(July 8, 2011) Toronto’s plan to sell subway naming rights is a bad idea.
National Post, July 8, 2011
To minimize fare hikes on Toronto’s deficit-ridden transit system, a desperate Toronto Transit Commission decided this week to raise revenue from corporations by selling them naming rights to subway stations.
Bad, customer-unfriendly idea. Rather than selling station names, the TTC should sell the stations.
Subway station names must reflect meaningful destinations, to maximize their utility to transit customers. When a passenger is likely to identify with a prominent institution — such as a museum or the train station — the institution’s name should be used, and it generally already is — witness the TTC’s Museum stop, or its Union station stop. But how would it aid a transit customer to change the name of the Bloor station, say, to the Starbucks station, or to the Bloor-Starbucks station?
Not that a Starbucks would pay much, if anything, to be identified with Toronto’s mostly non-descript squat-box stations. The TTC acknowledges that naming rights won’t bring in much, probably less than 5% of the TTC’s $80-million annual deficit, making fare hikes or service cuts inevitable. And with either bad-news scenario, the TTC is sure to lose customers, raising the spectre of a downward spiral of deficits and decline.
But deficits are not inevitable. The TTC values its buildings at $1-billion. If it sold them off at the rate of $80-million a year, it could avoid the need to raise fares or cut service, and avoid losing customers, for the next 12 years, to 2023, all else being equal.
But not all else is equal.
By selling its stations, the city would save money as well as gaining revenue. The TTC’s deficits are driven in good part by the need to refurbish its stations. A sale to private-sector owners would eliminate those major capital costs in refurbishments, along with routine operating costs in maintaining the stations and surroundings. That might let the TTC avoid rate hikes beyond 2025.
But a sale-of-stations strategy is more compelling still, because the TTC’s buildings would be worth far more than $1-billion once in the hands of the private sector. Most TTC subway stations are located on prime retail land, along major thoroughfares. Yet TTC buildings — typically one-story glass and brick boxes enclosing one or more bored fare collectors — capture little of the value that their retail locations allow, let alone the immense value to retailers of the TTC’s own pedestrian traffic — almost one million riders use the subways each day.
While a Starbucks might not want to pay much of a naming fee to have its brand attached to a squat box of a building, it might well want to obtain the property, dress it up as a trendy café, and move the fare collectors to the basement after training them to greet their customers with a smile. With larger TTC properties, a commercial real estate developer would bid up the price for that TTC building and replace it with a 10-story office building or condo, or whatever the zoning in the district allowed.
Many of the occupants of the upper floors would then become TTC customers while the retail tenants in the ground floor and basement, through which almost one million subway riders pass, would specialize in extracting cash from the riders’ wallets.
In some districts, the ground floor of the subway station would be a Loblaws or small supermarket, catering to the neighbourhood’s needs while also acting as a convenience for commuters by letting them pick up their dinner fixings as they leave the subways for home. In others, the subway station might be a Shoppers Drug Mart or a Canadian Tire, or a Wal-Mart or a fast-food complex. These retailers’ value to the TTC would be ongoing — in the same way that the subways deliver pedestrian traffic to retailers, the retailers would be supplying fresh customers to the subways.
Selling subway stations, of course, would ensure public transit’s viability well past 2025 if somewhere along the way the city learned a lesson from its annual sale of stations: The private sector is better suited than government to running businesses, including transit businesses. If the city then decided to sell off the rest, not just the stations but the rolling stock, too, public transit — but not the TTC — would remain viable indefinitely.
Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and the author of Toronto Sprawls.
For Lawrence Solomon’s more detailed plan for subway privatization, click here.