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CBI BLOG - It’s time for Toronto to consider road tolls

Toronto downtown Gardiner Express traffic at noon.

Yesterday’s announcement to increase TTC fares by 10 cents is a grim example of what happens when the City runs short of revenue: vital services are reduced and the most vulnerable communities suffer the most. Toronto’s City Manager Peter Wallace continues to warn that we are in a budget crisis, but has also suggested we can’t cut our way out of it.

Without new revenue sources, cuts get deeper, services suffer, and roads crumble. Not to mention the construction of new infrastructure such as Toronto’s long-term transit plan continues to be unfunded. A more sustainable option is for the City to raise more revenue, including new taxes. And one important way to accomplish this is through road tolls.

 

User fees

Transit fares are an example of dedicated user fees. The fares collected at the ticket booth go directly to operating the service. Currently, the TTC fare box recovers 70 per cent of its operating costs. The remainder is subsidized. It’s also important to remember that fares go to maintaining existing operations, not building new transit projects.

Road pricing – or tolls – are another example of user fees. They are also an opportunity for a dedicated revenue tool where mobility pays for mobility. Revenue collected locally by charging drivers for using of Toronto-owned highways is returned locally where it can be dedicated to maintaining and building transportation infrastructure, including transit. Tax-payers know where their money is going, instead of it getting lost in the City’s general revenue.

Another advantage of tolls is that they can be applied to users who live outside the city and use roads and highways that Torontonians pay through Toronto property taxes to maintain. A City of Toronto KPMG study estimates that road pricing could net between $89 and $377 million annually. A Pembina study that analyzes per/km road tolls (not a cordon) on the DVP and Gardiner could generate up to $500 million/year by 2025.

 

Pay what you burn, not what you earn

Indeed, tolls represent a big ticket option for revenue generation stacked up against other taxes and fees (see table below), with income tax much higher – but there is merit in the expression: pay what you burn not what you earn. A gas tax fits into this category as well and in fact was recommended by the Premier’s transit investment strategy panel back in 2013 as the preferred revenue option to fund the Big Move regional transit plan.

Toronto Revenus Options study by KPMG

In some jurisdictions, tolls are known as “congestion charging.” London, Stockholm, and California all introduced road fares with the multiple objectives of reducing congestion and greenhouse gases and generating revenue. Stockholm’s congestion charge, for example, eased congestion by 20 per cent. In all three cities, revenues were invested back into transportation, in particular building more transit.

Toronto Mayor John Tory has taken some action to reduce congestion, including ticketing vehicles blocking traffic. However, a Pembina study from last year shows that a reasonable road price on Toronto’s busiest highways could reduce congestion by up to 15 per cent on the DVP and Gardiner. Less idling means less pollution and greenhouse gas emissions, and tolling would therefore help contribute to the city’s and the province’s climate goals.

 

The price is right

Another good reason for road tolls? It influences behaviour. Tolls encourage people to drive during off-peak times, take transit, or avoid their trip altogether. In fact, if a toll is properly priced (about half the price per km as Hwy 407) drivers can even come out ahead since congestion charges reduce travel times, thereby saving drivers money, gas, and vehicle maintenance.

However, road tolling in other jurisdictions has been largely successful because good alternatives exist to using cars. Toronto’s transit-building lethargy means drivers don’t have access to the ideal transit alternatives, but they do have some. We’ve already seen improved transit service. In recent years, GO transit has lengthened trains, added express routes, and introduced two-way half-hour service all day along its Lakeshore line. In Toronto, the 15-kilometre portion of the Gardiner Expressway from Highway 427 to Yonge Street corresponds with the Lakeshore West GO train route between Long Branch and Union Stations. GO services provide commuters with a viable transit alternative to driving along the congested Gardiner Expressway.

 

When the rubber hits the road

Implementing a road toll system takes time. They are by no means quick to deploy. By starting now, we can work towards developing one while important Toronto transit projects like the Eglinton Crosstown and a dedicated King streetcar lane can be constructed. It’s also worth remembering that transit users have always been charged to ride. It may be time to look at drivers the same way. After all, roads must be maintained, while the external costs of pollution, policing, accidents, and associated health care are paid by everyone, including transit riders and cyclists.

A valid concern is the unfair burden road pricing might place on low-income drivers.  However, exemptions could be built into a toll program, similar to tax credits for low- to moderate-income residents. This approach has already been tried and tested in Ontario with sales taxes and energy sales taxes. California provides rebates to low income toll users, and a number of jurisdictions build fairness into their tolling programs.

 

A time to boldly go forward, not backwards

Downtown Toronto’s population is expected to double in the 25 years. We can’t possibly accommodate twice number of cars in an already congested city.

This year’s Vital Signs Report by the Toronto Foundation notes that 20 per cent of downtowners still drive. The biggest challenge is finding viable alternatives for those who drive into the city and into the core. Are we investing in the most effective transit projects that carry the most riders from the suburbs and transform drivers into transit users?

Plans to rebuild the Gardiner East, which is not a busy stretch of the highway, only encourages car travel into the city. This approach takes us backward instead of forward. It doesn’t take into account how innovations such as on-demand mobility and AVs will change how we will get around in the coming years. The Gardiner East will cost over $1 billion to moderately reduce commute times (3 to 10 minutes) for about 5200 vehicles per hour who use the eastern stretch at morning rush hour. This is an investment that could go to improving transit service, building complete streets, and investing in affordable housing to benefit far more Torontonians.

However, if Mayor Tory insists on rebuilding the Gardiner East, road tolls are one way forward is to ensure it pays for itself.

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