Ontario transit-funding panel eyes raising gas tax, sources say

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Ontario's Liberal government is leaning away from hiking the harmonized sales tax as a method of paying for transit expansion, The Globe and Mail has learned, reasoning that such a move would be too unpopular.

Meanwhile, a panel tasked with figuring out how to fund the construction of new subways, light rail lines and commuter trains in the Greater Toronto and Hamilton Area is scheduled to report to the province next Thursday. Sources familiar with the panel's work said that, so far, the group likes the idea of raising the gas tax, but that the government is believed to be cool to this idea.

The panel is still considering different groupings of revenue tools and its recommendations have not been finalized, the sources said.

The panel's work is the second major government report in less than a year on the topic. Last spring, provincial transit agency Metrolinx recommended several options for raising $2-billion a year. Chief among them was a 1-per-cent hike to the HST.

But by the summer, sources said, the province was skeptical about raising the sales tax – before it appointed the panel in September.

When Premier Kathleen Wynne unveiled the panel, she suggested its work was necessary because there were "concerns" about what Metrolinx had recommended. She also signalled the panel's job was to find revenue options acceptable to the public.

Panel chair Anne Golden, former head of the Toronto chapter of the United Way and ex-CEO of the Conference Board of Canada, confirmed that the gas tax is something the group is "looking at," but declined to say which revenue options are likely to be included in the report.

She revealed, however, that her recommendations will go beyond a list of revenue tools. They will also address such things as the process for planning new transit lines and a trust fund that would hold the money raised and ensure it pays for transit instead of going into general revenues.

"It's going to be new. It's not an off-the-shelf solution. We put a lot of work into this," she said.

Ms. Golden said the panel has made decisions without interference from government.

"We did not get direction from the Premier's office on how to do it. This is our solution," she said. "In our briefings with government people, we've been encouraged. Encouraged by people I think feel that we've done a very good job and I think people feel that we've come up with a viable strategy."

Unlike Metrolinx, the sources said, the panel's recommendations might add up to less than $2-billion a year at the start, but escalate to that level over time. It appears the panel is also able to look at debt financing, something Metrolinx could not.

Metrolinx championed an HST hike because it would raise a large sum of money – $1.3-billion annually, roughly two-thirds of what the agency needs.

The government doesn't disagree with Metrolinx's reasoning on the HST, but believes it would be an impossible sell, sources said. Not only are both the Progressive Conservatives and New Democrats against it but, with an election expected in the spring, the Liberals do not want to risk it becoming a ballot question.

In Manitoba, for instance, NDP Premier Greg Selinger raised the sales tax by 1 per cent earlier this year to pay for infrastructure, and has had to spend months defending the move. An HST hike was also partly blamed for the ousting of Nova Scotia NDP premier Darrell Dexter in an election two months ago.

The government is expected to make a final decision on transit-funding measures by the spring.