Item - 2017.EX28.3

The Executive Committee recommends that:

1.  City Council reiterate its request that the Federal and Provincial Governments enhance the flexibility of the Public Transit Infrastructure Fund Phase 1 program by amongst other measures, extending the completion deadline for implementation of Public Transit Infrastructure Fund Phase 1 to March 31, 2020, and further to increase the cash flow flexibility in the final year of the program from 40 percent to 70 percent post March 31, 2018.

2.  City Council authorize the City Manager, in consultation with the Acting Chief Financial Officer, the Chief Executive Officer, Toronto Transit Commission (TTC) and pending Toronto Transit Commission Board approval; to further amend the Public Transit Infrastructure Fund Phase 1 Priority List of projects to increase the number of bus purchases from unallocated Public Transit Infrastructure Fund funding pending completion of negotiations with vendors on the number of buses that can be purchased within Public Transit Infrastructure Fund guidelines.

3.  City Council authorize the City Manager, in consultation with the Acting Chief Financial Officer, to make amendments to the Public Transit Infrastructure Fund Phase 1 Project List as approved by City Council on December 13, 14 and 15, 2016, (Item EX20.4 Federal Infrastructure Funding – Phase 1 and 2), as may be required from time to time by adding, deleting or changing project scope, subject to appropriate budget approvals, and the following conditions:

a. the project has been approved by City Council within the 10-year Capital Budget and Plan, and has a capital financing strategy which assumed future Provincial/Federal funding; or City Council gave direction to seek intergovernmental funding for unfunded (below-the-line) projects within the 10-Year Capital Budget and Plan;

b. the project meets the Public Transit Infrastructure Fund Phase 1 program criteria, including meeting the overall annual program cash flow and completion deadlines;

c. consideration has been given to best practices in capital planning and budgeting, including the prioritizing of projects that maintain assets in a state of good repair; and prioritizing larger projects that facilitate more efficient administration of the Public Transit Infrastructure Fund program; and

d. Toronto Transit Commission Board authority has been obtained to proceed with Toronto Transit Commission (TTC) projects.

4.  City Council authorize the following budget adjustments:

a. the transfer of $2 million in Public Transit Infrastructure Fund funding from the Transportation Services 2017 Capital Budget to the Toronto Parking Authority and to increase the Toronto Parking Authority 2017 Capital Budget by $4 million (gross), including $2 million in funding from the Toronto Parking Authority Capital Expenditure Reserve Fund (XR6002) for the purchase of 750 bicycles, 71 bicycle stations and 1,000 docks.  Future reallocations of Public Transit Infrastructure Fund funding related to the Bike Share program will be considered as part of the 2018 Capital Budget process;

b. the transfer of $55.5 million (gross) including $27.8 million in Public Transit Infrastructure Fund funding and $27.7 million in debt for Relief Line planning, design and engineering from the 2017 Corporate Initiatives Capital Budget Account (CCI108-01) to the Toronto Transit Commission (TTC), along with the addition of 1.0 temporary position required until project completion to support the program, fully funded from the capital project; and

c. the transfer of $3.6 million (gross) which includes $1.8 million in Public Transit Infrastructure Fund funding and $1.8 million in debt for Waterfront Transit planning, design and engineering from the 2017 Corporate Initiatives Capital Budget Account (CCI110-01) to the Toronto Transit Commission (TTC).

Federal financial commitment to municipal infrastructure investments are critical to the growth and economic vitality of Canada's big cities. The City of Toronto relies on intergovernmental partnerships to support necessary investments in state of good repair (SOGR) of Canada's largest transit system, the Toronto Transit Commission (TTC), investments in advancing future expansion of the transit network, and building an active transportation network that provides choice in mobility options.

The federal government launched the $3.4 billion Public Transit Infrastructure Fund (PTIF) Phase 1 in April 2016. The Public Transit Infrastructure Fund Phase 1 program provides 50-50 (federal-municipal) contributions for investment in public transit and active transportation projects. The City of Toronto was allocated $856 million in federal funding in August 2016 based on the City's share of transit ridership. Per federal funding guidelines, all projects are required to be complete by either March 31, 2018 or March 31, 2019, with a maximum of 40 percent of the program spent in the final year. In the event that projects are not completed by the end of the Public Transit Infrastructure Fund program, the City would be responsible for 100 percent of project costs resulting in additional capital expenses.

In December 2016, City Council approved 87 eligible Public Transit Infrastructure Fund projects (2016.EX.20.4), that leveraged the $856.2 million in federal funding and approved matching funding in the 2017 Budget process, establishing total project spending authority of $1.770 billion for the Public Transit Infrastructure Fund program. This included $22.9 million in federal funding remaining unallocated with eligible projects to be determined. At the time of reporting, staff also identified the potential risks with the delivery of the program given its requirements.

A recent review of Public Transit Infrastructure Fund project expenditures approved in December 2016 has identified approximately $301.2 million gross and $121.5 million in Public Transit Infrastructure Fund funds currently at risk that cannot be spent within current Public Transit Infrastructure Fund program guidelines. Further, of the $1.469 billion gross and $734.7 million in Public Transit Infrastructure Fund funding that can be spent within program guidelines, 37 percent is currently projected to be spent in the final year of the program (April 1, 2018 and March 31, 2019). As a result, there is limited contingency for slippage in project delivery beyond March 21, 2018. The annual cash flow requirements, also present limitations in the opportunity to find new projects to reallocate the $301.1 million gross and $121.5 million in Public Transit Infrastructure Fund funding currently at risk.

This report recommends City Council renew the December 2016 request to the federal government to extend program timelines. In particular, this report recommends the federal government increase the percentage of the program that can be spent in the final year from 40 percent to 70 percent, and extend the program completion deadline to March 31, 2020. In the absence of additional program flexibility, the City will need to revise the City's Public Transit Infrastructure Fund project list to phase projects so they can be completed within the Public Transit Infrastructure Fund program deadlines (i.e. reduce scope), or remove projects from the Public Transit Infrastructure Fund program that have limited to no spending to date, which would revert back to requiring full City funding to complete these projects.

The Public Transit Infrastructure Fund program is at a critical juncture, and timely decisions will need to be made regarding the scope of the City's Public Transit Infrastructure Fund project list pending the outcome of discussions with the federal government on program flexibility. The Public Transit Infrastructure Fund project list will likely require amendments and resubmission to the provincial and federal government.

The Toronto Transit Commission is currently investigating options to add additional buses to the Public Transit Infrastructure Fund program that can be delivered by March 31, 2019. Pending negotiations with vendors, there is the potential to reduce the risk to federal funding being left unallocated from $121.5 million to $84.8 million while still maintaining the overall program spend guidelines of 40 percent in the final year of the program. The purchase of additional buses is subject to Toronto Transit Commission Board approval. An increase in the cash flow available to be spent in the final year of the program, and/or extension in program timelines, may also provide opportunity for utilizing the funds for an increased number of additional buses. The City is interested in identifying large projects that can benefit from Public Transit Infrastructure Fund federal funding in the interest of more efficient administration of the overall program.

This report recommends that delegated authority be provided to the City Manager and the Acting Chief Financial Officer to amend the project list, within specific parameters in order to maximize the availability of federal funding and mitigate against future risks as they become known. The report also recommends reallocating project budgets to align with the programs delivering the work in order to streamline administration of the funds.