Danforth Line 2 Scarborough Subway Extension

[Xray_Crystal_Junkie]

Fine have the city issue it, makes no difference really. I only suggested the TTC doing it themselves to ensure that's where the money was spent.

They are historically low. Barley above inflation. And yes a transit authority issuing bonds are going to pay comparatively higher rates. Still going to be low by historical standards.

Don't get so excited.

 

[Forgotten]

Let the TTC sell bonds against future revenue, can they seriously not do that already? Have it backstopped by the city and people would flood to buy them with interest rates still so incredible low. Why do the "missing" funds need to be raised within a single fiscal year?

I think this project is a waste, but surely there are creative ways to fund it. Especially in this current climate of interest rates.

(I guess this assumes the TTC wouldn't increase money-sucking bus service around the subway. In which case building the subway would create a larger deficit - an increase in costs outstripping the increase in revenues - once built)

What revenue might that be?

 

[drum118]

If today rate is 3.5% for bonds, what happens when it jumps to 10%? The cost of borrowing at 3.5% is one thing, but getting to 10% going to be a lot harder on the pocket book. Ask the people in Alberta at the end of the 70's and early how hard was it on them for selling their homes for a $1 when interest rates went from 10% to 22% almost overnight since they couldn't afford to pay the extra interest.

Just because rates are low today it only going to take a thing or two to push the rates up and it will make it harder to pay back that higher interest rate.

TTC is not allow to sell bonds and it has to be done by the city. If they did, how would they pay it off as well paying the interest on it??

If you are going to the well for money, you better get all at once at a lower rate than going yearly when the rate maybe higher. Then it could be lower.

Getting all the money all up front then allow TTC to plan things in a timely fashion without worry where the next dollar is coming from. At the same time, you can bank some of that money to earn a return on it before having to use it. Mississauga did this for the BRT to the point they earn $20m interested on that money to help off set the cost over run.

TTC pays the city about $150m yearly in their operation budget to cover their share of money borrow for capital cost like subway cars, buses, etc.

The way I see it, the city is on the hock for about $600m assuming the Feds have kick in a 1/3 of the money. Since one of the condition for funding the subway has fail and council not meeting before October after the September deadline unless a special meeting is call, the subway is dead.

Joe Mihevcis a smart cookie and been on the TTC commission far too long to see the handwriting on the wall, that compel him to place that motion regarding the $1.8b funding from the province as a condition to fund the line.

 

[Electrify]

Could the money be found by cutting out the underground stops at Oakwood and Leslie on Eglinton?

Hell, cut out some of the extra surface stops on the three light rail lines, and use that money to build a stop at Brimley/Danforth. A stop there would generate far more ridership, at least walk in ridership, than the one planned for Lawrence.

 

[Rainforest]

If today rate is 3.5% for bonds, what happens when it jumps to 10%?

The rate might go to 5% or so; it will not go to 10% in the foreseeable future. A 10% rate would choke the consumer market and the economy; the central bank will not allow that, and will rather tolerate inflation.

Furthermore, a 10% rate on the Canadian dollar bonds while the American rate stays in the vicinity of 4% or 5%, would drive the exchange rate way up; that's good for Canadians vacationing in Florida, but would choke our exporters. And the American rate is unlikely to approach 10% since they will start having difficulties servicing their federal debt at that rate.

 

[Rainforest]

Could the money be found by cutting out the underground stops at Oakwood and Leslie on Eglinton?

Hell, cut out some of the extra surface stops on the three light rail lines, and use that money to build a stop at Brimley/Danforth. A stop there would generate far more ridership, at least walk in ridership, than the one planned for Lawrence.

There is no underground stop planned for Leslie. It is either surface stop, or underground tunnel with no stop.

Cutting surface stop may be useful to cut travel times, but not to save money. That would be peanuts compared to the cost of even one underground subway station.

 

[Xray_Crystal_Junkie]

What revenue might that be?

From the fair-box? I thought that was pretty straight forward. Increased ridership equals increased tolls collected.

If today rate is 3.5% for bonds, what happens when it jumps to 10%? The cost of borrowing at 3.5% is one thing, but getting to 10% going to be a lot harder on the pocket book. Ask the people in Alberta at the end of the 70's and early how hard was it on them for selling their homes for a $1 when interest rates went from 10% to 22% almost overnight since they couldn't afford to pay the extra interest.

Just because rates are low today it only going to take a thing or two to push the rates up and it will make it harder to pay back that higher interest rate.

Typically when you issue a bond, it's not a variable interest rate. Some may scale with time but it's set out at the time of sale. Your comparison to a home mortgage is not apt at all.

The price of those bonds may (read: will) change on the secondary market, but the interest the TTC would pay would remain the same. Sure if they issued bonds at a large date it could be much higher, but I'm talking now.

If you want to substitute "City" for "TTC", sure. I'm not in finance but this stuff is pretty straight forward.

 

[Jonny5]

From the fair-box? I thought that was pretty straight forward. Increased ridership equals increased tolls collected.



Typically when you issue a bond, it's not a variable interest rate. Some may scale with time but it's set out at the time of sale. Your comparison to a home mortgage is not apt at all.

The price of those bonds may (read: will) change on the secondary market, but the interest the TTC would pay would remain the same. Sure if they issued bonds at a large date it could be much higher, but I'm talking now.

If you want to substitute "City" for "TTC", sure. I'm not in finance but this stuff is pretty straight forward.

It's not straight forward and you've simplified it beyond what is possible. Unless fares double, riders will not be generating money to pay for the service they use plus interest. Any money for interest will be 100% paid by the city. The interest rate is also often not fixed. Toronto has floating rate debt, simply because investors won't give them fixed rates when needed, or effective variable rate debt as they use short term lending as needed to make budgets and every time they borrow they take up market rates.

And this totally ignores the principal. When is that going to be paid back and how? What will be the interest rate when that is rolled over? Someone above said interest rates will never go past 10, that central banks would never allow that: how laughably fast history is forgotten.

 

[Electrify]

There is no underground stop planned for Leslie. It is either surface stop, or underground tunnel with no stop.

Cutting surface stop may be useful to cut travel times, but not to save money. That would be peanuts compared to the cost of even one underground subway station.

What about Oakwood then? How much can be saved if we axed it?

Also while cutting surface stops is generally peanuts, I could cut half of them out without even trying. Put together it could add up to at least $100 million, and that is a conservative estimate.

 

[Forgotten]

From the fair-box? I thought that was pretty straight forward. Increased ridership equals increased tolls collected.

Ha ha how much operating profit do you think the stub extension will make? How do you make payments with negative profits?

Some of the ideas above are a laugh. The new tax isn't enough to pay for the gold plating and saving precious Scarboroughers a transfer despite the extension having fewer stations so let's start taking away stations from other people around Toronto to pay for it. All of it just so "Scarborough" doesn't feel "left out".

 

[TheTigerMaster]

What about Oakwood then? How much can be saved if we axed it?

Also while cutting surface stops is generally peanuts, I could cut half of them out without even trying. Put together it could add up to at least $100 million, and that is a conservative estimate.

I think you're overestimating the number of surface stops. There are only 8 (maybe 9) on the line. And you'll still need signaling at the stops, which I suspect would make up the bulk of the cost.

 

[Xray_Crystal_Junkie]

It's not straight forward and you've simplified it beyond what is possible. Unless fares double, riders will not be generating money to pay for the service they use plus interest. Any money for interest will be 100% paid by the city. The interest rate is also often not fixed. Toronto has floating rate debt, simply because investors won't give them fixed rates when needed, or effective variable rate debt as they use short term lending as needed to make budgets and every time they borrow they take up market rates.

And this totally ignores the principal. When is that going to be paid back and how? What will be the interest rate when that is rolled over? Someone above said interest rates will never go past 10, that central banks would never allow that: how laughably fast history is forgotten.

The subway is the biggest (only) money making venture of the network. It makes a profit on each rider assuming they didn't take a bus to get there. If all other service along the route was held constant and a subway built, revenues would increase and you'd have a net increase that could go to paying the bonds. And and fraction of the toll normally allocated to capital costs goes towards the bond since in essence that what it is. Oh and if the tolls don't cover the payment costs completely, we just hiked property taxes +1% specifically to pay for transit which I'm sure could cover the remainder. Hold that increase for the duration of the bond and you're set.

Are you sure Toronto doesn't get a fixed rate? I had always thought that was the case, and this Start article discussing Toronto's debt contains this line:

The rate is fixed for up to 40 years, so as inflation rises, the cost to pay for an asset does not, even if its value goes up.

Seems to be confirmed by this blurb from a Bloomberg article in 2010:

Toronto’s 5.2 percent bonds due in June 2040 yield 4.66 percent, compared with 4.20 percent for the Port Authority of New York and New Jersey, which is financing the reconstruction of Manhattan’s World Trade Center. Its 5 percent bonds maturing in July 2039 are rated Aa2 by Moody’s, one rank below Toronto’s Aa1 rating.

The rates from sale to sale differ but only the yield (what you get on the secondary market based on resale value) is changing constantly. The City pays the agreed upon rate year after year.

Also municipalities don't have the luxury of rolling over debt like the Provinces and Feds. The repayment schedule is such that the principal is amortized over the life of the bond and will be paid in full by the maturity. The amount of interest you budget is what you will end up paying, because you're forced to legally. That is, according to the City's website.

Lastly, you're right about massive interest rate spikes in the past. This may sound naive with respect to how quickly things can change but with the popularity of Keynesian economics, I think Rainforest is right in that the central bank wouldn't let that happen. Then again, what I've stated above kind of makes this irrelevant.

 

[rbt]

The subway is the biggest (only) money making venture of the network.

You are horribly mistaken. The subway does not make money. The subway has run a capital deficit of over $400M/year for the last decade.

On top of that, the subway requires the assistance of buses and streetcars just to get people to the door. The fare is for the trip, not a specific mode. You can do the split by distance, by underlying cost, by component but in the end the trip as a whole is at a loss and cannot be done by subway alone.

Walkins for the subway are far from sufficient to pay the operating costs. If we rolled out 1500km of subway service the system would not suddenly be profitable despite being an efficient way to carry a lot of people.



If the most popular item in a restaurant is a combo meal for $5, and each part costs $3 to produce, you don't get to say the drink had a $2 loss while the burger had a $1 profit.

Either the meal deal runs a profit or it runs a loss as the components aren't sold individually.

 

[JayBeeGooner]

Could the money be found by cutting out the underground stops at Oakwood and Leslie on Eglinton?

Hell, cut out some of the extra surface stops on the three light rail lines, and use that money to build a stop at Brimley/Danforth. A stop there would generate far more ridership, at least walk in ridership, than the one planned for Lawrence.

You're too obsessed with speed. The spacing on the surface portion is fine.

Residents in the area would (rightfully) raise holy hell if Oakwood is deleted. I used to live in the area, and Oakwood/Eglinton is quite lively. The neighbourhood needs a stop there. Also, there won't be an underground stop at Leslie. Metrolinx nixed that ammendment a few months ago.

 

[bobbob911]

You're too obsessed with speed. The spacing on the surface portion is fine.

Residents in the area would (rightfully) raise holy hell if Oakwood is deleted. I used to live in the area, and Oakwood/Eglinton is quite lively. The neighbourhood needs a stop there. Also, there won't be an underground stop at Leslie. Metrolinx nixed that ammendment a few months ago.

Really? It looks like the Oakwood stop is a 5 minute walk from the subway station, at a completely flat elevation - why would someone wait for the LRT when they could just walk to the station?