April 28, 2017 by
Steve
A Contrary View of Ontario’s 2017 Budget
With the release of Ontario’s budget for 2017, City Hall launched into predictable hand-wringing about all the things Toronto didn’t get with the two big-ticket portfolios, transit and housing, taking centre stage. Claims and counterclaims echo between Queen Street and Queen’s Park, and the situation is not helped by the provincial trick of constantly re-announcing money from past budgets while adding comparatively little with new ones.
There was a time when budgets came with projections of three to five years into the future, the life of one government plus some promise of the next mandate, but over time the amounts included within that period simply were not enough to be impressive. Moreover, in a constrained financial environment, much new spending (or at least promises) lies in the “out years” where “commitment” is a difficult thing to pin down, especially if there is a change in government.
Toronto has “out year” problems, but it has even more pressing concerns right now, today and for the next few years. Very little in the provincial budget addresses this beyond the authority to levy a hotel tax, and a gradual doubling of gas tax grants for transit over the next five years. These add tens, not hundreds, of millions to a City budget that runs at $12 billion.
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There are two major problems with both Ontario’s support for transit and Toronto’s politically-motivated budgets:
- In both cases, the focus is on capital projects, building and buying infrastructure, with little regard for the cost of operating new and existing assets.
- Past decisions on transportation spending have locked billions of dollars into a few projects for short-term political benefit at the expense of long-term flexibility.
Toronto perennially assumes that there will be new money somewhere to backfill the shortage in its capital budget. The Trudeau economic stimulus plan was the most recent magical relief Toronto expected, but it came with dual constraints: Toronto gets a fixed amount over the life of the program, and Ottawa will not contribute more than 40% to any individual project. Toronto had hoped that Ontario would chip in, possibly at the 30% or even 40% level, leaving the City with a manageable, if challenging, task of finding money to pay its share for the backlog of projects. The Ontario budget is quite clear – Toronto is already getting lots of provincial money and at least for now, there’s nothing new to spend.
Ontario is hardly innocent in this whole exercise having meddled for years with Toronto’s transit plans, most notoriously in Scarborough where the whole subway extension debate was twisted to suit political aims. After leading Toronto down the garden path on the SSE, Ontario has capped its project funding leaving Toronto to handle the cost of its ever-changing plans.
Queen’s Park loves to tell Toronto how much provincial money is already spent for Toronto, if not in Toronto, and the distinction gets blurry. GO Transit improvements, for example, will bring more service into Toronto benefiting the core area business district, but they will also improve commuting options for people outside of the City itself.
Before the fiscal crash of 2008, when Ontario was running surpluses, the typical way to handle project funding was to hive off surplus funds at year end into a trust account. That is how the provincial share of the TYSSE was handled. By contrast, Ottawa operates on the pay-as-you-play basis, and only turns over subsidies after work has been done. Each approach suits the spending and accounting goals of the respective governments. In a surplus situation, one wants the money “off the books” right away, but in a deficit, the spending is delayed as long as possible. Further accounting legerdemain arises by making the assets provincial to offset the debt raised to pay for them.
To put all of this into context, here is a review of projects proposed or underway in Toronto.
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“Downtown” Relief Line
The DRL has progressed into the level of a detailed review pending a Transit Project Assessment, and $150 million was provided by Queen’s Park for detailed study of the route. From a political point of view, the line faces two major challenges. First, it continues to be portrayed by many politicians as a sop to “downtown” even though the primary beneficiaries will be those from the inner suburbs now jammed onto the BD and YUS subways. The benefit will be particularly strong if the route goes north to at least Eglinton, if not beyond to Sheppard.
However, work on this line, even if it can overcome political hurdles, won’t start until well into the 2020s and this is beyond the scope of any funding promises we might see in current budgets.
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Summary
Ontario’s budget is a disappointment in what it does not do for municipal transit in Toronto, but I have to take the contrary view that if this forces some real examination of priorities, the result might not be entirely bad. Ontario is spending elsewhere, although on a handful of high-profile projects, and large chunks of the province can reasonably wonder what they will see beyond the already announced gas tax bump.
The real challenges for Toronto lie in shifting local spending priorities from capital to operating budgets, and in the danger that a new provincial government could turn off the tap permanently as happened twenty years ago with Mike Harris.
Jennifer Saltman
