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Commuters ride a TTC subway on Sept. 25, 2013.KEVIN VAN PAASSEN/The Globe and Mail

Toronto will need to raise a minimum of $910-million, and raise residential taxes by 1.6 per cent over the next three years, to cover its share of a Scarborough subway extension, says a new report prepared by the city's top official.

The report, to be considered by council at its meeting next week, also raises a red flag about the domino effect the subway extension could have on other parts of the system, noting that increased ridership will likely force the cash-strapped transit agency to take action sooner to address overcrowding on the Yonge line – including construction of the Downtown Relief Line.

The report sets the stage for yet another heated transit debate at council. Mayor Rob Ford, who has always pushed for subways over light rail, has claimed the Scarborough extension as a personal victory – one that was cemented last month when the federal government agreed to kick in $660-million to fund a portion of the cost. He is expected to make the report his key item, meaning it will be debated first when council meets next week.

Still, to get the line, Mr. Ford will have to agree to a larger tax increase than the 0.25 per cent annual increase over four years that he had set out as his line in the sand.

In order to fund its share of the proposed extension of the Bloor line to Sheppard Avenue, the report prepared by city manager Joe Pennachetti in consultation with TTC head Andy Byford, finds that the city will need to increase residential taxes by 0.5 per cent in 2014 and 2015 and by 0.6 per cent in 2016. The city also will need to increase development fees to raise an additional $165-million.

The province is contributing $1.48-billion to fund the subway, less than the $1.8-billion that the city had hoped for when it voted for the subway plan this summer.

Still, estimates on the city's share of the project and the needed tax increase are similar to those provided to council in July when it gave conditional support for the subway plan.

The report makes no recommendation on the question of light rail or a subway. It does say that if the subway option is chosen, the best route would follow McCowan Avenue, rather than the existing transit corridor proposed by Provincial Transportation Minister Glen Murray. It gives council two options – endorse a subway extension to Sheppard Avenue along the "McCowan Corridor," the route support by council in July, or reconfirm support for light rail line to replace the aging Scarborough Rapid Transit line.

The report makes clear there also will be additional costs that are as yet unknown, including repaying the provincial transit agency Metrolinx for the money it has already spend on the approved light rail deal and "initial work" for the subway extension such as an environmental assessment, that would be included in the city's budget next year.

It also makes clear that there are many unanswered questions about the subway extension, including the effect it will have on the existing transit system.

"The impact of extending the Bloor-Danforth line on the transit network as a whole is not clearly understood," the report states. Plans to upgrade signals will likely have to be accelerated, it finds, as will the proposed "Downtown relief line," envisioned in its first phases as a loop that would run south from the Bloor-Danforth line to Union Station to relieve overcrowding on the Yonge line.

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