systems that can generate an operating surplus, or even profit.

however, that only captures first party benefit, so if you rely on fares alone, to cover all operating and capital cost transit will be underprovided, and the system best at shifting costs to others will have an advantage.

The problem with traditional value capture is that it equates a rise in property value with the provision of transit service, but is not directly correlated. Property values can change for a number of reasons. Providing transit without changing zoning could restrict upward movement of valuation and restrict ridership. Allowing too much development could lower valuation if demand doesn’t match capacity.
IMO a public utility model would work better than value capture through property appraisals. In this way the cost is charged directly to those properties that benefit, based on the level of service offered. Utilities generally charge in two ways – base fees cover access to the system (fixed costs) and usage rates cover the marginal cost of the actual services consumed. What would happen if each property within a given distance of a trasit route got a bill for thier portion of the fully-allocated cost of that route, and then the total fares paid by users of the route was rebated to the properties? The properties charged would understand exactly what they are charged for. They would have incentives to request no more service than the market supports and to maximize ridership (fares) and productivity. The choice to subsidize a particular service would be transparent. The benefit of operating routes with high value capture (farebox recovery) would speak for itself in simple economics.

The political problem with your assertion is that, in the large supermajority of neighborhoods throughout North American, transit usage is a fraction of car usage among its residents. Thus, a proposition to charge every resident within 700′ of a tram stop or subway station certain amount of dollars to finance the capital costs of the infrastructure (tracks, stations, signaling – without vehicle purchase budget) would backfire as most residents perceive themselves as non-users of transit, regardless of where it is placed.

The idea is interesting, but I doubt it stand any chance of getting approved by voters anywhere but in some specific cities where specific transportation patterns coexist with specific demographics to make it viable.

In downtown Toronto, most residents walk more than they drive or use transit. The biggest modal shift has been from going by car to going on foot; transit has remained strong and stable, but is generally for trips outside the neighborhood.

Transit City did include a major shortcoming, and that was a lack of consideration for incremental upgrading to elevated or underground lines. The Jane line in particular was understood to require tunneling at its southern end. The Don Mills line would’ve most likely been tunneled from Leaside Bridge down to Pape station. As far as I know, it just wouldn’t be feasible to have 4-unit light rail trains for street running, but a line with 2-unit street-running trains could have been designed to evolve into a grade-separated light metro network. This would’ve probably yielded higher design costs, but it would’ve been a good way to counter Rob Ford.

There was also a disconnect in planning for Transit City and the downtown reliever subway. The reliever line is planned along Queen Street, and there are allowances for stations on both Yonge and University. In theory at least, you could route the reliever subway to have through-running from Jane to Don Mills. This could also be done by routing that connection in the railroad r/w, with a streetcar tunnel along Queen allowing for far more efficient crosstown operation from Long Branch and Mimico to Kingston Road and The Beaches. Surface operation on Queen would then be focused on the Parkdale-Riverdale section, where it’s just not practical to avoid mixed operation.

There are all kinds of ways to play with these ideas, but right now the city is getting the Eglinton line and nothing else. This election wasn’t for Toronto, it was against David Miller. Joe Pantalone was the Ralph Nader. If Transit City had been sold as both a new network AND a network planned for upgrading in increments, it would’ve stood a better chance of being implemented. On its own, it still probably wouldn’t be enough to change the election’s outcome. Rob Ford is not doing and will not be doing a good damn thing to make it possible to get from northeast Scarborough to downtown in less than an hour on TTC. The GTA already has the longest commute time in North America (80 minute average), and Rob Ford won’t be doing anything to ease Toronto’s mobility problems.

Once again there was a big dream of all citizens that city council used to gain popularity.
But I simply don’t understand how were first projects prepared when they proposed this financing by private sector and now they found out they can pay for max. 40% of costs? And I believe this is still not the final number. It just looks like they just sat, estimated some numbers and didn’t check anything.

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