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City to seek private finances to build new subways?

Updated — 4:59 p.m.

Tomorrow, Thursday, February 17, the City of Toronto’s Executive Committee will consider an staff report recommending that the committee approve the City’s 2011 capital budget and 2011 - 2020 capital plan and forecast. The 130th recommendation in this lengthy report reads:

“[that] The TTC report back to Executive Committee through the Budget Committee when negotiations with the Province and Metrolinx have been completed regarding the funding of Transportation City transit lines.”

(You can read the staff report here.)

Nevertheless, according to the Toronto Sun, Mayor Rob Ford has already decided to finance a Sheppard subway with private money.

Reporter Jonathan Jenkins quotes the Mayor’s interim chief of staff, Mark Towhey: “I’m comfortable saying we have an arrangement on the financing that involves private financing. And I’m comfortable saying it involves a subway on Sheppard and an underground LRV (light rail vehicle) on Eglinton.”

Towhey said he believes there is a “global appetite” for financing this kind of project, but admits that the City has not yet secured such financing.

On his first day as Mayor, Ford announced that Transit City — the light rail plan championed by former Mayor David Miller — was dead.

The Province of Ontario had already agreed to provide $8.1 billion to build Transit City. Since it has also declared that it would not provide extra cash for building a new subway line, the Mayor has to find another source of money to pay the difference between Transit City and the more expensive subway.

The Sun reports that Towhey now says that the City will fund that difference through a public-private partnership.

The Toronto Star has confirmed the Sun’s report and has more details of the plan. Reporters Tess Kalinowski and Robert Benzie write that the City is proposing a public-private partnership to extend the subway along Sheppard Avenue East to the Scarborough Town Centre. That would leave the $8.15 billion in provincial transit funds for building an underground light rail line along Eglinton Avenue. The City could also extend that line to the Scarborough Town Centre.

Under the mayor’s plan, the City would pay for the Sheppard line by combining development charges and “tax increment financing”. Former Ontario Finance Minister Greg Sorbara introduced tax increment financing in 2006 to help fund the project to extend the TTC’s 1 Yonge - University - Spadina subway northwestward into Vaughan.

The Star explains that this “innovative funding tool” enables municipalities to borrow against the future property tax revenue of land that a nearby subway would help to improve. The key to the scheme is that the municipalities have to designate the land — through zoning or the official plan — so that it can already accommodate high-density buildings — before the City or its private partners build any infrastructure.

The Star explains that extending the Sheppard subway would cost between $3.4 and $4.4 billion and that the City would own the new line.

The province would own and finance the Eglinton light rail line.

The Star article suggests that the City would prefer to relieve overcrowding on the the 2 Bloor - Danforth subway by extending it to the Scarborough Town Centre and shutting down the 3 Scarborough rapid transit line. It also says the province prefers to convert the Scarborough RT to light rail, as part of the new Eglinton line. (Personally, we think extending the Bloor - Danforth line to the Scarborough Centre would increase, rather than decrease, overcrowding on the line…)

This is not the first time that Mark Towhey has been in the news proposing private-sector funding for Toronto’s transit system. Towhey made headlines back in June, when the Toronto Star reported about an entry in Towhey’s personal blog that he had posted earlier last year. The blog post suggested that the City should stop funding the TTC altogether, sell off its assets and leave room for the private sector to take over Toronto transit, putting some underused routes out of commission.

Towhey was not a member of Mayor Ford’s campaign team when he published the post and his blog is no longer on line.

Toronto City Council is holding a special meeting next week to finalize the capital and operating budget on Wednesday, February 23, Thursday, February 24 and Friday, February 25 and on Monday, February 28.