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City deficit forces TTC to cut $848-million in costs

By Brodie Fenlon

The City of Toronto has pulled the emergency brake on the TTC’s spending plans, demanding $848-million in cuts to the transit agency’s recently approved 10-year capital budget.

The request for cuts offers more evidence of the financial squeeze the city finds itself in as it grapples with a $2.5-billion debt load and bare cupboards at senior governments, all while trying to preserve its credit rating.

Those challenges are in addition to an estimated $400-to-$500-million shortfall in Toronto’s operating budget and the city’s recent call for a 5-per-cent cut to spending next year.

The Toronto Transit Commission will consider today a revised capital budget with $548-million in new cuts, raising questions about its future and the ability to deliver on bold expansion plans. The city will absorb the remaining $300-million shortfall.

The savings will be found by deferring or halting more than 40 projects, most planned for 2012 and beyond, including the modernization of some subway stations, the purchase of 50 clean diesel buses, a new traffic signal system that gives TTC vehicles priority at intersections, the installation of elevators and rapid-transit bus service on part of Yonge Street.

That’s on top of the $417-million in projects the TTC delayed so it could fund a two-thirds share of the recent $1.2-billion purchase of new streetcars from Bombardier Inc.

At issue is Toronto’s debt target guideline, which prohibits the city from spending more than 15 per cent - or about $460-million - of property-tax revenues on interest and debt repayment.

The TTC’s original capital budget would have put the city well above the threshold, a universal benchmark for credit rating agencies, said city manager Joe Pennachetti. A downgrade in Toronto’s rating by even one step would cost the city tens of millions in higher interest fees compounded over several years, he added.

In the past, the city turned to Queen’s Park and Ottawa to make up shortfalls, but both levels of government have indicated the money tap is closed this year, he said.

“They’ve funded literally $10-billion worth of projects in the last two years of announcements,” Mr. Pennachetti said of big-ticket items like infrastructure stimulus, the Spadina subway extension and the city’s ambitious Transit City light-rail service expansion.

“The message we’re hearing from both [levels of government] is the programs are done,” he said.

Gary Webster, the TTC’s chief general manager, said large-scale projects with dollars already attached won’t be affected, including the first part of Transit City. But he said a new funding strategy is needed to keep the system growing.

“We’re all anxious to get back on track. We’ll slow the engines down in the short term, but once the money comes we’ll continue with that plan.”

“Am I concerned? Yes,” said TTC chairman Adam Giambrone. “But there are ways to get through this,” he said, citing large funding challenges the TTC overcame in the past.