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A sky train on the Expo Line makes its way past the Dunsmuir Viaduct in Vancouver on May 29, 2013.

John Lehman/The Globe and Mail

Canada's first effort at an American-style referendum to approve a tax increase for transit expansion has gone down in flames.

The results are sure to be a discouraging sign for other Canadian cities struggling to finance new transit for their exploding populations, with few options to raise the billions of dollars they require.

A vote among Vancouver-region residents on whether to approve a 0.5-per-cent sales-tax hike to help pay for $7.5-billion worth of projects was voted down by 62 per cent of the 700,000 who mailed in ballots.

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The tax increase would have contributed to the local share of improvements in a 10-year plan, agreed on by regional mayors, that included a major east-west subway line across Vancouver, a light-rail network for Surrey extending to Langley, a replacement bridge across the Fraser River, 11 new rapid-bus lines in the suburbs, a third harbour ferry and more.

The proposal was defeated in 20 of the 23 jurisdictions in the region, including in pro-transit municipalities such as Vancouver, New Westminster and the city of North Vancouver – dealing a blow to area mayors that had pushed for Yes.

"We're back to where we started," Richard Walton, mayor of the prosperous District of North Vancouver, said. "I think the referendum as a future direction is dead."

Vancouver Mayor Gregor Robertson, among many others, blamed the loss on the public's lack of confidence in TransLink, the region's transit authority, saying it's up to the provincial government to reform it.

"Immediate governance changes to TransLink are critical," Mr. Robertson said, warning that mayors will re-assess whether to participate at all with the agency if nothing changes by the end of this year.

In Toronto, local and provincial politicians have studied and floated various ideas, from new vehicle levies to a gas tax to a sales tax, then moved on, wary of public backlash. Montreal is exploring options such as using the profits from private developments around subway lines to help finance construction.

Desperate for options, two Ontario regions in the last five years have explored the idea of using referendums for public-transit financing before backing away.

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The B.C. experiment in unlikely to encourage any Canadian politician to see a referendum as a viable option, especially considering that the Yes side, which consisted of almost every local mayor, business organization, labour group, environmental organization and student association, didn't even get close to a majority after spending $5.8-million trying to persuade people to support the tax.

The No side, headed by the local spokesman for the Canadian Taxpayers Federation, Jordan Bateman, spent only $40,000 on its campaign, which started in January and continued through the 11-week mail-in voting period that ended May 29.

Mr. Bateman, who called the vote results a "victory for taxpayers," was successful in focusing the debate in the lengthy campaign on TransLink.

The unique agency created by the province in 2000 to oversee the region's transit system was at the height of its popularity during the 2010 Olympic Games in Vancouver. People took to transit en masse to get around and a new rapid-transit line known as the Canada Line whisked people easily from the airport to downtown.

But its reputation slowly declined, as local mayors and the provincial government wrangled for several years over where to get new money to expand the system. Premier Christy Clark ordered an audit of its operations in 2012 and, when campaigning in 2013, promised no new money would go to the agency without a referendum.

Mr. Bateman helped change the image of the agency, making it a major target of attacks for the past four years, saying its managers are overpaid, meetings are held in secret and money is wasted on everything from public art to staff parking passes.

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TransLink, which is run by a government-appointed board, had no identifiable spokesperson championing its work.

With the resounding No vote, the local transit debate has only grown more fierce among politicians, advocates and the public, with little consensus on how to get to a solution.

B.C. Transportation Minister Todd Stone has gone back to suggesting the mayors should raise property taxes to come up with the local share of major transit projects, something they have adamantly refused to do for the past decade.

Mr. Stone said the federal and provincial governments are willing to contribute one-third each if the mayors come up with alternatives to a sales tax.

But he shut the door on everything but a property-tax increase. The minister ruled out the idea of taking money generated in the greater Vancouver area from the province's carbon tax and diverting that to transit financing.

He also said that putting in a new vehicle levy, as NDP Leader John Horgan suggested, would require charging $250 a year per vehicle to raise enough money to finance the list of improvements.

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Editor's Note: The original version of this story should have made clear that the additional half a percentage point on the provincial sale tax in the Lower Mainland of B.C., proposed in a plebiscite, would not have paid for the whole $7.5-billion transit-expansion plan. This digital version has been corrected.

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