Staff Report #8
January 30, 2019
To All Commissioners
Re: Provincial Gas Tax Program Update
Recommendation
That the report be NOTED and FILED.
Background
The Provincial Gas Tax for Transit Program began in 2004, initially committing 2 cents for every litre of fuel sold in the Province towards programs intended to increase public transit ridership. Since its inception, the program has provided over $4.0 billion to municipalities across the Province who provide a public transit service.
Over the 14 year period, the program has been in place, London has utilized the funding for a number of projects. In the initial years, the majority of London’s allocation was directed toward capital programs (60% capital, 40% operating), in an effort to address the existing significant infrastructure deficit. Over this period, Provincial Gas Tax funding was utilized for programs including facility expansion, bus fleet expansion, and replacement of the automatic vehicle location/communication system, many of which would not have occurred had the program not been in place. More recently, over the past five year period, the utilization of Provincial Gas Tax funding has shifted to be directed more toward operating costs (60% operating, 40% capital). This shift was possible given the investments in capital infrastructure in the early years of the program, but also provided funding for key capital initiatives including cameras on buses, engine repowers for the bus fleet, and the smart card program. The increased use of Provincial Gas Tax funding for operating during recent years has provided the opportunity to introduce increased service hours at a significantly faster rate than historically, while mitigating the need to rely solely on the municipal tax base and transit riders to fund the costs.
Under the current program, which over the past several years has allocated between $320 million and $340 million to transit agencies in Ontario, London’s share has ranged between $9.0 million and $9.4 million, or approximately 3% of the total allocation (allocations are determined based on a formula of 70% transit ridership and 30% population in each municipality).
On January 8, 2019, the Provincial Government announced the 2018/2019 program, the details of which included a total investment of $364 million dollars, of which London Transit will receive approximately $10.3 million. The use of Provincial Gas Tax is approved via the annual (multi-year) budget process, noting the extent of use is impacted by an LTC administrative guideline, which sets a minimum unallocated balance in the reserve fund at the end of each year at 1.5 years of planned use. This guideline ensures that, should the program be altered and/or eliminated in the future, there are adequate funds available to maintain service levels for a period of one year while assessing options to address the reduction/elimination of a portion of the annual operating and capital expenditures.
In 2017, the previous Provincial Government announced planned changes to the Provincial Gas Tax Program, which would see the current $0.02 per litre contribution double to $0.04 per litre by 2021/2022, resulting in the total available annual allocation growing to an estimated $650 million. The current Government has not confirmed whether they intend to proceed with this planned increase. The Ontario Public Transit Association held meetings with Ministry staff and officials in late December, and one of the key messages shared was the importance of the Provincial Gas Tax Program to transit providers, noting it provides for a sustainable source of funding each year that can be relied upon to help grow local transit services.
A detailed assessment of the Commission’s reserves and reserve funds, including the Provincial Gas Tax Reserve will be included on the March 27, 2019 agenda as part of the year end reporting.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager