Anders Rasmusson
Public Transit Finance in Vancouver, British Columbia
Addressing Budgetary Challenges in Metropolitan Regions
Supervised Research Report Submitted to Raphaël Fischler School of Urban Planning McGill University October, 2010 PUBLIC TRANSIT FINANCE IN VANCOUVER, BRITISH COLUMBIA Abstract
This research project analyses public transit planning and financing in the Canadian City of Vancouver, British Columbia. The South Coast British Columbia Transportation Authority, commonly referred to as TransLink, is a made-in-BC solution to the region’s particular geographical and organizational challenges. However, TransLink continues to face fiscal problems paying for growing operating costs and implementing plans for future transit expansion. The financing and provision of public transit in metropolitan regions is inherently a political process. This process is complicated in areas with competing and overlapping governance structures – each with their own objectives and spending priorities. Given Metropolitan Vancouver’s public authorities, responsibilities and fiscal and political realities, it becomes clear that TransLink must evolve to simultaneously address budgetary challenges and to meet goals to improve the performance and delivery of an effective public transit system. Possible solutions to TransLink’s budgetary challenges are compared and analysed in the context of the region’s local planning history and culture.
Ce projet de recherche vise à faire une analyse de la planification et du montage financier du réseau de transport public de la ville canadienne de Vancouver en Colombie-Britannique. La South Coast British Columbia Transportation Authority (L’administration des transports de la côte sud de la Colombie-Britannique), mieux connue sous le nom de TransLink, offre des solutions sur mesure et développé localement afin de répondre aux défis particuliers que posent la géographie et aux enjeux organisationnels. TransLink fait cependant face à des problèmes fiscaux découlant de coûts opérationnels croissants ainsi que de la mise en œuvre du plan d’expansion de son système de transport en commun. Le financement et l’allocation dedeniers publics aux systèmes de transport en commun des régions métropolitaine est essentiellement une démarche politique. Ce processus politique est particulièrement complexe lorsque les différents pouvoirs publics agissent dans des champs de compétence superposés et concurrent – chacun ayant des objectifs et des priorités budgétaires divergentes. Compte tenu des pouvoirs de l’administration gouvernementale, de ses responsabilités ainsi que de la situation financière et politique de la région métropolitaine de Vancouver, il est clair que TransLink doit évoluer en faisant face aux défis budgétaires tout en rencontrant simultanément ses objectifs visant à améliorer les performances et les services d’un système de transport en commun efficace. Différentes voies pour solutionner les défis budgétaires rencontrés par TransLink sont dans ce travail comparées, analysées et placées dans le contexte historique et culturel local de la planification régional. Acknowledgements
It is a pleasure to thank the individuals who made the writing of this research project possible. My sincere thanks to my supervisor, Professor Raphaël Fischler, for your guidance throughout the entire process. Without your experience and advice this project would have been even more difficult to complete. Professor David Brown, your timely recommendations were thoughtful and very much appreciated. I am especially grateful for the support of my family. Your patience and support throughout my entire education has not gone unnoticed. Finally, I owe my deepest gratitude to Pascal-Hugo Plourde for your unending commitment and love. You were both a source of great inspiration and distraction, and I am thankful for both. Table of Contents
1.0 INTRODUCTION...... 1 1.1 Report Structure...... 3 1.2 Methodology...... 3
2.0 REGIONAL CONTEXT...... 5 2.1 Metro Vancouver...... 5 2.2 TransLink...... 11 2.3 Fiscal Context...... 17 2.4 Political Context...... 20
3.0 FINANCING TRANSIT IN VANCOUVER ...... 24 3.1 TransLink Revenue Mechanisms...... 24 3.1.1 User Fees ...... 26 3.1.2 Property Tax...... 28 3.1.3 Fuel Tax...... 28 3.1.4 Hydro Levy...... 29 3.1.5 Parking Sales...... 29 3.1.6 Non-tax Sources...... 30 3.1.7 Capital Financing Agreements...... 30 3.2 The Cost of No Solution...... 31
4.0 FISCAL ALTERNATIVES...... 34 4.1 Increased User Fees...... 35 4.2 Increased Property Taxes...... 36 4.3 Increased Fuel Taxes...... 37 4.4 Vehicle Levy...... 29 4.5 Payroll Tax/Income Tax...... 40 4.6 Carbon Tax...... 40 4.7 Congestion Pricing...... 41 4.8 Non-Tax Sources...... 43 54.9 Annual Provincial Transfer...... 44
5.0 ANALYSIS & RECOMMENDATIONS...... 45 5.1 Analysis Discussion...... 45 5.2 Alternatives Evaluation...... 47 5.3 Recommendations ...... 49 5.2.1 Short Term Recommendations...... 49 5.2.2 Long Term Recommendations...... 51 PUBLIC TRANSIT FINANCE IN VANCOUVER, BRITISH COLUMBIA
List of Figures
Figure 1: Metro Vancouver and the lower Mainland Figure 2: Local Governments of Metro Vancouver Figure 3: TransLink’s Rapid Transit Network Figure 4: Rapid Transit Network and Proposed Expansions Figure 5: 2006 Median Commuting Distance by Place of Residence Figure 6: TransLink’s Projected Funding Shortfall Figure 7: TransLink’s Governance Model Figure 8: 2009 Revenue (millions) Figure 9 2009 Expenditure (millions) Figure 10: TransLink Fare Zone Map Figure 11: Transit Share of City Property Tax & Utility Charges Figure 12: Canadian Fuel Price Comparisons, 2008 Figure 13: International Retail Gas Prices
List of Tables
Table 1: Population and Population Growth (2002-07) in Large Canadian Census Metropolitan Areas Table 2: Metro Vancouver 2006 Population and Dwelling Counts Table 3: Transit User Fee Comparison across Canadian Cities as of September, 2010 Table 4: Congestion Pricing System Comparison Table 5: Summary of Alternatives Evaluation
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1.0 Introduction
Academic research, political commentary and urban planning debates have placed a great deal of attention on metropolitan regions, their problems and their governmental structures. Municipalities that form metropolitan regions have interdependent relationships, overlapping and opposing interests, and exhibit varying levels of cooperation and integration. A particular challenge that urban planners face when planning at a regional scale is the difficulty determining and coordinating transportation and land use across areas involving multiple municipal bodies. A classic problem for municipalities in a metropolitan region is that area- wide concerns are often not met by policy-making institutions of a similar scope. Policy co-ordination among local units of government is difficult, and decisions made in one local city will frequently have consequences that impact neighbouring municipalities.
Metropolitan areas are closely tied to the global economy, and regional authorities must continually assess and monitor trends to develop strategies for continued economic development. A region’s transportation network plays a role in supporting the economic activity that allows a region to compete on the global stage. In urban settings where space is limited and living costs are relatively high, it is irresponsible to assume that everyone has, and will continue to have, access to personal automobiles. When public transit is insufficient or does not present a viable alternative to the car, then personal accessibility, economic activity and the environment all suffer. A city-region’s livability and health is, in part, dependent on the effectiveness of its public transportation network. Increasingly, cities will require transit alternatives that allow a region’s population to access non-traditional work locations at all times of the day. An effective public transportation system is vital in modern metropolitan cities given that most people live in large urban areas and require the ability to access jobs and services spread throughout an entire metropolitan region.
The federal and provincial levels of government in Canada have significant stakes in urban policy insofar as they are major landowners, service providers and investors in public infrastructure. The Federal Government of Canada has jurisdiction over waterways, ports, railways, airports and is a significant landowner in most cities. Among other responsibilities, provinces have jurisdiction over transportation and infrastructure, health, education and the management of resources. Provinces also determine legislation for the governance of municipal authorities. Municipalities do not have constitutional rights in Canada, and it is for this reason that provincial governments can be highly engaged in searching for urban solutions should they chose to become involved.
Municipalities in Canada provide a multitude of public goods including: parks and recreation, housing and development services, roads and utilities, community services, emergency management and public transit provision. Most of these responsibilities are delegated by provincial authorities. Provincial governments also mandate what types of revenue sources a municipality can use to fund public services. It is a common concern
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in local politics that the level of fiscal responsibility given to municipal bodies may be outstripping the ability of city governments to finance the services desired by residents (Sancton, 2008; Phares, 2004). Municipal authorities must then make the difficult decision whether to cut popular public services, rely evenmore heavily on local revenue-sources like property taxes, lobby senior levels of government for grants, or seek new revenue-generating powers from provincial authorities.
Municipalities face ongoing challenges delivering quality public services at a cost deemed acceptable by local taxpayers. When spending limited public revenue, municipal governments are constantly negotiating with residents, businesses, community organizations and other interest groups. The financing of local public services is further complicated by the mobility of residents and the consumption of services across multiple municipal territories. Regional governance structures are created to negotiate across municipal boundaries, to share costs, and also to include senior levels of government in decision-making processes.
Depending on the region in question, the authority to plan for public transit and the responsibility to implement those plans rests with any number of municipal, regional, or governmental actors and organizations. Financing public transit is particularly complex, considering that the costs of providing transit services are rarely borne completely by the residents enjoying all of the benefits. Naturally, the provision of public transit benefits residents in close proximity to the service more than people in outlying areas. In metropolitan regions with many local governments, residents who live in different municipalities will use transit to differing degrees and have unequal access to services. Therefore, it is inherently a political process to determine who should bear the costs of transit provision. This is especially true in fragmented regional contexts where there is no clear consensus or financing agreement in place. Public transit planning in the Canadian City of Vancouver, British Columbia is no exception in this regard.
The City of Vancouver sits at the centre of a diverse metropolitan region located on British Columbia’s west coast. The Vancouver region is Canada’s third largest metropolitan region after those of Toronto and Montréal. The challenge of providing efficient transit services across a wide geographic region is significant, especially when 60 percent of residents cross municipal borders on their daily commute (TransLink, 2008). The South Coast British Columbia Transportation Authority, referred to as TransLink, is a made-in-BC solution to the region’s particular geographical and organizational challenges. However, TransLink continues to face fiscal problems paying for growing operating costs and implementing plans for future transit expansion. Given Metropolitan Vancouver’s governance structures, responsibilities and fiscal and political realities, it is clear that TransLink must evolve to simultaneously address budgetary challenges and meet goals to improve the performance and delivery of an effective public transit system.
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1.1 Report Structure
This research project reviews current fiscal and organizational challenges faced by TransLink in response to an ongoing debate over who should fund public transit in the region. This debate has many layers given the region’s complicated and unique governance system. The history and evolution of its institutions and regional decision-making processes also impact current debates. An overview of the regional context is given in Chapter 2 by outlining the history of planning institutions in the area. The financial and political contexts are then reviewed in greater detail. The emergence of regional decision-making and the establishment of TransLink as the region’s transportation authority gives context to the current fiscal predicament.
A review of TransLink’s finance mechanisms is necessary to give a complete understanding of the transportation authority’s particular financial situation. Chapter 3 outlines each revenue-generating power under TransLink’s authority and discusses its relative importance to the overall functioning of transit in the region. Various alternative solutions to the transit finance problem are then discussed in Chapter 4 and they are analysed in light of Vancouver’s local context and with input from local experts and officials. Each alternative has different political implications and some are more realistic to implement than others.
Finally, recommendations are made based on the research conducted for this report. Short-term recommendations are offered to respond to immediate needs for deficit reduction and to pay for committed capital projects. Long-term recommendations are then provided to respond to larger concerns about regional decision-making and to provide a source of stable funding for ongoing system expansion and other objectives outlined in Metro Vancouver’s Liveable Region Strategic Plan.
1.2 Methodology
TransLink is facing structural budget deficits that threaten the region’s ability to deliver an effective and efficient public transit system. The challenge addressed in the report and questioned by local policy-makers is: how can TransLink simultaneously address current budget shortfalls without compromising its goals to expand the provision ofpublic transit and increase transit mode-share across the region? This research project analyses TransLink’s current budgetary crisis and offers recommendations for how this problem can be mitigated. Both political and operational challenges exist for each policy alternative analysed.
Both academic and professional input was required to formulate recommendations for TransLink. Academics have long studied the effects of fiscal policies in various urban contexts. Experiences in one area
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may provide insight for another region considering a similar policy. A wide array of academic literature was researched for this report. The literature review drew on economic, social, and political theories pertaining to metropolitan governance and transit finance. There is also a broad amount of literature about urban planning practices in Vancouver. This literature was consulted along with relevant media sources including transportation and governmental websites. Comparisons are drawn between Vancouver and other regions that have implemented innovative transportation policies and finance mechanisms to solve their own fiscal problems. There is insight to gain and lessons to learn from these policies and how they might be implemented in the Vancouver context. It is also understood that academic analyses alone are insufficient to produce the best policies for TransLink. Professional input given by local expects gives context to academic theory and provides insight into which policies are most likely to succeed in Metro Vancouver.
The literature review informed the researcher about the various ways that transportation authorities finance transit in other metropolitan region. Based on the research, a list of appropriate alternatives was then presented in a survey to local transit planners and policy-makers and they were asked to comment on the appropriateness of each alternative to raise additional revenue for TransLink. Six transportation and planning professionals answered a written survey by email and one local mayor preferred to respond to the questions in a telephone interview. These respondents represent professionals in both the public and private sectors, and at the provincial, regional and local levels. The respondents were selected by contacting local, regional and provincial offices involved in transit planning and requesting the input of key individuals. The professional opinions and experiences of the all respondents are described throughout the entire report. Each respondent was given the option to remain anonymous and the survey can be found in Appendix A.
Recommending funding mechanisms requires meaningful cost-benefit analysis of all realistic alternatives to determine which revenue-generating mechanism is most appropriate (Small, 1999). While it is certainly true that performance measures and any number of economic criteria should be used to help decision-makers decide how to fund transit projects, transportation decision-making is invariably a political process as well. It is always a decision that involves social, environmental and contextual considerations that are not easily measured. There are necessarily winners and losers in transit fund acquisition and allocation. The challenge is for authorities to gather both quantitative and qualitative data in a thoughtful, inclusive and transparent manner.
Any changes to TransLink’s revenue-generating powers should involve detailed fiscal analyses of each proposed alternative. Such a study is beyond the scope of this report. Instead, each funding alternative is described and considered primarily in terms of its political, economic and social feasibility. Although fiscal considerations are certainly not ignored, they are not the primary rationale for why a certain fiscaltool is recommended over another. The recommendations at the end of this report are derived by combining academic theory and experiences learned from other cities, research into local institutions and decision- making processes, and the opinions of experienced professionals.
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2.0 Regional Context
There is not a single ideal model for transit governance in metropolitan regions and a solution in one area may fail in another. Canadian metropolitan areas generally have more highly developed regional governance and planning systems in comparison the American metropolitan areas. This is true despite varied political histories of Canadian provinces, political experiences and a history of promoting US metropolitan planning (Rothblatt, 1993). Growing regionalism can appear threatening to both higher and lower levels of government, especially when powers are taken away from one level and given to a metropolitan institution.
To find a workable solution to transit budgetary challenges, it is vital to have a clear understanding of the regional context in question. The evolution of transit planning in Vancouver is long and ever-changing. The South Coast British Columbia Transportation Authority, or TransLink, is the result of decades of institution- building and collective decision-making. A review of the past and present political climate in British Columbia will aid in finding a solution to TransLink’s funding crisis.
2.1 Metro Vancouver
Special-Purpose Districts are independent governmental units that have their own administrative and fiscal independence. They provide a single or multiple related-functions, usually at the local level between municipal and provincial/state governments. Membership is usually voluntary and dependent on continued cooperation between members. Therefore, special districts have the corporate powers of cities, although is most cases, they do not have power over land use zoning and policing. It is for this reason that there is an important distinction to be made between government and governance. Governance implies less authority than a government, usually because it is not directly elected and has a mandate to provide specific services rather than implement a political agenda. At the same time, governance suggests the management of personal or community affairs; whereas government connotates political decision-making. Governance is whata government does, although the authority to govern can occur separate from the political decision-making process, as is the case when a special-district is created to deliver specific public services.
Metro Vancouver is a special-purpose district, although it has a larger mandate than many other examples of governance systems. Originally called the Greater Vancouver Regional District (GVRD), Metro Vancouver is a regional governance structure that was created in 1967 and enlarged in 1995 to help the region’s municipalities coordinate and address issues that are faced across the various jurisdictions (Metro Vancouver, 2010). Many special-purpose districts have a much narrower focus, such as the provision of health care, or sewage and water management. Almost all of the growth of local governance institutions in North America
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over the past 50 years has been due to the creation of special districts, while the number of municipalities have increased quite modestly (Berry, 2002).
Metro Vancouver is comprised of 22 member municipalities, one electoral area, and almost 2.3 million residents (Metro Vancouver, 2010). While British Columbia is largely recognized for its natural beauty and seemingly endless mountain and ocean vistas, the population of Canada’s westernmost province is largely concentrated in the lower Fraser Valley located in the south-west portion of the province. The region’s municipalities are positioned between the North Shore Mountains to the north, the Pacific Ocean tothe west, the United States border to the south, and prime agricultural land to the east (see Figure 1). Metro Vancouver is part of a larger bioregion called the Georgia Basin, which also includes an area called Pugot Sound in Washington State. It is one of the most ecologically diverse regions in North America (Meligrana,1999). The
Figure 1: Metro Vancouver and the Lower Mainland
North Shore Mountains
Vancouver
Fraser River
Canada/United States Border
Source: Google Map Data, 2010
Table 1: Population and Population Growth (2002-07) in Large Canadian Census Metropolitan Areas
Source: Statistics Canada. 2008. Annual Demographic Estimates: Census Metropolitan Areas, Economic Regions and Census Divisions, Age and Sex, 2002 to 2007. Statistics Canada Catalogue number 91-214-X.
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Vancouver region has consistently experienced strong economic and urban growth over the past 60 years. Between 2001 and 2006 Vancouver welcomed almost 15% of all new immigrants to Canada and approximately 3,600 more Canadians migrated to Vancouver than those who left the metro region for other provinces (see Table 1). Such rapid growth places significant pressures on the environment and on the ability of authorities to provide public services to residents.
The City of Vancouver is the largest municipality in the region with a population of almost 600,000, while the City of Surrey has the largest geographic size with 317 sq.km (Statistics Canada, 2006). Figure 2 shows the location of each municipality in Metro Vancouver while the complete list of municipalities and their respective population statistics are shown in Table 2. Metro Vancouver is not a very big metropolis compared with other North American regions; however, its unique characteristics tend to give the impression that it is bigger than it really is (Meligrana, 1999). Geographic barriers have shaped the growth of the region, and Greater Vancouver can only sprawl south to the American border and east into valuable agricultural land. In 1945 the City of Vancouver was a relatively small resource hub and it achieved a fairly high residential density post World War II (ibid). There are no freeways entering the downtown core, which serves to limit the
Figure 2: Local Governments of Metro Vancouver
Source: Metro Vancouver, 2008
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Table 2: Metro Vancouver 2006 Population and Dwelling Counts
Source: Statistics Canada, 2006. Canadian Census. number of personal vehicles that can enter the metropolitan centre at a given time. Vancouver has encouraged dense development in its centre at a level that is simply not seen in North American cities of comparable size (Punter, 2003). This is often explained by geographical and natural constraints, successive economic booms, consistently high levels of investment and immigration, and civic and planning leadership.
The greater Vancouver region has a deep history of regional coordination in areas of sewage and water sanitation, health and hospital management, and joint planning capacity to respond to environmental hazards like flooding (Smith and Oberlander, 1998). The Lower Mainland Regional Planning Board (LMRPB) was created in 1949 and the first regional plan was enacted in 1966, instituting land use planning regulations in the region for the first time (Metro Vancouver, 2010). At the formation of this new regional body, the British Columbia Government made it clear that regional planning institutions were purely functional entities and their existence was not political devolution to the region (Ibid). Regional planning began in British Columbia under close watch by provincial overseers – the province perhaps felt threatened by new regional authorities representing approximately half of the province’s population (Phares, 2004).
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Regional decision makers were then positioned to decide what kind of growth they wanted for the Lower Mainland. One approach was to do nothing while rapidly using land and challenging the region’s ability to provide healthy, vibrant neighbourhoods. The other approach was to contain and accommodate new development in specific areas, while limiting damage to the natural environment. The Livable Region Strategic Plan (LRSP) became the tool of regional planning in the 1960’s and 70’s.
In keeping with the priorities of the LRSP the Agricultural Land Commission was created in 1973 to protect and preserve valuable agricultural land under threat of urban development. In 1983, the four regional districts of the Lower Mainland lost regional planning responsibilities as part of the Social Credit movement of “restrained government” (Smith & Oberlander, 1998). This removal of responsibility also included rescinding the control and funding of regional transit planning—a right that had just emerged in the GVRD the year before. This centralization of power to the provincial government was a significant breach of trust with municipalities who were just getting used to having more control over regional issues. Regional planning and cooperation among municipal actors continued, albeit on a lesser scale, despite their not having the official authority to plan regionally.
Collaboration regarding regional growth management came later in the 1990’s. In 1995, the GVRD was given an expanded mandate and enlarged boundaries to cover the entire Vancouver Census Metropolitan Area (TransLink, 2008). Also in 1995, the province of British Columbia enacted the Growth Strategies Act to require municipalities to plan regionally and mediate issues through an extensive consultative process (Smith & Oberlander, 1998). An updated Livable Region Strategic Plan was approved by the provincial government in 1996 and was intended to guide all municipalities’ Official Community Plans (OCP’s). Both the Growth Strategies Act and the LRSP legitimized four primary strategies to: protect the Green Zone, build complete communities, achieve a compact metropolitan region, and increase transportation choice. Over the next few years most of the region’s municipalities had brought their OCP’s in line with the LRSP. The few disputes that arose were related to population projection targets and growth areas, but in the end no provincial mediation was necessary (Ibid).
Despite a longstanding commitment to compact development and regional growth management at the planning and policy-making levels, it has been argued that growth management aspirations have been diluted over time (Tomalty, 2002). This is potentially because of fears in suburban areas that diverting growth to the regional core could threaten their own aspirations for economic growth, property value increases and provincial funding for transportation and infrastructure (Ibid). Growth is therefore diffused and takes various forms across the entire region. Development patterns in the south-eastern suburbs are quite different compared to development in the central and northern areas (Punter, 2003). Progressive land use initiatives in the Vancouver core receive academic praise, but desired results are lacking in other areas. Most suburban development in the region is almost completely automobile-dependent (Tomalty, 2002).
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History in the GVRD shows that disagreements have occurred over land use, social equity, farmland preservation, air, water and other environmental quality issues. Many of the disputes can bebetter understood within the context of rapid economic change. British Columbia’s economy was largely resource- based, relying on logging, mining and fishing for exports. However, economic actors in the Lower Mainland are rapidly adapting to a knowledge-based economy, including personal and corporate services, tourism and goods distribution (Howlett and Brownsey, 1992). It is likely that there will be land use, transportation and infrastructure disputes in the foreseeable future considering the variety of economic and social requirements across a diverse metropolitan region quickly adapting to a 21st century economy.
Critics of Metro Vancouver argue that the consensual model is inherently weak (Frisken, 1994). Metro Vancouver is subject to parochial interests of member municipalities and faces challenges encouraging its political actors to speak with a regional voice. All decision-making is filtered through existing political bodies and accountability rests with actors serving multiple institutions. It is difficult to claim that politicians appointed to Metro Vancouver’s board can speak for a united region. Institutionally, Metro Vancouver is an illustration of local and regional decision-making, as well as an exercise of suburban and urban interactions more than it is a fully independent decision-making body (Meligrana, 1999). However, metropolitan governance is a clear alternative to metropolitan government. Metro Vancouver offers the benefit of being able to mitigate municipal disagreements, while avoiding the creation of an entirely new level of government.
Today, Metro Vancouver is officially a nonpartisan political body and a corporate entity operating under provincial legislation. It is governed by a Mayors’ Council of 37 elected representatives from each of the 21 municipalities and one electoral area that constitute the Metro Vancouver region. The number of directors appointed depends on the population of the area that they represent. Metro Vancouver exists primarily to deliver regional services such as affordable housing, solid waste removal and recycling, water and air quality management, and parks and recreation planning. It also provides political leadership and operates as a forum for regional discussions. It acts as a facilitator, partner, and advocate while providing information and education to the community (Metro Vancouver, 2010). Transportation is not explicitly under the jurisdiction of the district, although Metro Vancouver’s Mayors’ Council is linked to the decision-making arm of the transportation authority. As described later in the report, the Mayors’ Council acts as an important voice for issues regarding transportation planning at the regional level.
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2.2 TransLink There are various models available for the governance and management of transit systems in metropolitan regions. Complete independence of transit planning occurs when every municipality is in control of delivering public transit within its own jurisdiction. This model works well when there is a single municipality in a region, but it is less efficient when there are multiple municipalities in close proximity and there is a high level of regular travel between the two (Vuchic, 2005). Complete independence affords the greatest local control over transit planning but regional service is usually compromised. There is usually a lack of coordination among transit operators, an extra wait for transfers, complex fare structures and uncoordinated information for transit users.
Informal coordination can occur over time to deliver transit services between various jurisdictions that regularly interact. Agreements are usually short-term, and this type of arrangement makes it harder for long-term planning. Difficulties arise over time with staff turnover and the system is dependent on continued good-will between the two municipalities (ibid). Legal agreements can be made to formalize some ofthe coordinated services, especially when one transit body needs to operate on the streets of another municipality.
Formal coordination occurs when there is an institutional organization representing a regional area. The role is limited to the coordination of existing transit in the various member municipalities. Coordinated action creates common fare-structures, shares information for long term planning, and sometimes organizes the distribution of funding. Disputes over transit goals and strategy can still occur on a regular basis.
Partial integration is an institutional structure that coordinates regional planning and may operate transit service as well. This institution often supports regional transfer stations, matches transit schedules for efficient transfers, and usually is formed with the arrival of new regional transportation infrastructure linking different jurisdictions or integrating services with high-capacity system. Potential conflicts over responsibility can occur between a regional operator and local-service provider (ibid). There is the added risk of duplicating services, leading to increased administrative costs.
Full Integration exists when there is a single transit authority controlling the entire system. This type of system offers clear accountability, and its organizational structure is simple for the public to find information. Transfers are smooth, regional mobility is improved and there are few conflicts between the planning and operating of transit.
Traffic problems and congestion are familiar to most urban dwellers and commonplace in metropolitan regions across the world. Extensive literature has been devoted to the causes of congestion and how to manage transportation demand (Downs, 2004; Mohring, 1999; Vuchic, 2005). For much of the past 60 years, planners
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have accommodated road and highway expansions to placate angry citizens frustrated by traffic. Expanding road capacity scores political points for authorities willing to spend money appeasing frustrated commuters. A growing understanding is that there will always be congestion in dense cities because increasing road capacity will attrack even more traffic until the newly added roads are just as congested as the roads they were designed to alleviate.
Traffic congestion in Vancouver is known to be particularly bad. The reason for this is partly geographic but also partly political. Limited crossings across the Fraser River and the Burrard Inlet have created bottlenecks for commuters and traffic congestion is an ongoing challenge in the region (Meligrana, 1999). A massive highway project that would have cut through many communities was stopped by local opposition in the 1960’s, leaving Vancouver as the largest metropolitan city in North America without a highway into downtown. In many ways this has been a blessing for urban planners who present public transit as a viable commuting alternative to cars.
The history of transit planning in the region goes back to 1897 when the BC Electric Railway Company, a private consortium, was founded with operations in Vancouver and Victoria (TransLink, 2008). It operated until 1962 when it was purchased for the Province by Premier W.A.C. Bennett, thereafter it was operated by BC Hydro. The provincial hydro-electric utility company suddenly inherited the transit system and had no previous experience with transportation planning. Coinciding with a large investment in the region’s bus fleet, the system was then assigned to a new public company called the Bureau of Transit Services, later named BC Transit.
In 1980 BC Hydro transferred the responsibility for transit planning to the GVRD but not before creating a new crown agency called the Urban Transit Authority (UTA), and adding another provincially regulated organization, Metro Transit Operating Company (MTOC), to the decision-making table. This created an institutional framework that has been called a “three-headed monster” involving the UTA, MTOC, and the Greater Vancouver Regional District (Smith and Oberlander, 1998). Conflict between the regional district and two provincial agencies increased calls for the creation of one regional transit authority.
Instead of meeting demands for local control over transportation management, the provincial government essentially removed regional involvement by giving full control to BC Transit, another crown corporation. As previously mentioned, in 1983 the GVRD and other regional districts in the Lower Mainland lost control over regional planning. It was at this point that the province decided to build the fully-automated, elevated light rail system for the 1986 World’s Fair in Vancouver. The selection of SkyTrain technology, planning, construction and branding were wholly provincial decisions (TransLink, 2008). The sharp centralization of transportation authority stimulated inter-governmental disputes for years.
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The province gradually returned control of transportation planning to the regions. It is debateable whether the province wished to download responsibilities to municipalities in the face of provincial deficits, or whether the new Premier Mike Harcourt was sympathetic to cause of regional district empowerment (Smith and Oberlander, 1998). In the early 1990’s GVRD member municipalities worked to achieve consensus on a plan called Transport 2021: the objective being to ensure public transportation investments coincided with the agreed upon regional liveability goals. Consensus was reached on a medium-range transportation plan in 1993 and on a long–range plan in 1994. The goal was to increase the transit mode share from 13-18% by 2021 (GVRD, 1994). Transit ridership levels were estimated to be 12.5% in 2008, indicating that TransLink has not met its long-term ridership objectives thus far (TransLink, 2010). The Long-Range Plan recognized the need to integrate land use and transportation decision-making, which arguably has been occurring in much of the region, but not in other areas.
In 1997, the provincial government conducted a study agreeing upon a framework for negotiations on transportation governance and funding in Greater Vancouver. It included transit, major roadways, and transportation demand management in the Lower Mainland. The purpose of any future transportation authority would be to improve public transit and transportation demand management across the system area as well as to reduce single occupant vehicle use. In 1998, the province and the GVRD agreed to create a governance organization for regional transportation and transit, and the Greater Vancouver Transportation Authority (GVTA) was formed. The arrival of the regional authority was a process that involved extensive collaboration, negotiation and evolution of regional responsibility over time.
According to the Greater Vancouver Transportation Authority Act (later renamed the South Coast British Columbia Transportation Authority Act), the purpose of the authority is to provide a regional transportation system that: (a) moves people and goods, and, (b) supports i. the regional growth strategy, ii. provincial and regional environmental objectives, including air quality and greenhouse gas emission reduction objectives, and iii. the economic development of the transportation service region (Province of British Columbia, 1998).
It is significant to note that TransLink is unique in its integrated authority over major roadways and public transit infrastructure. Most North American metropolitan transit authorities are not specifically given the role to monitor and facilitate goods movement on roads (TransLink, 2008). Under this model, TransLink has authority over all modes of transportation and can integrate plans for transit, car travel and cycling. The authority does not have influence over land use outside of property that it expressly owns, although,
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it does have powers to expropriate lands as needed to support the transportation network and it can raise revenues by holding, managing, developing and disposing land. The authority may make bylaws and enter into agreements with governments for the collection of taxes (Province of British Columbia, 1998). Aside from being responsible for transportation and infrastructure planning, it assesses Official Community Plans, reviews major development proposals, and compares regional development strategies with provincial initiatives to measure consistency between the two levels of government.
As previously mentioned, transportation is under the mandate of TransLink, not Metro Vancouver, although Metro Vancouver Mayors’ Council approves TransLink’s Board. Originally it was a 15 member board, 12 appointed by Metro Vancouver Mayors/Councilors and 3 appointed by the province from local members of the BC Legislature. The board selected its own chair and CEO. The level of local control over transportation decision-making was significantly reduced in 2007 as a result of a structural overhaul of TransLink bythe provincial government. The implications of this are discussed further in Section 2.4.
TransLink has the responsibility to make a number of regional transportation plans. The most important planning tools are outlined below:
Long Term Strategy The Long Term Strategy is a 30-year plan and is the basis for all other plans and policies that TransLink implements. It outlines regional land use objectives, provincial and regional environmental objectives, anticipated population growth and economic development goals in the transportation service region. The most recent Long Term Strategy was created in 2008 and confirms TransLink’s vision to create a sustainable metropolitan transportation system.
10-Year Plan/Base Plans These plans outline how the authority will provide transportation services and manage transportation demand using anticipated resources and accumulated surplus revenue. As of 2009, TransLink is required by legislation to produce a Strategic Plan annually on rolling 10-year horizon. The first three years aretobe fully funded and TransLink must provide a firm budget for how it will to live within its means. The following component of the Base Plan outlines any future enhancements, additions or changes to the transportation system that are recommended for the remaining seven years, provided that the necessary capital becomes available. The authority also must propose recommendations as to how these acquisitions or enhancements will be funded – whether through raised taxes, user fees or another alternative.
Strategic Plan TransLink produces an annual strategic plan that consists of the previous years Base Plan and any
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supplemental plans that were approved for construction projects or financing changes. It is the detailed report outlining how TransLink used funds to meet the objectives outlined in the long-term strategy. It monitors TransLink’s annual successes and setbacks.
Area Transit Plan Area Transit Plans are produced for each of the five sub-regions of Metropolitan Vancouver. The plans cover a period of five years and outline all of the transportation requirements within the specific area. They also address the accessibility improvements necessary to connect the area to the wider region.
Service, Capital and Operations Plans and Policies These plans are produced when necessary to respond to specific policy decisions or transportation expansion projects that require context-specific plans for implementation. They must be consistent with the Strategic Plan.
SkyTrain is the region’s primary mode of rapid transit. It is the world’s longest network of driverless metro technology, and has come to symbolize the city (TransLink, 2008). The completed SkyTrain network is shown in Figure 3 and consists of the Expo Line, Millennium Line and the recently constructed Canada Line Figure 3: TransLink’s Rapid Transit Network
Source: TransLink, 2010
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Figure 4: Rapid Transit Network and Proposed Expansions
Source: TransLink, 2010
Figure 5: 2006 Median Commuting Distance by Place of Residence
Greater Vancouver A (part)
Lions Bay
West Bowen North Vancouver, DM Island Vancouver Anmore
Capilano 5 North Vancouver, CY Belcarra Seymour Coquitlam Creek 2 Vancouver CMA Greater Port Moody Vancouver A Mission 1 (part) Burrard Inlet 3 Median Commuting Distance Pitt Meadows by Place of Residence Maple Ridge Port Burnaby by 2006 Census Tracts (CTs) Coquitlam 2 Coquitlam Coquitlam 1 Vancouver New Westminster Musqueam 2 Number Katzie 1 of CTs 15.0 km+ 21 Langley 5 Whonnock 1 Greater Vancouver A (part) Katzie 2 10.0 to 14.9 km 125 Barnston Island 3 Richmond 5.0 to 9.9 km 200 McMillan Island 6
< 5.0 km 63 Surrey
Langley, CY Not available 1 Delta Langley, DM
Census Subdivision Musqueam 4
Tsawwassen
White Rock 0 4 8 12 16 20 km Semiahmoo Matsqui 4
Source: 2006 Census of Canada. Produced by Geography Division, Statistics Canada, 2008.
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connecting downtown Vancouver to the City of Richmond and to YVR International Airport. The Evergreen Line is a proposed SkyTrain expansion to the cities of Coquitlam, Port Moody and Port Coquitlam, shown with the green dotted-line in Figure 4. It is due to begin construction as soon as TransLink finds the remaining capital. TransLink is also studying alternatives for rapid transit expansion to the University of British Columbia, shown with the yellow dotted-line, and expansion in the City of Surrey, shown with the blue dotted-line. In addition to SkyTrain, the region has an underlying network of city buses, rapid buses, electric trolly buses, a seabus connection to the north shore, the Westcoast Express commuter rail line, and privately-owned micro ferries connecting the north and south side developments of False Creek. In 2009, Transit service hours have increased 6% over their 2008 levels (TransLink, 2010).
Based on the 2008 Regional Trip Diary Survey, the region now has a trips-to-work transit mode-share of 16.6%, ranking Metro Vancouver fourth in the country behind Metro Toronto (22.2%), Montreal (21.4%) and Ottawa-Gatineau (19.4%), and ahead of every major US city except New York (31.4%) (TransLink, 2010). Auto usage in central areas of Metro Vancouver is declining, while auto usage is outlying areas in increasing. Figure 5 shows median commuting distances across the metropolitan region. It becomes apparent that the more growth is concentrated in urban centres, the more people will use transit instead of personal vehicles. The farther people live from the Metro centre, the longer commuting distances are likely to be. This is particularly true to the south and east along the Fraser River.
According to the 2006 Canadian Census, Metro Vancouver has a combined walking and cycling mode- share of 8.0%. Metro Vancouver ranks 5th in Canada for use of active modes of transportation behind the census metropolitan areas of Victoria (16.1%), Halifax (11.1%), Ottawa-Gatineau (8.9%), and Quebec City (8.7%).
2.3 Fiscal Context
North American transit agencies and governments have commitments to use scarce resources effectively and are accountable for their spending and agency productivity. The implementation of transportation plans is dependent on the level of resources available to fund transit expansion, while stable and predictable revenue sources allow authorities to plan transit services more effectively. Yet public resources for transportation projects are limited and there is a need for planning efficiency and operating effectiveness, especially in the face of budget shortages and widespread economic uncertainties.
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The most significant issue facing TransLink is its structural deficit (Comptroller-General, 2009). While regional transportation discussions have been fraught with disagreements and power struggles, at the very least, the one thing that everyone appears agree upon is that TransLink has very few options to raise additional levels of revenue. This is something that all interview and survey respondents indicated, and it has been echoed by politicians, the media, government documents and even by the Vancouver Board of Trade (Comptroller- General, 2009; TransLink, 2008; Vancouver Board of Trade, 2007).
TransLink has grown from an annual budget of $400 million in 1999, to a proposed $1.225 billion budget in 2010 (TransLink, 2007; TransLink, 2010). By TransLink’s calculations it is estimated that the authority needs new funding of around $150 million a year in the near future, and an additional $300 million to meet planned payments for the next phase of system expansion (TransLink, 2008). Currently the system is running deficits and is using reserve funds to cover expenses. The reserve funds are expected to run out by 2011. Figure 6 shows TransLink’s expected funding shortfall over the next 10 years if not solution is found. Clearly, such prolonged deficits cannot be tolerated, and debt loads this high are not manageable.
TransLink has various powers to collect revenue and raise funds from other levels of government. User fees, property taxes and fuel taxes are the three primary revenue sources for the authority. These revenue sources and others are discussed in greater detail in Chapter 4. TransLink uses revenues primarily to operate its transportation system. Funds are also used to acquire, expropriate and dispose of assets for transportation purposes, including maintenance and expansion of the major road network. TransLink identifies major transportation initiatives and can negotiate cost-sharing agreements with the province.
Figure 6: TransLink’s Projected Funding Shortfall
Source: TransLink Annual Report, 2008
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According to the South Coast British Columbia Transportation Authority Act of 1998, TransLink is supposed to fund 40% of construction costs for major projects and government is to pay the remaining 60% (SCBCTA Act, 1998). The main problem is that TransLink has limited mechanisms to raise substantial amounts of money for expansion projects. The province has a list of transportation priorities and can put millions of dollars on the table to induce TransLink to spend on these initiatives as well. This kind of matching grant encourages the transportation authority to finance certain projects that the province endorses. However, because the revenue-generating capacity of TransLink is limited, in the current context, provincial grants may be encouraging expansion of the system even when TransLink cannot afford it.
When a senior government increases the responsibilities of local governments without increasing financial options to pay for public services, the senior government should either increase transfer payments to local governments, or expect service cuts (Bird, 2001). In the case of Metro Vancouver, a new regional transportation authority was given new powers over transit and infrastructure development, with inadequate financial reform. This innovative transportation authority has great institutional value, but it was implemented without agreement on finance mechanisms to pay for its services. In 2000, TransLink began work on implementing an annual $75 fee on vehicle registration in the Lower Mainland as permitted in its constitution (TransLink, 2008). It would have brought the authority an additional $95 million in 2002 when it was to be introduced. In the end, the vehicle levy stalled because there was no agreement on how the money could be collected from drivers and the province quashed the bylaw. Without the additional $500 million over five years TransLink was unable to expand the system during that time and structural deficits became entrenched.
In the past few years there have been property tax increases across the region, while increased transit fares and a three-cent increase in the gas tax is expected this year; yet these all serve to maintain existing services and to pay for the new Canada Line built for the 2010 Vancouver Olympics. The Mayor of Burnaby, Derek Corrigan, currently sits on Metro Vancouver’s Mayors’ Council and has described TransLink’s permutations and financial situation as a soap opera (Corrigan, 2010). He indicated that if the province does not find new revenue sources soon, then the mayors would be in a position where they would be forced to not approve TransLink’s budget. In this situation, TransLink would be required to maintain the budget from the previous year until a resolution is reached.
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Figure 7: TransLink’sGovernance Model 2.4 Political Context
In most metropolitan areas, providing effective and efficient public transit isone component of the region’s overall transportation strategy. Transit often competes with other public goods for funding, including other transportation priorities like investment in highways and bridges, improvement of street networks, and general infrastructure maintenance. It becomes clear that the more players there are seated at the table, the more likely it is that political disputes may arise. Major transportation initiatives are often planned and financed simultaneously by all levels of government. Consequently, there are disagreements between different levels of government, between municipalities, and with third-party organizations. It makes sense that all stakeholders want to be involved in the decision-making process, especially those who are contributing toward the capital costs. Disputes inevitably arise considering that stakeholders aim to shape the outcome in terms of their own priorities.
The interaction between the British Source: TransLink Annual Report, 2008 Columbia Provincial Government and local governments has been described as a relationship of “gentle imposition”, where the province has a history of leniency rather than heavy-handedness (Smith and Stewart, 2009). A relatively long history of intergovernmental cooperation has fostered the development of regional political cultures in British Columbia and a level of municipal autonomy that their Canadian counterparts have not achieved. For example, as a result of the Community Charter implemented in British Columbia in 2004, the provincial government must consult with municipalities if it plans to change their funding or responsibilities (ibid). In BC there is a history of collaboration between municipalities on issues concerning multiple jurisdictions, and the provincial government usually responds with legislation once a degree of intermunicipal consensus has been achieved. However, there is reason to believe that recent developments regarding the evolution of TransLink indicate that the province is exercising more direct control over transportation decision-making.
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The structural overhaul of TransLink in 2007 changed the selection process for the authority’s board of directors and gives control of that process to a screening panel made of influential private and provincial actors. The concept was that their expertise in law, accounting and transit planning provide better guidance and oversight of operations, as opposed to the guidance provided by a board selected by competing political actors. The screening panel is made up of five members, one selected by each of the following groups:
• The Minister of Transportation and Infrastructure; • The Mayors’ Council on regional transportation; • The council of the Institute of Chartered Accountants of British Columbia; • The Board of Directors of the Vancouver Board of Trade; and • The Greater Vancouver Gateway Society.
This panel selects five potential candidates for the board every three years, of which the Mayors’ Council must select three to sit of the board of directors (SCBCTA Act, 1998). Many TransLink documents, including TransLink’s own website, state that the Mayors’ Council selects the board, but TransLink fails to explain that candidates are pre-screened and selected by the separate panel (See Figure 8). The panel is not comprised of any elected officials and is not accountable to local residents. This restructuring can be considered a consolidation of power by the province and can be described as an erosion of local democracy.
Municipalities remain upset by the reform considering their loss of influence over the direction of TransLink. When discussing the provincial government’s action in his interview for this study, Mayor Corrigan stated that, “They’ve clearly indicated they don’t have faith in the municipalities, and they believe that somehow a private sector board will do a better job” (Corrigan, 2010). One survey respondent indicated that, in his view, what is needed is for the regional transportation authority to be returned to the municipalities and the region, with a source of secure and adequate funding. In his professional opnion, the province should once and for all withdraw from micromanaging transportation in the region. Another respondent expressed the idea that if the province wants this level of control then it needs to simply take TransLink back and be up front about deciding regional transportation policies. It would be better if the province took full responsibility for how that transit system succeeds or fails rather than pretend local government is in control.
On the one hand it is clear that local taxpayers should pay for local services that directly benefit them. This is an argument used by the province for why TransLink’s funding shortages should be financed by local municipalities. At the same time, it was the province that selected one of the most expensive rapid transit technologies, and the disagreement lies with whether provincial or municipal funds should pay for the associated costs of that decision. Similarly, the decision to install fare-gates at SkyTrain stations came from the Ministry of Transportation and Infrastructure, yet it is TransLink that will eventually pay approximately 60% of the $170 million price tag (TransLink, 2010). The Mayors’ Council has the power to raise transit fares
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or property taxes to fund transit expansion, but the council is unwilling to do so because of the widespread view that municipalities have lost regional control over what is done with those revenues. Local municipalities insist that the province has downloaded responsibilities to municipalities and that property taxes are already too high for local residents (Corrigan, 2010).
In October 2009 the Office of the Comptroller-General in the Ministry of Finance released a report entitled Review of Transportation Governance Models. Among other things, the document recommends that the Mayors’ Council and transit authority be given more responsibility for board appointments, not less (Comptroller-General, 2009). Instead, if the provincial government wishes to have an increased role in transportation decision-making, the report recommends that the province have representation on the Mayors’ Council, but this representation should not be greater than 20% of the Council. This provincial report clearly contradicts the centralization of power that occurred two years prior. It remains to be seen if the Ministry of Transportation and Infrastructure will implement any of the recommendations made by the Comptroller- General in the Ministry of Finance.
In British Columbia the relationship between the province and local government is more “confederal” than “hierarchical” (Smith and Oberlander, 1998). Regional districts exist to do what municipalities cannot do on their own. At times this consensual model can suffer from a lack of mandate, lack of representation and an inability to achieve consensus on matters that situate two stakeholders or regions against one another. Smith and Oberlander argue that these critiques do not apply in the BC context, yet the Comptroller-General brought forward these exact critiques against the governance model for TransLink. She recommended that amendments to legislation are needed to clarify roles and responsibilities, to enhance accountability and to increase oversight (Comptroller-General, 2009).
The province is eager to move forward with transit expansion and the ministry website indicates that construction of the new Evergreen Line will begin in 2011 (MoTI, 2010). Currently the federal government has committed $416.7 million and the province $410 million of the $1.4 billion cost estimate. TransLink is expected to finance $400 for the 11-km route and another $173 million is expected to come from private- public partnerships (TransLink, 2009). With 2011 on the horizon and no financing mechanism in place for TransLink’s share of the capital costs, it is expected that the province will react at any time to find a solution.
A provincial solution to fund expansion of the system in the near future will alleviate concerns about structural deficits, but will not remove them entirely. A short-term solution also threatens transit expansion elsewhere in the region if TransLink is burdened by increasing debt as a result of the Evergreen Line. Construction of the Evergreen Line will likely be welcomed by mayors in municipalities along that corridor; however, it is likely to face resistance from regional mayors elsewhere if it threatens their likelihood of getting improved transit services in the future.
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One issue that was raised by a survey respondent is that Translink is currently required to support much more than the transit system. TransLink’s responsibilities include maintaining the major road network and a number of bridges. The planning professional expressed the view that this infrastructure was downloaded from the province in an advanced state of neglect and requiring seismic upgrading. Add to that the burden of imposed public-private partnerships - the Canada Line and Golden Ears Bridge – and this means that there is not enough money left for much needed transit expansion. There is a concern that using PPP’s to finance transit prioritizes what is appealing to private-sector investors, as opposed to what is best for the region (Siemiatycki, 2006).
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3.0 Financing Transit in Metro Vancouver
Metropolitan areas have varying revenue needs and expenditure requirement. This reflects not only the nature and level of services provided in a metropolitan region, but also the its ability to raise revenues and fund expansion projects. This chapter reviews TransLink’s revenues and expenditures as they currently stand. Each revenue source is analysed in terms of its relative importance in funding regional transportation. The South Coast British Columbia Transportation Authority is required by law to produce an annual report reviewing the company’s expenses and revenues from the previous year. It monitors spending habits, relative gains and shortfalls in terms of specific projects and revenue sources. This chapter uses TransLink’s annual fiscal reports to outline how transit is funded in Metro Vancouver and examines revenue generating potential that is currently under local jurisdiction.
3.1 TransLink’s Finance Mechanisms According to the 2009 Statutory Annual Report, TransLink’s largest revenue source is transit user fees, representing about 38% of funds brought into the authority. Property taxes and fuel taxes generated 27% of revenues each (see Figure 9). Other revenue sources include parking related taxes, a hydro levy and tolls on the new Golden Ears Bridge. Senior government contributions represents about 1% of total revenues, and a marginal amount of interest income is collected on capital that TransLink holds in a contingency fund. Money in this fund is being used to pay for current deficits and is expected to run out in 2011. The poor economic climate is blamed for lower-than-expected user-fee and fuel-tax revenue. TransLink experienced a budget deficit of $67.3 million for the 2009 fiscal year (see Appendix B). The transit authority expects debt-service costs to increase from $171 million in 2009 to $251 million in 2010.
Operating expenses for the transit system constituted 74% of TransLink’s total expenditures in 2009. Debt-service costs were the second biggest expense at 17%, while maintenance and repairs on roads and bridges and TransLink administration costs each represented about 4% of expenses (see Figure 10). Itis important to note that TransLink excludes transit expansion costs from its operating budget, presumably because these are large fixed costs that TransLink spends as funding is available and they are amortized over long periods, not in a single year. Capital projects are improvements to transit infrastructure, facility upgrades and special initiatives like the upcoming installation of fare-gates at SkyTrain stations. In 2009 TransLink spent over $167 million on its Transit Capital Program. TransLink’s operating budget arguably does account for these costs by including its debt payments within the annual budget.
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Figure 8: 2009 Revenue (millions)
Source: TransLink Statutory Annual Report, 2009
Figure 9: 2009 Expenditure (millions)
Source: TransLink Statutory Annual Report, 2009
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3.1.1 User Fees
TransLink has the authority to recover any or all costs associated with the improvements to a part of the major transportation network through user fees. This applies to bus, rail, ferry, custom transit services and the major road network. User fees are the most efficient way to ensure cost recuperation for public services (Bird, 2001). They are the easiest way to ensure that the people gaining benefit from a service are also the ones paying for it. Currently 39% of TransLink’s operating budget is financed by user fees (Transit fares plus the Golden Ears Bridge toll revenue).
TransLink has implemented a three-zone system for setting transit rates (see Figure 10). The rationale is to charge people based on the distance they are travelling. Having multiple zones also provides an incentive for people to live and work in the same geographic area. After fare increases that came into effect April 1st, 2010, a monthly transit pass is $81 for zone one, $110 for zone two, and $151 for a zone three pass. Comparatively, prices are $2.50, $3.75 and $5.00 respectively for a one, two, or three zone ticket. Fare-saver tickets can be purchased for 30% less when they are bought in larger quantities. Additional incentives are provided to shape users’ transportation behaviour in the region. There are discounts for travelling in off-peak times and a transit
Figure 10: TransLink Fare Zone Map
Source: TransLink, 2010
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Table 3: Transit User Fee Comparison across Canadian Cities as of September 2010
Sources: TransLink, TTC, STM, OC Transpo, Calgary Transit, ETS, West Coast Express, Go Train, AMT, 2010 * West Coast Express rail service varies depending on distance. The lower range is for service to Port Moody, while the higher range is for service to Mission City. **GO Train rail service varies depending on distance. The lower range is for service to Etobicoke, while the higher range is for service to Hamilton. ***The Agence Métropolitaine de Transport rail service varies based on 3 zones. The lower range is for service in Zone 1, while the higher range is for service to Zone 3.
user’s family can ride for free on Sundays. Compared to other large Canadian transit systems, these prices are quite competitive for users in zone one; however, they are most expensive in the country for people crossing all three zones (see Table 3). Post-secondary students in Metro Vancouver have the best rate in the country. This is a result of negotiated low student fees that are included in the tuition payments of every student, regardless if they take transit or not.
Interestingly, TransLink has the power to implement motor vehicle user fees on any owner or operator of a vehicle that is used in the metropolitan region. It can establish stations to collect the charges on major roadways, but under current legislation this revenue cannot be used to fund transit. Vehicle toll revenue must be used to recover costs associated with a designated roadway project or major crossing, such as is the case with tolls on the newly constructed Golden Ears Bridge. This stipulation prevents the use of widespread tolls to solve TransLink’s financial challenges, although it does ensure that there is a stable funding mechanism for TransLink to repair the major road network as needed. Higher transit fees and road toll charges are both examined further in Chapter 4 as possible alternatives to raise additional revenue for TransLink.
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3.1.2 Property Tax
Property taxes are the main source of revenue for municipalities in North America and almost all local governments around the world make use of this type of revenue in one form or another (Slack, 2001). Because it is not deducted off a paycheck, residents are usually very aware how much property tax they pay, and the public goods acquired through property taxes are also more visible. Roads, garbage removal, parks and transit are all competing for the use of scarce municipal revenue. It is for this reason that adjustments to property tax rates are usually politically difficult to implement. Studies have shown that Canadian municipalities are more reliant on property taxes than their American counterparts (Schwartz, 2008).
TransLink raises approximately 27% of its revenue through property taxes and just implemented a 3% increase in 2009. The authority enters into agreements with municipalities to charge tax rates within the parameters established in TransLink’s strategic plan. Municipalities then collect the revenue and transfer it to TransLink. Currently, homeowners pay TransLink an annual flat rate of $36.77 per $100,000 of assessed value, with the total for the average home amounting to $221 a year (TransLink, 2009). The business property tax rate is $172.96 per $100,000 of assessed value, or $2,975 for the average business in the region.
A problem with relying on property taxes is that assessments rise slowly. While this can be a good thing in that funding is relatively stable and predictable, it does not allow TransLink to make expensive investments because revenues do not increase in line with TransLink’s desire to spend. There are also equity concerns with municipalities relying too heavily on property taxes. The value of someone’s land is not directly related to their ability to pay property taxes. For example, if an elderly person has lived in a home her whole life and currently lives on a fixed income, the land value may have increased dramatically over the years, but her ability to pay has not. Continual increases in property taxes may eventually drive that individual from her home.
3.1.3 Fuel Tax
Fuel taxes generate as much revenue for TransLink as do property taxes. In this sense they are very significant to the operating of the regional transportation system. In 2009 fuel taxes constituted $260 million (27%) of the transit authority’s revenues. Considering the volatility in the price of fuel, when gas prices are high, more income is raised. Similarly, during times of economic difficulties fuel-tax revenues decrease. TransLink was awarded the gas tax revenues provided that it is matched with funds from local taxation (TransLink, 2008). The authority initially had a fuel tax of $0.03/L, while today, the province collects $0.12/L on all fuel sold in Metro Vancouver and gives it to TransLink (TransLink, 2010).
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There are concerns about the long-term potential of using fuel taxes to pay for transportation. As the price of gas increases and as people buy more fuel-efficient vehicles, less gas will be consumed. Authorities will eventually be in a position where they must continually raise fuel taxes to achieve the same level of revenues. Currently TransLink and municipal governments are not in a legal position to implement higher fuel taxes. Increasing the fuel tax would require provincial approval through legislative amendments, and it is discussed in greater detail in Chapter 4 as one of the alternatives to solve TransLink’s budgetary challenge.
3.1.4 Hydro Levy
The provincial government authorized a power levy that requires BC Hydro to collect $1.90 from every household in Metro Vancouver. This funding source represents 2% of total revenue. Where a person is liable for more than one account for the supply of electricity on the same parcel of land the owner is only required to pay the levy once. This revenue mechanism is a remnant from when the transportation system was wholly-owned by the BC Government and managed by BC Hydro. Its relative importance is declining over time as the transit system expands and other sources of revenues increase in importance. It is very unlikely that the province will ever increase this levy in the future. There is no clear justification or connection between household energy usage and the funding of transportation. Increasing the Hydro Levy would be very difficult to justify and any increases would likely only marginally fix TransLink’s fiscal challenges.
3.1.5 Parking Tax
In 2009 parking taxes brought TransLink approximately $33.6 million in revenues, which is about 3% of total revenues. Two parking taxes have been implemented in Metro Vancouver. A parking site tax charges a fee based on the amount of private land that businesses dedicate for parking. A parking sales tax charges a tax on the revenue accrued by the sale of parking rights.
TransLink experienced difficulties measuring the quantity of parking at all business locations in the region. There were claims that businesses were being mistakenly charged for areas dedicated to pedestrians and cyclists. Disputes increased the already high administration costs associated with the implementation and monitoring of the program. The tax faced strong opposition because it appeared to target a relatively small group of businesses owners (Vancouver Board of Trade, 2001). In 2007, the Ministry of Transportation and Infrastructure decided to rescind the tax. It was agreed that it would be replaced with an increase in general property tax revenues. The tax was phased out with the implementation of the new provincial harmonized- sales tax in July, 2010.
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The parking sales tax was increased from 7% to 21% in January, 2010. It applies to all industrial, commercial and residential properties that collect revenue from parking sales. Anyone selling parking must register for a permit with TransLink. Parking sales tax revenues are not going to solve TransLink’s long-time financing dilemmas. As parking is taxed at ever-higher rates, landowners will either raise parking prices and receive fewer clients, they will accept lower revenues from the provision of parking, or they will convert parking to other land uses that return a higher value for their investment. Theoretically, this will lead to a gradual decline of the availability of parking in many parts of the metropolitan area and should have the effect of gradually shifting people’s behaviour toward the use of transit. With a greater shift toward transit, fare revenues should increase over time, but TransLink will also need to provide services with those user fees. Currently with the parking sales revenue, TransLink is getting money without having to provide services. This “free-money” will decrease over time as parking is replaced with other land uses.
3.1.6 Non-tax Revenue Sources The Comptroller-General recommends that TransLink increase non-tax revenue sources. Currently TransLink collects marginal revenues from commercial/retail leasing of space around transit stations, advertising and interest income. There are opportunities to gain more revenue in the future from real-estate development and the sale of air-rights on property owned by TransLink around rail stations.
Using real estate development to fund transit is not without its challenges. There were no real-estate revenues in 2009 because TransLink held its properties due to falling prices in the face of a deteriorating economy (TransLink, 2010). TransLink also faces challenges in terms of zoning and building regulations on land it owns. Municipalities officially control land use regulations and their bylaws affect how much revenue TransLink could collect from real estate development. It makes logical business sense for TransLink to hold onto land reserves until more favourable land use regulations can be negotiated and passed bymember municipalities. Certainly TransLink should examine all their land holdings and seek development proposals for sites already appropriate for intensification.
3.1.7 Capital Financing Agreements
From time to time, higher levels of government earmark money for TransLink for capital spending and system expansion. According to the South Coast British Columbia Transportation Authority Act signed into law in 1998, higher levels of government must contribute 60% of capital costs for any designated rapid transit project, while the transportation authority is required to contribute funding for 40% of the capital costs.
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This arrangement is contingent on the agreement by both the authority and the British Columbia Provincial Government. Both sides must agree on the design, scope and cost of the project in question, although the BC Government reserves the right to plan the acquisition and construction of the project and then hand the project over to TransLink for operation.
There is currently no agreement for consistent and stable capital transfers by senior governments. Revenue is given on an ad-hoc basis, according to the priorities of the Ministry. There is very little way for TransLink to predict when and how much money will be given. This complicates long-term planning for system expansion. Usually the province makes an announcement about capital expenditures and TransLink is expected to cover its share at that time.
This type of transit finance can have the effect of distorting local preferences because often money from senior governments has strings attached. A certain type of technology must be used, or as was the case of the Canada Line, a certain name must be adopted. Local municipalities feel great pressure and are often compelled to construct whatever the higher levels of government decide is best. The operating and maintenance costs of these infrastructure projects are often then passed onto municipalities, or in the case of Metro Vancouver, onto TransLink.
3.1.8 Public-Private Partnerships
Private-public partnerships are a relatively new way to fund projects. Governments short of money can seek private capital to fund construction. Potential benefits include reduced development cost overruns and increased construction-time reliability. They lower the financial burden and risk to the taxpayer by infusing private capital and sharing the risks. They have also been promoted in response to evidence that public construction can face weaker procedural accountability, higher construction costs and performance shortfalls (Flyvjerg, 2002).
The Canada Line rapid transit to Richmond and the YVR airport from Downtown Vancouver was planned, financed, constructed and is now operated by a private company. It represents the largest PPP for public transit in Canada’s history (Siemiatycki, 2006). It has been questioned whether the use of “private investment potential” as a criteria for transit decision-making results in a project that provides the greatest public benefits. It has been argued that the PPP framework predetermined the need for rail technology, extensive underground segments, quick travel times and an overwhelming preference for a single corridor (ibid). The selection of these criteria left little room for other alternatives.
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While the goal of initiating a public-private partnership is to leverage the innovative capacity and management skills of the private sector, the involvement of private stakeholders had the effect of limiting potential for multiple account evaluations of all options. Public-private partnerships are politically difficult to justify to the public when one combines concerns about inadequate transparency, the narrow self-interest of private stakeholders and the secrecy in bidding processes. There are real trade-offs and the private money invested is not “free”. It remains to be seen if there is a compromise where public accountability is maintained by decreasing secrecy surrounding finance and construction decision-making, while still harnessing private- sector innovation and effective project management.
3.2 The Cost of No Solution
Under the current model, TransLink does not have sufficient revenue-generating capabilities to meet operating expenses and to implement the expansion projects desired by constituents. If provincial governments want local authorities to have an increased role in the provision of social services, then there must be a devolution of revenue-generating capacity. If provincial governments fail to do this, then they must either scale back municipal responsibility to levels they can afford, or increase transfer payments to local governments. Of course there is the risk that no agreement will be reached regarding TransLink’s financial future. The British Columbia Government has the option to leave TransLink as it is, thereby cancelling future investments in the system, and putting TransLink in a position to dramatically cut services.
Service Cuts and Halted Expansion
When analysing TransLink’s budget it is necessary to understand both the operating and capital expenses. A major problem is that TransLink is not managing to cover its current operating costs and debt repayment obligations with incoming revenues. There are various ways that TransLink can improve efficiency and reduce costs by improving the performance of its fleet and administration. TransLink appears to be doing so in the face of continued deficits, and has so far avoided massive service cuts (TransLink, 2010). However, it is clear that efficiency measures alone will not be enough to fix TransLink’s current and forecasted structural deficit. This is because TransLink has embedded incentives to acquire more debt through system expansion.
More drastic cost-saving measures could be implemented, namely by cutting services on bus routes that are not performing well and cancelling future purchases or upgrades to the transit fleet. Such moves are politically difficult to implement, as indicated by several of the survey respondents. It is particularly
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difficult because the elimination of low-performing routes will hurt suburban municipalities more than the metro centre. Mayors in outlying areas would not tolerate service cuts when there is already a perception that they receive less for their tax dollars. Without increases to existing revenue sources or new revenue powers, TransLink will be forced to make the difficult cuts.
TransLink’s 10-year Base Plan indicates what services and improvement projects would need to be cut for the authority to manage with current levels of revenue. The plan projects that it will need to reduce bus services by approximately 40%, which is the equivalent of 2.0 million service hours (TransLink, 2009). These cuts would eliminate the ‘Frequent Transit Network’ of buses, cancel the planned acquisition of new regional trains, and cancel investment in cycling and road infrastructure.
It is clear that without a solution there will be no further system expansion in the foreseeable future. If TransLink tries to expand the system again, it will be forced to acquire more debt, thereby increasing annual repayment levels and leaving less money for current transit operations. Increasing debt loads puts several provincial rapid transit projects at risk, including the Evergreen Line, expansion of rapid transit to the University of British Columbia, expanding rapid transit within Surrey and plans to install fare-gates at existing stations. In a region characterized by rapid growth, a transit system that stands still can be expected to underperform. Without new capital expansions, the transit system will deteriorate, transit mode-share will decrease, and the region’s livability goals will not be met.
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4.0 Fiscal Alternatives
There is little reason to expect population growth rates to decline in the near future and it will be imperative for Metro Vancouver find a way to effectively transport hundreds of thousands of new residents in the upcoming years. The demand for auto-based travel is likely to grow at least as fast as population growth, but with a decreasing likelihood that road capacity will be expand to keep pace, it will not be possible for increased demand to be met by auto use alone. The ability of the province to fund expansion of the road network in the Lower Mainland in limited, as indicated by a planning professional working for the Ministry of Transportation and Infrastructure. Beyond the Gateway Highway expansions, the only investments expected for transportation infrastructure will be transit-related. Congestion will increasingly become a challenge on TransLink’s major road network and it is anticipated that transit will need to meet the majority of all future growth.
The need for new transit solutions will become even more prevalent as people move away from the metro core in search of affordable housing. With new transit infrastructure in place, TransLink will need to service system expansions and prepare for increased operating costs. Through efficient transit measures and prudent investments, the goal is to produce a competitive transit system with increasing ridership levels. None of this can be accomplished in a “business-as-usual” approach and without new revenue streams. Therefore, it becomes necessary to determine what are the best alternatives to establish a new and stable source of funding.
According to traditional economic theory there are several general recommendations that should be followed when devising local tax schemes (Slack, 2001). Taxes should be fair and based on benefits received and ability to pay. They should be as neutral as possible so as to not manipulate economic behaviour or fluctuate dramatically from year to year. Tax policymakers should be accountable, and the system should be relatively easy to administer. In addition, there is merit in avoiding the export of tax burdens to non-residents (Bird, 2001). This means that the people benefiting from the tax decisions should be paying as much of the taxes as possible. Keeping these criteria in mind, there are a variety of other social, environmental and political factors that need to be considered when devising funding policies. The region has goals to reduce car dependency and greenhouse gas emissions, increase accessibility to employment and economic opportunities, and focus growth in community centres. Chapter 3 discussed revenue powers already benefitting TransLink – most important revenue sources being user fees, property and fuel taxes. Increases to these sources would require local as opposed to provincial approval. This chapter reviews these major sources of funding in addition to revenue sources that could be awarded to TransLink by the province.
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4.1 Increased User Fees
When questioned about the feasibility of increasing transit fares to raise additional revenue for TransLink there were mixed responses from survey respondents. Some indicated that increased fees are logical if they rise with inflation and according to a “cost of living” index. Others indicated that fares have increased approximately 10% in 2010 with another 12% increase scheduled for 2012. One respondent suggested that there is no room to increase fares further as a three-zone transit pass currently costs $151 a month. Scheduled fare increases alone are not projected to solve financial shortcomings in the future.
It is logical to assume that most citizens would oppose paying higher transit fares as it is not in their individual interest to pay more. However, it makes prudent public policy to implement well designed policies of cost recovery and user charges. When a public good is underpriced it will be undervalued and over consumed (Bird, 2001). The same logic applies to providing free access to highways and city roads. When it is free to drive on roads, they are over consumed and the result is congestion. Market signals are sent that more roads should be produced, thus creating a need for higher levels of subsidy to meet the increased demand. Transit subsidies work in the same way in that they induce the provider to lower direct charges and inefficient over- expansion of the system may result. Currently, TransLink spends $3.91 for ever bus passenger it serves, and receives $2.00 revenue for every passenger trip across the transit system (2008 Statutory Annual Report). TransLink’s rail services are more cost-effective but still have an operating cost of $2.23 for ever passenger trip. On average, every bus passenger in Metro Vancouver is receiving a $1.91 subsidy for every trip, and every SkyTrain passenger is receiving a $0.23 subsidy for every trip.
All this is not to say that transit should not be subsidized with government revenues. Investment in transit creates jobs and acts to stimulate the local economy. In regions characterized by high levels of traffic congestion, affordable rapid transit alternatives allow continued economic growth by decreasing travel times and taking cars off the road to allow more room for goods movement. Subsidizing transit benefits drivers by reducing the amount of vehicles competing for limited road space. Government subsidization of transit services is beneficial for many non-economic reasons as well, most notably for concerns about social equity and accessibility. A balance must be found between providing affordable travel alternatives and pricing services that send accurate market signals about its value resulting in an efficient use of resources.
User fees could be raised gradually over time while providing relief or reduced fares for lower- income families. Such a system would ensure that people with the ability to pay for transit do so while not penalizing those who would be hardest hit by transit fare increases. The City of Calgary has a 50% reduced fare for low-income households. Those wishing to benefit from the reduced fares bring their official Notice of Assessment sent by the federal government after income taxes have been filed (City of Calgary, 2010). Most
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transit authorities already provide reduced fares for students and seniors. It is not unrealistic to assume that the same could be done for low-income individuals, especially with smart-card technology and modern fare systems. There are serious concerns about TransLink’s ability to attract new riders and increase transit mode- share in the region while it is simultaneously implementing substantial fare increases. It becomes apparent that user fees can only be raised so far before people will switch to using private vehicles or active modes of transportation where feasible.
4.2 Increased Property Taxes
The transportation authority may establish zones in the transportation service region and adopt different tax rates for land and improvements in different zones based on the benefit that the authority considers accrues to the land and improvements in a zone (SCBCTA, 1998). In the future TransLink may wish to consider charging more in areas surrounding SkyTrain stations or in areas with high levels of transit service hours. Such a change would require approval of the Mayors’ Council and would likely face resistance in the region faced with the proposed tax increases. One planning professional supported increasing property taxes, but only in the metro core because currently taxes are not in proportion to the level of transit service hours being received. The problem with charging different rates based on a house’s proximity to transit is that homes in central areas generally are already valued higher and are paying more property taxes as a result. Introducing higher property tax rates near transit may have the perverse effect of encouraging development away from transit, which is the last thing that TransLink wants to achieve.
Figure 11 shows the proportion of property taxes and utility charges dedicated to transit across various Canadian cities. The figure appears in a provincial report that concludes, among other things, that existing revenue sources should be examined to their full potential, suggesting that TransLink should dedicate a higher percentage of property tax revenues for transit. At first glance the graph supports that claim. One survey respondent noted that this type of comparison cannot be drawn because municipalities in the other Canadian cities receive higher levels of financial and capital transfers for running local services. British Columbian municipalities are almost entirely financially independent of the province – an argument which is also made in academic research (Smith and Stewart, 2009). Therefore, comparisons such as depicted in Figure 11 cannot be considered fair unless one also considers the amount of transfer assistance that municipalities receive from their respective provincial authorities. Dianne Watts, the Mayor of Surrey is reported to have said, “The provincial government is looking to cities to use property taxes to pay for public transit. Whether it’s homelessness, investing in infrastructure or funding policing costs, senior levels of government cannot continue to download programs or ask cities to be an equal partner at the table without transferring new sources of revenue to cities” (Watts, 2010).
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Figure 11:
Source: Comptroller-General, Ministry of Finance 2009
4.3 Increased Fuel Taxes
Fuel taxes can be very effective revenue generators and have the added effect of shifting market behaviour away from the use of polluting fossil fuels. In the near term the effects of an increase in fuel taxes are very positive for the region because fuel demand is elastic. People will adjust their level of consumption of fuel as prices rise by purchasing fuel-efficient vehicles, switching to public transit or active modes of transport, or by making fewer trips. In the very long term the security of this revenue source is called into question. Increased gas prices have the effect of reducing revenues for government as people reform their behaviour. Governments dependent on fuel taxes will need to increase gas taxes to higher and higher levels to raise the same level of revenue.
Metro Vancouver residents pay among the highest gas taxes in the country (see Figure 12). This is primarily because of the additional fuel taxes charged in Metro Vancouver and the BC carbon tax which are not applied elsewhere in the country. The provincial government could either dedicate more of its current share of fuel taxes to regional transportation, or it could increase the overall level of fuel taxes and transfer funds to the region.
One planning professional indicated that many states in the US are now rethinking the model of using a fuel tax because its variability with the overall economic climate. It was argued that fuel taxes do not provide the stability to operate a fixed-cost service. It is true that an over-reliance on fuel taxes as a revenue source would leave the transit agency dependent of the health of the economy. Furthermore, a strong transit system
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Figure 12: Canadian Fuel Price Comparisons 2008:
Source: Natural Resources Canada, 2008
Figure 13: International Retail Gas Prices
Source: International Energy Agency, 2008
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is arguably needed most during economically difficult times. An increase in fuel taxes to be used specifically for capital expansion projects could help mitigate the adverse effects of unpredictable levels of revenue. Expansion programs could be curbed during recessions and operating service levels would not be directly impacted. Many European governments extensively use fuel taxes to raise revenues and to reduce traffic, pollution, and over-reliance on fossil fuels (see Figure 13). This is especially true in countries that import much of their gasoline and oil.
4.4 Vehicle Levy
A vehicle levy was proposed in TransLink’s strategic plan in 2000 to fund transit expansion for the region. The average driver was to pay $75 a year, generating about $95 million in 2002, when it was to be implemented (TransLink, 2008). Improving transit was a major priority for people in the region, but opposition to the vehicle levy was strong and drivers argued that they already pay more than their share for transit with the fuel tax. The Mayor of Surrey at that time, Doug McCallum, threatened to withdraw from the GVRD if the levy was passed (ibid). In the end, there was no way for the transit authority to collect the levy from drivers, and the BC Provincial Government quashed TransLink’s vehicle levy agreement. Without the $500 million generated over five years, the transit system was not able to expand.
Both the City of Toronto and the Province of Quebec collect vehicle levies from drivers. In the case of Toronto, drivers are charged $60 a year for every personal vehicle and the plan was implemented in 2008 (City of Toronto, 2010). The Personal Vehicle Tax (PVT) is collected when drivers renew the licence plates with the province. It was developed to address city funding shortfalls and to help maintain and improve Toronto’s roads and public transit networks. Commercial and institutional vehicles are exempt. The province of Quebec collects $261 a year from every driver in the province. This includes insurance contributions, $104 for using roadways and a $30 contribution to public transit (Société de l’assurance automobile Québec, 2010).
Considering the failed attempt to implement the levy in the Lower Mainland in the early 2000’s, there does not seem to be much appetite to reopen the debate about vehicle taxes. Surveyed planning professionals highlighted funding alternatives such as fuel taxes and road tolls as more appealing at the current time. A vehicle levy still is included as an option for TransLink, although it would likely need the province to authorize the Insurance Corporation of British Columbia (ICBC) to collect the revenue on TransLink’s behalf. TransLink would likely face considerable political resistance from drivers if this option were to move forward, especially in areas where there are few alternatives to the automobile.
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4.5 Payroll Tax/Income Tax
Payroll taxes have been important sources of regional government finance in countries as diverse as Denmark, Australia, Mexico and South Africa (Bird and Slack, 2004). While income taxes are deducted off an individual’s salary or wages, payroll taxes are leveraged against employers for the number of employees hired. Such taxes have several advantages and at least two disadvantages. Their advantages are that they are easily administrable, at least when imposed on large population bases, and relatively productive even at low rates (ibid). The primary disadvantage of these taxes is that they can act as a tax barrier to employment when they are implemented in one metropolitan area. They have the economic effect of encouraging businesses to relocate to other areas where they do not face the tax. It is for this reason that payroll and income taxes are more efficient at the national and provincial scales. A second disadvantage is that, in most countries, senior levels of government already heavily exploit income taxes to finance national or provincial social programs.
Metro Portland, Oregon is a North American example where a payroll tax has been implemented rather successfully. The tax supplies more than half of all operating and non-operating revenues in the region (TriMet, 2009). Effective January 1, 2010, the rate increased to 0.6818 percent of the wages paid by every employer. The funds are collected from businesses by the Oregon Department of Revenue and transferred back to the Metro transit authority.
Income taxes and payroll taxes have been conspicuously absent from transit funding debates in Canada. Currently no local government in the country has the jurisdiction to collect income or payroll taxes. Local surveyed professionals did not express very much enthusiasm for this alternative. Income taxes are economically most efficient when citizens cannot escape them by changing households or municipalities. Perhaps no one realistically expects senior governments in Canada to open the gate of income tax competition at the local level. There is also the chance that provinces do not trust local governments to effectively manage such a powerful revenue mechanism. Several respondents indicated that, given other opportunities, this funding alternative should be a last resort.
4.6 Carbon Tax
In 2007, the Province of Quebec became the first province or state in North America to impose a carbon tax on energy producers, distributors and refineries (Carbon Tax Centre, 2010). This tax raises approximately $200 million in annual tax revenues and is deposited in the provincial Green Fund to help pay for reductions in greenhouse gas emissions and improvements to public transit. A carbon tax was implemented in British
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Columbia in February, 2008 and was designed to be revenue-neutral, meaning that revenues accrued are given back to the general population in the form of personal income and business tax cuts. The BC carbon tax is currently more than three times as high as the Quebec tax, and it is scheduled to increase to about 8 times the Quebec rate by 2012 ($30/metric tonne of CO2) (ibid). It is estimated to raise $2.27 billion in revenue over three years, which is to be redistributed 50/50 with individuals and businesses (BC Ministry of Finance, 2009).
The BC Government has made a commitment to keep the program revenue-neutral, particularly because it has the capacity to create an extremely competitive income-tax regime for the province and offers built-in protection for low-income families (ibid). As indicated above, the revenue-generating potential of this new tax source is significant. After 2012, there is reason to believe that the Provincial Government could alter its carbon tax policy to provide revenue for regional transit. Several local professionals indicated high levels of interest in this funding alternative provided that any changes to the existing policy is monitored closely.
4.7 Congestion Pricing
Congestion pricing consists of a toll or tax levied on personal vehicles that enter a specific area of the city or use a particular corridor. With the completion of the Golden Ears Bridge in 2009, TransLink started collecting tolls to recover investment costs of that capital project. It intends to use tolls in the future to pay for road and bridge improvements. An option for TransLink in the future is to install tolls to capture revenue from commuters entering the metropolitan core. Such a system would require provincial authority to use the revenues for transit as opposed to roadway expansion or improvements. An appropriate scale for congestion pricing would have to be developed to ensure it functions as intended.
There are several examples where widespread congestion pricing has been implemented successfully, particularly in Europe and Asia. Generally these systems have performed very well in reducing traffic congestion and encouraging a modal-shift to transit; however, there are questions to be raised about the potential ability to raise large amounts of revenue (Richardson and Bae, 2008; Eliasson, 2008). London’s congestion pricing garnered less-than-expected revenues of 50 million pounds ($80 million CAD) despite having 110,000 vehicles affected daily (Richardson and Bae, 2008). Metro Vancouver would have significantly fewer vehicles passing through a cordon, and likely would not implement fees near as high as in London which started at 5 pounds and were later increased to 8 pounds ($8 CAD or $12.75 CAD). High administration and capital costs for implementing and managing the system reduces the amount of money that is left to use for transit funding (ibid).
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Table 4 Congestions Pricing System Comparison
Source: King, Manville & Shoup, Eliasson, 2008
Where congestion pricing has been implemented successfully, namely in Singapore, London and Stockholm, the burden of congestion pricing falls on a motoring minority (See Table 4). It would be politically unwise to try implement widespread congestion pricing in the Vancouver region until the automobile mode- share has decreased to the point where it is in the minority and there is a transit majority who support the tax on cars. Implementing congestion pricing at the current time would require an significant amount of political will and would likely pit surburban mayors against their urban counterparts.
That is not to say that tolls cannot be used more widely as roads or bridges need to be repaired, and the province should consider allowing TransLink to dedicate toll revenues for transit purposes. Transit will gain even if revenues from congestion pricing are not given directly to the transit authority. Increased ridership as a result of vehicle tolls will increase transit revenues in the short term. Since the transit system is heavily subsidized, increasing system capacity to meet the demand of more riders requires higher levels of revenue from other sources.
The environmental and social benefits of congestion pricing have been the selling points of past systems, and additional municipal revenue has been a secondary benefit. Certainly the high level of initial capital costs to get the system in place runs counter to the idea that TransLink should fix its structural deficit in the near future. This alternative would require a massive spending increase to implement, or a transfer of funds from higher levels of government, as was the case in London and Stockholm (Richardson and Bae, 2008). This preliminary analysis indicates that congestion pricing, at the current time, does not appear to be the best method to solve TransLink’s budget problems, although it may one day warrant a more detailed cost/benefit analysis or even a trial. Considering that TransLink will need an additional $450 million within the next few years, it is likely that congestion pricing will not be the turn-key solution that its proponents might like to think it would be.
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4.8 Increased Non-tax Sources
Government documents and local professionals advocated for increased value-capture on real- estate developments and the exploitation of retail/commercial opportunities. Presumably there are a lot of development-ready or sale-ready parcels in TransLink’s possession and several professionals have indicated that TransLink needs to be more proactive and capitalize on its current land holdings. TransLink is in need of a long-term strategy to undertake these initiatives but in general the lands that could be developed would be highly transit-supportive.
While the powers to develop lands in possession of the transit authority are currently already under TransLink’s jurisdiction, some interest has been expressed about the potential for reform of land use regulations and zoning. Currently TransLink must abide by local land use regulations when developing land in its possession. Some municipalities resist intensification around transit stations and prevent the authority from building projects according to the principles of transit-oriented development. If a certain level of land use decision-making was given to TransLink, it would be able to focus more growth around transit and completely integrate land use and transportation.
The planning professional who suggested this option pointed to examples of transit agencies in Asia where each stop along a transit route has a large commercial complex or activity centre. These transit agencies are producing revenue from leases in addition to property taxes. Under the current system, the ability to shape land use is at the discretion of the municipality, whose Official Community Plan (OCP) can override the desires of TransLink and can conflict with the long-term vision for such corridors.
While there is merit in the idea that transportation and land use decision-making should be further integrated, there are serious flaws with any proposal that gives too much power to an organization that is not democratically elected. Considering that local governments have lost much of their authority over TransLink and power has been consolidated by the province and a board of private-sector actors, it is problematic to give land use decision-making powers to an unelected and democratically unaccountable board of directors. Such a reform would strip municipalities of one of their fundamental and longstanding rights. TransLink would effectively become both the policy-maker and the developer: giving it the power to implement zoning and regulations that are favourable for development but may not be socially appropriate. TransLink should only be given land-use decision-making powers in a context where it is controlled by elected local officials.
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4.9 Annual Provincial Transfer
Regular transfers from the British Columbia Provincial Government to local governments have decreased by 52% between 1995 and 2006 (Smith and Stewart, 2008). Currently, about $86 per person is transferred from the provincial government, while the federal government transfers about $18 per person (ibid). The relationship between the British Columbia Government and BC municipalities has developed such that there has never been a time where local governments have been more fiscally independent than they are now. The province could either fund TransLink directly, or it could choose to transfer larger quantities to municipalities with the expectation that they would dedicate higher levels of funding for regional transit.
One professional working for the provincial government expressed the view that provincial subsidies for local transit are nothing more than a handout encouraging reliance, and are counter to the promotion of efficient business decision-making. While there may be some truth to the statement that subsidies encourage reliance, to view provincial funds in terms of handouts is forgetting that provincial funds are derived income taxes and it is the provinces obligation to return this money in the form of public services. The province does not create, nor does it own the money: it belongs to citizens. Provincial transfers to local governments are normal in most jurisdictions and is an important way to mitigate the unequal revenue-generating abilities between the two levels. One respondent argued that the province’s obligation to fund transit alternatives extends beyond attending ribbon-cutting ceremonies and should be in the form of a consistent transfer. Transfer payments are important to keep user fees low, because without them, municipalities have limited other options to pay for needed services.
As much as local governments value continued transfers from senior governments, there is also a desire to remain fiscally independent from the provincial government. Uncertainty surrounding the quantities of transfer payments makes long-term planning difficult and municipalities have a legitimate concern that they can lose their autonomy when they are reliant on other levels of government for revenue. It had been argued that annual transfers may encourage “gold plated” services (Bird, 2001). In terms of the provision of transit, this critique seems to overstate the luxury involved in riding crowded buses. In an advanced and healthy society, quality transit facilities, such as wheelchair accessible buses or elevators for people with reduced mobility, should not be considered “gold-plated” services, but rather they should be viewed as valued components of a responsible and inclusive transportation system.
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5.0 Analysis and Recommendations
This report has drawn a profile of metropolitan transportation planning in Canada’s westernmost province. Chapter 2 analyzed the development of a regional identity in Metro Vancouver and examined its history and politics to understand the current transportation planning framework and fiscal challenges facing the region. Chapter 3 describes the specific revenue tools available to TransLink and they discussed in terms of their relative importance. Chapter 4 outlines the potential for TransLink to increase revenue from current as well as alternative sources. Each alternative is described in terms of its potential to respond to the problem and the political challenges with its implementation. This chapter draws everything together by summarizing the findings and making recommendations for TransLink to resolve its structural debt issues and ongoing intergovernmental disputes.
5.1 Analysis Discussion
Regional planning in Metropolitan Vancouver, British Columbia is described as having a history consensual decision-making among local municipalities, characterized by varying degrees of provincial oversight and dominance. Shifting spheres of influence in regional planning have led to disputes in the past, although the metropolitan governance model adopted has served the region fairly well in terms of its ability to facilitate complex negotiations among local jurisdictions. Metro Vancouver has been criticized for being politically weak, although in general it responds to Vancouver’s particular geographical and organizational challenges. Certainly, it provides an alternative to other forms regional amalgamations or overly complex metropolitan government structures.
The financing and provision of public transit in metropolitan regions is inherently a political process. This process is complicated in areas with competing and overlapping governance structures – each with their own objectives and spending priorities. Given TransLink’s responsibilities and fiscal and political realities, it becomes clear that the province of British Columbia must work with local governments to simultaneously address budgetary challenges and to meet goals to improve the performance and delivery of an effective public transit system.
TransLink is a relatively young institution. It was created in 1999 and has been considered quite innovative because of its comprehensive mandate to plan and manage cycling routes, the major road network, bridges, goods movement and public transit. TransLink was restructured in 2007, consolidating more power with provincial authorities. Local governments are experiencing resentment for their loss of control over the authority, the effect of which is an increasing unwillingness to use local tax dollars to fund transit. As the
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region’s transportation authority, TransLink has the difficult challenge of operating a high-quality transit system, implementing ambitious plans for transit expansion, while having limited revenue-generating potential to pay for operating and capital costs. TransLink is facing prolonged structural deficits and service cuts if the problem is not resolved.
To understand how the transit authority can increase revenues to meet its objectives, it is necessary to differentiate between the short-term deficit reduction and long-term obligation of debt-repayment. On the one hand, there is the current budget deficit of $67.3 million to mitigate for the 2009 fiscal year, and it is predicting an amended shortfall of $46.3 million for the 2010 year after having cut operating costs and experiencing higher than budgeted revenues for their first quarter (TransLink, 2010). On the other hand, TransLink expects debt-service costs to increase from $171 million in 2009 to $251 million in 2010 once construction of the Evergreen Line begins. This is problematic because rapidly rising debt repayments without new revenue means that less income can be devoted to the delivery of services. This is especially troubling because the 2009 deficit of $67.3 million gives the impression that the current deficit is manageable and current surpluses are within reach, when in fact, in 2009 TransLink committed to spend almost $240 million in committed capital expansion projects. Arguably, the connection between operating costs, system expansion costs and revenue is not strong enough. TransLink is not directly considering its revenue-generating capacity when planning system expansion projects.
In the long term, if the province finds money for the Evergreen Line and does not restructure how TransLink can generate revenue, then future deficits can be anticipated once again. TransLink will likely have financial shortfalls as soon as the next round of system expansions are scheduled. In other words, a funding agreement for the Evergreen Line will almost certainly not alleviate larger regional concerns of how transit should be financed and who should have control over major transportation decision-making. This is a debate that local decision-makers are hungry to pursue, although it is the province that will ultimately decide the future of transit planning in the region.
Local governments in the United States receive dedicated funds from the federal government. Without such a structure in Canada, funding is more ad-hoc. There is less zero-sum competition between regions for funds, but the Canadian system is also less predictable. If anything is clear about the Vancouver context, it is that local governments have regular confrontations with the province, yet history indicates that the region has a high propensity to mitigate confrontation through collaboration and collective decision-making. At times this results in a highly politically-charged forum, but it is telling that the province has not needed to resort to heavy- handedness as often as other provinces in Canada. Possible solutions to TransLink’s budgetary challenges have been analysed in the context of the region’s local planning history and culture.
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5.2 Alternatives Evaluation
The implementation of innovative policy tools is often a challenge. Table 5 shows a summary of the alternatives analysed in this report. They are rated qualitatively based on the researcher’s assessment of their feasibility and potential to generate new revenues for TransLink in the short- and long-terms. The table also gives an indication of the ability of each revenue alternative to support the region’s environmental and livability goals. The analysis results are assessed based on the extensive academic research pertaining to local revenue tools and from information gathered from practicing professionals in British Columbia. The Short-term is considered to be 2010-2015, while the long-term is considered to be between 2015-2030. Following the table is a description of the results for each alternative.
Table 5: Summary of Alternatives Evaluation
Increased User Fees Transit fares increased by approximately 10% in 2010 with another 12% increase scheduled for 2012. TransLink already counts these scheduled increases in their revenue projections. The short-term feasibility for increasing fees beyond this is very low. In the long-term, increasing transit fares becomes more likely but politically difficult. Recommendations for how this could be done are provided in Section 5.3.
Increased Property Taxes Local authorities are largely against raising property taxes to pay for transit, especially considering that there was already a 3% property tax increase in 2009. In a political climate where municipalities appear to have lost control over the transit authority, it is difficult to ask those same municipalities to increase the amount of funds dedicated to transit. Property value assessments occur regularly and property tax revenue will increase in proportion to changes in the assessed values, but not by any substantial margin.
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Increased Fuel Taxes Political challenges exist to implementing fuel tax increases, particularly because higher fuelcosts impact people who are least likely to take transit as opposed to the typical transit riders. Such an increase would require provincial cooperation to remit fuel tax funds to TransLink. The potential to raise revenue is dependent on the level of tax that the province is willing to authorize. This alternative is discussed further in Section 5.3.
Vehicle Levy A vehicle Levy is a viable alternative to raise moderate levels of new revenue and there are successful case studies from other jurisdictions. The feasibility of implementing it in Metro Vancouver in the short-term is limited because of the recent failure to implement such a policy in 2000. Severe resistance was observed at the time and one municipality threatened to withdraw from Metro Vancouver. Like fuel taxes, this charge impacts drivers as opposed to transit riders. While many drivers may not realize how much fuel taxes they pay, an annual vehicle fee is very visible and may generate significant opposition.
Payroll/Income Tax There is no precedent in Canada for the municipal collection of payroll or income taxes. Implementing such a policy would require significant provincial legislation giving Metro Vancouver or TransLink the necessary authority. Considering the feasibility of various other options, this alternative is very unlikely to be implemented and it is not recommended.
Carbon Tax Overall, this appears to be the most promising revenue alternative to fund transit in the region. Currently the provincial government has promised to use revenues for income and business tax rebates which limits the potential to use it for transit in the short-term. There is a scheduled increase in the carbon tax expected in 2012 and the government may wish to use the additional revenue for regional transit instead of increasing tax cuts. The carbon tax alternative is discussed further in Section 5.3.
Congestion Pricing Congestion pricing is controversial and politically difficult to implement. Cities that have successfully implemented widespread congestion pricing have a minority of people in the region using personal automobiles. It may feasible insofar as it is implemented incrementally, which has the added effect of distorting travel patterns in unpredictable ways. High initial costs for implementing and operating congestion pricing schemes limits potential revenue and does not address immediate budget concerns.
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Non-Tax Sources (real-estate development) Real-estate development around transit stations likely will not provide sufficient and predictable levels of revenue for TransLink. Relying on land market forces to fund transit increases levels of risk and the likelihood of unforeseen budget fluctuations. The feasibility of this alternative is relatively high considering that TransLink already has authority to develop lands in its possession and institutions exist for regional coordination of land use plans to maximize the land-development potential.
Annual Provincial Transfer British Columbian municipalities are almost entirely financially independent from provincial transfers while other Canadian municipalities enjoy regular funding for the provision of services. Changing this structure would require a substantial amount of provincial goodwill, with the expectation that municipalities would dedicate larger amounts of property taxes for transit. Alternatively, the province could fund TransLink directly and avoid structural reform.
5.3 Recommendations
It is clear the BC Provincial Government will play the largest role in resolving TransLink’s financial dilemma, by either forcing municipalities to dedicate more funds to TransLink, by giving TransLink new revenue-generating powers, or by providing TransLink dedicated income from the Provincial Treasury. Within these three options there are multiple alternatives that could be used to generate new funds. While each alternative deserves its own cost-benefit analysis to determine its ability to resolve TransLink’s immediate and long-term financing issues, this study has given an indication how each alternative is likely to be received from a political and policy implementation perspective.
5.3.1 Short-Term Recommendations
Any short-term recommendations must meet two requirements: 1. Resolve TransLink’s operating budget deficit projections; and 2. Find revenues for TransLink’s $400M share of the $1.2 billion construction costs for the Evergreen Line expansion.
TransLink has a disconnect between the level of revenue it expects to raise on an annual basis and the amount it is required to spend on capital expansion projects and debt repayment. It is recommended that the provincial government allocate dedicated funds so that TransLink can plan its expansion projects
OCTOBER, 2010 49 PUBLIC TRANSIT FINANCE IN VANCOUVER, BRITISH COLUMBIA
appropriately. Currently, TransLink evaluates transit expansion alternatives without knowing the amount of money available for transit investment across the region. The authority then submits a plan for each “desired project” as it becomes available for review, and the province accepts, modifies, or rejects the plan. Instead of planning for incremental improvements across the entire system, TransLink is encouraged to plan one expensive project after another in order to attract provincial money, effectively bankrupting itself inthe process. With dedicated funds, TransLink would know exactly how much money is available for all capital projects across the system and can plan transit investments accordingly.
Alternatively, if the provincial government is unwilling to relinquish power over the management of transit expansion, it is recommended that capital expansion projects be funded entirely by the province. Otherwise, TransLink is unable to manage its revenues responsibly. Under the current system, the authority incurs debt at the pace the province is willing to invest in the transit system, not at a rate it is able to effectively handle more debt. The planning of the Evergreen Line SkyTrain expansion has been heavily politicized and the province has had significant control over the decision-making thus far. The province has undermined the wishes of municipalities and TransLink’s professional recommendations for the technology and route, while also removing local influence in the selection of TransLink’s Board of Directors. It is recommended that the province provide payments totalling $400 million to pay for the remaining costs of the Evergreen Line. This will allow for construction to commence immediately while permanent changes to TransLink’s finances can be finalized and implemented. It will significantly reduce TransLink’s projected debt-payment schedule, freeing capital for continued service-efficiency measures such as bus signal-timings, dedicated bus lanes and traditional traffic-demand management practices.
If the Ministry of Transportation and Infrastructure cannot free this level of revenue from within its budget, then it is recommended that the Lower Mainland’s share of expected carbon tax revenues be devoted to transit investments instead of cuts in personal income and business taxes. This breaks the provincial government’s commitment to the carbon tax being revenue-neutral, but it ensures that citizens in the Lower Mainland are paying for the added transit services they are demanding. The Ministry of Finance projects that $2.5 billion of carbon tax revenues will be available for income tax and business tax cuts over a three- year period. Considering that approximately half of British Columbians live in Metro Vancouver and that urban residents have higher incomes than their rural counterparts, the amount of money available should be greater than $1.25 billion. Surely the province would be able to dedicate a certain level of these funds for transit while also lowering taxes marginally.
It is recommended that TransLink continue to invest in transit priority measures that reduce overall travel times and, more importantly, reduce travel time variance with respect to posted schedules. Transit queue jumpers, signal priority, and dedicated lanes have direct measurable impact on transit operating costs and overall fleet size. This allows TransLink to focus resources and dollars on other routes that are either
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underserved or have potential to attract high levels of riders. Improved efficiency of the transit system will help reduce the current deficit to a manageable level.
TransLink should move forward with the development of properties within its domain. Negotiations with municipalities should begin for properties with inappropriate zoning designations, and TransLink should encourage appropriate levels of up-zoning of neighbourhoods in close proximity to rapid transit and frequent bus corridors. Additional revenue from real-estate development, commercial leasing and advertising will also assist in reducing the current deficit.
Regarding the extension of new revenue-generating powers to TransLink, it is recommended that TransLink be allowed to increase fuel taxes gradually to reduce the remainder of the deficit. This will require provincial amendments to TransLink’s constitution. Concerns about high fuel prices in the Lower Mainland should be examined, although there are specific reasons why high fuel prices are justified in the Vancouver context. Vancouver arguably has the least amount of available land in Canada and urban land uses will intensify as a matter of necessity. Quality rapid transit alternatives are required in the near future to help residents adapt to more dense living and fuel taxes offer the best potential in the immediate future to increase TransLink’s revenue significantly.
Finally, it is recommended that any carbon tax revenue increases beyond the 2012 level of $30/tonne of carbon be dedicated to transit across the province. This allows the province to continue giving current levels of tax rebates to individuals and businesses, but earmarks revenue from future increases in the tax for transit and sustainability initiatives. Local governments are better prepared to make the incremental adjustments to a post-carbon economy and will need new revenue to do so. They have wide authority over water and waste management, parks, energy use and transportation and would benefit greatly from access to carbon tax revenues.
5.3.2 Long-Term Recommendations
Long-term recommendations include a resolution to TransLink’s ongoing dispute regarding who should have control over the management of regional transportation planning. A final solution will also address concerns about the lack of stable and secure finances that allow TransLink to expand its system as required. It is recommended that the British Columbia Provincial Government return control of TransLink to the region. The selection of TransLink’s Board of Directors should be returned to the Mayors’ Council. To address provincial concerns that the Mayors’ Council does not represent regional interests but rather the sum of each municipality’s political interests, it is recommended that the province have representation on the Mayors’
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Council as well. This representation should not exceed 20%, which is consistent with the recommendations made by the Comptroller-General in 2009.
TransLink should increase user fees regularly in proportion to the cost-of-living index. Multipart tariffs already exist in Vancouver where different prices are established for travelling to different zones. TransLink should consider implementing variable block pricing where transit prices are raised slightly at peak periods. This is one way to reduce demand on overcrowded routes while still maintaining efficient service provision and revenue capture. It is recommended that fares in zone one (City of Vancouver) be increased first to reflect the higher level of transit services concentrated in the metropolitan core. Residents in this area pay less than their counterparts in the metropolitan centres of Toronto, Calgary and Ottawa. Residents in the City of Vancouver are least likely in the region to revert to using private motor vehicles in response to higher transit fares. Some people in zone one will prefer to use active transit modes of transportation as distances are relatively shorter and the city is already accommodating to cyclists. This will relieve transit congestion in the centre while still supporting sustainable alternatives. If user fees are increased substantially across the entire system, then it is recommended that transit fare discounts be provided to low-income households as in currently done in the City of Calgary.
Fuel taxes are preferable to vehicle levies because people are taxed based on the amount they use their car, not for simply owning one. If there is a significant shift to transit, fuel-efficient vehicles and a subsequent decrease in overall levels of fuel consumed, then fuel tax revenue can be expected to decline. In recognition that fuel tax revenues will eventually decline as people shift consumption patterns away from fossil fuels, the ability of the fuel tax to mitigate traffic congestion will decline as well. Electric vehicles are largely unaffected by fuel taxes and congestion pricing will likely be needed to reduce traffic demand in the future. In this case, it may be desirable to implement vehicle levies, although congestion pricing may prove to be more effective than vehicle levies.
Therefore, TransLink should be granted the authority to implement pilot projects for congestion pricing on certain major roads with the funds dedicated for transit expansion. In particular, TransLink should have the power to implement tolls on corridors that run parallel to existing high-order transit routes. This will discourage people from driving in areas served by transit but will avoid penalizing drivers in areas where there are few viable alternatives. A system-wide congestion tax should not be implemented until there is clear political leadership and the regional mode-share shifts such that a majority of all trips are on transit or by active modes. There is also a question of equity that needs to be addressed before congestion pricing could be implemented. It cannot be a considered a fair tax unless there are viable and efficient transit alternatives. Providing an adjacent free lane ensures that people willing to have a longer commute can still access the major road network for free. This is a simple solution to respond to goals of reducing congestion, raising revenue and meeting future needs for financing transit expansion.
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Appendix A
Transit Finance Alternatives Survey
OCTOBER, 2010 56
Public Transit Finance Survey
Thank you for taking the time to complete this survey.
The question being analysed in this research project is: Given the various governance structures, responsibilities and fiscal and political realities in the Vancouver metropolitan area, how can TransLink simultaneously address current budgetary challenges and meet goals to improve the performance and delivery of an effective public transit system?
Questions Please answer the following questions based on your professional experience with transportation planning in British Columbia. You may answer with your personal opinions or on behalf of the organization that you represent. Please indicate at the end of the survey if you would like the researcher to respect your anonymity in the written research report. You may wish to review the TransLink finance figures attached before answering the questions.
1 A. Current Revenue Sources
1. Do you think that TransLink has sufficient revenue-generating capabilities to finance growing operating expenses and system expansion?
2. How can TransLink make better use of existing revenues?
3. What governmental processes or mechanisms impede the efficient use of existing funds?
B. New Revenue Sources
4. Do you support giving TransLink new revenue-generating capabilities to meet growing operating costs and to fund system expansion?
2 5. If TransLink were to be given new revenue sources, which of the following would you be inclined to support? Why? • Increased transit fares • Increased property taxes • Increased fuel taxes • Non-tax sources (advertising, real estate development, commercial/retail leasing) • Vehicle Levy • BC Carbon Tax • Congestion charging/tolls • Payroll/income tax • Annual intergovernmental transfers • TransLink does not need new revenue sources • Other: please specify
6. Are you confident that the revenue sources selected above are sufficient to meet TransLink’s growing operating and capital costs? Why?
3 7. Of the following potential revenue sources, which options do you most strongly oppose? Why? • Increased transit fares • Increased property taxes • Increased fuel taxes • Non-tax sources (advertising, real estate development, commercial/retail leasing) • Vehicle Levy • BC Carbon Tax • Congestion charging/tolls • Payroll/income tax • Annual intergovernmental transfers • TransLink does not need new revenue sources • Other: please specify
8. Do you have any other input regarding public transit finance in Metro Vancouver that you wish to share with the researcher?
Thank you for completing the survey.
Please indicate if the researcher may use your name in the written report or if you prefer to remain anonymous.
4 TransLink Finances 2008 Revenues (millions) 2008 Expenditures (millions) $15 $15 $9 $18 $38 $38 Transit Roads & Bridges
Fuel Tax Transit $256 $360 Opera ons Property Tax TransLink Parking Site Tax $687 $262 Special Projects Parking Sales Tax Hydro Levy Source: Translink 2008 Statutory Annual Report TransLink Projected Funding Gap
Source: TransLink Source: Ministry of Finance
Fuel Tax Comparisons by Municipality
Source: Natural Resources Canada PUBLIC TRANSIT FINANCE IN VANCOUVER, BRITISH COLUMBIA
Appendix B
TransLink 2009 Statutory Annual Budget
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SOUTH COAST BRITISH COLUMBIA TRANSPORTATION AUTHORITY
2009 STATUTORY ANNUAL REPORT
The South Coast British Columbia Transportation Authority (SCBCTA) is required to provide an annual report and audited financial statements to the Mayors’ Council on Regional Transportation and the Regional Transportation Commissioner. This report fulfills the reporting obligation to provide:
A. A summary of operations during the year with comparison to the strategic transportation plan and the annual transportation plan
B. The audited financial statements for the year
C. A summary of the nature of complaints received in the year and actions taken in response to those complaints
D. A summary of the results of the customer satisfaction survey process
E. Amendments to the articles of the authority, and
F. The date, type and outcome of meetings of the board held during the year.
This report should be read in conjunction with the 2009 Annual Report, in order to get a full understanding of the organization and its financial and operational performance. The 2009 Annual Report will be presented at the May 11th Annual General Meeting and will be available on the company website.
South Coast British Columbia Transportation Authority ‐ 2009 Statutory Annual Report March, 2010
EXECUTIVE SUMMARY
Context In 2007, the Province of British Columbia amended the Greater Vancouver Transportation Authority Act that involved significant changes to TransLink’s planning, funding and governance framework. The amendments included the creation of new annual 10‐year strategic plans commencing in 2009.
TransLink’s inaugural 10‐year plan, the 2009 10‐Year Plan, is a Base Plan under the legislative requirements of the South Coast British Columbia Transportation Authority Act. As such, the 2009 10‐Year Plan is based on existing revenue sources and does not include any expansion beyond 2011. The plan provided for expansion over the 2009‐ 2010 period with further expansion dependent on future approval of one or more supplemental plans. To meet the legislative parameters of a fully‐funded Base Plan, a service reduction is assumed for 2012 and beyond.
2009 10‐Year Plan Initiatives The 2009 10‐Year Plan included the following major initiatives: • Completion and opening of the Golden Ears Bridge and Canada Line • Complete Major Road Network projects and provide funding for future projects • Expo Line station improvements • Addition of 48 new SkyTrain vehicles and a third SeaBus • Improve Access Transit service • Increase bus service • Obtain approval of a 2010 Supplement, and • Provide funding for the Evergreen Line
Plan Successes TransLink was successful in implementing many of the initiatives noted in the 2009 10‐Year Plan. A major milestone was achieved with the approval of the 2010 10‐Year Plan, with the $130 million revenue supplement being the largest single funding increase in TransLink’s history. The Golden Ears Bridge and the Canada Line opened in mid‐2009, ahead of schedule. The Coast Meridian Overpass project was nearly complete by the end of the year and the Fraser Highway widening project continued. All of the new SkyTrain vehicles were delivered by the end of the year and the new SeaBus was placed in service. Broadway Station was upgraded and other stations are in various design stages. Improvements were made to Access Transit trip booking and dispatching. Transit service hours have increased by 6% over 2008.
On January 18, 2009 a fire destroyed the timber spans on the south end of the Patullo Bridge, resulting in complete closure to traffic. Emergency repairs were completed in one week, three weeks ahead of the initial estimate.
Another notable achievement was the completion of the preparation necessary to execute our role as the public transportation provider for the Vancouver 2010 Olympics. An Olympic operations plan was developed to provide the additional services required to transport thousands of Olympic spectators, workers and volunteers. This involved staff from TransLink, BC Rapid Transit and the Coast Mountain Bus Company who were supported by senior level operations managers from across the organization. As well over 300 employees were trained as transit hosts and the TravelSmart campaign provided local commuters and businesses with travel options that would keep commuters, customers and goods moving during the Games.
Plan Challenges During 2009 it became apparent that TransLink was being impacted by the fallout from the 2008 global economic crisis. Declining revenues and funding issues identified during the development of the 2010 10‐Year Plan(s) led to difficult but necessary decisions around the level of service expansion and capital investment that could be afforded. Bus service expansion planned for late 2009 has been deferred and there are not sufficient revenues in the 2010 10‐Year Plan to fund TransLink’s share of Evergreen Line capital costs. Buses that were to be allocated for expansion provided enhanced Olympic service and will be used as replacement vehicles.
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South Coast British Columbia Transportation Authority ‐ 2009 Statutory Annual Report March, 2010
In the latter part of 2009 a labour dispute between TransLink’s HandyDART service contractor and their unionized employees resulted in a 10 week service disruption. The reduction of service to essential levels impacted TransLink’s most vulnerable customers, and considerable effort was made by all parties to resolve this dispute. A settlement has been achieved and full service was restored in early 2010.
Going Forward TransLink will continue to focus on cost management and the delivery of core services. In addition to deferring service expansion, there is an organization‐wide freeze on non‐service related hiring, and training, travel and other administrative expenditures have been reduced; capital spending not essential to the delivery of service was deferred; and supplier payment terms were amended to standard business practices. The 2010 budget process included $30 million reduction target, which will further increase the cumulative surplus from what the 2010 10‐ Year Plan anticipated. The newly appointed Chief Executive Officer will lead the implementation of the organizational restructuring and realignment process that was initiated early in 2009. The change process will align the organization under one single mission and vision.
Conclusion In summary, TransLink has had notable successes despite a challenging economic environment. It secured sufficient funding to maintain existing transit service levels, it dealt quickly with eroding financial performance and delivered significant service expansion in both transit and roads and bridges. This report should be read in conjunction with the 2009 Annual Report, in order to get a full understanding of the organization and its financial and operational performance. The 2009 Annual Report will be presented at the May 11th Annual General Meeting and will be available on the company website.
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South Coast British Columbia Transportation Authority ‐ 2009 Statutory Annual Report March, 2010
3. 2009 Financial Plan
2009 Financial Plan
The 2009 10‐Year Transportation and Financial Plan included a high‐level forecast (see page 38) of projected revenues and expenditures for the year. The forecast provided the framework for the development of the detailed 2009 budget.
The table below compares the 2009 plan forecast to the budget (which was approved December 2008) as well as the 2009 actual results. The table presentation format is similar to what was presented in the plan document.
A detailed review of 2009 actual revenue and expenditures compared to the 2009 budget is provided in Section 5.
TransLink 2009 Plan compared to Budget and Actual Results Actual‐Plan 2009 2009 2009 Fav./ ($ millions) Plan Budget Actual (Unfav.)
Revenues
Transit * 388.3 381.3 366.7 ‐5.6% Golden Ears Bridge Tolls 13.4 13.4 11.2 ‐16.6% Real Estate 20.6 15.0 ‐ Taxation Fuel 269.6 264.8 259.8 ‐3.6% Property 263.2 263.2 264.1 0.4% Replacement Tax 18.0 18.0 18.0 0.0% Parking Sales Tax 14.9 15.1 15.6 4.5% Hydro Levy 18.4 18.1 18.2 ‐1.0% Total Taxation 584.1 579.2 575.7 ‐1.4% Interest Income ‐ 3.7 1.7 Senior Government Contributions 6.8 7.0 7.5 10.3%
Total Revenues 1,013.2 999.6 962.8 ‐5.0%
Expenditures Transit Operations 797.1 817.8 763.4 4.2% Roads & Bridges 43.2 46.7 43.6 ‐0.9% TransLink 46.4 46.8 39.1 15.8% Other Programs 16.5 7.9 9.1 44.8% Corporate Contingency ‐ ‐ ‐ ‐ Total Expenditures 903.3 919.1 855.2 5.3% Surplus/(Deficit) before Debt Service Costs 109.9 80.5 107.6 ‐2.1% Re‐Structuring Costs ‐ ‐ 3.1 Loss on disposal of capital assets ‐ ‐ 1.1 Debt Service Costs 191.8 183.5 170.7 11.0% Surplus/(Deficit) (81.8) (103.1) (67.3) 17.8%
* Mission subsidy moved into Transit fare revenue (budget & actual columns)
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