Hike gas tax to pay for new Toronto transit, panel recommends

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Toronto-area drivers should pay for most of an ambitious transit expansion through a sharply higher gas tax, a government-appointed panel is recommending, but the promised sweetener is that motorists can expect to come out ahead by preventing even worse congestion.

Their report lays out ways for the province to pay for the so-called Big Move – which proposes a network of transit lines intended to tackle congestion currently estimated to cost the Toronto area $6-billion annually – and suggests gradually increasing the gas tax by as much as 10 cents a litre, which would cost the average household $260 per year.

The idea brought a sharp reaction from political opponents. The provincial Conservatives and some among the right wing at Toronto City Hall insist that transit can be expanded from within existing budgets and that drivers bear a heavy enough burden.

Asked about that notion by reporters, though, panel chair Anne Golden was quick to fire back. "Would it be possible to fund this out of waste? The answer is no," she said. "The money has to come from somewhere. This cannot be done for free."

Premier Kathleen Wynne conceded it will be a tough sell, but vowed to implement a transit-funding mechanism in the spring budget.

"I knew that it was going to be difficult to make the connection between the transit needs and having to pay for it," she said in an interview shortly after receiving the panel's report. "If it were an easy thing to do, it would have been done already."

Funding for the Big Move was the focus of an investment strategy by Metrolinx, the regional transit agency, that was built around an increase in the HST to raise the bulk of the money. That idea brought a cool reaction from the provincial government and is played down in the new report.

The panel lays out two options, both relying heavily on gas taxes. Each would raise money across the province, with only the funds generated locally being used in the Toronto area. Money raised elsewhere will be spent in those communities.

Option A calls for a three-cent rise per litre in the gas tax, rising by a penny a year to a total of 10 cents per litre (at that point raising $1.4-billion annually in the Toronto area), along with a 0.5-per-cent rise in the corporate tax rate (generating $189-million) and the redirection of the HST on gas taxes to transit ($80-million).

Option B shares the same approach to corporate taxes and the HST on gas taxes. It also starts with a three-cent-per-litre hike in the gas tax and increases at the same rate but caps the total additional gas tax at 5 cents per litre, making up the difference with a 0.5-per-cent increase in the HST (raising $918-million in the Toronto area).

In both cases, the plan calls for leveraging the new revenues raised to borrow and then pay down around $7-billion or $8-billion.

Asked about the lesser emphasis on HST, Ms. Golden told reporters that a broad-based rise in a consumption tax would not have the effect of modifying drivers' behaviour. And she said road tolls are not included at this point because they are typically applied to new instead of existing roads, and they cannot be implemented quickly and easily. But she suggested they could play a role in the future.

The report comes amid an increasing drumbeat of concern about the cost of congestion and how much worse it could become as people continue to flock to the area. "If we do nothing, the consequences are unbelievable," said panel co-chair Paul Bedford.

While drivers – who currently pay 14.5 cents per litre in gas tax – are expected to carry most of the freight, Ms. Golden urged that that burden be weighed against the cost of unchecked congestion. If the Big Move is not implemented, the panel says, the average driver will eventually be paying $700 per year more because of money lost idling in traffic. Under the two options presented, the increase in the gas tax ultimately will cost each household between $130 and $260 annually.

New Democratic Leader Andrea Horwath said new transit taxes are unaffordable. But Transportation Minister Glen Murray countered that they will be less expensive than to buy cars to compensate for poor transit service. If Ms. Horwath votes against the government's plans, he said, her party's left-wing, urban voter base will abandon her in favour of the Liberals.

The report also recommended putting transit monies into a legislatively dedicated fund and increasing the rigour around transit planning, which has been criticized as rife with political interference. Last summer, for instance, the provincial government abruptly cancelled a planned LRT in Scarborough and replaced it with a subway extension as it tried to win a difficult by-election in a nearby riding.

The provincial Tories praised the idea of dedicated funding but slammed what they called a "sin tax."

"That's just like increasing the cost of alcohol and cigarettes because you want people to quit smoking and drinking," PC MPP Doug Holyday said. "So they want them to quit driving, and they want the drivers to pay for the transportation of the whole area. I don't think it's fair."

The Tories say the government should find the money by prioritizing transit over other infrastructure projects, and by selling off government-owned property.

"You've got the Ontario Power Generation headquarters filled with bureaucrats we don't need, on some pretty expensive real estate," PC Leader Tim Hudak said. "Why couldn't you actually sell that off, downsize those operations on cheaper land, and use that excess revenue to build subways?"

Toronto Councillor Doug Ford insisted the province should find "efficiencies" to come up with the funding. "Five cents a litre will kill our economy," he said. "It's hitting our taxpayers right in the pocketbook."