Executive Summary

In its first discussion paper, the Transit Investment Strategy Advisory Panel constituted by Ontario Premier Kathleen Wynne to review the Metrolinx Investment Strategy noted:

“The infrastructure investments we make today will determine the quality of our lives for generations. Despite consensus on the seriousness and scope of the problem, we can’t seem to agree on how to solve it.”

If decision-makers are to reach agreement on transit investment projects, they must have information that is clear, complete, and consistent to allow for the comparison of the relative merits and drawbacks of proposed projects. At present, this type of information is not readily available, and its absence is impeding public and political debates on how the region can use transit to reduce congestion and improve economic competitiveness.

Given the urgent need to expand transit in the region and to make decisions based on the best possible evidence, the Neptis Foundation commissioned this evaluation of all Metrolinx projects on a consistent basis, the first study of its kind for the Big Move. The report analyses the business case for each project individually and as a package. It also draws on international best practices to offer suggestions for improving certain projects to help Metrolinx realize its goals of doubling transit ridership by 2031, reducing average commute times and highway congestion across the region.

Using data from Metrolinx and TTC and making reasonable assumptions where information is unavailable, this report estimates the total cost of each scheme, including both capital and whole-life operating costs and benefits, the number of new riders that would be attracted to transit, what percentage of the costs could be recovered through passenger revenues, the net financial effect (which, if negative, is known as the “Funding Gap”), and the economic benefits, including time savings to motorists using less congested roads. These calculations generate key indicators, including Net Costs, Net Incremental Revenues, Net Benefits, Benefit:Cost Ratio, and Net Cost per New Transit Rider. As a general rule, if Net Benefits do not exceed Net Costs, and the Benefit:Cost Ratio is therefore less than 1.0, a scheme should not go ahead, at least not without modification.

The result is a high-level analysis that, for the first time, allows comparisons among the proposed projects and should help decision makers and the public better understand which Big Move projects offer the best value for money.

Key Conclusions

The report shows that while some projects represent good value for money, several can  be modified to improve cost-effectiveness. A few projects should be reconsidered in their entirety (see Figure E1). The advice to Metrolinx is to consider a “course correction” to ensure that the Big Move reaches its important goals, and makes the best use of its available funds. 

Figure E1: The map summarizes transit projects currently funded or included in Metrolinx’s “Next Wave.” Green shows projects that represent good value for money. Orange indicates projects that can be modified to deliver better value for money. Red shows projects that are not good value for money, and should not be implemented. 

1. Recommended Projects

Union Pearson Express, the subway to Vaughan and several “Next Wave” 905 BRT-LRT schemes generally provide good value. Although the Metrolinx analysis indicates that some of the 905 schemes have low Benefit:Cost Ratios, they are recommended because the Metrolinx analysis ignored the potential of improved transit to alter development or travel patterns and so may have underestimated ridership and benefits.

Metrolinx could push more aggressively to upgrade the GO Rail network into a Regional Express Rail network, through electrification and the operation of faster and more frequent all-day two-way services. GO Rail represents an underdeveloped asset that has more potential to take cars off the regional highways than any other scheme. In the 2008 Big Move plan, upgrading the GO rail network was listed as Metrolinx’s “Number One” priority. Now it is on the back burner, with a 15- to 25-year implementation timeframe. Without this “backbone” of the regional transit system, the value of most of the other schemes is reduced.

Metrolinx may have hesitated to proceed with Regional Express Rail because the costs are considerable, without realizing that the benefits are even more so. GO Transit produced a flawed electrification study of the Lakeshore corridor that overlooked the potential of operating a mixed fleet, using electric locomotives to propel the existing bi-level cars along with smaller Electric Multiple Units (EMUs). The report shows how a mixed-fleet strategy would be more cost-effective, and how an incremental investment of about $1 billion on the Lakeshore line could be offset entirely with additional fare revenues and operational savings. The entire GO system, including branches to Milton, Georgetown, Barrie, Richmond Hill, and Stouffville can be upgraded to a 15-minute-all-day, two-way service with 25% faster journey times for less money than the cost of the Phase 1 of the Downtown Relief Line.

2. Projects recommended with modifications

The report shows that the value for money of some Metrolinx schemes can be substantially improved, with specific modifications. As currently planned, the costs of the Eglinton Crosstown line are about twice the expected benefits. However, the Benefit:Cost Ratio can be improved if the construction of stations at Chaplin, Oakwood, Avenue Road, Laird Drive, and Mount Pleasant is postponed – unless major redevelopment is planned for the areas surrounding these stations. Each station costs more than $200 million to build, yet will attract only a few hundred new transit riders per day. The benefits of the line would be increased if the surface sections were elevated, allowing for faster travel times, while eliminating impacts on road traffic. With automated trains, as used on Vancouver’s Skytrain, the additional costs could be entirely offset by additional revenues and operational savings.  

Similarly the business case for the subway to Richmond Hill can be improved by deferring construction of several underground stations, which can be added later with contributions from developers with property interests along the line.

3. Projects for which the business case is weak

Metrolinx itself acknowledges that the business cases for the $2-billion Finch and Sheppard LRT projects are weak.

The report finds that surface LRT in the inner suburbs will not attract large numbers of new riders because the distances are too far, the services are too slow, and the vision of “Avenues” along Sheppard and Finch is unrealistic. The Benefits Case Analysis for the Finch and Sheppard Light Rapid Transit (LRT) projects also does not reflect current plans, as it was created for a single continuous line rather than the two separate lines now being proposed

The report shows how the Scarborough RT, the proposed Sheppard LRT, and the Sheppard subway line can be combined into a single automated light rail system for a similar cost, yet would attract many more riders than either TTC’s LRT proposal or the subway alternative.

Metrolinx’s BCA for the proposed $7.4-billion Downtown Relief Line contains no quantitative information about the likely benefits or incremental ridership, and provides no basis for policymakers to decide whether to support the scheme. Making reasonable assumptions, the report suggests that there is little chance that benefits of this scheme will offset even half its cost.

This report suggests relief to subway congestion can be provided more quickly by upgrading GO Transit services and integrating them with the TTC, at a fraction of the cost of a new line. A new link between TTC’s Main Street station and GO’s Danforth station, with integrated fares and shuttle trains to Union Station, would take thousands of passengers out of the Bloor-Yonge interchange at rush hour.

Similar opportunities exist at Dundas West, Kipling, and Kennedy stations.

4. Overlooked opportunities to improve services and increase value for money

The report identifies several opportunities to optimize transit that Metrolinx has overlooked (see Figure E2):

  • Integration of Services and Fares: Although TTC has now agreed to implement the PRESTO fare card as an “electronic purse,” the benefits of this initiative will be limited unless there is also full integration of the regional fare structure. “Smart pricing” with differential fares for peak and off-peak travel and lower fares for trips involving multiple operators can generate more revenue while attracting more riders onto the system. TTC’s view that fare integration will reduce revenues is, we think, mistaken. GO could also introduce charges for car parking at stations, perhaps offsetting the impact with a reduction in off-peak fares.
  • Subway Modernization: The report suggests that a subway modernization package with a 33% increase in capacity and improvements in off-peak frequency, offering transit passengers a faster and more comfortable journey, would result in a 10% increase in ridership and another 15% increase in revenues with “smart pricing.”
  • Operating Efficiencies: The report highlights some outdated operating practices, and estimates the potential financial benefits that could be achieved with automation of the subway and competitive tendering of service delivery, as is now common in many other cities. While the report endorses proposed charges for car usage and parking, which will encourage the shift to transit, it suggests that transit agencies need to demonstrate that they are efficient operators before asking for additional financial support.

Figure E2: This bar chart shows the differences in capital cost, net incremental revenue, and new ridership for all major Metrolinx projects as currently proposed, and an “optimized” system – that is, projects that incorporate the improvements suggested in this report. The costs and contributions of GO Rail, subways, LRT, and BRT are shown within each bar, all as “Net Present Values.” Note the large incremental revenue from the GO Rail schemes in the Optimized Program, far more than the capital cost of the GO Rail schemes. 

5. Ridership goals

The report finds that the projects, as proposed, will not achieve the objective of doubling transit ridership. By 2033, the Metrolinx schemes currently under construction or planned will attract only about 700,000 new daily riders. Growth in demand on existing routes will be about 600,000, bringing the total daily ridership up to about 3.4 million, 800,000 short of the Metrolinx target of 4.2 million. With 800,000 more daily trips being made by car, traffic congestion will worsen and average daily commute times will continue to rise. Optimizing the system could, however, improve this situation, attracting about 43% more riders, with 20% less capital expenditure.  With higher revenues and greater operating efficiencies, the net Funding Gap would be reduced by more than 50%.

6. Transparency

In 2008, Metrolinx committed to issuing a Benefits Case Analysis (BCA) for every project, and to using these analyses for prioritizing investment in schemes with a “regional focus.” In fact, Metrolinx has not released BCAs for many projects. Where BCAs are available, they do not always provide the consistent, complete, and comprehensive information decision makers need. Specifically:

  • The BCAs for the $2.6-billion subway extension to Vaughan and the $456-million Union Pearson Express have never been released, even though both schemes are currently under construction.
  • The BCA for the Eglinton Crosstown LRT was not released publicly until the author filed a request under the Freedom of Information Act, and after Metrolinx had awarded contracts to construct the tunnels.
  • The BCA for the Finch and Sheppard Light Rapid Transit (LRT) projects does not reflect current plans. The BCA was prepared for a single continuous line rather than the two separate, shorter lines now being proposed.
  • The BCA for the Downtown Relief Line does not provide any quantitative information about the likely benefits or incremental ridership, and gives no basis for policymakers to evaluate the project.
  • No BCA has been issued for the Scarborough subway, which the Province now says it will fund.
  • While most BCAs provide estimates of total ridership, they usually do not disclose the proportion that is “new” ridership, attracted to transit specifically because of the scheme. This is a critical measure for comparing cost-effectiveness and the contribution to achieving the Metrolinx goals.

The Transit Investment Strategy Advisory Panel has highlighted the need to take account of operating and maintenance costs and their relationship to fares to understand the larger question of whether a new project will be an ongoing financial burden to the system or a source of additional revenue (if fares exceed operating costs). While some of the BCAs present this information, not all do, and there are some large discrepancies between Metrolinx numbers and TTC numbers.

This report represents the first step towards a re-evaluation of Toronto’s regional transit plan. It is not meant to scuttle existing plans, but to improve them. It is based on the limited information made available by Metrolinx and on the author’s experience in international transit systems. More analysis is needed to understand the potential and the costs of the Big Move and its individual projects, and to give policy makers and regional residents confidence that Metrolinx is delivering projects that will meet its own principles and achieve its stated goals. In the end, the goal is to develop better transit that meets the region’s needs and that demonstrates the power of transit to transform a region and keep it competitive.

Figure E3: The summary graphic on the following page compares the schemes proposed by Metrolinx and the improvements recommended in this report. The black bars indicate net costs, taking account not only of capital and operating costs, but also savings from services that are replaced. The white bars represent net revenues, and the red line shows new riders for each scheme. Below the graph, the boxes indicates projects for which Metrolinx has issued a comprehensive Benefits Case Analysis, those for which funding has been identified as of late 2013, and the Benefit:Cost ratio for each project. A Benefit:Cost ratio of less than 1.0 indicates that a project does not represent good value for money. Note that incremental revenues exceed total costs for the UP Express and for the GO Rail upgrading schemes.