# How Do We Calculate the Cost of Transit Operations? Part 1: The Raw Data [Updated]

Yes, friends, I am finally starting to dig through the backlog of issues, and I’m starting with an analysis of the TTC’s route cost and revenue figures.  These are normally reported in the annual Service Plan, but since there was no plan published this year, the stats for 2005 appear in a stand-alone document at this link.

This data, reformatted as a spreadsheet and with additional columns can be obtained here: 2005 Route Statistics.

I have written before about how untrustworthy these numbers are as a guide to operating costs and service productivity.  Various comments came in, and I have held them awaiting a chance to work on this in more detail.

Overview

Some time ago, you may have seen the article in the Globe’s Toronto section by Geoff Nixon about the Forest Hill bus and the suggestion by some [misguided] members of Council that routes like this should be axed to save money.  I spoke with Mr. Nixon about this article and am quoted in it.

This brings me to the ongoing saga of measuring a transit service for “productivity” and “profitability”.

At the outset, I will attempt to mollify some of the professional planners who say “a bad route’s a bad route, no matter what”.  Yes, if a route isn’t carrying anyone, no measurement scheme is going to make it look good.  Our problem here is that the TTC’s methodology and arbitrary views about what “productivity” means can threaten routes.

Let’s look first at “profitability”.  It is impossible in a flat fare system to make a reasonable allocation of fare revenue to individual routes.  The TTC’s scheme goes roughly like this:

• Each time someone boards a new route (the subway counts as one), this is a “boarding”.
• The total fare revenue is allocated to all of the boardings, and then parcelled out to each route pro rata.
• In practice, the average TTC trip involves two routes (some more, some less), and so the revenue allocated per boarding is about half an average fare.
• Trips that are entirely contained on one route would allocate only one boarding’s worth of revenue, and this would understate the revenue due to local trips that don’t need a transfer.  The TTC adjusts the revenue per boarding on each route to correct for this although the underlying assumptions in the calculations are not published.
• Trips that use more than two routes (eg bus to subway to bus) allocate more than a full fare’s worth of revenue to their various component routes.  This overstates the revenue on routes that serve long trips with multiple transfers.

A major problem with this scheme is that it makes no distinction of how far someone rides on a route, and routes with many short trips (either because the route is short, or because there is a lot of turnover of riders) run up much higher revenues than routes that handle long-distance trips.

On the cost side, the TTC breaks costs down into various factors related to the controlling variable.  For example, Operator wages are a function (more or less) of vehicle hours while fuel costs are charged to the distance a vehicle travels.  Both of these are subject to distortions, notably the effect on fuel efficiency depending on operating speed and traffic conditions.

The most telling problem with the TTC figures is that although the overall cost recovery ratio for the system is supposed to be 80 percent, the surface system as a whole shows a calculated recovery of only 49 percent.  This means that somewhere we have a much more profitable operation — the subway and/or weekend service — or that allocated revenues and costs are out of whack.  One way or another the degree of “unprofitability” of TTC routes is very substantially overstated.

Now let’s look at “productivity”.

The most common complaint we hear from people who think the transit system has room to cut spending is that they see scads of nearly empty buses and streetcars.  Indeed, the jumping off point for the story about the Forest Hill bus was that it had just one rider.

If we only look at vehicle occupancy as a measure of “productivity” we miss several key points.

• No transit vehicle will ever be completely full all day long over its entire route.  For example, the Queen car does not pick up a full load at Neville Park, carry them to Yonge, exchange some of them for an equal number of new riders, and carry all of them out to Long Branch.
• Productivity is at least partly a question of how many people we serve, how far we carry them, what resources we used to do it, and how attractive the service is to existing and potential riders.  We may carry a few riders a short distance at low cost, or a lot of riders a long way, and we may lose much more on the full bus than on the half-empty one.  Which is more productive?
• Service quality is measured by accessability, frequency, reliability and comfort.  If routes are far apart, infrequent, unreliable and jammed with passengers, we are not running a system that will attract new riders and support a transit oriented city.  The system is unproductive because it does not achieve the goals we expect of it.

If we compare three routes, Forest Hill, Don Mills and Dufferin, several anomalies show up:

• The variation in the revenue allocated to each passenger.  The Don Mills bus appears to have a higher proportion of captive riders than Dufferin.  This implies much more local traffic on that route than on Dufferin.
• The much higher daily mileage on Don Mills compared with Dufferin (other factors being roughly equal) does not produce much of an increase in the cost per vehicle.  Don Mills runs at an average speed about 25% higher than Dufferin, and this is probably the major factor.

If we look at how many passengers each bus served over the course of the day, we get the following:

• 740 per bus on Forest Hill
• 1,229 per bus on Don Mills
• 1,363 per bus on Dufferin

Many bus routes operate in the range of a 40% cost recovery and under 1,000 customers per vehicle.  If we eliminated all of them from the map, we would lose a good chunk of the transit system.  Indeed, few routes have the kind of productivity, measured on this basis, that we see on Dufferin.  The winner, hands down, is Coxwell with 2367 riders per peak vehicle.  This shows very good off-peak ridership plus very high turnover of riders (e.g. very short trips for each rider).  Coxwell is an anomaly within the entire bus network and not representative of that mode as a whole.

(The streetcar system as a whole averages about 40% more boardings per vehicle than the bus system due both to vehicle size and the higher turnover of riders in the dense inner city.  The winner for the system is Spadina/Harbourfront at 2,411 boardings/vehicle.)

Until recently, we rarely saw efforts by the TTC to increase service on its most “productive” routes by any measure, only moves to cut service.  The Ridership Growth Strategy aims to correct this but we have no spare vehicles with which to improve peak service.

Cost Factors

The calculation of a route’s cost is alleged to work like this:

(Vehicle hours * Cost per hour) +
(Vehicle kilometers * Cost per km) +
(AM Peak vehicles * Cost per vehicle)

This is a standard three-variable equation that is subject to linear regression (a technique that works backward from the total values and the known parameters to retrieve the underlying cost values).  When I imported the TTC’s data into a spreadsheet and split the bus and streetcar routes into two separate groups, I obtained the following results:

Mode          Cost/Hour  Cost/Km   Cost/Vehicle

Streetcar      \$86.36        \$2.56         \$489.52
Bus               \$66.81        \$1.21         \$150.98

As a check on these values, you can recalculate the allocated cost for each route and compare this with the TTC’s published value.  Some small variations are expected due to rounding in the TTC’s published data.  For the most part, these values are within a percent of each other, although a few routes are off by up to five percent indicating some anomalies in the data.

The most striking difference here is the cost per hour assigned to the two modes.  This cost should be almost completely determined by the drivers’ wages and benefits, plus the supervisory/management overhead.  There is no way to explain the much higher value assigned to streetcars.

The cost per kilometer includes variable maintenance costs plus energy.  “Variable maintenance” includes those aspects of maintenance that are a function of the amount a vehicle is used.  In the case of streetcars, it also includes the cost of track maintenance that should probably be allocated per route mile.

The cost per vehicle is the fixed cost of each vehicle per day.  This includes cleaning and servicing plus the cost of operating garages and carhouses.  Although streetcars are larger and therefore fixed costs of carhouses are spread over fewer vehicles for a given size of facility, again I have problems with the magnitude of the assigned difference between streetcars and buses.

The inconsistencies in the TTC’s data need to be explained before we can use these factors for a meaningful comparison of the two modes.

Ridership

Ridership counts vary considerably in their age depending on whether the TTC has the resources to update their data.  Large routes get full, detailed counts infrequently, and some counts are at least two years out of date.  During a period of ridership growth, this understates the current level of demand relative to the service provided (which is up to date).

Next is the revenue allocated per rider.  Because the TTC is a flat fare system, the total revenue is spread out over “boardings”.  Every time someone gets on a route (the subway counts as 1 route), this is a “boarding”.  Because most riders transfer, there are far more boardings than fares paid.

The fare revenue is not allocated equally to each boarding, but is adjusted to reflect the proportion of transfering riders on a route.  A route where many riders’ trips are contained on the route gets higher revenue per boarding, whereas a route with a large proportion of transfer traffic (on or off) gets a lower revenue.

This shows up on the streetcar routes which tend to have more captive riders (riders whose entire trip is on one route), and the average revenue per boarding for these lines is 81 cents compared with 71 cents for the bus routes.  There is considerable variation from route to route.

On the streetcar system, this value ranges from a high of \$1.07 for Downtowner/Kingston Road to a low of 67 cents for Spadina/Harbourfront.  On the bus network, Avenue Road is in top spot at 94 cents per boarding, while Alness sits at the bottom at 54 cents.

Cost, Revenue and Productivity

Another factor affecting the cost of providing transit service is the average trip length taken by each rider.  If the typical rider travels only a kilometer or so, the amount of service they consume is low.  However, if most riders make fairly long trips on the same route, then they consume more service and the cost per rider is higher.

This typically shows up on three types of routes:

• very short routes where the average trip length cannot be long
• routes with good turnover of riders (frequent ons-and-offs)
• routes with good bi-directional demand (less dead mileage to be shared among the riders).

The bus routes with the highest number of boardings per kilometer are Main, Coxwell, Christie, Wellesley, Greenwood, Vaughan, Parliament, Sherbourne, Dufferin, Dawes, Pape, Junction, Lansdowne.  Note that this contains only one long route, Dufferin, that meets the second and third criteria above.  The next long route on the list (about five spots along) is Don Mills.  The interesting point here is that some of these routes do not have spectacularly good service, but what service there is is well used by this measure even if the buses are rarely full.

The list is similar, but in a different sequence when we look at boardings per hour rather than per kilometer.  Since the primary component of service cost is hours, not vehicle kilometers, this would be a better measure.  The list here is Main, Coxwell, Dufferin, Royal York South, Christie, Vaughan, Don Mills, Lawrence West, Wellesley, Thorncliffe Park, McCowan, Ossington.

The streetcar and bus systems have very different utilization rates:

Mode          Boardings/Hour   Boardings/Kilometer

Streetcar             95.09                  6.08
Bus                      71.41                  3.60

Few bus routes have values higher than the average of the streetcar system.  This partly reflects the higher demand levels on the streetcar lines but also the larger vehicles and the TTC’s tendency to overcommit their capacity to a higher degree.

Without question, routes that have a lot of boardings relative to the amount of service will always do well in this revenue allocation exercise.  Whether the figures are meaningful, especially when paired with suspect cost allocations, is another matter.

Finally, we need to look at the average speed of the two networks.  The bus network as a whole averages 19.86 km/hr while the streetcar network averages 13.99.  This is mainly a function of the service territories of the routes.  If anything, buses operated on streetcar routes will run slower because they don’t do as well in heavy traffic and at busy stops.  Most bus routes are faster than the average for the streetcar system, and interestingly the exceptions tend to be the same collection of routes listed above that have very high boardings/hour values.  This shows the effect of stop service time on operating speed.

Astoundingly, the fastest streetcar line (on paper) is Queen.  I suspect that this is due to the relatively high speed of the Lake Shore segment that pushes up the average.  Down at the bottom are Bathurst and Spadina/Harbourfront.  On Spadina, we see the combined effects of stop service time and traffic signal delays, while on Bathurst one big effect is the generous allowance for layover time on a short route.

Overall Costs and Revenue for the Surface Network

The total daily cost and revenue allocated to the surface network give us a recovery rate of only 49 percent, well below the nearly 80 percent level of the system as a whole.  The total boardings on surface routes are about 1.43-million.  Many riders transfer to the rapid transit system, and half of their allocated revenue goes to that network.

However, without the surface network, the subway would starve for business.  We must not ignore the contribution of surface routes both as feeders to the subway system for mobility within non-subway neighbourhoods.

Conclusion

Sadly, the values we do not have in the TTC data are measures of crowding and service regularity.  We have no way of knowing how many people were packed in like sardines or gave up waiting.  Some members of Council (and even some senior management who should know better) take this collection of figures at face value, and make arbitrary proposals for cutting services.  This is the “there’s always fat to be trimmed” school of transit management.

The very measures we need to assess service as riders see it are missing from debates over transit service quality and funding.

In a future post on this thread, I will turn to the question of appropriate technologies for various routes.

## 7 thoughts on “How Do We Calculate the Cost of Transit Operations? Part 1: The Raw Data [Updated]”

1. Jonathan Cooper |

Thanks for the explanation.  That being said, I don’t really understand why anyone at the TTC would use these numbers for service planning.  I would think it would make more sense to look at vehicle occupancy along the length of a route, recording total occupancy and net boardings at each stop.  I’d think that would allow them to see if a route is overcapacity or in need of adjustment.

I also don’t understand why they combine some routes, as it leads to obviously spurious conclusions.  I sometimes take 28 Davisville in the afternoon rush hour, and it is regularly overcapacity (leaving people at the platform).  Folding it into 11 Bayview makes it appear that the route is a big money loser.

Steve:  The Service Planning department does use actual conditions on routes in deciding about service levels, although they are rather parsimonious with their improvements because of budget, fleet and manpower constraints.

There are two problems with the list:

First, a measure of “profitability” was requested by the Commission years ago and this was the result.  Various members of Council take the numbers at face value and assume there is a lot of service that can be cut.

Second, the underlying cost factors show that something is wrong with the way the TTC costs service.  This has an impact when a new service is proposed and its potential impact on the budget is assessed.  If the revenue is understated or the cost overstated, a service that might otherwise pass the standards for implementation is dropped.

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2. Gordon |

Interestingly the fastest run time is on the Scarborough line. Of course it has an ideal combination of circumstances, complete right-of-way separation, few stops and sustained running at 70 km/h over much of its route.

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3. To me the fact that council members are not getting the best information possible is a critical issue.  Perhaps a group co-ordinated by you (I would be in to help) could prepare an info packet for councillors “explaining” the numbers they received from the TTC each month until it got to the point where councillors started demanding better figures from those paid to produce them?

Obviously I still believe that validation of passes and enforced transfer recording to provide near-real-time trip counts must be the end game so that TTC has more data to examine surges and falloffs and plan the schedule accordingly.

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4. Brendan |

To me the fact that politicians are making decisions about transit, is a critical issue.  One such decision was the Spadina subway extension, into the riding of, you guessed it, Mr. Greg Sorbara. who just happens to be the provinicial finance minister.  That in itself perpetuatates a self-serving transit funding policy.

A number of Transportation studies have been commissioned by the business community, including a transportation report commissioned by the Toronto Board of Trade claiming that gridlock is costing the GTA \$1.8 billion annually.  The most recent study, out yesterday [Nov 16], was done by the Residential and Civil Construction Alliance of Ontario.  The Residential and Civil Construction Alliance of Ontario condems politicians for making transit decisions without consulting those who actually understand the issues.

The Spadina extension will cost \$2.1 billion and only increase ridership by 30 million, where as an advanced system of LRT/BRT http://www.graemeparry.com/cartography/spacing/GTA_Regional_Network.pdf will cost \$1.5 billion and increase ridership by 80 million, even sooner. Obviously the money is there to drastically improve transit, but those making the decisions about where the money should go, seem to only be interested in their own constituents.  Studies, like the one by the Residential and Civil Construction Alliance of Ontario, are calling for the GTTA to be run by those who truely understand transportation issues in the GTA.

You, Steve, in my mind seem to have and extensive understanding of the transportation issues. A citizens’ group needs to be formed to ensure the GTTA does not simply become another piece of beaurocratic red-tape.

(Note ridership numbers and estimated costs are taken from TransitToronto’s November 9th article, titled Sexy Public Transit, part I)

Steve:  A few points here.  It’s amazing that when people talk about political interference, they usually mention folks like TTC Commissioners, not the funding “partners” at other levels of government who skew transit priorities with their formulas and pet projects.

The construction industry is not exactly a disinterested bystander here, and they have a direct benefit from continued increases in road capacity.  Without them, the development model of paving over farmland with low density housing wouldn’t work as we have already seen.  Frankly, I don’t know where the additional road capacity Dick Soberman things is needed will be built, but the idea of Spadina Expressway-like battles in darkest 905 is an amusing thought.

I would love to know exactly who is meant by people with an extensive understanding of transportation issues.  This usually means some political hack with friends at Council or Queen’s Park and a committee of bureaucrats who have their own agenda — lots of work for the designers, engineers and construction companies — and a plan that hasn’t been changed in 30 years.

I make no pretensions of knowing everything, and stick in my two cents’ worth wherever I can. All the same, there’s a necessary balance between politicians and professionals in any public endeavour.  The pols react to pressure from many communities as the York University subway so clearly demonstrates.  Sensible alternatives are not even on the table.  My two cents are not even worth that against the combined grandeur of the University and Queen’s Park.

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5. N. Clawson |

I’d agree with the sentiments that including “citizen representation” on transit boards is not the way to go. For better or worse, we elect mayors and councillors – and they are indeed our representatives.

However, I’d have to disagree that it’s the construction industry that is driving suburban development. Construction companies build houses for people – and from the sample of people (middle class professionals) I work with, the preference (especially for those with little ones) is for detached houses with some type of yard.

The other driver is that suburban growth is an incredible cash cow for the different levels of government. I’d figure that the typical housing start in Ontario will deliver tax revenue of easily \$60-70 K on construction alone (sales taxes on the suplies, levies, income and payroll taxes on the wages). With about 100,000 housing starts in Ontario yearly, this works out to \$6-7 billion in tax revenue – equivalent to a sizeable proportion of government revenue (even without considering the multiplier effect.) (The biggest part of the economic collapse of the first half of the nineties (the truly dark era) was a drop in Ontario housing starts down to about 30,000.)

Now that’s just on construction. On an ongoing basis, farmland actually costs the government (and therefore you and I) money. The average farm income in Ontario is actually negative. A lot with a house on – conversely – delivers a steady stream of revenue to government.

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6. D. Gold |

I have to disagree with you here. Clearly there are more things driving the suburban sprawl than just the developers, but building single occupancy houses on greenfields is extremely profitable, and there is a reason developers favour highway expansion (it saves on their costs).

People might prefer detached houses, but there are huge possible variation in lot sizes (2 houses per acre to 30) depending on the urban density. Consumers react to the market, including prices. If sprawl is subsidized, through highway development, low infrastructure charges and third-party costs of auto pollution), living in the suburbs appears more appealing.

The construction industry often pushes for more sprawl, for example by fighting against the greenbelt. They are not simply reacting to consumer preference, they are helping to shape them.

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7. Jacob Louy |

I realise that I’ve been asking a lot about subway costs lately. It has been quite easy to find operating costs for surface routes, but why is there so little information on subway operating costs?

Steve: Because the TTC does not publish them. The surface stats come as a result of comparing routes for their so-called economic productivity. Nobody asks such questions about the subway. In any event, the fare system is such that allocating revenue, and hence calculating “profit and loss”, is a meaningless exercise.

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