Ontario Budget Cut and Transit Expansion

[brockm]

Mostly 'cause I don't know where else they could cut that much money quickly enough. Healthcare? not likely. Education? that is always a real tough sell.....mmmm what are the other big expenditures? Oh yeah there is that debt service one...not sure you can just cut that which sorta points out why debt is not such a good thing....each dollar of debt adds to your cost tomorrow of things you bought today..making things you think you need tomorrow that much harder to afford.

Yeah, and the fallacy that debt servicing costs are low due to low interest rates should be avoided, too. Government's issue 1-year, 3-year, 5-year, bonds etc. So large amounts of it's debts are constantly maturing and resetting. Most government debt -- around 60-70 percent -- are short term maturity (less than 5 years), and will be subject to increases in interest rates. So debt servicing costs can go from being cheap to really expensive in a short period of time.

Not only that, but governments can face a harder time insuring their debt if their credit rating falls into disrepute. In which case, the debt can just take on a spiraling-out-of-control effect. In some cases, bond holders can demand the government put up collateral on a margin call. This was a serious threat for Greece, etc.

 

[CodeMonkey]

Mostly 'cause I don't know where else they could cut that much money quickly enough. Healthcare? not likely. Education? that is always a real tough sell.....mmmm what are the other big expenditures? Oh yeah there is that debt service one...not sure you can just cut that which sorta points out why debt is not such a good thing....each dollar of debt adds to your cost tomorrow of things you bought today..making things you think you need tomorrow that much harder to afford.

There are other big ticket items we can sell (other than the LCBO and OLG). How about the Highways? They don't make any money to justify there cost and no government is willing to put tolls up. So sell the highways or lease them out. Could take a chuck out of the debt and focus resources on transit.

 

[brockm]

There are other big ticket items we can sell (other than the LCBO and OLG). How about the Highways? They don't make any money to justify there cost and no government is willing to put tolls up. So sell the highways or lease them out. Could take a chuck out of the debt and focus resources on transit.

The city itself has a lot of unused property it could sell. It could also consider bringing in private contractors to run the TTC and dump the union, like many European and American cities have done with their transit systems. Actually York Region has done that too, with Viva.

The TTC could also consider service cut-backs in some areas. Such as less frequent off-peak service to the outer suburbs. This would create pressure for people to live closer to areas better serviced by transit, etc. But then again, I'm one for cold-hearted and practical solutions without consideration for "fairness".

 

[Glen]

I think you're quite optimistic. The structural imbalances in the US economy are far worse than most people want to believe. You've also got the fact that America is already on track to become the world's most indebted nation on a per-capita basis in the medium-term, with no real prospects of balancing it's finances within the next decade. America's fiscal survival is dependent on the misplaced belief that America will return itself to robust economic growth -- similar to previous periods of growth.

They have a long way to go reach Japanese levels. Plus they have better demographics and much more resources. They also have much more room to raise taxes.

 

[brockm]

They have a long way to go reach Japanese levels. Plus they have better demographics and much more resources. They also have much more room to raise taxes.

Unfortunately, Debt-to-GDP isn't the end all and be all. Almost all of Japan's debt is internal. Most of America's debt is external. Japanese households have net savings. American households have net debt. Japanese economy is majority production. America's is majority consumption.

Japan's debt-to-GDP aside, the US is in far worse shape. This is perhaps best exemplified by the fact that Japan is America's second biggest creditor.

 

[CodeMonkey]

The city itself has a lot of unused property it could sell. It could also consider bringing in private contractors to run the TTC and dump the union, like many European and American cities have done with their transit systems. Actually York Region has done that too, with Viva.

True the city, province and federal government have alot of unused property they can sell off. But thats a one time income, but doesn't address continuing funding, although it can help cut the debt.

As for dumping the unions, that seems highly unlikely at this point in time.

The TTC could also consider service cut-backs in some areas. Such as less frequent off-peak service to the outer suburbs. This would create pressure for people to live closer to areas better serviced by transit, etc. But then again, I'm one for cold-hearted and practical solutions without consideration for "fairness".

I get your idea, but it could also backfire and make people take there cars instead. But, selling off the 400-series highways makes more sense financially, think about it, transit has two other income sources other than taxpayer subsides: advertisements and fare collections.

Highways are 100% taxpayer subside and they don't generate a revenue. Advertisers can put their ads on private property without paying for the highway and we both know no government would ever put tolls up.

 

[Neil]

Greece is a rounding error.

Oh man! That's the funniest thing I've read all week.

 

[TOareaFan]

There are other big ticket items we can sell (other than the LCBO and OLG). How about the Highways? They don't make any money to justify there cost and no government is willing to put tolls up. So sell the highways or lease them out. Could take a chuck out of the debt and focus resources on transit.

Maybe I misunderstood your question to me because I thought you were talking about budget cuts to expenditures and not increases to revenues. In that context, the quickest cut is to eliminate an expenditure that has not been made (like these new projects) rather than cuts to current programs (health, welfare, education) where the expenditure is already being relied on (rightly or wrongly) and intertwined with other things. As a transit activist it might be hard for you to accept but cutting $4b of planned spending on lines that don't exist is easier and more likely to produce the results (from a fiscal point of view) that they desire.

I would be a very big supporter of selling the LCBO....but I don't think there is the political will (in any of the parties) to do that. They may get to it eventually but it won't be in time to help fiscal 2010/2011. Mainly because I am anti-gambling I would just shut the OLG but since I am talking in a fiscal sense here I would have no problem selling it too.....but, again, that is not gonna help this year.

Also, it is not too clear to me that selling either/both of LCBO or OLG ends up being much of a net contributor...we would get a whack of cash in to pay down the debt but since the purchase price would be in exchange for the annual profits/dividends they pay to provincial coffers we would lose the revenue. So this might be a case where paying down debt ends up being neutral(ish) from an operating point of view. Depends on the price I guess (ie. is the return on investment that the private sector buyer is expecting lower or higher or equal to the rate on the debt that would be retired).

Roads is interesting.....as fans of transit, we are often fond of saying "make drivers pay the full cost of their trips" (drivers say they already do but we will leave that debate for somewhere else)..........yet when someone (maybe "brockm") suggests increasing transit fares to more accurately reflect the cost of the service (ie. make transit users pay the full cost of their trips) they are subject to much criticism. Perhaps the answer to our fiscal problems are to charge market prices for all government services....transit, roads, hydro...etc.

 

[TOareaFan]

True the city, province and federal government have alot of unused property they can sell off. But thats a one time income, but doesn't address continuing funding, although it can help cut the debt.

That is an interesting response from someone who just said :

There are other big ticket items we can sell (other than the LCBO and OLG). How about the Highways?

Am I missing something?

As for dumping the unions, that seems highly unlikely at this point in time.

Why is it less likely here than elsewhere?

 

[CodeMonkey]

That is an interesting response from someone who just said :

Sorry, should have made myself more clear on that point. I was thinking of something like Pickering Airport Lands, which the government holds on to, for a airport that not going to be built. Really more physical property(unused crown land) rather than public company assets(crown corporation) cross my mind when I wrote that.

 

[Glen]

Unfortunately, Debt-to-GDP isn't the end all and be all. Almost all of Japan's debt is internal. Most of America's debt is external. Japanese households have net savings. American households have net debt. Japanese economy is majority production. America's is majority consumption.

Japan's debt-to-GDP aside, the US is in far worse shape. This is perhaps best exemplified by the fact that Japan is America's second biggest creditor.

Again, if the US tames it's trade deficit, then the need for external financing disappears. Even as at stands now, by issuing debt in its own currency, the issue of its debt being external is different than for other countries whom must issue debt in US$. The accumulation of USD by both Japan and China was/is a means to control currency values. It is as much as an expense as it is an asset. As soon as Japan and China had traded under-priced goods for over priced USD they incurred a loss. All that remains is the balance sheet recording of such. That is why Japan still holds so much USD, and why when China started its rampant accumulation, which really dilutes USD value, it could nothing but stand still. Fearing a large appreciation of its own currency.

 

[TOareaFan]

Sorry, should have made myself more clear on that point. I was thinking of something like Pickering Airport Lands, which the government holds on to, for a airport that not going to be built. Really more physical property rather than public company assets cross my mind when I wrote that.

no prob...thx.

 

[Rainforest]

If we can not, or should not, build transit with borrowed money, then we need revenue sources to pay for it. Road tolls and parking taxes come to mind. Without transit expansion, large municipalities like GTA cannot be viable.

We can debate benefits and drawbacks of 100% operational costs recovery from the farebox, but there is no way the farebox revenues will pay for capital expenses.

 

[Rainforest]

You replace them with MPP's & MP's from a "Toronto Party" based a bit upon the Bloc Quebecois, a Toronto/GTA Centric party that only cares about the specific concerns of the citizens of the Toronto Area & the eventual Provincehood of the GTA.

It doesn't have to be a so-called "fringe party". The Bloc Quebecois was formed by former members of the Federal Progressive Conservatives, Parti Quebecois, Liberals.

A Toronto Party can also be a "Big Tent" coalition of like minded Conservatives, Liberals & NDP'ers.

This is one good option.

Another option is voting for minor parties (like Greens), or for independents. Obviously, Greens won't win majority, neither will they form a sizeable minority to be invited into a coalition and advance transit agenda. However, the very fact of Toronto voters' flight away from both major parties will gradually change the political landscape.

 

[CodeMonkey]

no prob...thx.

My point in excluding the LCBO and OLG is because, it's the only thing the government can think of when it comes to cutting expenses and finding a quick cash infusion. Highways have no income, we fully pay for them through our taxes, but we refuse to put it up as a option and transit, LCBO and the OLG either have a mix income though taxes and general revenue or are completely self-financed.

Just think of what we could have accomplished with transit if we put the same amount of money to build transit lines instead of building and maintaing highways that don't have a return of investment. We're a transit orientated culture, but we will take our cars over transit if we can't get from point A to B and back again.

There are business benefits of having a more transit lines such as Subways, LRTs and Commuter Trains. More people off the road would allow transport trucks to ship faster, companies that pay for employees fuel for their travel to and from work would benefit on having paying fix transit price. Companies don't have to have parking spaces that require shovelling in the winter adding additional costs.