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HomeMy WebLinkAboutCAO 06-04PICKERING REPORT TO Council Report Number: CAO 06-04 Date: November 24, 2004 From: Everett Buntsma (Acting) Chief Administrative Officer Subject: Region of Durham Business Case Analysis - For the Potential Transfer of Lower Tier Municipal Transit Services - File: CAO 1000 Recommendation: That Report CAO 06-04 be received and; That Council advise the Region of Durham that the City of Pickering Operations Centre is the physical asset of Pickering and is not to be considered, in whole or in part, for transfer to the Region of Durham; and That Council request the Region of Durham to provide a further report on cost sharing and unfunded liabilities to be forwarded to the local municipalities for review and comment, and; That the Region maintain the existing level of "GO" funding to the local municipalities at the 2004 funding level for the 2005 Operating year to ensure the viability of the existing local transit operations until transfer to the Region in 2006, and; That the sharing of Regional Transit costs be based on the traditional funding model of using 100 percent equalized assessment that is used for other Regional services; and, That copies of this Resolution be forwarded to other Durham municipalities. Executive Summary: In May 2004 Council directed that the Chief Administrative Officer commence negotiation with Regional staff to affect the transfer of APTA to the Region of Durham. Subsequently, the Region of Durham Council directed Regional staff to commence a Business Case Analysis investigating the rationale of a fully amalgamated Regional Transit Operation. Report CAO 06-04 Subject: RTC Region Transfer Transit Services Date: November 24, 2004 Page 2 The Regional Report 2004-RTIC~7 provides recommendations to Regional Council to amalgamate all local transit operations in Durham to create a Regional Transit Authority. Several of the recommendation are addressed in the foregoing City staff recommendations for amendments to the Regional Report. Financial Implications: The transfer of local APTA operations to the Region of Durham should not have a negative impact on the City of Pickering. Withholding of the 2005 GO Subsidies will result in a financial shortfall of Transit funding to Pickering of $1.3 million. This is not acceptable and will result in significant impacts on the transit operation or the City tax rate. Background: With respect to the recommendations of this report we present the following information. 1. No explanation required. The TSH Business Case Analysis suggests that all facilities presently owned or used by local transit operations be transferred to the Region of Durham. Although we have indicated to TSH that Pickering Operations Centre (POC) is the property of Pickering and not APTA they suggest that further investigation is required with regard to POC to determine its status. At present APTA pays rent to the City of Pickering for the use of storage and minimal office space. This clearly indicates that this facility is the property of the City and should not be transferred in whole or in part to the Region of Durham. Should the Region of Durham proceed with an amalgamated Regional Transit Operation and with it assume ownership of all assets of the local transit operating authorities, they should also assume liabilities associated thereto. The Region's report indicates that all Human Resource assets will be transferred to the Region but not the associated Unfunded Liabilities. Due to insufficient time and detail the City is requesting further information in this regard. If the Region assumes that local Transit Operating Authorities will continue "as normal" for 2005 and the amalgamated authority will commence January 2006 APTA requires the 2005 GO subsidy from the Region of Durham at the 2004 funding level. These funds allow APTA to operate as a viable authority. Without funding at this level, APTA may have to reduce its services or the City may have to increase property taxes to offset the shortfall in funding. 5. Recommendation 5 states that the cost of Regional Transit should be based on the traditional Regional funding formula of equalized assessment. The Region is CORP0227-07/01 Report CAO 06-04 Subject: RTC Region Transfer Transit Services Date: November 24, 2004 Page 3 recommending that the transfer of assets be based on the "Cumming Principle." Inherent in the "Cumming Principle" is the understanding that all parties are contributing assets. The northern municipalities are not contributing buses or any other transit infrastructure assets on a more or less equal basis. Therefore, to partially offset this, the full cost of Regional Transit should be allocated based on the traditional Regional funding formula. 6. No comment required. The above attempts to convey the rationale for the recommendations and as such we are seeking Councils' approval for same. Attachments: 1. Regional Report 2004-RTIC-7 ~'Everett B~-h'~s mat--'''' (Acting) Chief Administrative Officer Gillis Paterson Director, Corporate Services & Treasurer EB:mld Attachments Copy: Chief Administrative Officer Director, Corporate Services & Treasurer Picke~ Thomas U.~;))~d'nn, ~t onsideration of '~f Administrative Officer CORP0227-07/01 To: From: Report No.: Date: ATTACHMENT#,,,, / TO REPORT The Regional Municipality of Durham The Regional Transit Implementation Committee Commissioners of Planning, Finance and Works 2004-RTIC-7 November 4, 2004 SUBJECT: Business Case Analysis for the Potential Transfer of Lower-Tier Municipal Transit Services to the Regional Municipality of Durham RECOMMENDATIONS: THAT the Regional Transit Implementation Committee (RTIC) recommend to Regional Council that: a) The report entitled, "Business Case Analysis for the Potential Transfer of Lower-Tier Municipal Transit Services to the Regional Municipality of Durham" by Totten Sims Hubicki (TSH) be received for information, and that the following recommendations contained in the TSH report be endorsed: The transfer of the transit responsibilities of the City of Pickering, Town of Ajax, ToWn of Whitby, City of Oshawa, Municipality of Clarington and Handi Transit Inc. to the Region of Durham; · Regional staff be directed to present to Committee and Council for their approval an appropriate net-cost allocation formula for the levy of Regional transit taxes at a local municipal level; · Apply the "Cumming Principle" to any transit-related asset transfers, and all transfer-eligible assets of Handi-Transit Inc.; Adopt the following timetable for Regional Transit implementation: ATTACHMENT # Report No.: 2004-RTIC-7 Page No. 2 Transition Period - Date of Transit By -Law approval to effective date of service transfer (January 1, 2006): Resolution of critical HR and union issues including union certification; Staffing of the new Regional Transit Department; Development and implementation of operational and financial controls; Obtain Public Vehicle Operating License for the Region of Durham to operate transit; and Asset transfer. Completion of Transfer - complete transfer of service and initiate Regional transit service on January 1,2006; Inform the Provincial and Federal governments of the creation of a Durham Regional Transit system and pursue the acquisition of additional Provincial/Federal government funding. Extend the mandate of RTIC to oversee the transfer of transit services; and b) · Endorse the establishment of a Transit Working Committee (TWC), reporting to RTIC, to oversee all actions necessary to complete the transfer, including but not limited to, action items contained in Tables 11.1 to 11.6 of the TSH Report. Pursuant to the recommendation by TSH io'transfer the responsibility for transit services to the Region, the Region of Durham Transit By-Law (Attachment 1) providing for the transfer of the lower-tier power relating to public transportation systems, other than highways (transit) to the Region, and encompassing the following terms and conditions for the transfer, be presented to Council for enactment: As of the Effective Date, the Region shall operate, maintain and regulate the use of a Public Transportation System for both conventional and specialized services. 2 Report No.: 2004-RTIC-7 ATTACHMENT# Page No. 3 The Region shall maintain the existing overall revenue hours of service in effect as of May 1,2004, with the addition of the Rossland/Taunton "beltline" service jointly planned by the City of Oshawa and the Town of Whitby, the planned service realignments in Oshawa and Whitby for implementation in 2004/2005 and enhanced specialized transit service in Oshawa as a result of a vehicle acquired in 2004. After the Effective Date, the Region may enter into agreements with any adjoining municipality or the Province for the provision of public transportation services. All physical assets used in whole or in part for public transportation systems shall be transferred to the Region without compensation as of the Effective Date. Assets shall include, but not be limited to: vehicles and equipment; lands and premises including garages, terminals and shelters; and other transit amenities. The transfer of all transit-related assets shall be subject to confirmation of inventories, appropriate asset valuations and environmental site assessments. Such inventories shall include all transit-related assets of the lower-tier municipalities and transit agencies as at the Effective Date. Discretionary transit-related fuqCs including reserves and reserve funds existing on the Effective Date shall be transferred to the Region. All transit-related development charge and other non-discretionary reserve funds shall be transferred to the Region. Lower-tier municipalities shall continue to collect transit development charges where applicable until their by-laws expire or are repealed, including periods beyond the Effective Date. Ali such development charges shall be transferred to the Region. The transit-related provisions of the development charges by-laws shall not be changed Report No.: 2004-RTIC-7 ATTACHMENT# TO RE~OR'~~ ~ C~o OG -OU.- Page No. 4 after the Transit By-Law has received the necessary triple majority approval, without the approval of the Region. After the Effective Date, all Provincial and Federal transit-related funding received by the lower-tier municipalities shall be transferred to the Region, including but not limited to funds received from such programs as the Ontario Transit Vehicle Program (formerly the Transit Renewal Program), the new Provincial Gas Tax Funding program for public transit and potential federal programs such as a federal gas tax. As of the Effective Date, the lower-tier municipalities shall be relieved of all liabilities in relation to any assets transferred to the Region. The amount of any unfunded liabilities existing at the Effective Date shall be determined through negotiations between the Region and the lower tier municipalities to ensure that the Region receives the necessary funding from the transferring corporation or agency. All employees with permanent positions, both exempt and union, that are exclusively employed in transit by the lower-tier municipalities, transit operators and Handi Transit Inc. as of the date that this by-law comes into force shall become employees of the Region as of the Effective Date. During the period of time between the date that the Transit By-Law has received the necessary triple majority approval and the Effective Date (the "Transition Period"), any new or renewed transit-related contract, lease or contractual obligation that requires a significant financial commitment extending beyond the Effective Date shall require the approval of the Region. Handi Transit Inc. shall be dissolved prior to the Effective Date in order to facilitate the transfer of transit-related assets to the Region. 4 ATTACHMENT# . 06 Report No.: 2004-RTIC-7 [ TO REPORT Page No. 5 c) During the Transition Period, the Region and the lower-tier municipalities shall negotiate and enter into agreements for the transfer of all assets, liabilities and personnel on terms that are consistent with the transit By-Law. Any matters not agreed to within three (3) months of the Effective Date may, at the request of the Region or a lower-tier municipality, be determined by arbitration under the provisions of the Ontario Arbitrations Act. The 2005 Regional Transit funding be referred to the 2005 Regional business planning and budget deliberations in order to determine the funding for the transition and related costs associated with this recommended transfer; d) e) Subject to enactment by Regional Council, the Region of Durham Transit By- Law be forwarded to the Councils of the lower-tier municipalities requesting consenting resolutions, on or before December 8, 2004; and A copy of this report be forwarded to all area municipalities in Durham Region. REPORT: i.0 PURPOSE 1.1 The Business Case Analysis completed by Totten Sims Hubicki (TSH) recommends that the responsibility for transit services be transferred from the lower-tier municipalities to the Region, effective January 1,2006. The purpose of this report is to summarize TSH's findings, provide staff comments on their findings, and recommend next steps for consideration by Committee and Council. 5 REPORT#~_.~ 0(o Report No.: 2004-RTIC-7 Page No. 6 2.0 2.1 BACKGROUND On April 14, 2004, Regional Council authorized the Commissioners of Planning, Works and Finance to initiate a Business Case Analysis to assess the impacts of the potential transfer of transit services to the Region, including an examination of the issues raised by the area municipalities. In addition, Regional Council authorized the retention of consulting services to prepare the business case analysis. Pursuant to this resolution, and based on a competitive bidding process, TSH was retained on May 31,2004 to undertake the Business Case Analysis. The consultant team, in addition to TSH, included the following firms: 2.2 · McCormick Rankin Corporation (Transit Planning) · KPMG (Business Review/Organizational Management/Human Resources)~ · Aird & Berlis LLP (Legal/Labour Relations) · C.N. Watson and Associates Ltd. (Finance/Management/Governance) During the June-October period, TSH cOnducted the Business Case Analysis. Regional staff and area municipalities were consulted at various stages in the process for input. A copy of TSH's Business Case Analysis report is attached under separate cover (Attachment 2). 3.0 TSH REPORT 3.1 The TSH approach to the Business Case Analysis included: · Establishing a vision and proposed service standards for transit in Durham (see Attachment 2 - sections 5 and 6); · Identifying the need for integration of transit services across the Region to achieve this vision (see Attachment 2 - section 7); · Evaluating the alternatives to achieving this integration, including the Status Quo, Partial. Amalgamation (i.e. Whitby-Oshawa-Clarington) and Full Amalgamation (i.e. Regional Transit) options (see Attachment 2 - section 8); Report No.: 2004-RTIC-7 Pa~e No. T 3.2 3.3 · Establishing an amalgamated Regional Transit system as the preferred business delivery model to achieve this integration (see Attachment 2 - section 8); · Developing preliminary service plans for the Regional Transit system (see Attachment 2 - section 9); · Undertaking a comparison of the Regional Transit and Status Quo options, using the preliminary service plans as the basis (see Attachment 2 - section 10); · Developing a transition plan and terms and conditions for the transfer, (see Attachment 2 - section 11 ); · Developing an organizational structure for Regional Transit (see Attachment 2 - section 12); and · Identifying potential opportunities and risks associated with the transfer (see Attachment 2 - section 13). Based on the analysis, TSH recommends the transfer of the responsibility for transit services from the lower-tier municipalities to the Region, effective January 1,2006 (Effective Date of Transfer). It has also been recommended that 2005 be used to execute the transition. The Business Case Analysis concluded that the transfer of responsibility for the delivery of transit services to the Region is in the best interest of the residents of Durham. Specifically, TSH concluded that an amalgamated transit entity funded and operated by the Region has the highest potential to achieve: · an integrated network characterized by higher levels of inter- municipal and inter-regional travel and overall increased ridership; · enhanced conventional service; · seamless travel for specialized service patrons; · more balanced investment in transportation infrastructure; · spin-off economic benefits to the community; · sustainable upper-tier government subsidies; · liveable and environmentally sustainable community; · consistency with provincial growth management policies/strategies; · equity in service provision; and · public satisfaction. Report No.: 2004-RTIC-7 Page No. 8 4.0 4.1 4.2 4.3 POLICY FRAMEWORK TSH has recommended Regional Transit as the preferred business delivery model as it has the potential to achieve maximum increases in transit ridership. Any effort to increase transit ridership is consistent with the goals and objectives of the Community Strategic Plan (CSP), Regional Official Plan (ROP) and the Transportation Master Plan (TMP). Community Strateqic Plan (CS.P) The vision outlined in the CSP captures the type of community that the residents of Durham desire. It focuses upon six strategic objectives that will directly benefit from enhancements to transit service, and the resulting increases in transit ridership: Objective A: To strengthen and integrate the transportation system At present, only 4% of trips made in, to and through Durham, are made by transit. Enhancing transit service will lead to a stronger and more integrated transportation system, in that transit will be seen as a true alternative to the single occupant vehicle. Objective B: To protect and enhance the environment The transportation sector is one of the largest contributors to air pollution in the GTA. For example, 40 vehicles, each 9arrying a single occupant, produce six times the amount of carbon dioxide as a single bus carrying 40 passengers. Increasing transit ridership levels, therefore, has a tremendous potential to improve air quality in the Region. 8 Report No.: 2004-RTIC-7 Page No. 9 Objective C: To ensure balanced growth and liveable communities Traffic congestion in the GTA is largely occurring as a result of our dependence on the automobile. Increasing congestion is contributing to a poorer quality of life for Durham's residents, as their commuting times, commute distances and level of frustration increase, and their level of safety decrease. By increasing transit ridership, a more sustainable transportation system will emerge, that is capable of supporting the Region's objectives for balanced growth and liveable communities. Objective D: To support safe, healthy and caring communites To achieve higher levels of transit ridership, transit improvements are proposed not only for conventional' but specialized transit as well. As our society ages the need for specialized services will increase. Ensuring accessibility to all segments of the Region's population is paramount to supporting a safe, healthy and caring community. Objective E: To build the Region's economy Increased transit ridership and improved transit services will assist in attracting new employers, employees and businesses to the Region. A key factor to attracting new industries to Durham is ensuring that the potential labour force is well served by a variety of transportation modes, including transit. A second factor towards attracting new employers, is ensuring that goods can be moved effectively and efficiently. By facilitating measures which address traffic congestion (i.e. transit), the ability to move goods along key trade corridors will improve. 9 Report No.: 2004-RTIC-7 ~/~'TACHMENT# .... I To REPORT Page No. 10 Objective F: To increase partnerships and government effectiveness Recently both the Federal and Provincial governments have announced steps toward providing sustainable funding for transit through gas taxes. These funding initiatives are consistent with growth objectives expressed by the Province through their "Places to Grow" initiative, and the Federal Government through their Sustainable Transportation and Air Quality initiatives. Improved levels of transit service are key to achieving the objectives of these programs, and as such, they provide greater opportunity to foster funding partnerships with senior levels of government. 4.4 Re.qional Official Plan (RO?) The ROP advocates the creation of liveable urban environments for the enjoyment of present and future residents, through the provision of distinct urban areas that are oriented to people, and through improvements to transportation linkageS both within the Region and between the Region and adjacent areas. The Plan further expresses that this goal be achieved through compact, efficient and accessible urban areas, that are supportive of transit, and which lead to increased public transit usage. Measures to increase transit ridership levels are therefore consistent with the directions of the current ROP and the directions being expressed through the ongoing OP review. 4.5 Transportation Master Plan (TMP) The TMP, endorsed by Regional Council in December 2003, outlined a transportation vision (2021) for the Region. The vision is that "the auto continues to be the dominant mode of transportation; however, the community has realized a shift towards greater use of transit, pedestrian and cycling facilities". The Plan acknowledges that diversion to transit (from auto) is a key element to achieving this vision, and recommends that the Region take an active role in promoting measures to reduce forecast 2021 peak period automobile trips by 15% below projections, based on current mode choice trends. The Plan estimates that achieving this goal would require quadrupling transit ridership in the Region by 2021. 10 Report No.: 2004-RTIC-7 Page No. 11 5.0 5.1 5.2 5.3 5.4 FINANCIAL IMPACT ANALYSIS In order to address the costs associated with an integrated transit strategy for Durham, preliminary transit service operational plans were developed for both conventional and specialized transit. TSH performed an assessment of the necessary investments for conventional and specialized transit in terms of both capital and operating costs, and addressed the implications of transferring the responsibility to the Region, in terms of cost allocation and funding sources. For the purposes of the financial analysis, TSH examined the Full Amalgamation and Status Quo scenarios. In addition, the Status Quo option was only examined as a benchmark for comparison. The Status Quo scenario is described as a continuance of the local transit service in a "business as usual" approach with additional costs associated with planned fleet expansion and other costs rela.ting to the Durham D-Pass, UOIT student pass and other Transit Improvement Plan (TIP) programs previously forecast. Funding would be raised through local municipal levies and development charges, supplemented by the Regional TIP recommendations and provincial/federal funding programs. Full Amalgamation would consist of conventional and specialized transit incorporated into a "regional" organization. This would include amalgamation, transition and implementation costs as well as service enhancements such as the GO fare subvention agreement and Region wide transit planning and monitoring. Funding would be raised through Region-wide property taxes, development charges and supplemented by provincial/federal funding programs. !1 Report No.: 2004-RTIC-7 Page No. 12 5.5 Costin_q Analysis. 5.5. f Assumptions and Commentary There are some key assumptions and propositions underpinning the TSH estimated cost forecast, which accounts for the significant additional costs of a Regional transit system when compared to either the TSH's Status Quo scenario or the approved 2004 net expenditure levels. 5.5.1.1 Pre-Amalgamation Assumptions For conventional transit, TSH has included pre-amalgamation planned service improvements provided by the local transit agencies for the introduction of Rossland-Taunton service in the City of Oshawa in conjunction with the Town of Whitby, as well as enhancement to regular routes and schools. These are estimated to cost about $2.3 million in 2006 on a net basis, up from $255,000 in 2004, which would have to be financed by the Region under Regional transit. ' 5.5.1.2 In addition, TSH has assumed that under the. Status Quo scenario of continued area municipal transit, the net operating costs of the area municipalities will increase from $16.7 million as budgeted in 2004 to $21.7 million in 2006, a $5.0 million increase, largely funded from property tax. TSH has also assumed a $t .3 million increase in capital although this is more than offset by the newly announced gas tax revenue. Proposed Service Enhancements and Harmonization There are significant proposed service enhancements and harmonizing costs contained in the TSH scenarios as outlined in the previous section. These costs will require increased funding, from property tax, either by the area municipalities orthe Region. 12 Report No.: 2004-RTl C-7 Page No. 13 5.5.'1.3 One Time and Ongoing Amalgamation Costs Another key assumption is that ongoing amalgamation costs for conventional transit starting in 2006 will introduce about $1.7 million in new Regional costs every year. The biggest anticipated contributor is the migration of the compensation packages of the separate unions currently in place. Further, some area municiPalities currently provide some indirect administrative support to their respective local transit providers for such functions as finance (payroll, payables, purchasing, and accounting services) and human resources. With the creation of a Durham Regional Transit service, TSH has estimated that the Region would be required to increase the Regional full time support staff to perform these functions for the new Regional system, at an annual estimated cost of $600,000. For specialized transit, ongoing amalgamation costs are anticipated to add about $256,300 per year in new Regional costs each year potentially starting in 2006. The anticipated amalgamated capital requirements will be about $573,000 in 2005, but decreasing to about $180,000 per year for conventional transit and $15,000 for specialized transit starting in 2007. These costs are assumed to be funded from property tax revenue in the year incurred. These costs are due to image rebranding such as bus decals/repainting, new uniforms, and bus sign replacements 5.5.1.4 Capital Requirements A comparison of the TSH capital forecast to actual historical capital expenditures suggests substantial capital investment in transit is required under a Regional system to maintain the fleet at a reasonable state as well as to accommodate the proposed introduction of new services. 13 Report No.: 2004-RTI0-7 Page No. 14 TSH has proposed that between $10.3 and $11.3 million per year starting in 2006 is required to address the aging conventional fleet as well as the service expansion. The key requirements under their plan calls for the replacement of 10 conventional buses per year, expanding the fleet by 5 conventional buses per year, refurbishing 8 conventional buses per year, and replacing 2 non revenue vehicles per year over the forecast period. They have also proposed facility replacement and expansion that will range in cost between $2.3 million in 2006 to $648,000 in 2008. In 2009 and 2010, they have included the construction of a new 150 vehicle transit operations centre, at a total cost of $21.8 million to be constructed in 2009 and 2010. For specialized transit, TSH has estimated fleet, facility, and refurbishing under a Regional system will cost as Iow as $236,000 in 2006 and as high as $399,000 in 2008. In terms of capital financing, TSH anticipates annual development charge revenues of $1.2 million, the issue of $20 million in debt for the new transit operations centre and an amount of gas tax subsidy reflective of'the October 22, 2004 Provincial announcement. The balance of th~ capital financing required, including the annual debt payments, is assumed to come from property tax financing, 5.5.2 Net Operating Cost Forecast TSH estimated the 5 year net operating costs for a Regional transit system as compared to the status quo as follows: TABLE 1 Estimated Net Operating Cost of Transit (per TSH) 2006 ($000's) 2004 2006 2007 2008 2009 2010 Status Quo Conventional Transit 15,04S 19,690 20,352 20,771 21,184 21,680 Specialized Transit 1,623 1,984 1,994 2,004 2,184 2,194 !Total Operating Status Quo 16,672 21,674 22,346 22,775 23,368 23,874 Regional Transit Conventional Transit~ 1,40C 22,687 23,623 24,828 24,036 23,903 Specialized Transit 0 2,440 2,450 2,460 2,680 2,680 Total Operating Regional Transit 1,400! 25,127 26,073 27,288 26,716 26,583 $ Difference Regional from "Status Quo" 3,453 3,727 4,513 3,348 2,709 % Change Regional from "Status Quo" 15.9% 16.7% 19.8% 14.3% 11.3% % Change Regional from 2004 Municipal 50.7% 56.4% 63.7% 60.2% 59.4% Notes 'The 2004 Regional TIP expenditures for Durham Pass, UOIT Student Pass Programs, etc. 14 Report No.: 2004-RTIC-7 Page No. 15 Based on TSH's estimates, a Regional transit system is expected to incur additional net operating costs of $3.5 million, or approximately 16%, more than if transit remained the responsibility of the local municipalities during 2006. Further, the net operating cost of a Regional transit system is anticipated to increase by $8.5 million, or approximately 51%, to $25,1 million in 2006 from the current 2004 net operating cost of $16.7 million. 5.5.3 Capital Cost Forecast TSH estimated the 5 year capital cost and financing for a Regional transit system as compared to the Status Quo option as follows: TABLE 2 Estimated Capital Forecast and Financing of Transit (per TSH) 2006 (S000's) 2004 2006 2007 2008 2009 2010 Status Quo Capital Expenditures Conventional Transit 8,176 9,931 6,089 9,485 7,569 7,594 Specialized Transit 618 156 356 499 0 500 Total Capital Status Quo 8,794 10,087 6,445 9,984 7,569 8,094 Less Financing Subsidies i 830 5.395 6.640 6,640 6.640 6.640 Development Charges 1.230 1.230 1,230 1.230 1.230 1.230 Subtotal 2.060 6,625 7.870 7.870 7.870 7,870 Required Financing from another source 6.734 3.462 -1.425 2,114 -301 224 Regional Transit Capital Expenditures Conventional Transit 0 13,063 12,366 12.878 21.952 21.73C Specialized Transit 0 256 241 414 15 15 Annual Debt Payment 0 0 0 0 0 1.359 Total Capital Regional 0 13.319 12.607 13,292 21.967 23.104 Less Financing Subsidies ~ 0 5.395 6.640 6.640 6.640 6.640 Development Charges 0 1.230 · 1.230 1.230 1.230 1.23C Debt2 0 0 0 0 10,000 10,00(3 Subtotal 0 6,625 7,870 7,870 17,870 17,87C Required Financing from another source 0 6,694 4,737 5,422 4,097 5,234 Difference Net Capital Financing Regional ($) 3,232 6,162 3,308 4,398 5,010 from "Status Quo" (%) 93.4% 432.4% 156.5% 1461.1% 2236.60/[''' Notes ~ Assumed amounts of provincial funding announced on October 22, 2004 and used for capital except when surplus occurs to be used for operating budget Debt issued for $10 million in 2009 and 2010 for a term of 10 years at 6%. This negative change reflects the additional gas tax subsidy over the forecast period 15 Report No.: ATTA ...HM~:N" :~ 2004_RTIC.7:~"~ Page No. 16 TSH identified that the capital expenditures on conventional and specialized transit was about $1.0 million in 2000 and 2001, $5.7 million in 2002, $2.5 million in 2003, and had increased to $8.5 million in 2004. Based on TSH's estimates, the 2006 property tax supported capital program of a Regional transit system is expected to cost about $3.2 million or 93.4% more in 2006. 5.5.4 Total Cost of Transit The total net cost of operating and capital estimated by TSH is as follows: TABLE 3 Total Net Operating and Capital Costs of Transit (per TSH) 2006 ($oo0's) To Be Financed from Property Tax 2004 2006 2007 2008 2009 201(~ Status Quo Net Operating Cost 16,672 21,674 22,346 22,775 23,368 23,874 Net Capital 6,734 3,462 - 1,425 2,114 -301 224 Total 23,406 25,136 20,921 24,889 23,067 24,098 Regional Transit Net Operating 1,400 25,127 26,073 27,288 26,716 26,583 Net Capital 0 6,694 4,737 5,422 4,097 5,234 Total 1,40C 31,821 30,810 32,710 30,813 31,81.7 Difference Regional from "Status Quo" ($1 6,685 9,889 7,821 7,746 7,719 (%1 26.6% 47.3% 31.4% 33.6% 32.0% % Change Regional from 2004 Municipal 36.0% 31.6% 39.8% 31.6% 35.9% Based on TSH estimates, a Regional transit system is expected to cost approximately $6.7 million, or 27%, more than if transit remained the responsibility of the local municipalities in 2006. Further, the total property tax supported requirements of a Regional transit system is anticipated to increase by about $8.4 million, or 36%, to $31.8 million in 2006 from the current 2004 net cost of $23.4 million. Report No.: 2004-RTIC-7 Page No. 17 5. 5. 5 Provincial Sharing of Gas Tax Revenue The Provincial Government announced on October 22, 2004, that over the next three years, they will invest 2 cents a litre of the provincial gas tax into public transit about $680 million. 'l'his is new funding above and beyond the government's current existing commitments. Beginning in October of this year, muniCipalities will receive one cent a litre of the gas tax, growing to one and a half cents next October, and two cents in October 2006. The Provincial government's funding formula for the amount each municipality will receive is based on 70 per cent ridership and 30 per cent population. The amount of gas tax funding each municipality in Durham will receive for the period October 2004 to October 2007 is as follows: Table 4 Local Municipality Gas Tax Allocation(1 cent/litm) Gas Tax Allocation{1.5 cent/litre) Gas Tax Allocation(2 cent/litre) October 2004 to October 2005 October 2005 to October 2006 October 2006 to October 2007 Ajax Pickedncj Transit Authority $1,176,793' $1,765,190 $2,353,586! i Oshawa T~a,~it Commission $1,137,179 $1,705,769 $2 274,358 Clarlnuj[on $363,9~ . $.545,994 $727,992 Whitby $589,336 $884,004 $1,178,672 Uxbdd~e/Scogog $52,736 $79,104 $105,472 Total $3,320,040 $4,980,060 $6 640,080 5.6 Property Tax Analysis The analysis by TSH focuses on the impacts of moving from their estimated 2006 scenario of locally provided transit (the "Status Quo" scenario) to a 2006 Regional Transit system. The TSH analysis assumes that the various service enhancements and associated capital requirements would occur over 2005 as outlined in their report. As estimated by TSH, the local area municipal property tax requirement for transit in 2004 was approximately $12.6 million (based on the TSH 2004 net estimated cost of $23.4 million shown in Table 3 less other non property tax funded costs and the 2004 Regional transit tax contribution of $7.05 million). 17 Report No.: 2004-RTIC-7 In contrast, under the 2006 Status Quo scenario of locally provided transit, the area municipal property tax requirement would be $22.7 million (based on TSH net $25.1 million cost estimate). This reflects the increased service enhancements and associated capital requirements suggested for 2005 by TSH. As well, Regional staff assumed that the Region would fund TIP programs (Durham D-Pass, UOIT Student Pass program) estimated to cost about $1.6 million but not levy the remaining $6.8 million currently included in the Regional Budget. The following table outlines the average residential tax impact of this shift from the budgeted 2004 tax requirement to the TSH estimated 2006 "Status Quo" scenario: Table 5 ,,, Average Residential Taxpayer Property Tax Impacts · Comparis0n of 2004& 2006.~ Locally provided Transit Plckering Average Residential Taxpayer Impact ($): Ajax Whitby Oshawa Clarlngton Scugog Uxbridge Brock 2004 E~timated Taxes fer Averaae Home Regional Taxes ($8.4m) 44 44 44 44 44 44 44 44 Local Taxes ($12.6m) 74 82 66 ~ 12 2004 Total Estimated Taxes 118 126 110 156 44 44 44 44 2006 E~im~ted Taxes for Averaoe Home Regional Taxes ($1,6m) Note 1 8 8 8 8 ~ 8 6 8 Local Taxes ($22.7m) Note 2 162 168 96 ~66 41 2 2006 Total Estimate Taxes 170 176 104 174 49 8 8 10 Chance tn T~xes from 2004 t0 2006 Regional Taxes (36) (36) (36) (36) (36) (56) (36) (36) Local Taxes 85 8c3 30 54 41 2 Estimate Tax Change from 2004 to 2006 52 50 ' (6) 18 5 (36) (36) (34) Percentage Change 44% 40% -5% 12% 11% -82% -82% .77% 1. Assume Regional Transit Levy is $1.6m for RTIP Program 2. Assume Local Municipalities tax for transit needs with no offsetting Regional Levy Contribution 3. 2004 & 2006 Estimated Total Local Transit Costs provided by Consultant (TSH) 4. Based on Average 2004 Residential Home CVA of $250,000 t8 Report No.: 2004-RTIC-7 '~':" Page No. 19 It should b'e noted that impacts on the Town of Whitby vary from the other southern lower tier municipalities. It is our understanding based on the information provided by TSH that the Town's 2004 capital program was at an extra-ordinarily high level compared to the 20~6 forecast, which appears to account for the estimated decrease in property tax requirement from 2004 to 2006. Two alternative approaches of cost allocation were considered by staff. The first approach was allocating the costs using 100% equalized assessment and the other was a formula that considered combinations of equalized assessment and service level to be phased in to 100% equalized assessment ove~ a period of time. It is important to note that the analysis in the section is based on the current 2004 assessment and approved tax requirements as identified by TSH. For more specific local property tax analysis, the Area Municipal Treasurers should be consulted. 5.6.1 Equalized Assessment Staff first considered allocating the net cost using 100% equalized assessment like other regional services. This approach reflects the methodology used for other Regional services and as such, the transit related cost should be allocated on the same basis. Further this approach is easily administered and the data can be independently derived and easily verified compared to other approaches. The TSH Business Case Analysis considered the comparison of the 2006 "Status Quo" locally provided transit at a cost of $25.1 million ($22.7 million funded from property tax) to the 2006 Regional transit scenario system at an estimated net cost of $31.8 million ($23.4 million funded from property tax and $8.4 million from the existing Regional Transit Levy). 19 Report No.: Using the weighted equalized assessment approach, the potential property tax impacts by area municipality on an average residential home using 2004 assessment data would be as follows: Table 6 Average Residential Taxpayer Property Tax Impacts Regional Transit: 2006 2004 Regional Tax ($8.4m) 100% Regional Assessement Based Tax Increase Pickering 44 123 Average Residential Taxpayer Impact ($): Ajax Whitby Oshawa Clarington Scugog Uxbrldge Brock 44 44 44 44 44 44 44 123 123 123 123 123 123 123 Total 2006 Estimated Regional Transit Taxes 167 167 167 167 167 167 167 167 Status Quo: 2006 Locally Provided Municipal Transit + RTIP Initiatives Note 1 & 3 2006 Estimated Taxes (170) (176) (104) ('174) (49) (8) (8) (t0) INet Estimated Change in Taxation in 2006 (3) (9) 63 (7) 118 159 159 157 ,J 1. Assume Regional Transit Levy is $1.6m for RTIP Program 2. Assume Local Municipalities tax for transit needs with no offsetting Regional Levy Contribution 3. 2004 & 2006 Estimated Total Local Transit Costs provided by Consultant (TSH) 4. Based on Average 2004 Residential Home CVA of $250,000 5.6.2 Weighted Assessment and Service Levels The second option considered including allocating 50% of the net cost of transit on the basis of equalized assessment and the other 50% based on service level received (based on the TSH estimates of the 2006 relative shares of service level by area municipalities). This formula allows the property tax generated in each area municipality to be linked to the level of benefit received under a Regional transit system. While area municipalities that receive only minimal service will not pay the full cost, they will still contribute to 50% of the cost because Regional Transit provides indirect benefits to their local communities and economies as identified by the consultant team. 2O Report No.: 2004-RTIC-7 Page No. 2'1 The following table provides the average residential property tax impact under this allocation approach: Table 7 Average Residential Taxpayer Propert7 Tax Impacts 'i~::comPans Average Residential Taxpayer Impact ($): Picketing Ajax Whltby Oahawa Cladngton $cugog Uxbridge Regional Transit: 2006 2004 Regional Tax ($8.4m) 44 50% Regional Assessernent Based Tax Increase 39 50% Local Municioal Service Level Based Tax Increase 104 Brock 44 44 44 44 44 44 44 39 %9 39 39 39 39 39 93 77 !26 32 6 6 12 Total 2006 Estimated Regional Transit Taxes 187 176 160 209 115 89 89 95 Status Quo: 2006 Locally Provided Municipal Transit + RTIP Initiatives Note 1 & 3 2006 Estimated Taxes (170) (t76) (104) (174) (4S) (8) { 8) (10) INet 17 SS 35 66 81 81 85 J Estimated Change in Taxation in 2006 1. Assume Regional Transit Levy is $1,6m for RTIP Program 2. Assume Local MunicipaJities tax for transit needs with no offsetting Regional Levy Contribution 3 2004 & 2006 Estimated Total Local Transit Costs provided by Consultant (TSH) 4 Based on Average 2004 Residential Home CVA of $250,000 5.6.3 While this allocation formula would be inconsistent with the approach of weighted assessment used for other Regional services, it would ease the initial tax-related implementation in those municipalities currently without a formal transit system. Future Property Tax Allocation The net cost allocation could be phased over a minimum 5 year period with a 10% step annually until 100% equalized assessment is reached in 2011. This would be reviewed annually at the time of the annual Regional Transit Servicing and Financing Study. The experience of other Ontario Regions in allocating the net cost of transit during the first years of a regional system transferred from the area municipalities were examined in the TSH's report and Durham's recommended allocation is consistent with their findings and best practices. 21 Report No.: 2004-RTIC-7 Page No. 22 5.7 Financial Risks 5.7.1 The following are potential financial risks associated with the transfer: Competing Capital Needs Based on TSH's estimated capital forecast, Regional Transit will require significant capital investment over the next 5 years as compared to historical levels. These estimated transit capital requirements will be a significant competing demand with other infrastructure needs for limited Regional financing. Financing all of these capital requirements will not be feasible nor sustainable without significantly increasing the Region's property taxes, or the realization of significant senior government financial assistance. 5.7.2 Implications for Debt Capacity Regional governments only have a certain level of sustainable deb. t they may issue and can carry before it materially deteriorates their financial flexibility and credit rating, which would increase the future cost of borrowing as well as the amount of debt the Region could issue in the future. Further, it is not good business practice to fund ongoing annual capital expenditures, such as regular rehabilitation and replacement of rolling stock. Durham Region is firmly committed to "pay as you go" financing, maintaining Iow debt levels, and ensuring "growth pays for growth", which has contributed to its strong track record of prudent fiscal management and triple AAA credit rating. Therefore, it is not recommended that the proposed capital program. for replacement and ongoing expansion be funded from debt. Based on TSH's preliminary capital'forecast, the Region could become exposed to unsustainable and high debt levels (approximately $100 million by 2014). However, debt may be appropriate for the $20 million transit operations centre proposed in the time period 2009-2010. 22 Report No.: 2004-RTIC-7 Page No. 23 5. 7. 3 Financial impfications of Service Expansions and Amalqamation Introducing new and/or expanding transit service can require significant operating and capital funding especially if the expanded services turns out not to yield the expected fare revenue. In addition, the proposed fare harmonization with the increased fares in Ajax and Pickering could result in a short term decrease in revenue. As well, the capital cost forecasts related to purchasing new buses and/or more frequent refurbishing and replacement of existing buses, and operating cost forecasts related to salary and wages of drivers, inspectors, and administration staff, and new administration costs are estimates which may be exceeded thus requiring additional funding. 5.7.4 Unfunded Liabifities TSH has identified the unfunded liabilities related to providers and area municipalities. As an example, Appendix A of Attachment 2 refers to unfunded liabilities of $8.6 million for "employee future benefits" for Oshawa Transit Commission alone. There is a significant risk that these could be understated and/or pose additional financial costs. If transit is transferred to the Region, the Region would potentially be exposed to those risks. The amount of unfunded liability existing.at the time of the Effective Date must be determined through negotiations between the Region and the affected area municipalities and the Region must receive the necessary funding from the transferring corporation or agency. Report No.: 2004-RTIC-7 Page No. 24 6.0 OTHER POTENTIAL RISKS 6.1 A number of potential risks exist, beyond those identified above in section 5.7. 6.1.1 Preliminary Service Plans The service operational plans prepared by TSH are preliminary and are based upon plans provided by the local municipalities and Handi-Transit. A detailed assessment of regional service needs has not been undertaken, nor has there been any detailed development of potential future routes or schedules. This analysis is critical to confirming manpower and vehicle requirements, and associated costs over time. TSH has recommended that a detailed transit operations service plan be prepared during the transition year (2005) at an estimated cost of $100,000, to determine priorities on a year by year basis, to reflect growth patterns. Given that APTA did not provide plans to be incorporated, and that the preliminary plan represents local plans which are currently in place, it is quite likely that operational and capital costs associated with the plan have been underestimated. 6.1.2 Impacts on the Existinq Unionized Reqional Workforce There are several collective agreements in place covering the unionized staff of OTC, APTA, and Whitby Transit, and these agreements contain significantly different salary and benefit provisions. With the transfer of transit to the Region, TSH has indicated that there will be movement, through the collective bargaining process, toward the most generous of these arrangements. TSH has estimated that the cost of harmonizing salary and benefit structures for the various unionized transit staff will be significant. Another potential risk that has not been addressed in the Business Case Analysis is that if the unionized transit employees and the Region enter into a contract that provides enhanced benefits for transit employees, the same benefits may be demanded by the existing unionized workforce in the Region. ?_4 Report No.: 2004-RTIC-7 d_ o or: - Page No. 25 6.1.3 Impacts of Non-unionized Staff transferrin.q to the Re.q/on.. As noted above, TSH has estimated that the harmonization of salaries and benefits of the unionized employees transferred to the Region will be significant, however the cost of harmonizing non-unionized employee benefits and salaries has not been calculated. Provisions have been made in TSH's analysis, only for new Regional staff and indirect staff costs related to expanding the number of transit support staff. 7.0 7.1 TRANSITION Should Council agree to adopt the Business Case Analysis to go forward with the transfer of transit services to the Region, and a triple majority vote is reached, TSH has recommended the following interim organization to oversee the transition between January 1,2005 and December 31,2005: 7.2 · A Transition Working Committee (TWC) to oversee and manage implementation activities during the transition period; · Subcommittees to manage activities related to: human resources, finance, communications/marketing, legal, operations/planning, and, implementation; and · An "Oversight Subcommittee" to monitor and ensure quality control of the transition implementation plan. The TWC would report through the CAO to RTIC and Council through the course of the transition. TSH has provided a list of action items (i.e. transition plan) that need to completed prior to start up of a Regional Transit System on January 1,2006 (Attachment 2 - Tables 11.1- 11.6). Key activities will include: Report No.: 2004-RTIC-7 Page No. 26 · Undertaking the necessary work to ensure that the required operating approval and Public Vehicle Operating License is in place; · The creation and staffing of the new Regional Transit organization; · The development and implementation of operational, financial, legal, administrative, and human resource policies and systems; · The development of short term operating plans and long-range service plans detailing system improvements in terms of routes, services, equipment and staffing; and · The negotiation and execution of agreements with local municipalities regarding transfer of assets, DC Reserves, debt, liabilities, etc. 7.3 Transition of Financial Functions and Responsibilities The Regional Finance Department concurs with TSH's list of finance related implementation tasks to be undertaken during 2005 if transit is to become a Regional responsibility in 2006. Regional Finance staff also concur with TSH's recommendation that a Finance sub committee be formed to implement these required finance related tasks. The complexity and time required to undertake and resolve the identified financial issues should not be underestimated. Having effective and fully functional financial logistics in place will be critical to having an operational and accountable transit system. 7.4 Accountinq, Purchasing and Payroll During the transition year, the Regional Finance Department will retain a consultant to conduct an evaluation of the area municipalities' transit related purchasing, accounting, and payroll systems, processes and policies and then integrate them into a Regional system. Further, in early 2006, the consultant will also conduct a reconciliation of the 2005 financial statements, and an assessment of the associated transferred historical financial and corporate information as soon as possible and, provide to the Regional Treasurer and Council fo~' information. Report No.: 2004-RTIC-¥ Page No. 27 7.5 Budgets and Annual Business Plans and Reportin.q Requirements If transit is to be transferred to the Region effective January 2006, area municipalities will be required to continue to approve a 2005 transit budget and financial statements, and exert normal budget control policies as well as continue to file any necessary transit related reporting requirements for 2005. Once the transfer occurs in January 2006, the Regional Finance Department will integrate the budgeting of a new regional transit system into its current annual budget and business planning process. Further, the Regional Finance Department will also produce an annual transit servicing and financing study similar to the other studies conducted on regional services like waste, water and sewerage, social housing, roads, etc. 7.6 Leases and Other Financial Obligations Any new lease renewal or long term financial commitment, including but not limited to debt, beyond January 2006, will need to be submitted to Regional Council for pre-approval. 7.7 Development Charges TSH has identified that sections 188 to 193 of the Municipal Act, 2001 provide the legal procedures and mechanisms for the transfer of powers between tiers, as well as the subsequent implications for which they believe development charges would pertain. According to these sections, an existing by-law of a lower tier municipality related to the transferred power shall become the by-law of the upper tier municipality. It will remain in effect until the earlier of two years after the Effective Date of Transfer, and the day the existing by-law is repealed by the upper tier municipality. Report No.: ATTACHHENT #1_J__TO REPORT .0 2004-RTIC-7 Page No. 28 As such, TSH suggests that the lower tier development charge by-laws could remain in place after the transfer date of transit to the Region. The local municipalities could continue to charge and collect transit development charges and remit them to the Region, until the Region amends its current development charge by-law within a maximum of 2 years from the effective transfer date. TSH has also suggested that lower tier municipalities could just amend their development charge by-laws without having to repeal them, thereby avoiding a whole new development charge process. During 2005, the Regional Commissioner of Finance will work with the Area Municipal Treasurers to establish a process whereby the local municipalities will continue to collect development charges for transit and remit them to the Region, until the Region can introduce or amend its own Development Charge by-law beginning January 1,2006. This approach would retain the area municipal control and use of the transit Development Charge revenue in 2005 with the necessary 2005 reporting to be complet.ed by the Area Municipalities. It is also recommended that during this period beginning January 2006, the local municipalities should be requested not to amend their respective development charge by-laws to alter any transit related provisions. Further, it is recommended that the local municipalities transfer to the Region the transit-related DC Reserve Fund balances as of December 31,2005 as well as any other applicable transit development charge information in order to permit the Region to assume the necessary financial control and reporting requirements beginning January 1,2006. Further, the Regional Finance Department will begin to undertake the process of introducing or amending its development charge background study and by- law with the assistance of the Regional Planning and Works Departments as well as the new Transit Department. This process requires the Region to prepare a transit capital forecast based on a sound plan or business case, plus a background study, by-law, public meetings, and adoption.. 28 Report No.: 2004-RTIC-7 Page No. 29 7.8 Transfer of Assets and Liabilities Physical Assets TSH has identified a list of existing transit assets for each agency and Handi Transit as summarized in section 3.3 of Attachment 2. TSH has recommended that the "Cumming Principle" govern the transfer of assets to the Region. This principle means that all local transit assets .should be transferred to the Region at no cost as taxpayers should not be expected to pay for the assets twice. Regional staff concur with TSH's recommendation that all physical transit-related assets such as vehicles and buildings be transferred to the Region at no cost, and that site inspections and environmental site assessments be undertaken prior to transfer in order to fully understand potential liabilities. It is further recommended that the transfer of physical assets that are jointly used for transit as well as other purposes by area municipalities also be transferred to the Region with no compensation. In any disagreement over physical asset transfer, TSH recommends'that an independent arbitrator be retained to provide dispute resolution and mediation services. Regional staff will work with area municipalities to update and finalize the listing of assets to be transferred to ensure that appropriate insurance and inventory measures are in place for the January 1,2006 transfer. Once the Region has ownership of the physical assets, Regional staff will initiate a comprehensive valuation and evaluation of the condition of all assets. Transit will be included in the Region's existing asset management strategy to ensure that these assets are maintained and replaced in the most productive and cost effective manner. Report No.: 2004-RTIC-7 Page No. 30 Transit Reserve and Reserve Fund Balances, Grants, and Subsidies TSH has identified the transit related reserve and reserve fund balances of the lower tier municipalities for the last 3 years from their respective financial information returns. Regional finance staff concur with TSH's recommendation that any transit- related funds including uncommitted reserve fund balances (e.g. development charges), reserves, and grants (known and new) of area municipalities should be transferred to the Region as of January 1,2006, if transit becomes a Regional responsibility. With regards to the collection of transit development charges after January 1, 2006, it is recommended that the area municipalities remit them on a monthly basis to coincide with the collection of regional development charges with annual reconciliation statistics subject to review by the Regional auditor until the introduction of a new or revised Regional DC By-law. If a dispute arises among the Region and the area municipalities, the arbitrator will intervene and provide mediation. It is also recommended that Regional Council establish the appropriate reserves and reserve funds in late 2005. Once the funds are transferred to the Region, they will be placed in these new funds. These funds will be used for smoothing future Regional transit expenditures and for any unforeseen circumstances that may arise. Further, the Regional Finance Department will investigate all available senior government grant and subsidy opportunities and apply for them should they be appropriate and attainable for financing Regional Transit. 3O Report No.: 2004-RTIC-7 Page No. 31 7.9 Debt and Any Unfunded Liabilities Any transit related debt obligations and unfunded liabilities will be reviewed by the Regional Treasurer in conjunction with Area Municipal treasurers, to provide recommended terms for potential transfer to Regional Council for approval prior to January 1,2006. As recommended, if a dispute arises among the Region and the area municipalities, the arbitrator will intervene and provide mediation. 7.10 Regional Financinq for Local Transit Initiatives Since 2002, the Region has been funding about $12 million per year from property taxes for transit purposes, with approximately $3.6 million used to finance the Region's share of GO transit capital. In accordance with Regional Council direction, the remaining $8.4 million has been set aside for transit improvement initiatives with $7.05 million provided to the local area municipalities for transit. It is recommended for 2005 that this Regional Transit Budget commitment be used by the Region to offset expected transition and amalgamation costs as well as fUture capital and operating needs. It is anticipated by TSH that the Region will incur approximately $4.0 million in transition costs in 2005. As well, there may be additional transition and related costs incurred prior to assumption by the Region. If transit becomes a Regional service in 2006, these funds would be applied to the new Regional Transit system. 8.0 NEXT STEPS 8.1 Pursuant to the recommendation of the Business Case Analysis, and subject to a triple majority approval of the Region of Durham Transit By-law (Attachment 1), it is recommended that the Region of Durham: Use the transition period (i.e. Date of Transit By-law approval to the effective date of transfer) to complete the transition activities; Report No.: 2004-RTIC-7 Page No. 32 Complete the transfer of service by, and initiate Regional transit service on, January 1, 2006; Inform the Provincial and Federal governments of the creation of a Durham Regional transit system and pursue the acquisition of additional Provincial/Federal government funding; Extend the mandate of the Regional Transit Implementation Committee (RTIC) of Council to oversee the transfer of transit services; and Endorse the establishment of a Transit Working Committee (reporting to RTIC) with a mandate to undertake the necessary action items. 8.2 It should be noted that the Region of Durham Transit By-Law, once adopted by Regional Council, cannot be amended. Any resolution from an area municipality with a proposed .modification will be considered not in support of the transfer of transit responsibility. 8.3 TSH will be available, upon request, to present the findings of the Business Case Analysis to local municipal councils, if requested. 8.4 Departments. A. L. Georgieff,--'7~.fC(I P, R P P Commissioner of Planning This report has been prepared in consultation with Human Resources and Legal Clifford Curtis, P Eng, MBA, Commissioner of Works Commissioner of Finance Report No.: 2004-RTIC27 Page No. 33 RECOMMENDED FOR PRESENTATION TO COMMITTEE Garry H. Cubitt, M.S.W. Chief Administrative Officer Attachments: Region of Durham Transit By-law TSH Business Case Analysis Report (Under Separate Cover) ATTACHMENT 1 BY-LAW NUMBER - 2004 OF THE REGIONAL MUNICIPALITY OF DURHAM A by-law to transfer all of the lower-tier power relating to public transportation systems, other than highways, to the Region from all of its lower-tier municipalities. WHEREAS Section 189 of the MunicipalAct, 2001, S.C. 2001, c. 25 (the "Act") provides that an upper-tier municipality may pass a by-law to provide for the transfer of all or part of a lower-tier power to the upper-tier municipality from one or more of its lower-tier municipalities which are specified in the by-law; AND WHEREAS public transportation systems, other than highways, are defined in Section 188 of the Act as a lower-tier power that may be transferred to an upper-tier municipality; AND WHEREAS the The Regional Municipality of Durham (the "Region") desires to assume all of the power relating to public transportations systems other than highways ("Public Transportation Systems") from all of its lower-tier municipalities; NOW, THEREFORE, BE IT ENACTED AND IT IS HEREBY ENACTED as a by- law of The Regional Municipality of Durham through the Council thereof as follows: All of the power of lower-tier municiPalities with respect to Public Transportation Systems shall be transferred to the Region effective January 1,2006 (the "Effective Date"). On the Effective Date, all rights and obligations and all assets and liabilities of the lower-tier municipalities pertaining to or used for Public Transportation Systems including all real and personal property and all interests and obligations in any agreement, shall be transferred to the Region subject to the following terms and conditions: Operations (a) As of the Effective Date, the Region shall operate, maintain and regulate the use of a Public Transportation System for both conventional and specialized services. (b) The Region shall maintain the existing overall revenue hours of service in effect as of May 1,2004, with the addition of the Rossland/Taunton "beltline" service jointly planned by the City of Oshawa and the Town of Whitby, the planned service realignments in Oshaw-a and Whitby for implementation in 2004/2005 and enhanced specialized transit service in Oshawa as a result of a vehicle acquired in 2004. (c) After the Effective Date, the Region may enter into agreements with any adjoining municipality or the Province for the provision of public transportation services. Asset Transfer (d) All phYsical assets used for public transportation systems in whole or in part shall be transferred to the Region without compensation as of the Effective Date. Assets shall include, but not be limited to, (i) vehicles and equipment; (ii) lands and premises including garages, terminals and Shelters; and (iii) other transit amenities. (e) The transfer of all transit-related assets shall be subject to confirmation of inventories, appropriate asset valuations and environmental site assessments. Such inventories shall include all transit-related assets of the lower-tier municipalities and transit agencies as at the Effective Date. (f) Discretionary transit-related funds including reserves and reserve funds existing on the Effective Date shall be transferred to the Region. (g) All transit-related development charge and other non-discretionary reserve funds shall be transferred to the Region. (h) (i) Lower-tier municipalities shall continue to collect transit development charges where applicable until their by-laws expire or are repealed, including periods beyond the Effective Date. All such development charges shall be transferred to the Region. The transit-related provisions of the development charges by-laws shall not be changed after this by-law has received the necessary triple majority approval without the approval of the Region. After the Effective Date, all Provincial and Federal transit-related funding received by the lower-tier municipalities' shall be transferred to the Region, including but not limited to funds received from such programs as the Ontario Transit Vehicle Program (formerly the Transit Renewal Program), the new Provincial Gas Tax Funding program for public transit and potential federal programs such as a federal gas tax. Liabi/ities (J) (k) As of the Effective Date, the lower-tier municipalities shall be relieved of all liabilities in relation to any assets transferred to the Region. The amount of any unfunded liabilities existing at the Effective Date shall be determined through negotiations between the Region and the lower tier municipalities to ensure that the Region receives the necessary funding from the transferring corporation or agency. Personnel (I) All employees with permanent positions, both exempt and union, that are exclusively employed in transit by the lower-tier municipalities, transit operators and Handi Transit Inc. as of the date that this by-law comes into force shall become employees of the Region as of the Effective Date. Transition Period (m) During the period of time between the date that this by-law has received the necessary triple majority approval and the Effective Date (the "Transition Period"), any new or renewed transit-related contract, lease or contractual obligation that requires a significant financial commitment extending beyond the Effective Date sl~all require the approval of the Region. (n) Handi Transit Inc. shall be dissolved prior to the Effective Date in order to facilitate the transfer of transit-related assets to the Region. (o) During the Transition Period, the Region and the lower-tier municipalities shall negotiate and enter into agreements for the transfer of all assets, 37 liabilities and personnel on terms that are consistent with this by-law. Any matters not agreed to within three (3) months of the Effective Date may, at the request of the Region or a lower-tier municipality, be determined by arbitration under the provisions of the Ontario Arbitrations Act. BY-LAW read a first time this 10th day of November, 2004. BY-LAW read a second time this 10th day of November, 2004. BY-LAW read a third time and finally passed this 10th day of November, 2004. Roger Anderson, Regional Chair P.M. Madill, Regional Clerk