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TORONTO (Reuters) - Toronto reluctantly agreed on Friday to pay about C$400 million more than it had planned to buy streetcars from Bombardier Inc after the Canadian government refused to help fund the C$1.2 billion ($1.04 billion) project.
The deal with Bombardier would have expired if Toronto had not completed arrangements to fund the fleet of 204 streetcars by Saturday, and the city would have had to issue another call for bids.
Councilors in Canada's biggest city agreed in a raucous eleventh-hour meeting on Friday to defer other transit projects to beyond 2018 in order to cover the funding gap.
Toronto will now pay nearly C$800 million toward the streetcar project, while the province of Ontario has pledged C$416 million.
The city had initially expected about one-third of the money to come from Ottawa, but federal politicians said the project did not meet the requirements of its infrastructure stimulus fund.
"We have just secured the transit future for this city for a generation," Toronto Mayor David Miller told reporters.
"Was it unfortunate the federal government, at the very end of the process said no (to the funding)? ... Yes, of course. But as you can tell, the provincial government reads the stimulus guidelines to say this fits."
Federal Finance Minister Jim Flaherty said on Friday that the streetcar project would not be in place fast enough to tap into its C$4 billion stimulus fund.
"The streetcar project, as advantageous as it may be in the long term, is not stimulus," he said. "It doesn't happen right away; it's several years out. The whole idea of stimulus is to get it done in the next two years."
Under the agreement with Montreal-based Bombardier, the larger, more energy efficient streetcars would not enter service until 2012, with all 204 delivered by 2018. As well, most of the jobs created would have been at Bombardier's plant in Thunder Bay, Ontario, not Toronto.
Cities that wanted a share of Ottawa's stimulus fund were asked to present shovel-ready projects that could be completed in two years and would create jobs locally.
Toronto's plea to Ottawa for over C$400 million to help replace its aging streetcar fleet was the only request it made to the federal government for stimulus dollars.
Flaherty said it was regrettable the streetcar program was Toronto's only attempt at securing stimulus funding, given other shovel-ready initiatives in the city such as improving roads or the waterfront area.
However, Miller said that federal Infrastructure Minister John Baird had recently held out an olive branch, saying the city could still submit bids for other projects that would qualify for stimulus funding.
"Minister Baird generously has allowed us the opportunity to make another ask and we're asking for everything we possibly can that fits within the rules," he said.
Miller said that if the projects were ones that the city had already committed to funding, and if they were accepted by the federal government, Toronto could put the additional cash toward the streetcar deal.
Within the past six months, Toronto has secured funding for C$10 billion in transit projects.
Reporting by Frank Pingue and John McCrank; editing by Rob Wilson