Potential loan offers Brampton incentive to green its bus fleet but how will City pay for its share?

A heavy haze suffocated Brampton last week.

The merciless heat beat down on the city, while thick smoke from northern wildfires left the skies a murky grey. The sheet of ash couldn’t block out the sun’s scorching UV rays. 

Together, the heat, humidity and smoke created the most recent cautionary conditions for a planet on fire.

Like most cities, the reminders of cataclysmic climate change are becoming more and more frequent.

Brampton, like most municipalities, has a carbon mitigation target that is fast approaching. The City has promised to reduce its emissions by 80 percent before 2050. 

A lack of urgency, despite declaring a climate emergency in 2019, has permeated City Hall. The wildfires ravaging northern Ontario, turning the skies hundreds of kilometres away a gloomy grey, were a signal to residents and City officials: wake up! 

Ottawa has been gauging those winds.

The oppressive week coincided with an announcement that could deeply impact Brampton’s carbon emissions. A deal with the Canada Infrastructure Bank (CIB) will give the City access to as much as $400 million to transform more than half its bus fleet from diesel to electric. 

But the deal exposes a city that has failed to budget for its share of badly needed infrastructure under Mayor Patrick Brown and his refusal to raise revenues for critical needs, while homeowners have seen a steady increase in taxes due to rising assessments, as utility rates and user fees have also climbed under Brown’s leadership. 

The funding through Ottawa, covered by federal income taxpayers, could be used to purchase 450 electric buses for Brampton Transit. 

Federal and local officials announced an electric bus pilot program in Brampton that launched in the spring. (Image Government of Canada)

However, the City of Brampton has to come up with close to $700,000 for each bus, before the CIB will provide the remaining $600,000 needed to purchase an electric vehicle instead of the traditional diesel types the city has used for decades.

That means Brampton’s budget will have to include close to $315 million in the coming years, if it wants to purchase 450 buses under an agreement with the federal infrastructure bank.

Brown has refused to dedicate this type of capital spending for infrastructure, and reserve funds have been almost completely depleted to required minimum levels. 

The City has also exhausted its ability to request more grant funding through Ottawa’s pool of money for municipal infrastructure.

It means taxpayers will have to start paying for all the neglected needs, either through financing loans for infrastructure or directly through the property-tax-base.

A media release estimates, once all buses have been purchased, the full complement will eliminate approximately 100,000 tonnes of greenhouse gases per year. Electric buses are cleaner than diesel models as they do not emit carbon fumes, but their actual carbon footprint depends on whether or not the electricity powering them was produced at a clean-energy generating station.

There are still many unknowns around the announcement. Financial close on the deal will not take place until the end of 2021. By then, a federal election could be held and the loan offer pulled, depending on the outcome.

The requirements of the lending arrangement and the infrastructure needed to support electric buses could leave Brampton scrambling to find money in a capital budget that continues to face massive pressure, with little help from Brown’s misleading financial approach.

Brown’s idea of budgeting is the same as what absentee landlords do to their tenants, ignoring the need to set aside additional revenues for a new roof or failing furnace, until it’s too late and years of neglect leads to a much bigger bill paid for by a massive rent hike.

Residents fooled into thinking Brown is looking out for their long-term interests will be left wondering what happened when taxes have to be hiked dramatically to make up for the hole he has created, while utility rates and user fees continue to rise.

Transit is just one area that has felt the impact of the mayor’s irresponsible financial management.

He cut hundreds of millions from the capital budget after taking office to cover his so-called tax freeze, pushing critical transit infrastructure that was already delayed even farther down the road.

It left staff scrambling to figure out where buses would be serviced and stored, while transit growth was curtailed due to the failure to properly fund the needed capital costs for badly needed new transit facilities.

Brampton has also failed to properly study and plan for the necessary investments to meet its climate commitments, and no clear blueprint for the transit system’s transformation from a diesel-based model was provided to show the public how council’s own ambitious green pledge, complete with specific emissions reduction targets and dates, would be achieved.

Brampton has applied for funding to grow its existing bus fleet through the Investing In Canada Infrastructure Plan (ICIP). The federal government’s website states a decision on the request has been made but provides no further details.

The City received some funding to replace aging vehicles last summer.

Crews are tackling forest fires across Northern Ontario, an increasing number of which are linked to climate change. 

(Image from Dean Rosen)

Despite what the smiling photo-ops might tell you, the recent CIB announcement is not for free money. The deal, if finalized, will allow Brampton to draw on top-up funds from CIB to invest the money budgeted for diesel buses into electric vehicles. To access the extra funds, which will be repaid from savings, the City needs to put money aside for fleet replacement and expansion.

Brampton has also not publicly released a blue-print for the transit system’s transformation from a diesel-based model to electric. It’s a project council says is a top priority, but has been dominated by empty words and dwindling reserve funds.

“Transitioning the current diesel/diesel-electric hybrid bus fleet to full zero tailpipe emission buses supports the Brampton 2040 Vision and was included in the 2019-2022 Term of Council Priorities established to improve transit, implement a green framework, sustainable growth, and lead in environmental innovation,” a February staff report reads. 

The words have not yet been backed by the needed investments.

Alongside its potential CIB loan, Brampton has applied for funding to grow its existing bus fleet through the Investing In Canada Infrastructure Plan (ICIP). The federal government’s website states a decision on the request has been made but provides no further details. 

The recent announcement is part of a unique financing scheme that is being rolled out across the country. Brampton is the third city to sign up, after Ottawa received access to $400 million and Edmonton $14.4 million to green its short-term bus purchases. 

Brampton’s funds come from a $1.5-billion pot of financing being offered by CIB to various governments; it could be expanded to $5 billion in the future. Even the higher sum is a drop in the ocean as cities across Canada consider the onerous task of turning their largely diesel fleets over to electric or hybrid power.

The scheme offers especially favourable terms for cities, which will be able to repay the loan they receive from savings by not having to purchase diesel. In order to allow local transit fleets to rapidly switch from diesel buses to electric, CIB will front the higher immediate cost of buying zero-emissions buses (ZEBs) through a loan. Repayments only come from the funds cities save on maintenance, fuel and general operating costs. 

CIB has a long-term plan to invest $5 billion in ZEBs.

(Screenshot from CIB website)

For example, if an electric bus costs $1.3 million compared to $700,000 for a diesel model, CIB will offer $600,000 to cover the difference. Across the bus’ lifespan, it could save $790,000 through lower fuel and maintenance costs, an example provided by CIB shows. The City would keep roughly $147,000 of the savings, passing $643,000 back to CIB in a low-interest loan repayment. 

If the bus failed to generate the $790,000 in savings and yielded just $300,000, CIB would receive the partial repayment and the loan would be written off.

The City is not without commitments of its own. “This is a financing model, not a funding mechanism,” February’s staff report warns.

In order to access the financing, the City will need to budget to replace and expand its fleet covering the cost of traditional diesel buses. In 2020, the City bought 28 diesel and hybrid buses to expand its fleet. If it is to take advantage of the loan and purchase 450 buses by 2027, Brampton would have to budget for an average of 75 new buses each year. 

Brampton’s 2021 budget document mentions $39.3 million and $88.3 million for “bus purchases” in its capital forecast for 2022 and 2023. At $700,000 per bus (an estimate), Brampton could purchase 56 buses in 2022 and 126 in 2023, if council and staff decide to raise the funds necessary to pay for their plan.

The property tax funds Brampton has earmarked for this expansion are limited. The plan for 2022’s $39.3 million does not include any property tax funds, hoping to draw on $10.5 million in development charge reserves and $28.8 million in subsidies and grants from other levels of government. The next year could see $33.9 million from the property tax base, $11.8 million from development charges and $42.6 million in grants or subsidies used to purchase new buses. It is unclear if the grants or subsidies in Brampton’s budget have been approved, while councillors could still make cuts to the 2022 and 2023 funding plans.

For roughly five years, until 2027, Brampton will be able to draw funds from the CIB to pay for the extra cost of electric buses. As batches of buses come online, savings will trickle into a reserve fund and be used to repay the CIB loan over the lifespan of the different buses. 

“Repayment of CIB’s loans under the initiative are sourced solely from actual savings generated by the lower cost of operating ZEBs compared to the higher cost of operating diesel buses,” a presentation on CIB’s website explains.

When the deal is finalized at the end of 2021, Brampton and CIB will agree on the reasonable lifespan of buses and set standardized rates for diesel and electricity so that market fluctuation does not skew potential savings. From its operational savings, Brampton will repay the loan while the buses are on the road. If buses exceed the expected lifespan, CIB can continue to draw additional repayments while they continue to be roadworthy, while any potential accident which writes a bus off would see insurance payouts used to fulfill the financing commitments. 

Several politicians and bureaucrats spoke at the announcement last week.

(Image from Twitter/Catherine McKenna)

The deal puts the vast majority of risk on CIB, not the City. The financing is only repayable through cost savings during the lifespan of each bus and not the City’s general operating budget. The loan has an interest rate associated with it that is at or below the standard borrowing rate for each city.

“The CIB and Bus Owners will share in the risk that actual cost savings are less than forecast, with the CIB ultimately taking the repayment risk,” the presentation says.

CIB is filling a gap the private sector is yet to view as a safe investment in order to get electric bus fleets on the road faster in the face of a rapidly worsening climate crisis.

Because repayments only come from the funds saved through ZEBs, there are a few main budgets repayments could be drawn from. The diesel fuel budget ($14.5 million in 2021) is one, while the maintenance budget is another.

Assuming charging infrastructure as a necessary shared expense, the $400 million loan comes to roughly $889,000 per bus. Over the 18 year lifespan Brampton targets for its buses, each bus would need to save around $50,000 per year to pay the loan back, plus interest.

Brampton can use the CIB loan to green its bus fleet and transition away from diesel-powered vehicles.

(Image from Isaac Callan/The Pointer)

For Brampton, the funding potential is a godsend, but only if it matches the loan with its own funding for the initial cost of a diesel bus. It's intervention, effectively, by federal income taxpayers, to help the City confront humanity’s greatest threat which local politicians have neglected to properly plan for. 

Despite declaring a climate emergency in 2019, the City has continued to buy greenhouse gas emitting diesel buses. Over the past seven years, Brampton has bought twice as many diesel buses as it has hybrids, purchasing 120 diesel units since 2015. The City’s greening strategy has slowly progressed at a rate that will fail to bring transformative change.

An electric bus pilot has been widely publicized by the City, but only puts eight fully electric buses on the road as part of a test. The majority of Brampton Transit’s fleet runs on diesel, which are substantially cheaper to purchase.

A meandering bureaucratic process with competing master plans, combined with populist political decision making, are both to blame for the continued lack of attention and investment into this critical transition. 

Brampton’s third transit storage and maintenance facility has become a political football, tossed from one budget and government to another. After Mayor Brown removed funds for the project from the 2020 financial blueprint to achieve his promised tax freeze, it has become a complicated project with many competing aims and claims.

The City’s master planning process originally called for two bus garages: one in 2021, another in 2028. In 2019, Brown’s council cancelled the plan and opted instead to build one large facility in 2024, pushing it further into the future. 

Floodplain issues with the site selected for the mega facility mean it will be constructed in two phases and, as a result, it will essentially be two separate garages side-by-side. Construction of the second phase relies on additional funding and the realignment of Rainbow Creek. Phase One of the facility will accommodate roughly 250 buses, and Phase Two will create storage space for an additional 188.

In April, after a year without a public source of funding, $174.7 million was finally pledged to the project’s first phase by the federal, provincial and local government. It means Brampton’s 2021 garage will effectively be built by 2024, with the City funding its share through debt.

The City continues to look for a further $150 million to turn the facility into an electric bus garage, the reason Brown originally gave for delaying the critical infrastructure.

It is unlikely that the CIB loan will pay for the electrification of Brampton’s third transit garage. Assuming each bus purchase comes with a loan of $600,000, the total CIB loan for buses would come to $270 million. This could leave as much as $130 million for charging infrastructure. This would not be enough to meet the full electrification target of Brampton’s garage.

It is unclear if Brampton has prepared a detailed plan for the electrification of its fleet. Charging within its garages alongside on-street infrastructure will likely be needed, while changes to maintenance systems will also be on the horizon.

For three consecutive years, Brown has pushed tax freezes through his council. The policy has limited the funds coming into City Hall and put pressure on rainy-day reserve funds. The transit service has felt the pinch as a result, with the 2020 budget freezing service levels.

The CIB loan will allow the City to green its fleet without drawing on the taxbase, but only covers the difference. Brown and his council will still need to invest in the capital cost of bus replacement and growth buses to access the extra financing required to purchase electric vehicles.

Brampton’s bus procurement schedule for the past seven years.

(Image courtesy of City of Brampton)

It is also unclear precisely how much of Brampton’s bus fleet will be electrified as a result of the CIB loan. In a May email to The Pointer, the City said its fleet should be around 867 buses by 2031, a target established in the 2015 Transportation Master Plan. This figure will evolve as funding parcels change and the City recovers from COVID-19. 

Buses bought in the past five to ten years will remain on the road until at least 2031, meaning some of the City’s fleet will still include diesel next decade, even if it can take full advantage of the loan. If all 450 electric buses are purchased through the loan, Brampton will be in a strong position to have a majority ZEB fleet by 2027.

The City and CIB hope to finalize their partnership by the end of the year. It will be subject to final council approval from Brampton and the Region of Peel.

Email: [email protected]

Twitter: @isaaccallan

Tel: 647 561-4879

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