Here’s Why Canadian Cities Struggle to Pay for Public Transit

Justin Trudeau Light Rail Public Transit Montreal

There’s nothing else like it in Canada.

Since the early 1970s, Manitoba’s provincial government has covered a full 50 per cent of the operating costs for Winnipeg’s public transit system. That means that half of the money required to make transit actually run — salaries and benefits, maintenance, fuel, bus parts — is guaranteed by the province.

It actually gets at what transit really is,” Joseph Kornelsen, chair of Function Transit Winnipeg, told DeSmog Canada about the arrangement. “Emphasizing that kind of funding is actually how other jurisdictions should be doing it.”

But the setup is almost certainly about to end with the passage of Bill 36 by Manitoba's Progressive Conservative government.

To be sure, Winnipeg will continue to receive funding from the province. But none of it will be specifically earmarked for transit, leading some transit advocates to express concern that routes and frequency of service could diminish significantly.

In short: Manitoba is about to join the rest of Canada with uneven, ad-hoc and underwhelming transit funding.

Higher Levels of Government Fund Capital, Not Operating Spending

It’s not exactly that federal and provincial governments don’t fund public transit.

Rather, it’s that they almost exclusively focus on capital funding. That means paying for the material infrastructure of transit: light rail transit lines, subway tracks, street cars, bridges.

Oftentimes, we focus heavily on the capital and getting new projects built,” said Matti Siemiatycki, geography and planning professor at the University of Toronto, in an interview with DeSmog Canada. “I would say there’s a political favouritism to projects where you can cut a ribbon. That tends to be new, large-scale infrastructure investments.”

For instance, the federal government announced $20.1 billion over 11 years for public transit projects in its March budget. It was a gargantuan figure relative to previous commitments.

Patrick Leclerc, president and CEO of the Canadian Urban Transit Association, described it in an interview with DeSmog Canada as “unprecedented,” noting that “it’s never been better than it is today and it will be in the coming years.”

But it’s all capital funding: money allocated for only building stuff, not actually running it.

Similarly, transit quality is often evaluated in a way that emphasizes infrastructure investments (such as the length of transit lines) over metrics like frequency of service or percentage of people who use a certain type of transportation.

When you look at the operating funding, this is where it’s more difficult,” Leclerc said.

You can buy as many buses as you want and a new maintenance facility. But if you cannot increase the number of service hours, or hire more drivers because you don’t have the operating budget then you won’t be able to expand service, you won’t be able to offer more frequency.”

Municipalities Forced to Rely Heavily on Unpopular Property Tax

That’s why the esoteric budget bill in Manitoba is a bit of a flashpoint for the conversation in Canada.

It’s one thing to build transit tracks and lines. It’s quite another to make sure they’re properly operated and maintained.

For example, a hot topic among transit geeks is “public-private partnerships” or P3s, in which the private sector finances the construction of a project. But as Siemiatycki pointed out, financing is only where the money comes from upfront.

Funding is how the money is paid back. Cities are almost always often left out to dry on that front, relying on a combination of fares and municipal funding.

One of the ironies about transit is even when the federal or provincial government provides significant capital dollars to help a municipality build new transit, that creates additional long-term financial liabilities for that municipality that they then have to raise additional revenue to pay for,” he said.

Unfortunately, cities in Canada exist in a fiscal straightjacket of sorts, with a heavy reliance on property taxes: a highly visible and politically difficult form of revenue generation.

Municipalities also have the least ability of any level of government to borrow money as they can’t run deficits or administer less conspicuous forms of taxes on residents. In addition, cities only receive around eight cents of every tax dollar, but own about half of the country’s public capital stock.

That can result in a flatlining or declining of transit ridership year over year.

Stefan Kipfer, professor of environmental studies at York University, told DeSmog Canada that most major cities in the country have a transit ridership of between 20 and 25 per cent.

In turn, that can mean transit becomes a low-priority issue for politicians to seriously address.

If you’re a politician in most jurisdictions, the vast majority of your constituents don’t use public transit on a regular basis,” he said. “We’ve got a big problem in terms of building a constituency that actually starts to have an impact on the national scale.”

Wide Range of Options Available to Help Fix Situation

With that said, experts have offered up some clear solutions to fix the transit crisis.

Higher levels of government — in a better position to borrow and raise revenue — could provide predictable and long-term funding to help cover operating costs (revenue from carbon pricing would likely help with that). Or the federal Liberals might reverse their controversial decision to cancel the transit tax credit, which was claimed by almost two million people in 2014 and helped to boost ridership in Toronto by 2.3 per cent.

Leclerc added there’s an incredibly wide range of alternative funding models that could be introduced: road pricing for cars, special taxation within a certain transit hub, allowing for an employer-provided and tax-exempt transit benefit.

There’s no magic bullet to this,” Siemiatycki said. “It just requires very careful attention and ongoing diligence. Putting regulatory frameworks in place like having an asset management plan would be one, and in some cases using public-private partnerships to lock in long-term maintenance arrangements.”

It’s Important to Me As A Financial Issue for My Future’

The ideas are clearly out there. What's missing is the sheer political will, combined with the recognition that public transit serves a vital role in cutting greenhouse gas emissions and creating a more socially equitable society.

Of course, it’s a complicated conversation in a federation like Canada. Each level of government wants to keep taxes and expenses low. But the “clean energy revolution” appears to offer up an opportunity to rethink how governments coordinate and fund transportation. Why shouldn’t that apply to public transit?

It’s important to me as a financial issue for my future,” concluded Kornelsen of Functional Transit Winnipeg. “I want a city that I can be proud of and one that’s not going to break my bank account.”

Image: Prime Minister Justin Trudeau announces support for light rail in Montreal. Photo: Prime Minister's Photo Gallery

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