Ottawa is standing firm in its refusal to give Toronto $400-million in stimulus money for the largest light-rail contract in North American history, raising questions about the fate of a project with huge economic spin-offs for Canada's beleaguered industrial sector.
Instead, Infrastructure Minister John Baird offered the city a way it could indirectly tap the stimulus fund: Move up construction projects that can be completed in two years and use the savings to pay the federal share of the $1.2-billion streetcar contract.
Mr. Baird's conciliatory gesture comes as Ontario Premier Dalton McGuinty and Toronto Mayor David Miller head to Thunder Bay Friday to pledge their financial support for a deal with Bombardier Inc. of Montreal that is set to expire in just over a week.
Amid strenuous efforts in recent days by the city and the province to get Ottawa on board, Mr. Baird continued to insist that the city's pitch to replace 204 aging streetcars does not qualify for his government's $4-billion federal Infrastructure Stimulus Fund.
"It's a fantastic project," he said of the streetcar initiative. "It's just not eligible for this program. And [that's]not just a technicality."
He said the federal stimulus funds are intended for projects that create local jobs over the next two years. By contrast, jobs for the streetcar project would be mostly in a Bombardier assembly plant in Thunder Bay, not in Toronto.
he streetcars would not be fully delivered until 2018, but Toronto deputy mayor Joe Pantalone rebutted suggestions the project does not qualify for the federal stimulus fund.
"This is not about technicalities," he said. "This is about the substance of what is required for economic stimulus and to make sure this country is in a position to have a good quality of life and good jobs."
Despite the most emphatic no yet from the federal minister, a spokesman for Mr. Miller said "we remain in discussions" with Ottawa. Deputy press secretary Stuart Green added, "we have not received a formal response yet."
At Queen's Park, an Ontario government official said "there is no strong sense from the federal government about what direction they're going."
Neither the Ontario official nor Mr. Miller's spokesman would explain how the deal could go ahead with only two-thirds of the funding so far in place.
The city is already on board for one-third of the cost - with the province expected to match that share Friday - but the deal with Bombardier Inc. of Montreal is set to expire June 27 if all the funding isn't in place.
That date is also key because, without a deal on streetcars, the city cannot exercise an option to purchase up to 400 light-rail vehicles for "Transit City," the mayor's ambitious plan to install new streetcar lines across Toronto's inner suburbs over the next decade.
The streetcar funding request was the only application Toronto made for stimulus cash - a gamble that last week drew a profanity-laced critique from Mr. Baird for which he apologized the next day.
Although the deadline for cities to apply for stimulus aid passed May 1, Mr. Baird said he's willing to reopen the deadline for Toronto so it gets its fair share of funds.
"I am happy to sit down and work with them, but the projects have got to be eligible," he emphasized.
He suggested Toronto could apply for stimulus cash to pay for infrastructure projects set for three or four years from now. By moving up public works like road or bridge repairs that meet Ottawa's two-year eligibility timeline, he contends, the city could redirect the funds to streetcars.
For workers in Thunder Bay, Quebec and Manitoba, a lot is riding on the deal.
A report commissioned by Bombardier concluded the streetcar contract would create 5,700 jobs, mostly in Ontario, but with spin-offs in Quebec and Manitoba as well.
Word of Friday's announcement was kept so quiet that Thunder Bay Mayor Lynn Peterson didn't learn something was up until late Wednesday.
"This is 10 years of work for hundreds of people here and spin-offs for thousands of people across Ontario," she said. "And Toronto gets much needed rail cars. So it's a win-win-win all the way around."