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The Proposed Scarborough Subway Extension

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Figure 1: Congestion in Toronto on a regular day. Source: Metro News.

Before I moved to North York in 2013, I lived most of my childhood in Scarborough. I attended elementary and middle school there, and my primary means of transport was the TTC. Bus delays and conga lines (as illustrated in figure one) made arriving on time a miracle when it happened, if ever. This year, I applied to UTSC, and got accepted for an International Business program. After taking a five-year hiatus from the Scarborough transit system, I can’t wait to be back, except for reacquainting myself with the delays.

But, the City of Toronto seems to have heard my silent prayers to resolve the congestion problems, and decided to approve of a TTC subway extension. This extension would essentially revitalize Scarborough’s whole public transit system. I was ecstatic at first, but upon further research, my joy turned into disappointment with the city. Let’s find out why.

For more information on the TTC extension in general, please click here. Shown below, in figure two, is the current Scarborough transit configuration.

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Figure 2: The current Scarborough Subway. Source.


What’s happening right now?

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Figure 3: The proposed Scarborough Subway Extension. Source.

What exactly is the Scarborough subway extension? Stated by the project website, the TTC will deliver a “fast, efficient, and reliable” subway system that extends the Bloor-Danforth line to Scarborough Center that should finish in 2025 – 2026 (shown in figure 3), effectively replacing the current RT line (shown in figure 2).

As of 2017, the vehicles that run on the blue line are now over 30 years old. With that age, citizens think it’s time for an upgrade to the Scarborough transit system. However, a simple “upgrade” isn’t possible. The Scarborough line has been operating extensively over capacity for over the past three decades, and maintenance / repairs for the current line of trains are obsolete because Bombardier discontinued the product line.

Furthermore, in 2013, the Toronto City Council voted 24-20 in favor of constructing the subway extension and scrapping the existing rail. This current project, as of February 28, 2017, now costs $3.35 billion to construct.

That’s one hefty sum for a one-stop extension.

 

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Hold on a second. $3.35 Billion?

You heard me. As the citizens of Toronto, you’re probably wondering how can we possibly pay for this? The answer boils down to the city’s financial budgeting.

From all three levels of government, the Toronto Star reports that the TTC is given an allocation of $3.56 billion dollars to spend on transit. But even with the current cost estimate, it’s not factoring in a staggering $600 million in additional expenses. After doing the math, the grand total is now around $3.95 billion, which is about $390 million over budget.

In the week of  March 2, Mayor Tory mentioned that the city had an additional $200 million to spend in cash reserves, but still with these numbers the final sum isn’t looking very pretty.

Shown below is a detailed breakdown of the extension costs, courtesy of the Toronto Star.

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Figure 4: Detailed Breakdown of Subway Extension Costs. Source.

Well, at $370 million short of funding for the subway, any sane person would say “cut the project.” I hope you do, at least. Unfortunately, Global News Toronto reported that for the 2017 municipal budget, city council voted 27-16 in favor of the proposed plan. The city launched a 2% residential property tax increase as well as cutting programs for the homeless, seniors, and raising fares on the TTC. Some argue that this is the real cost of constructing this one-stop extension line, on the backs of Toronto taxpayers and individuals in need.

 

Is this project worth it?

Well, we can answer that question using two key economic theories: efficiency and equality.

  1. Efficiency

Efficiency is defined by Investopedia as the economic state in which individuals are able to become better off without making others worse off. The resources in the economy are allocated to serve each individual with minimal waste. By analyzing the proposed extension, it appears that the subway extension is somewhat inefficient.

It would make the residents of Scarborough better off, at a sizable cost to residents in Etobicoke, Downtown, North York, and other regions in Toronto. All this inefficiency would be traced back to the initial cost of the project, $3.35 billion. As noted previously, the city introduced a 2% property tax hike which affects all residents in Toronto, not just the citizens of Scarborough. Why should an adult, living in Etobicoke, struggling to make ends meet pay additional tax in order to assist the Scarborough transportation problem? In the next few years, this course of action isn’t fair at all, as just demonstrated. Every person suffers the consequences of higher taxation, but only the people living in Scarborough receive the benefits.

2) Equity

An equitable economy is defined by Macnomics as a system where every individual receives according to their “fair share”, or enough resources are distributed to them to ensure that everyone is brought to the same economic standing. The underlying goal of the Scarborough extension project was to modernize the transit network there. With that being said, it’s the most needy region out of Toronto’s six large neighborhoods that gets this deserved transit revitalization. In essence, the Scarborough extension is equitable.

 

So, the project isn’t too effective. Is there a better way to revitalize the Scarborough transit system?

Right now, we’re locked into the extension project by city council. They made a choice to proceed with the project, but they could’ve voted no and went ahead with another project instead. This scenario can be defined as opportunity cost – “the value of the benefits of the foregone alternative, of the next best alternative that could have been chosen, but was not.” The main opportunity cost with building the Scarborough subway extension is the cost or expense of foregoing other transit development opportunities across the city, such as the proposed Scarborough SRT/LRT line. This is the next best option. Here, the city is able to save money by constructing a SRT/LRT system instead.

City council seems to have put the project on pause, although it still remains one of the very best, if only, economically feasible solutions to replacing the current project while addressing the needs of the citizens of Scarborough. A seven stop SRT extension line would be constructed over and past the current RT (blue) line, and ending at Sheppard Avenue. The 18-stop LRT would be running along Eglinton and onto Kingston, ending at UTSC. Please see figure 4 below for an illustration.

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Figure 5: The Alternative Proposed LRT Solution. Source.

Let’s discuss why the SRT/LRT extension is one of the best options for Scarborough, instead of one subway stop and scrapping the current RT line.

First and foremost, it is cheaper. Contrasting the $3.95 billion dollar price tag of the extension with the $3.08 billion cost of the SRT/LRT System, we subtract $3.08 billion from $3.56 billion in available funding. This solution presents an additional $480 million left over in savings. 

This amount can be used for quality-of-life upgrades at existing stations (such as furniture, fences etc.), better track maintenance, as well as increased bus service or construction of bus shelters across Scarborough. By proceeding with the current extension proposal, the opportunity cost is money. $480 million in leftover sums is no small amount to forego easily.

Secondly, the transit network in Scarborough will become more established. Let’s take a second look at Figure 5. We can see that a majority of the shaded areas, the neighborhoods in development, would be better connected. With the SRT/LRT System, the transit system would be able to reach six neighborhoods, while the current extension reaches one.

Right now, we’re on track to pairing the scrapped RT line with an increased dependency on bus routes. In January 2017, 99 000, or 48% of transit trips starting in Scarborough also ended in Scarborough. After construction, thousands of people would now need to depend on buses in order to get to either STC or Kennedy Station, where before they would’ve went to a station in the middle of those two (ex. Ellesmere). This scenario presents fundamental inefficiency, as a majority of the commuters using the TTC in Scarborough is now worse off and close to no one has a better experience.

Lastly, from the project website itself, the current expansion estimates that at rush hour, or the peak point, there would be 7 400 riders on the subway. Approximately 632 098 people live in Scarborough. 7 400 commuters would be approximately 1.12% of the total population of Scarborough. But what is most appalling is the net new rider statistic, which projects that in 2031, the extension would bring in 2 300 new riders. 

The SRT/LRT solution would prove to be more efficient, as more people have access to TTC stations and the transit network while no one suffers an economic loss. The SRT/LRT system would also be fair and equitable, as now the citizens of Scarborough now have a transit system that is on par with the rest of Toronto, and no region gets left behind. Scarborough, in this case, gets their “fair share” of the transportation solution.

 

But what about SmartTrack?

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Figure 6: The SmartTrack System. Source.

One may argue that SmartTrack, another municipal transportation project, would be a wonderful compliment to the proposed subway line. At the same time, it might even be a better alternative when pitched against the SRT/LRT line. A network that now connects Agincourt, Scarborough with Etobicoke via Downtown would be extremely efficient, and much-needed for Downtown-headed commuters coming from the surrounding regions. 

This new plan, at a glance, seems efficient and equitable to all Torontonians. People from all over the city could now take buses to their local SmartTrack station and commute Downtown or to any other station much quicker than if they took the TTC. The financing, however, is waiting on federal funding still, as well as the 2% property tax raise mentioned earlier. Everyone pays the same price here, but everyone will also benefit from better accessibility to quicker transport, not just the Scarborough region. The SmartTrack, when paired with the current project, would make the subway extension inefficient. Less commuters are now using the Scarborough line, all for the same price tag.

But, let’s back up a second. If someone argues in favor of the complementary nature of the current two plans, we must first acknowledge the fact that SmartTrack is fully approved and will be completed in the future. On June 28, 2016, both the SmartTrack project as well as the current subway extension were signed into action by city council. However, according to the project website, the reason that only 2 300 new riders will come is because of the newly constructed SmartTrack railway. If that is the case, wouldn’t it make more sense to scrap this project, avoid the 2 300 minimal new riders, save $3.35 billion dollars, and further develop the transportation network in Scarborough? If all of the benefits that I presented in the previous paragraphs hold true, then SmartTrack would truly compliment the SRT/LRT system once in place. It would make transport more efficient by allowing commuters to reach their destination at a quicker time, by allowing commuters diversity of transportation paths, and Toronto saves money if we choose the SRT/LRT.

 


The Verdict

In conclusion, I believe that the city should place a stop to the expansion project immediately and start focusing more on the SRT/LRT project. Mayor Tory stepped into office promising change for the Scarborough transit system, and change he bought. As for how good the change is, it’s not looking too great.

The SRT/LRT system is simply more efficient, provides more access to the citizens of Scarborough, it could be completed for less than the $3.56 billion in government funding, and reaches six times more people than the current proposal. 

The opportunity cost of building the subway extention is the loss of new riders, the loss of a developed Scarborough transit system, and even simply money. However, according to the Toronto Star, they state that for the SRT/LRT proposals, “the delay has been exclusively related to staff reports not being ready on time, additional review of subway options recommended by staff and regular processes involved with billion-dollar infrastructure projects.”

Only time will tell if Mayor Tory changes heart and acts in the best interest of the people, or if he completes the project eager to put an “accomplishment” on his track record. For his political reputation’s sake and my future vote, I sure hope he chooses the former.

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Rational Economics: Think We Make Rational Decisions? Think Again

Why are some people willing to purchase designer purses, watches and shoes for thousands of dollars from names such as Louis Vuitton, Gucci and Rolex, when similar products that have the same functionality for fractions of the price are neglected? While many of us may think we make rational decisions as a consumer, it turns out, humans tend to make irrational decisions on a rather consistent basis.

Image result for fashion brand name vs regular

http://www.thebrandchecker.com/news

Before I explain why humans are not rational decision makers, we must first examine the definition of ‘rational decision making’. For a decision to be deemed as rational, all emotional contents from the decision making process must be removed and must solely be based on the facts presented.

“A rational behavior decision-making process is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption all individuals taking part in an action/activity are behaving rationally. Rational behavior does not necessarily always involve receiving the most monetary or material benefit because the satisfaction received could be purely emotional. “

-According to Investopedia

On the contrary, an irrational decision is one that lacks logical thinking. Irrational decisions are often based on emotions and personal bias. To be specific, as person’s memory can take presence over analysis or consideration.

https://www.ucl.ac.uk/media/library/decisionbrain

Image result for irrational decision making

In traditional economics, supply and demand models demonstrate how supply and demand relate to quantity and price. On the model, the vertical axis is the price and the horizontal axis is the quantity.  The supply and demand curves both intersect at a point which represents the equilibrium price and quantity.

Image result for supply and demand graph

Since we are talking about the rational decision making that consumers exhibit, it is necessary to note the factors which effect consumer demand – it is not necessary to discuss the factors which effect supply. The five determinants which effect demand are: buyer’s income, buyer’s preferences/consumer’s taste, buyer’s expectations, other prices and number of buyers.

We refer to a lack of goods, due to a low price as a shortage. In this case, consumer demand more than what suppliers will produce. The supplier will counter this by increasing the price, until the equilibrium price is attained. However, if there is an excess in goods, due to a price that is just too high, we refer to this as a surplus. In this scenario, the suppliers will produce more than customers demand. The supplier will then decrease prices until the equilibrium price is reached. Supply and demand directly impact the market, which is then reflected on the price of a particular good. However, as it turns out, due to the irrational behavior we exhibit, the price actually determines the market. This is studied in behavioral economics.

https://www.youtube.com/watch?v=ptluv3didYI

A common example which demonstrates our irrational behavioral decisions as consumers is the purchasing of iPhones. A rational person might reckon that consumers are willing to pay anywhere around $500 for a smartphone. However, Apple has found a genius way to overprice there iPhones to nearly double the willing consumer price and still get remarkable sales. You might be wondering how this is possible. Well, it is simple. There are people out there willing to overpay for these smartphones!

Image result for why do people pay for overpriced iphones

Therefore, as this applies to the food and drink, automotive and particularly fashion industry, we can conclude that people are willing to make decisions, beyond reason, to purchase goods and services that are simply not worth it. Everyday, we constantly go against our reasoning and logic for decisions based on emotion and memory. In doing so, as a consumer, we can be deemed as irrational.

http://www.investopedia.com/terms/r/rational-behavior.asp#ixzz4dKpQg0dZ https://pdfs.semanticscholar.org/ace5/115e38d84696f745cbaa9647dc17a77a9734.pdf

https://www.emptywheel.net/2015/07/20/mankiws-principles-of-economics-part-3-rational-people-think-at-the-margin/

http://www.ase.tufts.edu/gdae/Pubs/te/MIC/3e/MIC_3e_Ch7.pdf

http://economictimes.indiatimes.com/definition/rational-behaviour

https://www.behavioraleconomics.com/rationality-and-affective-biases-do-you-know-what-they-are/