Google sister company Sidewalk Labs won’t pay the upfront costs of the transit project that’s critical to the its planned “smart city” neighbourhood on Toronto’s waterfront, meaning the public sector will have to come up with the hundreds of millions of dollars required to build the new rail line.
Instead, in its long-awaited master plan released Monday the company proposes giving up to $100 million in “credit support” to help finance the project, to be repaid later at a low interest rate.
But the LRT isn’t part the transit plans that are currently the subject of fractious debate between the city and province, meaning the viability of Sidewalk’s proposal could now hinge on city hall and Queen’s Park both agreeing to change course.
The 6.5-kilometre Waterfront East LRT would run from Union Station to the Port Lands along Queens Quay, and is estimated to cost at least $1.2 billion.
Although the city has been studying building the line for over a decade, it’s unfunded and there is no firm timeline for its construction.
According to plans contained in leaked documents obtained by the Star earlier this year and later confirmed by Sidewalk CEO Dan Doctoroff, Sidewalk was considering providing the upfront costs for the LRT, on the condition that it be paid back through the tax proceeds of new development served by the line.
However, a highly-anticipated Master Innovation and Development Plan Sidewalk released on Monday proposes what appears to be a much more modest contribution. The tech giant is now offering to provide up to $100 million in “credit support” for the Waterfront LRT.
Under the new plan, Sidewalk would only provide the credit support for the portion of the LRT that would serve the 77-hectare Idea District it hopes to build. This section of the line would connect to the existing streetcar network via Cherry St. and Broadview Ave., and run along Commissioners St.
Sidewalk estimates this section of the LRT would cost about $406 million to construct, and could be paid for through a mechanism called tax increment financing. Under the scheme, the proponent of a project, usually a government, issues debt which it then recoups over a period of years through the tax revenue generated by new development near the line.
Investors in a TIF scheme typically require the government to provide a “backstop” to pay them interest during the period after the project has begun but before development has arrived to generate new tax revenue.
Sidewalk’s $100 million in credit support would replace the government backstop, and “relieve the public sector of a significant portion of this responsibility,” the master plan states. The company would be repaid the money it puts up, at a low interest rate.
“This enhancement would alleviate the main risk that holds governments back from using transit-oriented development to pay for transit infrastructure,” Sidewalk said in a release.
The company says the credit support could help get the LRT built “years ahead of schedule,” with construction to begin by the early 2020s.
Sidewalk isn’t making any specific financial commitments to the segment of the LRT outside of the Idea District, including the crucial link to the transit hub at Union Station and the portion running along Queens Quay between Bay St. and an area near Sherbourne St.
This segment is estimated to cost about $700 million, and the company’s plan asserts it likely couldn’t be funded using TIF because it would run through an already dense portion of the city where there’s little prospect of lucrative new development springing up.
Sidewalk proposes that segments of the LRT outside its planned neighbourhood would be paid for by traditional funding agreements between the city, provincial, or federal governments.
However, the company’s master plan notes that these sections “are nevertheless critical to the viability” of its smart city plan, and “Sidewalk Labs is therefore open to discussing how it could assist financially.”
Tapping government funding for the LRT would require a changes to the city’s and province’s existing transit priorities, which are already the subject of heated debate between city hall and Queen’s Park.
In 2016, city council voted to designate a Waterfront transit network as one of its key transit priorities eligible for federal funding. But in April, Premier Doug Ford unveiled a new $28.5-billion transit plan for the GTA that left the LRT line off the map. As a result, the city has also removed it from its list of immediate priorities.
The provincial government will likely have the final say in what new transit gets built. Legislation the Ontario PC’s passed earlier this month gives Queen’s Park the authority to take control of new transit projects in Toronto, and to order the city and TTC stop work on lines it doesn’t support.
Ben Spurr is a Toronto-based reporter covering transportation. Reach him by email at email@example.com or follow him on Twitter: @BenSpurr