OPINION: The TTC’s Property Potential
Posted June 12, 2010 12:04 pm.
This article is more than 5 years old.
Courtesy TheMarkNews.com
It’s no secret that Torontonians favour the building of new subway lines.
From recent proposals like extending the Bloor-Danforth line or converting the Eglinton LRT to past visions like the Queen Street subway, Network 2011, and the Downtown Relief Line, the promise of new subways has long been a cornerstone of any mayoral campaign.
While interesting to entertain, these ideas have all suffered from a lack of innovation in securing funding.
A quick look at the TTC’s 2009 finances shows a 94 per cent reliance on fares for revenue, with an additional subsidy of almost $400 million required to cover its costs. As such, all the talk of increasing ridership and subsidies through tolls and taxes is important and certainly part of any short-term solution.
But if the dream of an expanded subway network is to become a reality, the TTC must minimize its reliance on fares and subsidies and explore alternate sources of revenue from within its own operations.
The previous entry in this series focused on returning the TTC to a state of political independence as a precursor to financial autonomy. This article will examine how the TTC can unlock its property assets to help finance the construction of new transit investments.
Step 2. Explore the TTC’s Property Potential
Access to transit increases land values. This much has been confirmed the world over, including Toronto in studies comparing values before and after the opening of the Yonge and Bloor-Danforth lines.
However, not all transit is created equal. Compared to adding bus and LRT routes, laying down new subway lines results in the greatest and most predictable increase in value of surrounding lands.
But at a cost of $300 million per kilometre, expanding the TTC’s subway network is an expensive proposition, made worse by the fact that building subways to the suburbs is an incredible way to waste taxpayer dollars.
Subways depend on high densities to make economic sense, densities that currently do not exist outside of the downtown core. In the past, the city has built new subway lines first and relied on the private sector to increase densities around stations. While some successes have occurred, the TTC’s numbers show that many stations remain painfully underutilized.
However, by engaging in property development, the TTC can guide intensification to create a more subway-friendly landscape, increase ridership, and finance its costs.
The current mandate of the TTC limits it to acquiring properties only when it is explicitly for the purpose of providing transit. The city needs to expand this mandate to include the acquisition of properties surrounding new subway stations. For every new station, the TTC could purchase properties at pre-rail values. As the subway is built, these lands increase in value, allowing the TTC to raise revenue through the sale, lease, or development of these properties in partnership with the private sector.
Such a system has been used to finance the construction of subways in many emerging cities across Asia and has recently been adopted by TransLink in Vancouver to finance future expansion of the SkyTrain network.
The Board of Trade estimates this option can raise $500 million annually for Metrolinx to fund transit in the GTA. But with higher land values in Toronto, there is an even greater potential for property development above future stations to maximize transit value capture by the TTC.
A second opportunity for alternative revenue exists within stations by better utilizing their commercial potential.
In cities with newer subway systems like Hong Kong, New Delhi, Tokyo, and Singapore, stations include amenities for retail, banking, food, and services, greatly increasing convenience for riders and maximizing the station’s cost-recovery potential. Location can mean everything for a business, and with thousands of riders per day, subway stations present amazing opportunities for commercial development and rental income for the TTC.
As it stands, the current network is a lost opportunity. The lines are built and the value increases have already occurred. Many stations operate at a fraction of their capacity and have little in the way of commercial potential by design, with rental income accounting for less than one per cent of the TTC’s revenue.
But between property development above and commercial development within stations, tremendous potential exists to design and finance new subway construction in a way that better utilizes future property acquisitions and increases the value capture of these investments.
To be sure, Toronto is no Hong Kong or New Delhi. But like TransLink in Vancouver, the TTC can begin to explore new transit revenue options beyond the fare box to decrease its reliance on subsidies and build the network Toronto has long been promised.
The Mark News is Canada’s online forum for opinion and analysis.
