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Work on the Steeles West Station on the Spadina subway extension project is photographed on March 6 2015.Fred Lum/The Globe and Mail

Toronto will have to find another $51-million to fund the troubled Spadina subway extension after the province refused to cover a shortfall in its part of the funding.

A new report from city manager Joe Pennachetti comes on the eve of council being asked to approve $150-million in additional spending to speed up construction of the delayed and over-budget project.

The provincial shortfall identified Monday by the city manager is separate from that funding request and stems, he says, from Ontario's assumptions about investment returns.

Mr. Pennachetti notes that a joint municipal-provincial application for federal funding of this project assumed the province would chip in $1.059-billion.

But Ontario did not, in fact, put up $1.059-billion. Instead the province put $870-million into a trust and believed it would grow at 4 per cent to reach the promised total. That did not happen and the city manager says the provincial shortfall totals $85-million.

"This report recommends that the province be requested to contribute additional funds to remedy this shortfall," Mr. Pennachetti writes. "However, should additional provincial funding not be forthcoming, it would result in additional municipal funding pressures."

Under the cost-sharing agreement with York Region, where the subway extension will finish, Toronto's share of the shortfall would be would be $51-million.

In a statement, provincial Transportation Minister Steven Del Duca said the trust "was never obligated" to cover such shortfalls. In a later e-mail, his spokesman was more direct, saying the province would not bridge the funding gap.

Extending the Spadina subway from Downsview, its current terminus, to York University and then up to Vaughan has been plagued by problems. Harsh winters have delayed construction, the relationship between some contractors and the Toronto Transit Commission has soured and a worker fatality forced a lengthy shutdown.

The TTC says the best option now is to outsource project management in a sole-source deal and spend the $150-million. Under the same cost-sharing agreement, the city's portion of that amount would be $90-million, which the TTC has said it can find internally.

This option would allow the project to finish in 2017, the TTC says, one year after an already revised completion date. Continuing with the status quo is the slowest and most expensive option, according to the transit agency, costing an extra $185-million and not finishing until 2019.