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TTC Budget Report: Raise the Fares

The TTC staff report recommending a fare increase is now available on the TTC’s website.  This will be formally considered at the Commission meeting on November 17, but of course this subject has already been discussed at length in the media and on blogs.

The new price for adult tokens will be $2.50, up 25 cents, with all other fares increased roughly pro-rata.  The one exception is the Metropass for which the proposed fare multiple (the ratio between the pass price and the token price) would be bumped by the equivalent of two fares.  This places the burden of the fare increase disproportionately on the Metropass users.

The TTC projects essentially flat ridership and service for 2010 relative to 2009.  Projected riding is 473-million, up only 2-million over the likely 2009 level.  Other than the full-year effect of service changes added during 2009, no major service improvements are planned for 2010.

A particularly striking comment in the report is that TTC costs are expected to rise next year by 7% and to continue rising at that rate for the foreseeable future.  A number of factors are cited, but they don’t all make sense over an extended period.

  • Labour costs.  The TTC is committed to wage increases at the currently contracted levels, but unless there is a major change in economic circumstances, the next round of bargaining will almost certainly result in a lower rate of increase.
  • Energy costs.  It is unclear whether all of the TTC’s energy costs (diesel fuel, electric power) will rise at greater than the rate of inflation and if so, by how much.
  • General inflation.  Since labour and energy are already out of the mix, this only affects costs such as materials.
  • Annualized service increases.  This affects only 2009.
  • Low floor bus adjustments.  By the end of 2009, high-floor buses are planned to be less than 10% of the bus fleet, and by 2013, last of them will be retired.  The capacity adjustment for changing to low-floor buses will be completely worked into the system substantially in 2010 when 58 of the remaining 100 “New Look”s are retired.
  • Construction and congestion adjustments.  Some additional construction effects can be expected as programs such as watermain replacement ramp up, but this will hit a new plateau at some point.
  • Increased vehicle and facility maintenance requirements.  I can understand better facility maintenance (although stations are covered in a separate bullet), but if anything the vehicle maintenance costs should start to drop with the implementation of large new fleets of vehicles in all modes.

If we are looking at a sustained 7% growth in the TTC’s operating budget, even without service improvements, the underlying reasons must be clearly understood.  This has very serious implications for transit funding, service and fares in the coming decade.

The TTC projects that, relative to the 2009 budget and without a fare increase, revenue would be $13-million lower and expenses $93-million higher for a combined shortfall of $106-million.  This does not take into account the City’s request for a 5% cut in funding requirements.  The details of this are not included in the online report.

Revenue will be lower than the 2009 budget because more riders are using concession fares of some form:  passes, students, seniors, children.  The budgeted ridership for 2010 will be the same as in 2009, but the TTC expects to get less revenue than they had budgeted for in 2009 because the average fare is falling.

With the gradual shift of riders to some form of pass, not to mention a future migration to smart cards and whatever schemes they might bring for fare incentives, revenue forecasts will become more complex.  The term “average fare” may cease to be meaningful depending on what that fare can buy (time based usage, integration with other transit operations).

Metropass holders now account for 46% of all TTC riding and 41% of the revenue.  TTC staff claim that this disparity bears examination because pass users may be getting too much of an advantage.  This is a faulty analysis.  Indeed, if the use of passes (or an equivalent pricing scheme through smart cards) grows, the vast majority of revenue will come from pass holders.  As a group, pass-based trips will always generate less revenue per trip, just as token-based trips generate less revenue than cash fares.

The average pass generates 70 trips per month, of which 3 are by someone other than the holder of the pass.  This makes the average fare per trip quite low, this must be take in context.  Some of those extra trips simply wouldn’t occur if they could not be made at zero marginal cost.  Some of those trips would not necessarily generate extra fares as riders would organize their travel to minimize fare payments and use their transfers.  Many of those extra trips, being on transit, bring savings to the pass holder and to the City because they avoid the need for an extra auto with its associated costs.  Unfortunately, those savings do not show up in the TTC’s budget.

The TTC argues that the Metropass fare multiple, now sitting at 48.4 (before the effects of either the discount available to monthly subscribers or the tax rebate) should be raised to 50.4.  This would add $5 (two fares at the new rate) to the price a pass would have at the current multiple.  Little riding would be lost to the TTC because pass holders already get a good deal on fares, and there is no incentive for them to switch back to tokens or change their riding habits.  Only the marginal users, who are right on the borderline of breaking even with passes, would drop back.

This would have an odd statistical effect.  Those riders would use far fewer fares than the 70/month assumed for a passholder and so “ridership” for this group would go down quite drastically (from 70 to something under 40).  However, the remaining hard-core pass users would continue to ride at historical rates, and the rides/pass value would go up.  No doubt, this could be used in future years to show how pass holders are even more out of whack with “average” riders.  However, the “average” rider is becoming a pass holder, and it’s time the TTC stopped looking at them as the coddled exception.

If the Metropass is held at a 48.4 multiple and all fares rise based on a $2.50 token rate, the TTC projects it would lose 11.5-million rides.  Most of these would be from the higher-priced media used by casual riders who are more sensitive to fare increases.  The net revenue gain would be $50.4-million.  For each +1 in the Metropass multiple, the TTC would get roughly $6-million more revenue while losing about .5-million rides.  The proposed change in the Metropass multiple is worth about $12-million to the TTC.  Whether it is justified in the sense of “fairness” is quite another matter.

The staff report talks about ways in which current costs can be trimmed (one example is the switch from biodiesel to regular fuel, a change already approved by the Commission).  However, we don’t know which potential savings have already been worked into the proposed budget and which remain as areas for additional improvement.

The budget as described in this report does not meet the targets the TTC itself describes — a need to find over $100-million annually plus whatever cutback will occur in revenue from the City, Province or other sources such as parking and advertising.  We will hear, no doubt, how the sky will fall if the money is not found somewhere so that service and quality can be maintained, but this has not been quantified.

I don’t want to see the TTC slip back into just “making do” with inadquate year-to-year funding as that leads not only to poor service and unacceptable maintenance issues as we learned all too well in the Russell Hill subway accident.

Next week, we will see the usual melee of speakers at the TTC meeting all pleading their variations on how fares should be structured.  Many of the issues they will raise cannot even be settled by the TTC itself either because the decisions belong elsewhere, or because the TTC cannot force other governments to give it money.

The TTC, the City and Queen’s Park need to map out a service, fare and funding strategy on at least a five-year basis just as they would with other parts of the budget.  If a new philosophy of transit financing comes along, plug it into that model, see what happens, and agree that this new direction will be implemented.  These discussions should happen regularly as we consider the increasing role transit is expected to play across the GTA.

13 thoughts on “TTC Budget Report: Raise the Fares”

  1. Spacing is reporting that Adam Giambrone will oppose the proposed fare structure and seek to maintain the current metropass multiple resulting in a $121 Metropass.

    In addition, he will propose fully extending the high school student fare structure to post-secondary students.

    Not noted, but I assume this would mean an end to the volume-discount program at the University level?

    How much will this last thing cost Steve?

    Steve: Yes, obviously if all students can get the student fare rate, then the VIP program doesn’t make sense as it charges more for adult passes. The spacing article reports that this change would only cost $2.5-million annually. I don’t know where that figure came from.

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  2. I don’t believe that the Union would let the TTC get away with a lower increase. If anything they’d demand even more due to other things costing less.

    At a 7% increase rate, tokens will hit $3 by 2012, and $4 by 2016. $5 by 2019 and $10 by 2030. the Metropass Discount Plan (they mail it to your house! if you use a pass, sign up now!) will hit $500 by that time. Even a 5% increase, tokens will hit $3 at 2013, and the MDP $200 in 2020. 75% of the TTC’s bills are salary, and I can’t see the union settling for inflation.

    Steve: As I think I said somewhere else in a post or a comment, I don’t believe that labour costs will be controlled one contract at a time, but by provincial fiat setting across-the-board rules. The tricky part right now is to distinguish between areas where “Dalton Days” (or equivalently fewer staff) can provide the same service with less workers, or worked hours, and those service-based situations like schools, hospitals and transit where any cutback in staff directly affects clients/customers. We could cancel 20% of TTC service tomorrow, but I don’t think riders would be too happy.

    There is also the question of whether we can get people to do the work if we pay them less, but that needs to be seen in the wider context of jobs in the private sector and in other jurisdictions (particularly for health care).

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  3. Another well thought out analysis, and sort through of TTC doublespeak. I have not bought a pass in years for the reasons you mention.

    The closest comparison I can think of is Montreal: the only other large city in Canada with a transit system of a similar scale. You can get single rides as cheap as $2, and a monthly pass for $68.50. That’s 89% of Toronto’s cheapest single ride, and 68.5% of Toronto’s monthly pass (at the discount rate)!

    Not only is Montreal’s system available at 2/3 the cost of Toronto’s, but only thirty-five rides make the monthly pass pay for itself: seventeen return trips. In Toronto that requires forty-five: ten more rides! This is twenty-three return trips (which is more than the number of workdays many people have in a month). This is today’s rates, not the raised ones.

    I’d say we’re already getting hosed.

    I have a theory that smacks of conspiracy, and you have the knowledge to tell me if I am onto something here. Perhaps the TTC simply raises fares as high as they can, in order not to let demand get beyond capacity, as they are never funded appropriately to improve capacity. I do not see the TTC as having much improved in the thirty years since I first rode it.

    Steve: I don’t think that the TTC attempt to throttle demand via the farebox. The larger problem lies with Queen’s Park and, to a lesser extent, the City who both talk a good line about the importance of transit, but are quick to cut back on transit funding whenever times get tight. We’ve got about as pro-transit an administration as we can hope for in both places right now, and I am not hopeful about what’s in the pipeline. There will be a burst of construction over the next half-decade, but beyond that things are not as clear. Queen’s Park, via Metrolinx, still refuses to deal with the question of how transit can be a real alternative to the car once one is out into the 905, let alone how they will pay for it.

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  4. There are I think two quite important points left out of the TTC’s analysis:

    1. How much do extra trips made by Metropass users actually cost the TTC? If these extra trips are made at rush hour (or on busy routes that are often overcrowded even off-peak, such as the subway and busy surface routes like Spadina) then these rides will have a high marginal cost to the TTC because it has to run more service to accommodate them. However, if most of these trips are made off-peak on buses that run half-empty, then the marginal cost to the TTC will be very low, because the TTC doesn’t have to run any more service. I suspect most extra trips by Metropass riders fall into the latter category. Furthermore, I suspect that most of these extra trips made by Metropass users are short, such as trips to the grocery store. Some of these extra trips are also the result of stopovers (e.g. a Metropass user stops at a transfer point to buy coffee, while a non-Metropass user cannot do so without paying twice).

    2. If the TTC raises fares, some trips will shift from TTC to automobile. If this results in increased congestion, this will increase running times for surface routes and thus increase the cost of running the service.

    As a result of these effects, the TTC will probably find that a fare increase brings in less revenue that they think it will.

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  6. In the States, their monthly passes are cheaper because they tend not to use them in the non-rush hour. Toronto has the highest non-rush hour usages in North America, except for New York City.

    Steve: Closer to home, GO Transit’s loyalty fare system on Presto kicks in at 40 fares. Beyond that point, rides are almost free. Of course, most people won’t take more than 40 in a month on GO given the route and service structure which are both peak-oriented.

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  9. Re QC vs ON comparisons; true, cost-wise it may not be a useful exercise, but I remember being surprised to find that the city of Montreal is actually denser than Toronto. Yes, geography plays a part in that, but so does policy. I really believe it is in everyone’s interest – excepting maybe people invested in the tar sands – to make it more expensive to live in the suburbs and cheaper to live in a high-density, transit-oriented neighbourhood.

    It could be that the low price of a big house in the 905 is possible only because of a grand, collective mortgage that must be paid off in the future by the costs of road maintenance, petrol, increasing commute times, and climate change.

    I applaud Montreal for their Bixi scheme; now let’s get that going in TO!

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  10. Can we please stop talking about Toronto as an exception to maintain an unacceptable status quo? Yes, Ontario is robbed by the feds, and the city is robbed worse by the province. The fact that Montreal transit is better subsidised is rather the point, don’t you think. Everyone does a better job at that than the feds and QP do for Toronto, which is the better part of why the TTC blows.

    Bradley is right about Montreal’s density: Toronto’s is exactly as low as LA’s. The main reasons are historical: which cities were built up before car ownership was common. It’s no coincidence that Toronto’s few walkable neighbourhoods are pre-war. I have no faith in ‘new-urbanist’ developments, because if too many people in an area own cars, they can and will shop and entertain themselves elsewhere. Heavy infill starting from the core is the only, though imperfect, solution. In the meantime, people should realise that a house nearer the core without car ownership (but access to transit and car-share) costs the same and is more livable than a house and a car for every adult in the home.

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  11. I second that James! Been 30 years in Little Italy, and never owned a car. Must have saved $4000-$5000 a year. Also, because we are in a high-demand area, we were able to rent out the second floor to help pay the mortgage. Consequently we are able to afford my wife staying at home until the kids were in high-school.

    Now she is back to work, and it’s only a 10 minute commute, not an hour like many of her co-workers. I’ve worked at half a dozen offices in those 30 years, and five of them I could walk to in 45 minutes or less. Virtually all our shopping is within a 15 minute walk. More-and-more that’s becoming my favorite way of getting around.

    So potential buyers scared off by high prices in the old city should honestly consider the savings (in time and money) they could realize by simply NOT owning a car.

    (In the interest of full disclosure, my wife and I have never owned a car, but have on occassion borrowed one from friends and relatives. We rent a few times a year when travelling out of the city, and more recently we joined AutoShare for the occassional “big shop”.)

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  12. There are numbers being thrown around which offend any sense of numeracy.

    An article in the Globe and Mail on Tuesday 17th concludes:

    “But that stocking up is disrupting the TTC’s delicate token economy. Although there are about three million tokens in circulation, staff rely on about 400,000 tokens being recycled throughout the day in order to keep from running out.

    “As token sales rose 20 per cent with ridership staying stable, the TTC lost an estimated $1-million from what it would have raised had riders bought their tokens in 2010.”

    High-school math follows. (It may be public-school now for all I know.)

    Determining the number of extra tokens sold from the estimated “lost revenue” is very easy: $0.25 x (number of tokens hoarded) = $1 million. The reverse is also true: the only way to determine the “lost revenue” is to know how many tokens have been “hoarded”. So that’s 4 million tokens hoarded. (According to somebody.)

    Right, so this is due to sales that “rose 20 percent”, presumably since about November 3rd when the news came out, looking at postings on this web site. That’s about 15 days ago. So to sell an additional 4 million tokens in 15 days, each day an additional 266,666 tokens must be sold.

    Now, if 266,666 is 20% of X, where X is the number of tokens normally sold, then it’s easy to determine that X = 266,666 * 5 = 1,333,333 tokens “normally” sold each day. In the last 15 days, this means that 1.6 million (1,333,333 “normal” + 266,666 “hoarded”) tokens were sold *every day*.

    Okay, now square the statements “about three million tokens in circulation” and “about 400,000 tokens being recycled throughout the day” with the picture of *4 million tokens* hoarded since the beginning of November, with daily sales of *1.6 million tokens*, as determined by the financial claims made in the concluding sentence of the article.

    Can’t be done.

    The two simplest explanations I have:

    1) The TTC sources of information are making up numbers, without even checking if they make sense
    2) The media is reporting numbers without checking what their accuracy might be

    Steve: There’s another indication of how the TTC’s numbers don’t add up. Daily fares collected are about 1.5-million, and the lion’s share of this is adult riders. However, under half of the adult rides use tokens. The majority use passes, and a small number pay cash. The daily token sales should roughly equal the number of tokens used per day and that is clearly impossible. It’s almost as if the TTC used the total adult fare count as the starting point rather than only those fares paid by token.

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  13. Another possibility for the “$1 million in lost revenue” occurs to me: instead of counting the 25 cent increase as “lost”, someone may be counting the entire $2.50 future fare as lost! That would cut the hoarded token count down to 400,000, which is a lot more reasonable, considering. All the follow-on calculations make some more sense as well, although they still don’t add up at the end.

    Of course, counting the $2.25 you get now as $2.50 “lost” in 2010 doesn’t make any logical sense at all, but yes, the numbers can be manipulated by either the ignorant or the cunning, take your pick.

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