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11 ways to pay for transit?
Metrolinx proposes taxes, tolls and fees

Earlier this month, Metrolinx released a short list of what it’s calling a “short list” of “investment tools” to help fund transit projects in the years ahead.

Late in May, the province’s regional transit agency plans to release an investment strategy. The strategy will choose from among the 11 short-listed investment tools and recommend that the Ontario government approve them as the best ones to use for funding transit.

The list of taxes, tolls and fees will to help finance “The Big Move” — the regional transportation plan — and the “next wave” of projects including:

Metrolinx says it looked at more than 25 investment options — strategies and investment tools to fund transit — that other jurisdictions use. It also received comments and ideas through “The Big Conversation”, a series of 12 round-table meetings with residents across the Greater Toronto Area and Hamilton on ways to fund public transit.

By releasing this short-list of investment tools, Metrolinx wants to gain more input from residents, business and municipal governments to help it narrow down the proposals. “We want to continue our conversation with municipalities, stakeholders and the public to help us deliver our investment strategy,” said Metrolinx’ chief executive officer Bruce McCuaig.

The Metrolinx short list of options includes:

  • development charges
  • employer payroll tax
  • fuel tax
  • high occupancy tolls (HOT)
  • highway tolls
  • land value capture
  • parking space levy, including pay-for-parking at transit stations
  • property tax
  • sales tax
  • transit fare increase
  • vehicle kilometres travelled (VKT) fee

Metrolinx says that during “the Big Conversation”, its board members and staff heard that people widely recognize that we have a problem with congestion and that they’re impatient for a solution. “Participants want to see more transit and transportation expansion, they understand that this requires significant investment and overall they supported tools to build new transit and transportation”, McCuaig explained.

In addition to whatever investment tools that Metrolinx recommends, the Ontario Government may also dedicate funds to expand transit. In the Globe and Mail, Adrian Morrow reports that Ontario will release its budget Thursday, May 2 and that

“Ontario’s projected deficit this fiscal year will clock in between $9.8-billion and $12.8-billion as the province pumps money into transit, holds program-spending growth to less than one per cent and considers tying the clean energy benefit to income.

“Liberal Finance Minister Charles Sousa revealed these details of his first budget, scheduled for May 2, to a business crowd at a downtown Toronto hotel Monday.”

Morrow continues:

“Given the need for spending restraint, the Liberals maintain Queen’s Park must find new sources of money to build the massive network of subways, LRTs and dedicated bus corridors planned for Toronto, Hamilton and their suburbs.

“Provincial transit agency Metrolinx is set to present a list of possible revenue options in late May, but Mr. Sousa suggested the government will detail some of its plan for paying for transportation infrastructure before that.

“‘Any new revenue that is required to address this problem will be generated in a way that is fair, transparent, and directly tied to the transit project it is funding,’ he said.

“The Finance Minister reiterated Premier Kathleen Wynne’s promise that any new taxes, tolls or levies would apply only to the Greater Toronto and Hamilton Area and would not be paid by people in the rest of the province.”

What does this all mean? In the Toronto Star, transportation writer Tess Kalinowski provided more details on each of the charges. (A document by consultants AECOM KPMG, in turn, was the source for her information.)

Some mix of the following revenue tools could be dedicated to a $2 billion annual transit expansion fund.

Development charges : Municipalities already charge fees to developers. But they can be increased on a per-project basis; for instance, a recent bump in fees in Toronto is helping to pay for the Spadina subway extension. A boost of $2,000 to $3,000 per new residential unit would generate $25 million to $50 million per year. If a development charge was applied to several projects in the region, the tool has the potential to raise $100 million. But the increase can’t be so high it drives development elsewhere.

Employer payroll tax : Used in Paris, France, and in Portland, Ore., this tax can be based on the employer’s proximity to transit lines. Based on 2009 employment figures, a 0.5 per cent employer payroll tax could raise between $810 million and $920 million by 2021.

Gas tax : A 5-cent/litre fuel tax could raise $300 million to $400 million a year by 2021. It could encourage motorists to cut fuel consumption, buy fuel-efficient cars and reduce their greenhouse-gas emissions. But it would also boost the cost of moving goods, affecting business.

High-occupancy toll lanes : Vehicles carrying more than one person would still be allowed to use HOV lanes for free. But single-occupant cars could also use them for a fee. Converting existing HOV lanes and those slated to be built this decade could generate between $160 million and $250 million. Implementing HOT lanes would be costly, but less so than tolling the entire highway.

Highway tolls : Tolls would be applied to 400-series highways and some city-owned roads such as the Gardiner and DVP. Completely phased in, they could raise up to $1.5 billion a year at a cost of 10 cents/km. Installing and administering tolling technology on highways would be costly, but could help reduce congestion.

Land value capture : Developers could end up paying more for land in the vicinity of specific transit improvements. Developers or land owners could be required to provide facilities (such as transit stations), cash or infrastructure; they could be taxed on revenue generated by the property; or the property tax could rise to reflect the increased value of the site.

Parking space levy (including transit stations): A charge per day on all non-residential, off-street parking could be based on the total area rather than number of parking spots, much like a property tax. Based on an estimate of 4.1 million parking spaces in the region and a charge of $1 per space per day, it could generate $1.4 billion to $1.6 billion. No new infrastructure would be required, but municipalities would have to do an inventory of available space. GO Transit, the region’s largest parking operator, drew stiff objections from customers when it floated the idea earlier this month. Ontario Transportation Minister Glen Murray has already suggested charging for GO parking could drive some transit commuters back to their cars.

Property tax : Based on the assumption of $7.7 billion in property taxes raised in 2010, a 5.2 per cent increase could raise up to $650 million in 2021.

Sales tax : A 1 per cent sales tax applied to all consumer goods in the region could generate up to $1.6 billion. Because it would be applied to the 8 per cent provincial portion of the HST, it could be complicated to limit the tax to the region and might have to be implemented province-wide, in which case the revenue would also need to be more widely shared.

Transit fare increase : Transit officials fear raising fares to help fund system improvements could drive down ridership. A 10-cent increase on 618 million annual transit trips in the Toronto region could generate up to $45 million, given population growth and the likelihood of some ridership drop-off, according to the AECOM report.

Vehicle kilometres travelled : Tracked through odometer readings or GPS transponders, this method of road charging would have to go through a pilot phase. Based on total kilometres travelled in the region in 2009, a charge of 3 cents/km might generate up to $1.9 billion by 2021, taking into account the inevitable reduction in trips as drivers adjust their habits. Implementing such a system would be costly but could dramatically affect driver behaviour as well as raising funds.”

“Source: AECOM KPMG Big Move Implementation Economics: Revenue Tool Profiles