I think the reason might be the SSE - and the change in travel patterns and demand that the project would create. Think of it this way, say you want to travel downtown and you want to reach downtown via Line 2, and you live on the Eglinton East corridor, say Kingston/Lawrence, or UTSC. Currently the best choice is for you to take the RapidTO bus down Eglinton. However let's say by the time they finish construction on the EELRT it's 2030, where if we re-ask that same question, the answer isn't going to be the same. If you live/commute at/to UTSC, there is now A) the DSBRT right on Ellesmere that B) takes you directly to the subway station at Scarborough Centre. Same principle applies to those who live in Lawrence. Because Line 3 is no longer an awkward intermediary people would choose to avoid, the necessity for Eglinton East to be a high capacity trunk route significantly diminishes to the point where it could seem that the LRT that would conveniently open at the same time would see a decrease in ridership. It simply has competition now with all of the other East-West routes north of it, and its value has diminished.4. The authors do not expect the LRT travel times to improve compared to the existing RedTO bus lanes (Table 5 on Page 27).
Moreover, the transit ridership impact from the LRT is stated as negative (-4,700, continuation of Table 5 on Page 28). This could be a modeling mistake: they only counted riders boarding in the LRT corridor for the LRT’s total count, while the Bus RedTO’s total count includes the boardings on Guildwood, Meadowvale, Morningside north of Sheppard, etc. The actual count for the LRT option might be better than their estimate.
But even then, if they do not forecast a growth in ridership, then how can they expect a positive "city building" impact of the LRT (Page 18)? If residents and businesses settle next to higher-order transit, they aren’t doing so because the rails are cool, or because they can shout "Bingo!" when an LRV is coming. If they settle next to higher-order transit, then they want to use that higher-order transit. And then, the forecast ridership counts have to go up. If they don't go up, then there is no "city building" impact.