The Fiscal Realities of Ridership Growth

During the TTC board meeting on June 13, two of the fiscal conservatives on the Commission ran aground on the cost of running a successful transit system.

As I reported earlier, the TTC has an embarrassment of additional riding and will begin increasing service in September and through the fall to bring crowding within the Commission’s service standards.  More service, of course, costs more money and it is very unlikely that this will be made up from added revenues.  We are, after all, trying to give all current riders better service rather than forcing them to ride on the roof, and we are trying to attract new riders to the system within the constraints of the fleet size and available operating staff.

With Metropasses now a highly attractive fare medium, more people are buying them and more rides are taken on each pass.  This dilutes the revenue per ride as ticket, token and cash fare riders migrate to the cheaper, fixed-price pass.  Riding is going up, but revenue is not. 

Commissioners Michael Thompson and Peter Milczyn wondered openly about changing the fare structure to recover some of the additional cost including schemes such as zone fares or charging for transfers.  They should talk to their constituents in Scarborough and Etobicoke respectively.

Suburban riders take longer trips to get to work, and a transfer between routes is almost inevitable for most of them.  Downtown riders might organize themselves to stay within one route, either the subway or a streetcar line.  Charging for transfers or imposing a zone system penalizes those for whom the transit system is already less attactive — the long distance traveller — and is likely to disproportionately affect those who can least afford it.

My rationale for that statement is that long, tedious trips including transfers are likely to have a larger proportion of “captive” riders who cannot afford to trade up to an automobile as an alternative even though it would be very attractive in comfort and travel time. 

Do these Commissioners/Councillors really understand the impact of their proposals?

During the same debate, Commissioner Thompson spoke of a “crisis” facing the TTC, and indeed he planned to launch a “strategic planning” process for the system.  Yes, we need a strategic plan, but the real “crisis” is that everyone hopes that somehow the problem of transit funding will solve itself for both the capital and operating budgets.

There is no magic here.  If you want better transit, then you must spend more money.  This may come from fares or taxes or transfers from other governments, but it must come from somewhere. 

Anyone who talks about charging for transfers or imposing a zone fare system, but  never breathes the words “fare increase” is not being honest with the TTC’s riders.  The irony here is that the amount of money needed to operate better service is between $6- and $7-million on an annual basis.  This is less than one percent of the total operating budget and could be funded by a miniscule fare increase.

Any change to bring in zones or charge for transfers would be complex to implement, and unless the base fare were lowered substantially, would bring in far more revenue than is needed for the service improvements.

In another context, Toronto Council seems willing to increase the subsidy to passengers by about $13-million to operate the York University subway extension.  Why do we happily go forward with such schemes but nickel-and-dime plans for better bus and streetcar service?  The real reason, no doubt, is that York U won’t see its first passenger until at least two further terms of Council while better bus and streetcar service is something for today, for this year’s budget.

Support future spending for a dubious subway project and you are a visionary investing in the future of our city.

Support better transit for riders today and you are a wasting precious taxpayer dollars on riders who should be paying more for their service.

I look forward to seeing Commissioners Thompson and Milczyn with coffee-pot fareboxes on buses in Scarborough and streetcars in Long Branch defending the public purse from marauding, oversubsidized riders.  It will be a great photo op for their re-election literature.

13 thoughts on “The Fiscal Realities of Ridership Growth

  1. By then Thompson *might* be a Tory MPP (or so speculation goes) and not care what his successors have to worry about.

    Steve: Yes, but if he hopes to be mayor some day, Thompson needs to do his homework and decide whether his fiscal conservatism trumps any social liberalism he might harbour.


  2. Hi Steve,

    Just how big would that “minute fare increase” that would cover the additional operating costs of running better service be? Over on transit toronto, “Dave” is claiming we’ll need a $3.50 fare by 2008. I assume this number was brought up by someone at the board meeting yesterday?

    Steve: The TTC’s own figure for the service increases needed to catch up with overcrowding and riding growth is betwen $6- and $7-million annually. That’s about 1 percent of the fare revenue, and less than 1% of the total budget including subsidies.

    A $3.50 fare would imply an increase in revenue of at least $1 per ride or over $400-million annually (less the inevitable losses because people won’t tolerate that big an increase). That would not only pay for a service increase but for much of the capital cost of Transit City. I cannot find the post you refer to, but claims on that scale would be irresponsible and inaccurate.


  3. I thought that in exchange for killing the Spadina expressway zoned fares were also dead?

    Not that I think paying for the service used is a bad idea, I got used to it as a GO Transit customer. That’s how cellphone operators work, internet service providers are looking at it, and how taxi’s have worked that way for years. Toronto has residential water meters now, something it never had before. But before I sell anyone on the idea, how much more cost recovery would a 25, 50 cent or even a dollar increase across the board generate than the additional administration costs of zoned fares? How many transit users would we loose with a moderate increase in this age of over a dollar a litre for petrol?

    I’m also not keen on tax increases to fund transit operations. My 1940’s vintage TTC map proudly boasts how no tax revenues are used to fund the TTC. Of course that was in the pre-subway days and before metro government. Although the North Yonge Railway’s costs were covered by the taxpayers of Thornhill and Richmond Hill, the primary users of the service.

    Steve: The Spadina Expressway was killed off a year before the zone fares. The fare decision came about because suburban Metro Councillors chafed at funding the TTC deficit but having to pay extra to ride the service.


  4. >>Andrew,

    There was no discussion at yesterday’s Commission meeting of a (alarmist, sky-is-falling) $3.50 TTC fare in 2008 to pay for the TTC’s proposed service improvements. I went to Transit Toronto’s website and couldn’t find the “Dave” comment you refer to above. I presume “Dave” is speculating without benefit of informed knowledge of TTC fare revenue calculations.

    To put Steve’s comment in perspective, a 1% fare increase on TTC’s “average fare” of ≈$1.72 is less than 2¢—a very modest fare increase (or subsidy) to bring the TTC service up to Council-approved “loading standards” ie. a seat every once in awhile, and fewer sardine crush loads! There is something perverse about a Councillor justifying a fare increase on the basis that you’ll occasionally get a seat on the TTC and therefore should pay more!!! 🙂

    This “average fare” is a weighted average fare (all passenger revenues/rides), so it could be achieved a variety of modest ways (Cash—$2.75>$3.00; Adult Metropass—$99.75>$99.95, etc.) If TTC fares were increased across the board proportionately by the smallest 5¢/ride adult ticket/token increment, it would be ≈ 2.4% (adult ticket/token) fare increase—and generate way more revenue than is needed to pay for these modest service improvements to return to the TTC’s loading “standards.”

    Rest assured TTC Commissioners… right, left and centre are very wary of the rider backlash from increasing TTC fares. It sends the wrong message as they promote increasing transit usage to reclaim its declining “modal split” back from the car—in order to just reduce the rate of congestion growth on GTA streets—let alone decrease it!


  5. While the greater impact of increasing fares for long distance TTC rides would be to discourage use by those who can’t afford it, some riders may take another look at premium service like GO.

    Steve, have you yet had a look at Transport 2000 Ontario’s updated proposal for urban frequency transit, called GT-Rail?

    Is there room, both geographically, fiscally and planning-wise, to consider some “medium-distance” corridors in the GTA, sort of between the mandates of TTC and GO? Or is this decades in the future?

    (At the same time, GO is apparently noticing a trend toward longer trips on its system. I also recall a recent GO report stating the average subsidy is only 60 cents a ride. I thought this was an error, but at an 89.5% fare recovery ratio, it seems possible.)

    Steve: I hate to give T2000 a hard time in response to a comment, but since you ask, here goes:

    Claimed advantages of GT-Rail:

    “A faster way to get from Kennedy to STC than a subway extension.” There are no plans to extend the subway and that decision was taken last year. Where has T2000 been? Whether we replace the RT with LRT or with Mark II RT, there is already a rapid connection from Kennedy to STC that I and many others ride every day. It requires 6 4-car trains and could handle more riders if there were more equipment available. Why would you convert this to a DMU service when the demand characteristics are way, way above those of a regional rail service?

    The RT now runs 15 4-car trains per hour, packed full, for a capacity above 3,000 at peak and projections for an increase to at least 6,000. That’s a lot of DMU cars.

    There is no existing rail corridor that goes into Scarborough Town Centre and you would have to build one, somehow. Moreover, the line will be extended north and east to Sheppard Ave.

    “A faster way to Weston”. I agree that there should be better service in the Weston corridor, but don’t see DMU’s as the way to provide it. This scheme also suffers from a core-orientation as not everyone in Weston wants to go to Union Station.

    T2000 is rather coy about the Blue-22 scheme prefering not to take a position on it. That’s what advocacy groups do, take positions. Are they afraid of alienating this project’s sponsors, moribund though it is?

    “Lower cost than LRT or various alternatives.” I have no other way of saying this: that is a dishonest claim. GT-Rail depends for its success on existing rail corridors where there is surplus capacity or very low cost infrastructure upgrades needed. Costs for LRT include creation of the right-of-way because we don’t have railway lines running down the middle of Eglinton, Finch or Don Mills, as well as a fleet to handle projected demands very much higher than a DMU service would provide. It’s easy to be cheap when you put new lines only where there is existing track and you run infrequent service with small trains.

    I am not going to get into a detailed critique of the proposed routes, but have to say that this proposal smacks of a solution looking for a problem. We need many improvements to GO’s rail service, and should concentrate on those.

    After all of this, they probably won’t invite me to speak at their meetings again.


  6. Enough is enough with fare incrases. What needs to be done is for riders to stand up and demand the government provide proper subsidy for transit.

    As it is right now, public transit fares do not compete well with the price of driving. I know people who drive, because it’s just cheaper then leaving the car at home and taking the TTC to work.

    And I do not want my fare going up for the slow service I receive in Scarborough. If TTC actually had proper express routes from outlying areas, etc., then I would gladly pay $130 for my METROPASS like I did when I took the DVP EXPRESS. But for regular service, we pay enough.

    What Toronto does need though is an inner city core fare, of like 75 cents or something, covering the downtown area.

    I think we have to remember not to always punish the suburban TTC riders. Let’s be honest, the suburban 416 area is most of the TTC’s ridership base. So treat us well, because we are just as much a part of the TTC success story, as the inner city riders. And yet they are treated as kings and queens, who have to subsidize the cheap suburbanites.

    Steve: I was with you up to that last comment. The subsidies that enable the TTC to exist are paid by all of the city, not just those who live and travel downtown, and I agree that good transit should be provided everywhere. “Good” also means adqeuate to handle the demand, and there’s a lot of demand on many of the downtown routes (not to mention several suburban ones). Why should there be a 75-cent “core” fare, but not an equally cheap price for a short trip in the burbs? If ever we considered subsidising those downtowners, your fare proposal does it in spades.

    Transit fares need to decouple from incremental use of the service. That’s what passes are all about — a flat rate for a month’s riding, whatever that may be for each person. This, along with better service, will encourage more riding, a highly-desired goal in our congested and smoggy city.

    Local phone service works that way in many cities because people would rather pay a monthly fee than worry about the cost of one huge call when they need or want to make it. The phone company does not go bankrupt. Indeed, long distance carriers are moving into the same type of scheme with flat rates for specific calling packages. The cost of actually providing service is averaged over all of the customers.


  7. Commissioner Milczyn asked TTC Staff yesterday “If the increased 2007 ride forecast means the TTC’s 2007 subsidy/ride is also going up?”

    The TTC Staffer paused, then said “Yes.” Unfortunately, he answered intuitively and guessed wrong… showing that even expert, knowledgeable TTC Staff sometimes fall victim to the complexities of running the TTC.

    Over the past 6 years, the TTC virtually froze the service hours, despite increasing ride demand (since 2004). Service lagged demand. Within 2007’s fixed annual service hours (and relatively fixed operating costs) increased rides and revenue mean the subsidy/rider will actually go down (until Sept).

    This sounds counter-intuitive: diesel is going up, labour is going up year-over-year: therefore more rides require more service, more subsidy, more subsidy/ride. It is true that year-over-year the absolute subsidy is going up due to inflationary cost increases—but not due to service improvements!

    A quick check of the detailed P3/4 CGM Report Income Statement shows the TTC now projects a $277.8M operating deficit in 2007 or $.601 subsidy/ride @ 462M rides. This is virtually equal to the budgeted $.599 subsidy/ride (271.8M/454M)—less than a 0.5% difference.

    Steve notes above that the increased cost is just 1% of revenue. The increase in rides gained, however, is almost 2% (8M—462M vs 454M). It’s a blend of 8 months of 2007 at higher rides at the fixed service level and 4 months (Sept>) at higher (100 RGS) service. The TTC Staffer simply forgot to incorporate the (2%) increased 2007 rides in his subsidy/ride answer.

    (N.B. in interests of fairness, this is not totally accurate as another ≈1900 hours and about $640K cost is needed to reach 462M according to the separate TTC Report #22—not included in P3/4 CGM forecast).

    As Steve mentions in other posts, much of the growth in TTC rides in 2006/2007 has been off-peak when TTC runs spare capacity, particularly since the Metropass became transferable in Sept 2005.

    The TTC should be commended for squeezing blood from a stone in adding over 55M rides since 2003—with virtually flat service hours—it’s time however to redress the poorer quality serive: crush sardine loads, way below loading standards.

    In this context, it’s important to note the TTC has not needed to increase it’s subsidy/ride due to improved service, just for inflationary cost purposes, as much of the ride growth was off-peak when they’ve had excess capacity… until now!

    These easy efficiency gains are now over… the off-peak ride gains exhausted with the TTC facing signficant (inflation and) service-related cost increases in 2008 to keep up with ride demand, as reported in today’s Press inteviews with TTC Chair Adam Giambrone (upwards of $100M annually).

    As Steve notes… more service will mean more cost: some combination of higher subsidy or higher fares. There’s no avoiding it.


  8. If they are going to increase anything, increase the cash and ticket fares, but freeze Metropass fares. In most cities, a monthly pass is more or less the same cost as riding the system 10 times per week (a 2 way trip for a 5 day work work week), or 40 trips a month. Here an adult Metropass is equivalent to nearly 50 rides a month, and a student/senior Metropass is about 60 rides a month!!! This alone is very discouraging for potential transit riders, since it can become tedious going to the ATM every week to take out more transit fare, yet they may feel a Metropass is too expensive. Because of this, they may never realize the benefits of owning one.

    I think they should increase the cost of tickets to $25 for 10, and cash fare to $4. Maybe not in a single increase, but over 2-3 year period. Other GTA transit systems raise their fares each year without much complaining, but if Toronto as much as hints at an increase all hell breaks loose. It is time to stop acting like babies with fare hikes and suck it up.

    However, to counter the increase, introduce 2 hour transfers. They are already doing it on St. Clair (as well as other regional transit systems), it would help local business, people would take transit more often for shorter or casual trips over driving, and with the fare structure I suggested it would be an overall cost effective plan for both riders and the TTC.

    Steve: The net cost of a Metropass purchased on the monthly discount plan and after the income tax deduction is about 40 fares. A time-based transfer is already under study, and implementation would greatly simplify the introduction of Smart Cards because the only “validation” would be a timestamp, not a complex calculation of where a passenger had travelled.

    My complaint is not against fare increases, but against politicians who want to re-arrange the system in such a way to hide a big fare increase that would reduce the need for subsidy. The irony is that the constituents in their wards would be disproportionately affected while downtown riders would be largely unscathed.


  9. So the metropass is now 99.75… Why not increase the cost of the metropass to 100.00 flat? I can’t see many people complaining about this… It would make the collectors job a lot easier, by removing the need to hand out a quarter every time someone wants to pay with 100 cash. It also would undoubtedly make everyones income tax calculations easier at year end… 1200 is an easier number to work with than the decimal value that would now result, for those claiming 12 months worth of passes. And that extra little bit of revenue could go far in helping the TTC increase service (and hopefully entice further money into the farebox/monthly passes).

    Steve: Hmmm… at 25 cents a pop, that only works out to half a million a year or so. As for simplicity on tax returns, the really heavy pass users are in the discount subscription program and pay $91.50 a month. The real issue is whether we should be raising fares generally and what ratio we should maintain between cash, tickets/tokens, passes and various discretionary fares. The vast majority of riders are adults and any meaningful increase must go against their fares.


  10. As an operator for TTC, I believe an increase of the Metropass is a must. $99.75 is nothing in today’s standards. Try filling up your tank, paying for insurance, maintenance, license plate sticker renewal, emission tests. If anyone can find me someone in Toronto who pays less on their car I would be truly shocked. The Metropass is great but TTC needs to make revenue from this source, and as we can see they’re not.

    I am also a supporter of elimination of cash fare and implementing either a smart card or a system that uses only tokens, tickets, and passes. I would challenge anyone to count a handful of change that is often dropped into the farebox and see if they can count $2.75!! Good luck.


  11. Steve asks :
    Do these Commissioners/Councillors really understand the impact of their proposals?

    To that question, I add : do they ever debase themselves to use public transit? If they did, they wouldn’t make such inane statements. Can we see “class structure”? Do these councillors really understand the needs of us “lumpen-proletariat”?


  12. @Lou – on my way home from work this week I got off the 504 at Loblaws to get groceries a couple of times and walked to Danforth. I might have driven once I got home instead. I took the subway downtown to do some rare weekend overtime. That’s why the metropass is important for Toronto, off-peak trips which don’t add to smog. The City has to recognise this by increasing subsidy of operating costs if they want the environmental benefits.

    Your point on cash is well taken – why won’t TTC let corner stores sell tokens rather than adult tickets? This would help reduce queues at collector booths as people could use turnstiles.

    @David – Giambrone is a well known TTCer – I don’t know about the other councillors. I do know they all get (transferable?) metropasses.


  13. Lou a METROPASS may be cheaper then owning a car. But the thing we have to remember, and the reason why TTC is so great, is that the majority of riders are CHOICE RIDERS. They have cars. So for them to use transit more, it has to be cheap, or they are not going to ride as often.

    Sure a METROPASS for 100 bucks is great for people who choose not to own a car. But as I said, the majority own one, and we need to keep the cost down.

    Calgary for example has a weekday METROPASS that is cheaper for people who just use transit Mon-Fri but drive on weekends.

    But overall if you push the METROPASS to 100, that is going to be the breaking point. 99.75 does not sound as bad as 100.

    Steve: Remember that a Metropass is $91.50 on subscription, and from that one must deduct the tax credit of about $14. This brings it below $80.


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