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SmartTrack (Proposed)

Question: JT wants to fund ST through TIF. If I understand correctly, this means that Toronto would have to borrow $3 Billionish to pay for the ST plan. How would this work with the Scarbrough Subway being built, since the SS already is touching torontos debt limit?
 
TheTigerMaster said:
Question: JT wants to fund ST through TIF.
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I know what you mean, but whenever I see "JT" I get the impression that Justin Timberlake is really involved in Toronto politics for some reason.

TheTigerMaster said:
If I understand correctly, this means that Toronto would have to borrow $3 Billionish to pay for the ST plan. How would this work with the Scarbrough Subway being built, since the SS already is touching torontos debt limit?
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Technically the debt limit is self-imposed, so they could go over. And I don't understand what part of Smart Track is so expensive that $3 billion of city money could be needed, given that the province was already planning on doing the electrification and other leg work.
 
aquateam said:
I know what you mean, but whenever I see "JT" I get the impression that Justin Timberlake is really involved in Toronto politics for some reason.



Technically the debt limit is self-imposed, so they could go over. And I don't understand what part of Smart Track is so expensive that $3 billion of city money could be needed, given that the province was already planning on doing the electrification and other leg work.
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Yeah, but that limit isn't.arbitrary. I'm not exactly sure how it was selected, but I think it has something to do with interest rates.

I suppose it could be increased. That seems like a really bad idea though. The limit would need to be raised several times over
 
TheTigerMaster said:
Yeah, but that limit isn't.arbitrary. I'm not exactly sure how it was selected, but I think it has something to do with interest rates.

I suppose it could be increased. That seems like a really bad idea though. The limit would need to be raised several times over
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The debt limit is set such that the city isn't spending more than 15% of its budget on interest payments. I think that if it exceeds that amount it might risk having its credit rating downgraded, but I don't know for sure if that would result in a bond rating downgrade.
 
aquateam said:
The debt limit is set such that the city isn't spending more than 15% of its budget on interest payments. I think that if it exceeds that amount it might risk having its credit rating downgraded, but I don't know for sure if that would result in a bond rating downgrade.
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What is the difference, in your mind, between a credit rating downgrade and a bond rating downgrade?
 
TOareaFan said:
What is the difference, in your mind, between a credit rating downgrade and a bond rating downgrade?
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Sorry, I don't have a background in finance so I might be misusing terms. I was using the two interchangeably. Is credit rating for individuals? My impression is that when the city takes on debt, it issues bonds on the bond market to raise money. The bonds are rated by the three standards agencies: Moody's, Standard & Poors, and the third one. The rating is based on the city's ability to raise funds, as well as different financial ratios (debt to equity, etc.) and is either AAA, AA, A, BBB etc. Based on what the rating is (with AAA being the best) the city would pay an interest rate of prime + x%. So if the city was downgraded from AA to A, any new debt would have an extra (say) 0.5% interest tacked onto it in order to sell. Larger governments have a larger tax base so they usually have better ratings and lower interest rates, since they're basically guaranteed to pay back the principal.

This is my mental picture of how things work, so if anyone knows in more detail I'd appreciate any corrections.
 
aquateam said:
Sorry, I don't have a background in finance so I might be misusing terms. I was using the two interchangeably. Is credit rating for individuals? My impression is that when the city takes on debt, it issues bonds on the bond market to raise money. The bonds are rated by the three standards agencies: Moody's, Standard & Poors, and the third one. The rating is based on the city's ability to raise funds, as well as different financial ratios (debt to equity, etc.) and is either AAA, AA, A, BBB etc. Based on what the rating is (with AAA being the best) the city would pay an interest rate of prime + x%. So if the city was downgraded from AA to A, any new debt would have an extra (say) 0.5% interest tacked onto it in order to sell. Larger governments have a larger tax base so they usually have better ratings and lower interest rates, since they're basically guaranteed to pay back the principal.

This is my mental picture of how things work, so if anyone knows in more detail I'd appreciate any corrections.
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your very close but for an entity that raises money via bond issues "credit rating" and "bond rating" are really the same thing....that is why you confused me in your earlier post.

There are, actually, 4 large bond rating agencies active in North America (Fitch and DBRS being the ones you left out).....the whole point of bond ratings is, to an extent, create a level of homogeneity between debt/bonds issued by differing entities in different segments. So a AAA bond should have similar credit characteristics (in terms of the two main characteristics - likelihood of default and loss in the event of default) regardless of industry/segment.

Bonds then, typically, trade at spreads over (in Canada) Government of Canada Bonds (as opposed to the prime +X example you gave). The theory being GoC bonds are the lowest risk and the highest liquidity debt issuances in our market and everything else is priced in relation to those. The province of Ontario, as an example, 10 year bond will yield to investors .5% - .6% above the government of Canada bond of similar maturity. Municipal issuers would likely expect to pay higher again.

Yes any downgrade would lead to a higher credit spread but, importantly, only on new debt being issued. One of the mis-truths (as an example) the PCs tried to sell in the last provincial election that an Ontario government downgrade (which was - and remains - a real possibility) would lead to a huge increase in the province's interest carrying costs. This was simply not true as the one really good fiscal management thing the current government has done was extend the maturity of a lot of its debt to take advantage for a longer time of the current low rates. Only new debt being issued now would be subject to the higher spreads created by a downgrade.

Debt 101 will now recess ;)
 
What or should I say where is the extra station that Ms. Nunziata wants to add to SmartTrack?
 
From the WT CEO's report to the Board meeting on 18 February:

Mayor Tory’s SmartTrack Plan builds on the existing Provincial Regional Express Rail initiative to transform the regional transportation system by advancing service through the current GO Transit network. Upon completion, SmartTrack will be a regional line that provides connections between the Mississauga Airport Corporate Centre in the west and Markham (Unionville) in the east by way of downtown Toronto’s Union Station. This will be accomplished through service improvements on a 53km rapid transit line along the Kitchener and Stouffville/Lakeshore East Go corridors respectively. Specific enhancements include:
 A service frequency of 15 minutes or better;
 All-day, bi-directional, service across the city;
 Electrified service on the entire line;
 Integrated fares between GO Transit and TTC;
 Three additional stations plus the already planned new station at Mount Dennis on the Kitchener GO corridor (a total of 5 stops including Mount Dennis); and
 7 additional stations on the Stouffville GO/Lakeshore East GO corridor (a total of 14 stops including Union Station).

The Province is currently working with the City of Toronto and their respective agencies to provide an accelerated work plan for the review of both the Regional Express Rail and SmartTrack plans. An assessment of the infrastructure requirements, planning, social, and economic development considerations and incremental costs of implementing the SmartTrack plan is being undertaken through several phases of work.

At a briefing with Mayor Tory and his staff, Management raised the idea of adding a SmartTrack stop at Lower Sherbourne Street to serve the EBF. Currently in the EBF, there are a number of existing and planned employment generating developments that will rely heavily on transit including:

Corus Entertainment - existing – 500,000 sf of commercial
 George Brown College - existing – 330,000 sf of institutional
 George Brown College - future expansion planned – 225,000 sf of institutional
 Daniels Guvernment site - planned – 446,000 sf of commercial
 Waterfront Innovation Centre - planned – 350,000 sf of commercial
 Hines Bayside - planned – 500,000 sf of commercial

In addition, EBF will house over 6,000 residential units, 1,200 of which will be affordable rental. Collectively, there is sufficient critical mass to warrant a stop on the SmartTrack line at Lower Sherbourne Street.
 
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