Corporate Sponsorship: The New Key to Funding Public Transit?
Image of GO Train in Downtown Toronto (Link)
By Eric Pu
There is very much an unwritten rule in the world of public service—that the grasps of corporatism remain separate from public entities and infrastructure. Given the nature of these services, funded primarily through taxpayer dollars, their priority is to guarantee the highest quality of service for said taxpayers, rather than to appease the demands of private interests. Hence why most could never imagine vital public infrastructure, such as New York’s iconic Grand Central Station, plastered with corporate branding to the same extent as privately-owned sporting venues like Citi Field or MetLife Stadium.
However, recent news from Toronto, Canada’s largest city, has revealed that not all public service figures share these sentiments. Earlier this February, the talking heads of GO Transit—the regional public transit agency serving the Greater Toronto Area—began expressing interest in the sale of private naming rights to a number of station names within its commuter rail system. If these plans were to come into fruition, Torontonians could very well begin incorporating trips to “Shoppers Drug Mart Exhibition Station” or “A&W Oakville Station” as part of their daily commutes. Interestingly enough, this isn’t the first time that GO Transit has considered the introduction of corporate sponsorship for stations as a potential revenue stream—the agency originally presented the idea in 2019, proposing that it could generate up to $500,000 annually per station.
Although the notion of corporate sponsorship as a means of funding public transportation may sound ludicrous, it is important to recognize the circumstances that led to the genesis of such an idea in the first place. Public transportation has long been one of the most pressing issues for Torontonians, with recent concerns revolving around insufficient rapid transit development in a city whose growth (second fastest in the US and Canada) is rapidly outpacing its current infrastructure. Furthermore, transportation accessibility is an issue which disproportionately affects poorer communities, a fact highlighted by a University of Toronto study revealing that transport-poor neighborhoods tend to fall into two categories; the first encompasses low-income and high-density communities living in apartment towers—such as Flemingdon Park and Thorncliffe Park—which tend to house large amounts of recent immigrants who cannot afford automobiles. The second are low-income and highly diverse suburbs—like Scarborough or Etobicoke—where lower density and local infrastructure catered to automobiles makes the lack of accessibility to public transit especially impactful.
In order to ensure the economic prosperity of the Greater Toronto Area’s six million inhabitants, it is critical that all communities have access to reliable, efficient and affordable means of transportation. The aforementioned study also found that those who reside near the downtown Toronto core, where the city’s subway system is most centralized, have up to four times as many jobs available within a 45-minute commute than those who reside in neighborhoods like Scarborough or Etobicoke. These issues are especially pertinent to a city which prides itself as a global immigration hub, in which case maximizing socioeconomic mobility should be one of Toronto’s largest priorities in order to maintain its status as a city of profound opportunity. In that regard, it is evident that the city is in dire need of additional investment in its transit infrastructure—perhaps to the extent that necessitates corporate sponsorship as a new revenue source?
Fortunately, political pressure has spurred a number of significant public transportation projects in the Toronto area, but not without cost. The city’s recent Eglinton Crosstown light rail line, slated to open to the public in 2023, is estimated to run at a staggering $325 million over-budget—a hefty premium for a project with a total price tag of $5.5 billion. Although cost overruns in general are less than ideal, the Toronto Transit Commission (TTC)—the agency that operates Toronto’s subways, streetcars, and buses—is disproportionately affected by such issues, primarily due to the unique model through which it is funded.
Unlike most other public transit agencies in North America, the TTC is highly dependent on ridership as a primary revenue stream, as more than two-thirds of the agency’s $1.8 billion operating budget was sourced through rider fares in 2017 (with the rest coming from city and provincial government subsidies.) This is in stark contrast to the funding scheme for the vast majority of other cities in the US and Canada, where fare revenues generally meet less than half of total operating expenses, and consequently receive substantially more support through government funding.
To put things into perspective, in 2017 the TTC received just 90 cents in government subsidies per public transportation rider. Meanwhile, Vancouver received $1.86 in subsidies per rider, more than twice that of Toronto. Interestingly enough, York Region (a set of suburbs just north of Toronto) raked in an astonishing $4.56 per rider in subsidies. Looking outside Canada, Houston, Texas similarly sourced $4.75 (USD) per rider in government funding. Such a heavy reliance on ridership revenue rather than stable government funding sources may result in a downward spiral of declining service quality, potentially reducing future ridership as the system seeks to maximize fares rather than improving the quality of the network.
However, the most important of all these issues was something that only came to light during the COVID-19 pandemic, during which transportation agencies like GO Transit and TTC were most severely affected as public entities so highly burdened with generating their own revenue. During the first quarter of 2021, TTC ridership was measured at only 27% of pre-pandemic levels—ridership revenue has since declined accordingly, now comprising only 33.5% of the 2022 budget. GO Transit has faced similar challenges as a result of COVID-19, when it received $961.6 in provincial subsidies in the year following the beginning of the pandemic. These funds were allocated towards a system with a total ridership of only 6.8 million during that corresponding time period, resulting in an astounding subsidy of $141.41 per rider on the regional train and bus network. In comparison, the fiscal year prior to the pandemic saw ridership of 76.2 million, funded by a subsidy of only $478.1 million.
These funding concerns are what bring everything back to the topic of alternative revenue streams for Toronto’s transit, during a period in which public transportation ridership continues to operate at a fraction of pre-pandemic levels. Given that these agencies cannot sustain themselves forever on such extreme subsidies (issued only to prevent the complete collapse of Toronto’s public transit infrastructure), it is clear that the city will have to seek new and creative avenues of securing stable revenue streams. With that in mind, the notion of selling naming rights of train stations seems to check all the boxes at first for GO Transit’s new revenue stream, providing reliable and risk-free funding to an agency in dire need. Obviously, the few million that GO Transit may potentially generate through this measure makes up only a miniscule fraction of its total financial obligations, but any amount certainly helps when it comes to the maintenance of public services, right?
Practicalities aside, the main dilemma that arises with this proposed station-naming scheme is the extent to which private interests should be involved in public services. While simply attaching a corporation’s name to a train station may seem harmless, there is a slippery slope in setting a precedent that public property can be infiltrated by private interests if the price is right; what’s stopping the city of Toronto from transforming the names of its most iconic public spaces and infrastructure into monstrosities like “Rexall Trinity Bellwoods Park,” or “Nofrills Highway 401”?
Conversely, one could surely make the argument that when government forces are evidently uninterested in providing vital public transportation infrastructure with adequate funding, that certain extreme measures must be taken. After all, isn’t it better to have a “Canadian Tire Whitby Station” than no station at all?
It is at this point that one must consider the bigger picture, and what these plans represent for the province of Ontario as a whole. The fact that such a massively important entity like GO Transit, serving a region of over six million residents, would ever even have to consider such unconventional and bizarre revenue streams serves as an unfortunate symbol of the Ontario government’s failures to sufficiently address one of the province’s most pressing issues. Rather than supplying Torontonians with the large subsidies needed to fast-track its severely underdeveloped public transportation infrastructure, Ontario Premier Doug Ford continues to set his sights on immensely unpopular projects like Highway 413, whose $10.9 billion price tag makes the few million potentially generated annually by GO Transit’s proposed corporate naming scheme seem like a drop in the bucket. This is all despite mountains of evidence showing that highway megaprojects seldom succeed in alleviating traffic congestion; beyond their inefficiencies, automobile infrastructure also presents disastrous environmental and health repercussions, issues which can surely be mitigated through increased focus on public transportation.
Thus, the question local politicians should be asking is not whether GO Transit should follow through with its corporate naming scheme, but rather, why must these transportation agencies consider such bizarre plans in the first place?
