TTC Budget Decisions: The Sky Has Not Fallen (2)

In the previous post, I detailed the decisions taken by the TTC at its September 12, 2007 meeting.  Here, I will discuss how they will address the budget shortfall in 2007, 2008 and beyond.

As widely reported in the media, the target budget cuts for the TTC are:

  • $30-million for 2007
  • $100-million for 2008

These numbers as I now understand things are not hard targets, but guidelines that the City Manager wishes to achieve.  The rationale for each of them is:

  • The City would like to pare $100-million in total from its 2007 spending to assure that there will be no deficit carried forward, and indeed to create a small surplus going into 2008.
  • The TTC’s assigned share of the 2007 goal is roughly 1/3 or $30-million.
  • Options for budget cuts were to be drawn from those areas where it would be easy to reverse the change if funding became available.
  • For 2008, if there is no new source of city revenue, then the subsidy to the TTC would be flatlined at its 2007 level.  If this happens, then there is a gap of roughly $100-million between the TTC’s planned budget (which includes many service increases discussed previously) and the total revenue including subsidies and fares.

In fact, the TTC (and many other agencies) will not hit their 2007 goal.  To date, the TTC savings that have been identified are:

  • Roughly $6-million from deferral of planned new services in September and October 2007.
  • Roughly $6-million from the planned November fare increase.
  • Small savings from cutbacks in travel and similar expenses.

For 2008, the initially expected shortfall was $104-million, but this is now reduced to $60-million by:

  • A $7-million saving in the cost of diesel fuel versus the original budget figure.
  • A $3-million saving from deferral of the opening of Mt. Dennis Garage and associated service changes to mid-February 2008.
  • A $34-million rise in fare revenue from the full-year effect of the November 2007 fare increase.

This $60-million needs to be funded from somewhere, and the likely sources are:

  • $35-million earmarked for the TTC from the proposed new taxes.
  • $20-million from deferral of the Ridership Growth Strategy.
  • $5-million in unspecified savings needed to offset Adam Giambrone’s amendment to the proposed fare structure that lowered the Metropass price by $2.

For a three year view, please refer to the pro forma budget summaries.  Note that these are based on the originally proposed fare structure for 2008 and therefore do not include the $5-million cost of the amended Metropass price.

Pro Forma Budget 2007-2010

This chart also shows a progression from the current 75% cost recovery to the 68% “user fair share” target over a three-year period and the impact this would have on subsidy requirements.  Obviously, if the R/C ratio stays higher, then the subsidy goes down accordingly.  This information is intended to show both Council and other potential funders like Queen’s Park the cost of getting back to where we were under the historical funding arrangements.

A range of fare increases is discussed in the TTC report from a low of 10 cents to a high of 25 cents.  The revenue gains range from $20- to $45-million, while the potential ridership losses range from 4- to 11-million. 

If the entire shortfall in the TTC’s 2008 budget were funded from fares, an increase of at least 50 cents would be needed, and ridership loses would easily fall in the range of 25-million or more.  Oddly, this would reduce some of the crowding on TTC vehicles, but not in a way that is sustainable as a long-term strategy.

One remaining issue is the TTC’s method for evaluating service improvements or cutbacks.  This has long been regarded as a purely technical exercise without impacts at the political level, but as we have seen, when budgets get tight, any saving, real or imagined, comes forward for review.  We must be able to trust that this process produces meaningful, accurate results on which we can base policy decisions.

One thought on “TTC Budget Decisions: The Sky Has Not Fallen (2)

  1. I must say I have a problem with the idea of deliberately dropping the cost-recovery ratio to 2/3rd instead of the current 4/5ths to 3/4ths that has been over the last while.

    This is fundamentally no different than the game of chicken played by council with the tax deferral – it applies the exact same logic of expecting Queen’s Park to crack and pony up, or possibly Parliament Hill in Queen Park’s absence, but we both know this is not going to happen – Flnance Minister Jim Flaherty literally bursted out laughing when asked by a journalist if he would consider providing any emergency assistance to Toronto.

    The Premier is being adamant in his stance of already having given new powers to let Toronto generate more revenue itself. Why do they think that, already knowing that this game of chicken failed with the tax deferral, the result should be any different when they increase the percentage of the subsidy – especially on purpose?! This will accomplish nothing but getting us back to another budget crisis at a later date.

    Steve, you yourself had extremely harsh words for council on their tax deferral, but now you seem to do a 180 when it is the TTC doing the same kind of playing chicken behaviour instead of council, it leaves one confused. Historical reasons is not enough of on its own, especially when anybody can simply retort “times change”.

    The TTC should be going for a 100% cost-recovery ratio so that it is in a strong bargaining position with the governments for capital funds in future, and can strongarm more intelligent decisions and distribution of capital funds, avoiding politically-motivated infrastructure or service, since the operating subsidy that was needed from the province or city would no longer be floating above its head like the reaper if it had the full cost recovery. That said, I am not saying that they should cut service or hike fares by a huge amount to achieve this (I’d advocate diversification first and foremost for generating more revenue).

    It’s the good old days that predate 1971, before we had political subway lines in the network… and the more political subway lines that get built, such as the 905 portion of the Spadina extension (I can agree with a York U terminus), the further the decemation of the system marches from a “net-work” to a “not-work”. The TTC’s future will continue to be under threat every so often from political stupidity without the full cost-recovery ratio in its hands.

    Steve: Just to be clear, a 68% cost recovery has been a touchstone of debate on “appropriate” funding levels for some time. The purpose of the pro forma numbers is to show everyone exactly what it would cost to do this regardless of which level of government would shell out. It might be the City or Queen’s Park, but it’s important that the discussion be based on real numbers rather than an abstract idea.

    A big problem with this type of formula is that the size of the overall budget is always dictated by the “funding partners”. If, for the sake of argument, Queen’s Park is expected to pay 1/6 of the budget, and they only can “afford” $150-million, then the total budget will be forced to come in at $900-million. This sort of thing happened notably under the Rae government, but the problem would apply if the City also wanted to cap its contribution without the political embarrassment of the R/C ratio going up again.

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