There’s nothing else like it in Canada.

Since the early 1970s, Manitoba’s provincial government has covered a full 50 per cent of the operating costs for Winnipeg’s public transit system. That means that half of the money required to make transit actually run — salaries and benefits, maintenance, fuel, bus parts — is guaranteed by the province.

“It actually gets at what transit really is,” Joseph Kornelsen, chair of Function Transit Winnipeg, told DeSmog Canada about the arrangement. “Emphasizing that kind of funding is actually how other jurisdictions should be doing it.”

But the setup is almost certainly about to end with the passage of Bill 36 by Manitoba’s Progressive Conservative government.

To be sure, Winnipeg will continue to receive funding from the province. But none of it will be specifically earmarked for transit, leading some transit advocates to express concern that routes and frequency of service could diminish significantly.

In short: Manitoba is about to join the rest of Canada with uneven, ad-hoc and underwhelming transit funding.

Higher Levels of Government Fund Capital, Not Operating Spending

It’s not exactly that federal and provincial governments don’t fund public transit.

Rather, it’s that they almost exclusively focus on capital funding. That means paying for the material infrastructure of transit: light rail transit lines, subway tracks, street cars, bridges.

“Oftentimes, we focus heavily on the capital and getting new projects built,” said Matti Siemiatycki, geography and planning professor at the University of Toronto, in an interview with DeSmog Canada. “I would say there’s a political favouritism to projects where you can cut a ribbon. That tends to be new, large-scale infrastructure investments.”

For instance, the federal government announced $20.1 billion over 11 years for public transit projects in its March budget. It was a gargantuan figure relative to previous commitments.

Patrick Leclerc, president and CEO of the Canadian Urban Transit Association, described it in an interview with DeSmog Canada as “unprecedented,” noting that “it’s never been better than it is today and it will be in the coming years.”

But it’s all capital funding: money allocated for only building stuff, not actually running it.

Similarly, transit quality is often evaluated in a way that emphasizes infrastructure investments (such as the length of transit lines) over metrics like frequency of service or percentage of people who use a certain type of transportation.

“When you look at the operating funding, this is where it’s more difficult,” Leclerc said.

“You can buy as many buses as you want and a new maintenance facility. But if you cannot increase the number of service hours, or hire more drivers because you don’t have the operating budget then you won’t be able to expand service, you won’t be able to offer more frequency.”

Here’s Why #Canadian Cities Struggle to Pay for Public #Transit https://t.co/x2p3zEhMv7 #publictransit #Voices4Transit #cdnpoli

— DeSmog Canada (@DeSmogCanada) October 24, 2017

Municipalities Forced to Rely Heavily on Unpopular Property Tax

That’s why the esoteric budget bill in Manitoba is a bit of a flashpoint for the conversation in Canada.

It’s one thing to build transit tracks and lines. It’s quite another to make sure they’re properly operated and maintained.

For example, a hot topic among transit geeks is “public-private partnerships” or P3s, in which the private sector finances the construction of a project. But as Siemiatycki pointed out, financing is only where the money comes from upfront.

Funding is how the money is paid back. Cities are almost always often left out to dry on that front, relying on a combination of fares and municipal funding.

“One of the ironies about transit is even when the federal or provincial government provides significant capital dollars to help a municipality build new transit, that creates additional long-term financial liabilities for that municipality that they then have to raise additional revenue to pay for,” he said.

Unfortunately, cities in Canada exist in a fiscal straightjacket of sorts, with a heavy reliance on property taxes: a highly visible and politically difficult form of revenue generation.

Municipalities also have the least ability of any level of government to borrow money as they can’t run deficits or administer less conspicuous forms of taxes on residents. In addition, cities only receive around eight cents of every tax dollar, but own about half of the country’s public capital stock.

That can result in a flatlining or declining of transit ridership year over year.

Stefan Kipfer, professor of environmental studies at York University, told DeSmog Canada that most major cities in the country have a transit ridership of between 20 and 25 per cent.

In turn, that can mean transit becomes a low-priority issue for politicians to seriously address.

“If you’re a politician in most jurisdictions, the vast majority of your constituents don’t use public transit on a regular basis,” he said. “We’ve got a big problem in terms of building a constituency that actually starts to have an impact on the national scale.”

Wide Range of Options Available to Help Fix Situation

With that said, experts have offered up some clear solutions to fix the transit crisis.

Higher levels of government — in a better position to borrow and raise revenue — could provide predictable and long-term funding to help cover operating costs (revenue from carbon pricing would likely help with that). Or the federal Liberals might reverse their controversial decision to cancel the transit tax credit, which was claimed by almost two million people in 2014 and helped to boost ridership in Toronto by 2.3 per cent.

Leclerc added there’s an incredibly wide range of alternative funding models that could be introduced: road pricing for cars, special taxation within a certain transit hub, allowing for an employer-provided and tax-exempt transit benefit.

“There’s no magic bullet to this,” Siemiatycki said. “It just requires very careful attention and ongoing diligence. Putting regulatory frameworks in place like having an asset management plan would be one, and in some cases using public-private partnerships to lock in long-term maintenance arrangements.”

‘It’s Important to Me As A Financial Issue for My Future’

The ideas are clearly out there. What’s missing is the sheer political will, combined with the recognition that public transit serves a vital role in cutting greenhouse gas emissions and creating a more socially equitable society.

Of course, it’s a complicated conversation in a federation like Canada. Each level of government wants to keep taxes and expenses low. But the “clean energy revolution” appears to offer up an opportunity to rethink how governments coordinate and fund transportation. Why shouldn’t that apply to public transit?

“It’s important to me as a financial issue for my future,” concluded Kornelsen of Functional Transit Winnipeg. “I want a city that I can be proud of and one that’s not going to break my bank account.”

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This article originally appeared in Maclean's magazine and is republished here with permission.

It was reported recently that Exxon-Mobil will begin disclosing the degree to which its assets are exposed to future greenhouse gas policies. This risk is at the heart of what has become known as the carbon bubble, a term advanced by UK group Carbon Tracker, which suggests that assets may be over-valued as a result of not accounting for potential future limits on fossil fuel extraction imposed to fight climate change.

The so-called carbon bubble should be a concern to investors in oil sands stocks, and you only need to consider two numbers to understand why: 80 and 320. First, the number 80: oil sands producers and the Alberta government are quick to tell you that up to 80 per cent of the life-cycle emissions from oil sands occur from refining and combustion, not from extraction and upgrading.

That’s comforting, until you consider that this means that most of the carbon policy exposure for these projects comes from emissions-control policies and innovations far beyond the jurisdictions and markets in which oil sands companies operate.

Second, the number 320: when it was leaked that the Alberta government was considering a 40-40 approach (a requirement to reduce emissions intensity by 40 per cent, with a penalty for exceeding this limit of $40/tonne), the oil industry responded that governments acting this aggressively would create significant competitiveness concerns. Shell’s CEO Lorraine Mitchelmore, long a champion for carbon pricing policy, was quoted as saying that, “Alberta needs to be sure that it keeps the industry competitive,” while former Suncor CEO Rick George stated that, “it’s a bad idea to make companies uncompetitive.” 

Here’s the kicker: if an average cost of carbon of $16/tonne on 20 per cent of your emissions raises competitive concerns, it seems that investors should worry a great deal about risks to future returns from oil sands assets. Such a policy boils down to 320 pennies per tonne of life-cycle carbon emissions, hardly aggressive given the magnitude of global emissions reductions which will be required to meet Prime Minister Harper’s commitment to policies which keep global climate change below 2 degrees Celsius.

Reports by Carbon Tracker and others were part of what led me and my colleague Branko Boskovic to ask whether stringent carbon policies, if applied to all emissions associated with oil sands, would render new oil sands investments uneconomic. We started out with a model of an oil sands mine, tabulated the life-cycle emissions (for a mine, production emissions are about 36kg per barrel of bitumen produced, while total, life-cycle emissions are about 535kg per barrel as estimated by Jacobs and others), and applied carbon taxes first to production emissions, and then to the full emissions impact of the oil produced.

Sensitivity of oil sands mine rates of return to upstream and downstream carbon prices.

In the figure above, you can see some of the preliminary results of our analysis. Our base case is a mine with financial attributes similar to Suncor’s recently-approved Fort Hills mine. This project has a rate of return of 12.5 per cent assuming WTI prices of $90, a Canadian dollar exchange rate of 94 US cents, and a $15 differential between light and heavy oil at Edmonton, with Alberta’s existing policy in place.

In the top row of the figure above, you see what happens to those returns on investment as carbon prices on production increase—not so scary, even as carbon prices climb to $100/tonne of CO2. However, it’s when the number 80 starts to play a role that you really see where the risk comes from. Reading down every column, you see what happens to project returns as a greater share of the downstream (combustion and refining) carbon liability is paid for by the producer, most likely indirectly through lower oil prices resulting from demand-side carbon policy.

Even a $50/tonne carbon price presents a serious risk to the economic viability of this investment if, as will have to be the case if global emissions are to be reduced, these policies are applied to combustion emissions and consumers aren’t willing to simply pay the tax. The more consumers react to increased prices with reduced demand, the more detrimental carbon policies become for oil sands investments.

So, if you want to know where the risks to oil sand projects lie, they aren’t from the policies which are being considered for production emissions in Canada. They come from two numbers—the 80 per cent of emissions that occur once the oil is burned, and the concerns that executives appear to have with carbon emissions costs of as little as 320 pennies per tonne.

Image Credit: Alex MacLean via @grossmanmedia, used with permisson

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Jennifer Story of the Canadian Centre for Policy Alternatives recently interviewed Alex Himelfarb, former chief of the Privy Council and member of the DeSmog Canada advisory board. Himelfarb recently co-authored with his son, Jordan Himelfarb, a collection of essays called Tax is Not a Four Letter Word. In this interview Story asks Himelfarb about the book and his efforts to shift they way Canadians think about taxes. 

Jennifer Story (JS): The sub-head of the book is “A different Take on Taxes in Canada”… different from what?

Alex Himelfarb (AH): Different from the predominant negative view of taxes as simply a burden from which we must be relieved. For decades now that’s precisely how our leaders have talked about taxes. Our tax conversation has become profoundly distorted. What’s missing in this conversation is what we get for the taxes we pay. We are more than just consumers and taxpayers. We are citizens with responsibilities for one another; we undertake to do some things together, things that we could never do alone or that we can do much better collectively. Taxes are the way we pay for those things. They’re the price of living in Canada and the opportunities that provides. Indeed, those opportunities exist because of the sacrifices and taxes of previous generations to build the Canada we inherited.

It’s become a political truism that politicians would have to be nuts to talk about taxes unless they’re promising more cuts. But that fear of taxes is limiting, dangerous. We need to shift the conversation, to recognize that the public services and goods we value have to be paid for and that tax cuts are not free. We cannot have Swedish levels of service and American levels of taxation.

We demand of our leaders to explain how they are going to pay for new services but, equally, we need to demand that they explain the COSTS of their promised tax cuts ­–­­­ to our quality of life, to our democracy, to our economy. Would we be so pleased with the next tax cuts if we knew they came with worsening traffic congestion, increased risks to food safety, longer wait times for health care, less help for the jobless and needy, rising inequality and environmental degradation? We seem only to talk about what government costs and not about what it gives.

Too much is at stake to let our identities as “consumers” and “taxpayers” supplant our citizenship and commitment to the common good.

(JS): You already knew more than your average citizen about taxes and the public good. What, if anything, were you surprised to learn during the editing of this book?

(AH): We worked with people who have much greater tax expertise. We learned a lot about the technical aspects, new kinds of taxes. But the biggest thing we learned is how profoundly this anti-tax conversation now dominates.

Of course, a minority will never be convinced, and we will always have legitimate disputes about the right amount and mix of taxes. But the majority does value what their taxes buy. Nonetheless, they worry about how government spends, inevitably  circling back to the problem of waste. Why would I want to pay taxes when so much is wasted?

Let’s be clear, I have never known a political leader who promoted more waste, less efficiency. Politicians are always reluctant to raise taxes and they all want to get as much bang for their revenue as possible.  Some governments are better at this than others, but over the past few decades, all governments have sought to get the best results at the lowest costs. Yet perceptions of wasteful spending persist.

In part, concern about government waste is a proxy for differences in values. What we call waste is often spending we don’t much like (say, the arts from the right, or military spending from the left). That’s the stuff of elections as we try to choose a government that reflects our priorities.

But here’s the thing: we can’t pick and choose a personalized, made-to-order government profile in the way we personalize our latest mobile device. We cannot unbundle government the way we are proposing to unbundle cable services. No political party, no government will be a perfect reflection of our personal preferences. In a pluralistic society, sometimes we pay for things we don’t like. For a democracy to work we must get beyond our personal desires, engage on what the country needs now and for the future, sometimes even set aside our private desires for a larger purpose. There will always be some spending we just can’t fathom, but much of that isn’t waste, simply disagreement on what the country needs and on the role of government. Sometimes we are part of the minority. Those tensions are built into any democracy. It will always be so.

Yes, waste, pure and simple, happens. All of us have shaken our heads at some example of inexplicable spending. All governments do, and ought to, work at reducing waste and increasing efficiency. But no organization, public, private or in-between, is or ever will be perfectly efficient, nor does the evidence support that private is necessarily more efficient than public.  We are talking about imperfect systems made up of perfectly imperfect people. Those desperate to prove government is useless will always find some example. While it is certainly the job of leaders to ensure that waste is minimized, our fixation on government waste is vastly exaggerated, and undermines even the minimal amounts of trust we need to find collective solutions to problems we can’t address on our own.

Former Parliamentary Budget Officer Kevin Page reminded us regularly that any promises that tax cuts would be paid for by reducing waste are bogus – the numbers never add up. The screaming headlines about waste mislead us. Studies in the U.S., even before the major downsizing of the ’90s, found big numbers but which added up to a very small percentage of spending.  Same here in Canada. The vast majority of tax dollars are spent on things the majority of us care about: infrastructure, environment, health and safety, health care, education, social assistance, child development. The gravy just isn’t there.

Tax cuts inevitably affect public services. The evil twin of tax cuts is austerity, ongoing and seemingly endless. In Canada, austerity has been implemented in the slowest of motion and so the consequences are less visible than, say, in parts of Europe. But they are real nonetheless, felt first by women and youth, and the most vulnerable. Austerity, it seems, makes us meaner. Next in line are the politically easy targets – civil service, teachers, unions. It seems that bashing bureaucrats is always good politics whatever the consequences.

But of course in the end we all pay the price in rising inequality and the erosion of essential institutions, infrastructure and the environment. This erosion happens so slowly it’s hard to attribute to the tax cuts. Government just slowly gets worse. Ironically this is used to justify further tax cuts. Witness recent proposals to eliminate EI because it now serves so few people so badly. The Post Office. What next? When we lose trust we can’t solve problems together. We look at traffic gridlock and instead of saying, ‘let’s build transit solutions’, we conclude, ‘government doesn’t work’.

Extreme inequality further undermines trust – those at the very top become increasingly effective at convincing us of the dangers of taxes – after all they don’t need many of the public services the rest depend on – and those at the bottom won’t want to pay if they think the game is rigged. Extreme inequality erodes our ability to come to a common view, to build a shared sense of the common good.

Perhaps the most enduring consequence of austerity is that it stunts the political imagination. Previous generations could imagine universal public health care, public pensions, the National Child Benefit. But now our first response to the dreamers is ‘ya, but how would we ever pay for it?’ This breeds a kind of fatalism, declinism –growing doubt that we could make things better together, that we could ever hope to solve the big problems, inequality or climate change.

If I track the last fifteen years, all the tax cuts, federal taxes as percentage of GDP are four points lower, each point worth about $20 billion. Imagine what we could do with that, or even a portion. The two cents of GST that the Conservative government cut in its first couple of years cost about $14 billion per year, slightly more than the surplus they inherited. Think about how much more resilient we would have been without those cuts when the recession hit, how much more we could have helped those hardest hit, without so much added debt and without turning to austerity as though it were inevitable. We chose the path we are on.  We can choose something better.  

(JS): You are fundamentally an optimist … what evidence do you see to be optimistic about the future as it relates to taxes?

(AH): To some degree, optimism is a matter of disposition. But it’s also a philosophical choice. If we have a choice between hope and despair, why would we choose despair? If we believe nothing is possible, then we don’t act. When we think nothing is possible, well, nothing’s possible.

But in practical terms, I see some signs – perhaps I want to see them – that people are ready to turn a corner. Municipal leaders in Vancouver, Edmonton, Calgary, Halifax – just to cite a few – seem ready to discuss more ambitious visions for their cities and grapple with the revenue tools they’ll need. Maybe it’s easier to build trust locally.

Bill de Blasio, the Mayor-elect in New York City, won on four priorities: addressing inequality, taxing the rich, raising the incomes of the lowest public sector earners, and limiting police powers. Various jurisdictions are raising the minimum wage. When the State of Missouri’s Republican legislature recently passed a tax cut, the Democratic governor vetoed it, and he seems to be winning the debate. We simply can’t keep squeezing and let inequality go unchecked. We will turn this around. The question is how much pain will we endure before we do that.

(JS): You said at the Toronto book launch that not all the authors would agree about some things. What are those areas of tension you found and how were they resolved?

(AH): Who gets taxed, what’s the best mix – all debatable. But they agree 100% that we have a distorted conversation and that’s doing damage. They agree we need to transform how we govern and tax reform must be an essential part of that transformation. And they agree that there’s no free lunch; we all must pay our fair share.

We will have to be smart in how we tax and, to be fair, progressive. By progressive I mean three things: those who benefit most should pay the greatest share; those who do most damage to the commons should pay most for its repair; and when we have broad-based and seemingly regressive tax measures, as we will, we should mitigate the harm to those least able to pay.

(JS):Imagine you’re sitting in Stephen Harper’s chair. What do you think the number one agenda item should be to improve our tax system for the common good?

(AH): I wouldn’t necessarily lead with taxes. But I wouldn’t avoid the discussion. There’s no way to get to where we need to go without considering taxes. The number one agenda item for me would be to address poverty and inequality. We can’t achieve the trust necessary to move forward together without tackling inequality. We won’t find the collective will to tackle climate change if we don’t tackle inequality.

Here in Toronto, the tale of two cities, the rich and poor, that is the problem. The resilience of our cities demands that we address this. The focus on waste, the gravy train, bloated bureaucracies, this is a conjurer’s trick. Focusing on those ‘problems’ ensures we don’t focus on the real problems. Don’t look there, look over here. Don’t look at that, look at this.

We need leaders to say no to these conjurers’ tricks, to focus on building the cities, the provinces, the country we need.  It is time to change the conversation.  We don’t need to choose decline. We will get the future we are willing to pay for.

Edited to reflect the author's changes on 12/23/13. Image Credit: Kevin Dooley via Flickr.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.