Transit, public housing, shelters: Toronto’s tough funding choices

Emergency shelters bursting at the seams. Public housing falling apart. A transit system struggling to maintain service for the people who need it most. People have been crying out for fixes to these issues for years.

But they’re also problems that have led some to ask: why has Toronto been left to foot the bill?

When it comes to the city’s bottom line, there are many expenses the municipal government covers that used to be shared by higher levels of government until they stepped away, downloading them onto the city and its taxpayers. Other costs are ones Toronto has traditionally taken on, but as demand has surged and problems multiplied they’ve become increasing burdens to a city desperate for help.

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These expenses are now part of the city’s precarious budget balance, with officials sometimes facing choices about which services will be put on the back burner or allowed to erode.

It’s an issue made more challenging because the law doesn’t allow Toronto to run an operating deficit, even in times of crisis, and has limited tools to boost its wallet. The Federation of Canadian Municipalities raised concern in 2020 with the “scant” revenue options available to local governments, beyond property taxes and user fees.

The issue has been made worse by the pandemic, which has added immense financial pressure on city hall. Toronto faced new expenses while revenues from normally reliable sources like TTC fares and Green P parking fees waned, with commuting and tourism down.

In 2022 alone, the cost of the pandemic for Toronto was estimated at $1.4 billion, with the city’s manager warning money woes were expected to continue in 2023 and beyond. As a result, municipal officials have said one-time bailouts from upper levels of government, which have filled the gaps over the last three years, are not sufficient and are hampering the city’s ability to plan ahead.

As the city grapples with its sizable budget gap, observers — and often, city hall officials — have appealed to other levels of government to help pick up the tab.

A ‘handcuffed’ transit system

With weekday ridership still more than 30 per cent below pre-pandemic levels and the prospect of emergency subsidies drying up, experts wonder how Toronto will support the growing cost of the TTC without other governments stepping up.

Something to remember next time you’re waiting for a streetcar that’s been delayed yet again: Unlike other North American cities, such as Vancouver and New York, which benefit from both municipal and provincial or state money to keep things running, Toronto is the TTC’s sole stakeholder, said David Cooper, a transportation consultant and professor at Toronto Metropolitan University.

“Ultimately, the city decides the subsidy that it provides the TTC to provide service. And that level of subsidy really has a direct relation to how much service the TTC provides,” Cooper said.

This funding model leaves the TTC “handcuffed,” he said, because it doesn’t have the power to generate new revenue tools.

It wasn’t always this way: Throughout the 1970s, ’80s, and early ’90s, the city and the province each funded about one-sixth of the TTC’s operating cost, while the remaining two thirds came from fares, said transit advocate Steve Munro.

But when former Conservative premier Mike Harris came into power in the ’90s, “he basically cut off all subsidies,” Munro said, which were not restored by future governments. Since then, the province has focused on funding new capital projects, like the upcoming Ontario Line, rather than paying for day-to-day operations.

“The issue is, it’s not sexy to pay for day-to-day operating,” said Cooper, noting that it’s more politically beneficial for Ontario to fund “tangible assets,” like new fleets or new subway lines. But as the transit system expands, its operating costs will grow too, he said.

It makes sense for the province to help pay the bill to keep transit moving, Munro said: it helps move people, including essential workers, around the city without clogging up our overstressed roads. “It’s a public interest, just like it’s a public interest to run schools or run hospitals.”

Still, the total operational bill falls to Toronto taxpayers, and those who ride the TTC. Which, of course, are usually the same people: Between 2016 and 2019, fare revenue accounted for about 60 per cent of the TTC’s operating cost, while the city subsidy, funded through municipal property tax dollars, made up another 30 per cent. (The final 10 per cent came from provincial gas tax funds, reserves, and other TTC revenue sources.)

A financial stress enough, without a pandemic, and a recipe for what transit watchers call a death spiral: a transit agency, responding to a decline in ridership and struggling for funding, makes service cuts, which, in turn, make transit less attractive, pushing away more riders, further reducing revenue and necessitating more service cuts.

It’s a direction some warned the TTC could be heading in after COVID-19 caused ridership to plunge. And with weekday ridership still more than 30 per cent below pre-pandemic levels and the prospect of emergency subsidies drying up, experts wonder how Toronto will support the growing cost of the TTC without other governments stepping up.

In 2022, the city anticipated just 33.5 per cent of the TTC’s $2.2-billion operating budget would come from fares. The city’s own share was bumped up to 38 per cent, and COVID-19 relief funding was expected to fill the missing 25 per cent — or about $561 million. (Three per cent of the budget was allocated to ancillary revenues and reserves.) Of that COVID gap, $370.7 million has been promised so far by Queen’s Park and Ottawa, and $123 million is still missing, said Stephen Conforti, the city’s executive director of financial planning.

Once the pandemic funding expires, the TTC will have a “pretty significant funding gap” that will have to be filled either through additional dollars from the city — potentially meaning cuts to other city services — or by cutting service to reduce costs, Cooper said. “There’s no other way around it.”

Emergency shelter for refugees

Earlier this year, when the Star reported that an increasing number of people were being turned away from shelter, the city responded that it was contending with a significant uptick in refugees and refugee claimants.

As the colder weather approaches, the toll of a city in a housing crisis can be seen on its streets — as people set up tents in city parks or in Toronto’s ravines.

The city’s shelter system is hitting a wall — on the night of Sept. 26, the family shelter system was at 99.6 per cent of its capacity, with just three unoccupied rooms as of 4 a.m.

Earlier this year, when the Star reported that an increasing number of people were being turned away from shelter, the city responded that it was contending with a significant uptick in refugees and refugee claimants.

Toronto has long been a hub for those fleeing international strife. Typically, federal counts show roughly half of refugee claimants come to Ontario, and most flock to the Greater Toronto Area. And when people arrive without housing, they often lean on the city’s emergency shelter network.

The city has attributed the latest surge to reopened borders and global instability, including the war in Ukraine, and has appealed for emergency aid. For this year, it’s asked for $61 million from the federal government. “We are still waiting for that money,” said Gord Tanner, head of the city’s shelter division.

He’s seen the city face a similar situation before — following 9/11, then again in 2008-09. The waves have come faster in recent years, he says, hitting in 2017, 2018 and 2019. This year is expected to be even tougher, with staff expecting arrivals to surpass the pre-pandemic highs. On Sept. 1, 2021, there were 507 refugees in Toronto shelters; by March 6, there were 1,176.

“This is the new normal,” Tanner said.

The city wants to work with Ottawa and Queen’s Park on a strategy for large-scale arrivals, to ensure “reception programs and facilities” outside Toronto, as well as more direct funding to refugee shelter providers.

“The city has requested, on numerous occasions, immediate and urgent action from the federal and provincial governments to plan for the large-scale increase in refugee claimant arrivals in order to avoid a potential crisis,” a staff report earlier this year warned.

The federal housing minister’s office, asked about the city’s request, pointed to programs that fund shelter projects, and redirected the Star to the immigration ministry.

A spokesperson for Ontario’s housing minister also pointed to existing funding for services, and pledged to work with Ottawa to ensure Toronto could “properly support” newcomers.

Tanner warned that, should the $61-million request not be fulfilled by the time Toronto is budgeting for next year, it could result in “reductions in services elsewhere.” In July, city staff warned that if other governments didn’t step in to fill the city’s budget gaps, it would have to cut the likes of road repairs and parks upkeep. And if a more consistent funding stream isn’t created — to the city or local agencies — he worries it’ll happen again, year after year.

Broken public housing

There's a nearly $10-billion portfolio of subsidized housing throughout the city, including this one on Sherbourne Street, that eroded, over decades, due to chronic underfunding.

You can’t always see it from the outside, but there’s a nearly $10-billion portfolio of subsidized housing throughout the city that eroded, for decades, due to chronic underfunding — providing a lesson in the long-term damage that occurs when other levels of government step away from local issues.

The problem started in the 1990s, when the federal and provincial governments no longer wanted responsibility for public housing, meaning they’d no longer foot the bill for the necessary upkeep. Toronto assumed a disproportionate burden in the downloading, as it currently holds 37 per cent of public housing across the province’s 444 municipalities.

Post-download, Toronto wasn’t left with long-term financial aid for keeping homes in good shape, so when problems arise, tenants say they’ve been met with patchwork fixes instead of full repairs. Gradually, problems ballooned until they hit a crisis. As of 2017, an internal Toronto Community Housing Corporation (TCHC) database showed half its complexes were expected to be in critical shape within five years.

Among the worst: 188 Sherbourne St., where repairs would cost 80.85 per cent of replacing the building, and Riverdale Acres, where fixes would cost 53.17 per cent of a replacement. Anything above 10 per cent isn’t in a good state; anything over 30 per cent is seen as critical.

“We have operated for more than 15 years without a stable, long-term source of funding to pay for capital repairs, which has resulted in a $2.6-billion repair backlog, deteriorating building conditions and the permanent closure of hundreds of units,” TCHC wrote in a 2018 report.

The good news is that the federal government promised $1.3 billion for repairs in TCHC buildings in the spring of 2019. In 2021, TCHC announced that for the first time in its history that its 10-year building repair capital plan was fully funded.

But it’s been up against a steep backlog, meaning many tenants today are still living in broken homes. TCHC expects it’ll take until 2026 to reach an overall state of good repair, though some homes’ outlook is worse than others. Riverdale Acres has seen a sharp improvement, according to new data shared with the Star. But at Sherbourne, things have gotten worse. As of 2022, it would cost more to repair the heritage home in Moss Park than rebuild, with repairs costing a whopping 119.80 per cent of replacement.

Repairs on a heritage site are costlier, TCHC spokesperson Robin Smith said — so they’ve prioritized where money will go the furthest. TCHC now has a permanent funding model with the city, but he expects with inflation and climate retrofits more will later be needed.

Having the funding when it’s needed means fixing and replacing building components gradually, TCHC says, rather than facing a mountain of backlogged repairs as it has in recent years.

“If you have one leaky pipe and you’re not able to address it, there can be knock-on effects … being able to fix problems in more real time — it extends the lifetime of the portfolio,” Smith said. “When we’re given the funding to deliver … we can do what we’re supposed to be doing.”

With files from Jennifer Pagliaro

Lex Harvey is a Toronto-based transportation reporter for the Star. Follow her on Twitter: @lexharvs


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