Senior City of Toronto officials warned the mayor’s transit czar Gordon Chong that a much-touted revenue tool meant to help underwrite the Sheppard subway would generate almost no new funds, according to documents obtained through access to information requests.
Private-sector consultant KPMG, hired to help Dr. Chong scope out funding options for the multibillion dollar plan, did not mention those concerns in their final report, which was made public before council killed Mr. Ford’s Sheppard subway plan in March.
The revelations come on the eve of the OneCity debate at City Hall that will focus, among other things, on the viability of a new Scarborough subway line and, come fall, the tax tools required to build additional rapid transit.
Mr. Ford pledged that the Sheppard subway would attract high-density development along its corridor, with the city paying the project costs with tax increment financing, which allows municipalities to borrow against future property assessment growth.
The mayor appointed Dr. Chong CEO of Toronto Transit Infrastructure Ltd., a subsidiary of the TTC. TTIL retained KPMG’s global infrastructure group last June to recommend financing options.
KPMG’s global infrastructure group predicted that tax increment financing (TIF) could bring in as much as $6-billion over several decades thanks to up-zoning measures. High-density development would be directed to areas within an 800-metre radius of all the proposed subway stops, as well as the stations on the crosstown line.
But in e-mails to KPMG, city officials said that Cam Weldon, the city’s CFO and deputy city manager, felt the municipality would “basically break even” under the proposed TIF financing: New revenue generated by condo development near the stations would be offset by higher municipal servicing costs.
Joe Farag, a director in the City’s finance division, also wrote in an August, 25, 2011, note to Dr. Chong’s analyst Jo Kennelly that much of the additional development in those 800-metre TIF zones “will be drawn from other parts of the City of Toronto” – where there would be a corresponding “reduction in growth-related tax revenues.”
The documents obtained by The Globe also included an application to the federal government for $1.5-billion through its PPP Canada Fund, which underwrites infrastructure projects built using public-private partnerships.
According to the June, 2011, application submitted by Dr. Chong, the City was aiming to entice investors with a long-term contract for “closed loop” transit line that would bundle a completed Sheppard subway from Downsview to Scarborough Town Centre with the all-buried version of the Eglinton-Scarborough Crosstown LRT.
The application pegged the total project cost at $13.2-billion, and would require about $3-billion in private investment, based on a 33-year deal. The winning consortium would design, build and maintain the tunnels and stations along the entire loop. The TTC would operate and maintain the vehicles.
The proposal included extremely aggressive, and almost certainly unrealistic, timelines, with TTIL saying the project could be complete by 2017 – a target date that is well short of what Metrolinx has currently estimated for the Crosstown.
“Since the announcement of the Mayor’s interest in building the Sheppard subway, the investment community has expressed substantial interest in participating in the project,” the application states.
The documents released by the TTC did not contain any direct correspondence from interested investors.