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.
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.