Unionized TTC workers will not have to pay Ontario's annual health tax because of wording in its 35-year-old contract.

The Supreme Court of Canada on Thursday ruled it would not hear the TTC's appeal of a lower court ruling.

The decision by the high court, which did not give a reason for not hearing the case, puts Toronto taxpayers on the hook for $6 million a year.

TTC Chairman Adam Giambrone also said the cash-strapped city expects to pay $15 million in back pay to workers. He was disappointed by the ruling.

"Well $6 million is a lot of service and we would have much rather have invested it in more drivers and more buses out there on the street moving people," Giambrone told CTV's Paul Bliss.

"If you've been on buses and streetcars, you'll know they're packed -- our ridership's up four per cent."

The issue stems from the TTC's collective agreement with Amalgamated Transit Union Local 113, which represents about 8,700 TTC employees.

In 1972, the union obtained a guarantee from the TTC that the transit authority would pay 100 per cent of Ontario Health Insurance Plan (OHIP) "contributions."

When Premier Dalton McGuinty's Liberal government introduced the Ontario health premium on July 1, 2004, the union said the TTC, not individual employees, should pay the health tax.

An arbitrator agreed with the union's argument, as did the Ontario Divisional Court and the province's Court of Appeal. All ruled the word "contributions" covered the new health fee.

Unionized employees will now receive a refund of between $500 and $700, money owed to them dating back to July 1, 2004, said Local 113 president Bob Kinnear, who was excited by the legal victory.

Giambrone said the TTC took the case to the courts because it respected taxpayers' dollars.

He and Kinnear both said that had the Ontario government introduced the health levy as a tax and not a "premium," the TTC might have won its case.

Giambrone says the transit authority has already budgeted money to cover the health premiums in anticipation of the court ruling.

"It would have been like a bonus -- that's not the case. We now owe it to our employees under the court ruling and we will now go ahead and pay it," he said.

Giambrone, however, is relieved the province set aside $8 billion last week for a massive transit project in Toronto.

McGuinty on Friday said he won't change the health tax following the ruling, arguing the decision only affects TTC workers and does not have an overreaching impact across the province.

But opposition critics at Queen's Park are furious, saying the premier's broken promise not to increase taxes -- and then implementing the health levy -- is now costing Toronto taxpayers twice.

The Conservatives say middle income earners are being affected the most.

Some community college unions have also argued their employers should be paying the premium.

With a report from CTV's Paul Bliss