At the recent TTC meeting, the Operating Budget for 2010 was up for review, not that there were many questions in the public session. All of the heavy lifting took place, no doubt, in private session and in other discussions leading up to the final version. (The information in the linked report does not exactly match the material presented at the meeting, and that presentation is not available online.)
I will review the budget and the sources of increased costs for 2010 in a separate article, but the fare increase deserves special mention. TTC staff have a bad habit of stating almost everything relative to something else, and this makes reference to a zero base tricky. Money shuffles around rather like a game of Three Card Monte, and only if you’re very good, can you find the lucky card.
The 2010 Shortfall, Then and Now
First off, we get a description of the budgetary shortfall. This is the difference between planned expenses and known revenue (either fares, subsidies or other income). This shortfall, originally stated as $106-million in November, then $131-million in December (both before any fare increase), has been whittled down to $46-million by various means, some of which are only accounting changes.
In past budgets, the TTC made provision for accident claims in the year of the accident even though the payout may be years in the future. The City of Toronto’s standard way of handling such claims is to expense them in the year they occur, and this takes a $25-million reserve off of the 2010 budget. This is a one-time saving which only puts off costs to future years. Eventually, we will reach a point where there is nothing left in the old claims reserve account, and the cost of settlements will show up as a current item.
When the Commission approved the fare increase, staff claimed that it would bring in $48-million in new revenue. Well, sort of. They deduct $2-million as the cost of implementing the Transit City Bus Plan (for 2010) because that was part of the fare increase package, and this leaves us with $46-million, net. Of course, the TCBP will only run for a few months at the end of the year, and its full year cost will have to be factored into the 2011 budget.
Next, the staff predict that ridership will fall from 472-million (2009 probable) to 462-million (2010 budget) even though riding has actually been growing relative to 2008 all year. The total is below the budgeted projection, but not below 2008 levels. That loss of riding allows the service budget to be cut by $9-million.
Miscellaneous reductions and the transfer of Special Constable costs to the Toronto Police Service yield another $5-million, and this brings the gap down to $46-million.
Fare Revenue — Now You See It, Now You Don’t
Recall that staff claimed the 11% fare hike would bring in $48-million. You may also recall that the TTC’s revenue stream is roughly $900-million, of which most is from the farebox. One might reasonably expect to see around $90 million from the fare hike, but it doesn’t work that way.
Because the TTC assumes that we will lose 10-million rides, we also lose the revenue associated with those rides. At the 2009 average fare of $1.78, that translates to $17.8-million dollars, or a bit over$20-million if you include the extra 25¢ the fare increase would bring.
Next, the TTC believes that the fare increase will disproportionately affect riders who pay expensive fares — single cash fares and adult tokens, and that the effect will be lower or negligible for the various concession fares. This will drive the average fare down by 2.5¢ relative to what it would have been otherwise, and that “costs” $12-million. This, of course, is money the TTC never had. What they are saying is that if everything had stayed the same, they would have taken in $48-million more, but that’s not how the real world works. In effect, the benefit of the 11% fare hike were overstated by about 33% because they were shown on a gross rather than a net basis.
(Other income from advertising and parking change a bit, but the effects net out to zero.)
This means that after an 11% fare increase, the TTC’s revenue stream will only rise from $904-million to $940-million, or about 4%.
Expenses rise by $82-million from $1.298-billion to $1.380-billion (6.3%), and this leaves the $46-million funding gap after the net new revenue is included. I will look at the issue of costs running above the rate of inflation in a separate article.
What Happened Between November and December
When the Commission discussed the proposed fare increase in November, the shift away from expensive fare forms was already underway, and the projected 2009 revenue was below budget. It is unclear whether the presumed drop in revenue for the 2010 budget continues this change pro-rata into 2010, or if this is an additional drop arising from continued shifts from full to concession fares.
In the three scenarios presented for a fare increase (see page 8 of the November report), the revenue benefit ranged from $50.4-million to $62.5-million depending on the pricing option for the Metropass, and the projected riding losses ranged from 11.5 to 12.5-million. Keeping the Metropass at the same pricing multiple only cost $12-million in lost revenue against the highest projection. Even with this included along with lost riding in calculations, the net revenue projection was about $50-million. Now it is only $36-million.
Why has there been such a shift in projections in only one month? Why were higher numbers shown to the Commission in November, only to be adjusted in the December budget presentation? What has changed in the methodology of staff riding and revenue estimates?
If riding continues to increase in 2010, even with the fare increase, then the TTC will have both a greater demand and greater revenue. However, increases generally do not bring in enough to cover the cost of more service, and the system will be constrained in reacting to growth if this occurs.
Between November and December, there was a substantial increase in the pre-increase budgetary shortfall (up from $106 to $131-million) and a decrease in the net benefit of the new fare structure (down from about $50 to $36-million). That’s a big swing in one month, and TTC staff should be called to account for such major changes.
In the next article, I will turn to the expense side of the TTC’s budget.
Steve Munro 
The title sure does explains why Mississauga Transit and YRT didn’t rise their fares. Does anyone actually see that the TTC will lose as much as 8 million riders next year? That seems like a huge drop to me considering that the gain was only 3 million this year.
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The TTC should honestly hire people that actually know how to do finances. If they knew (or should have known) in their projected budget that they were going to be short millions of dollars and needed to make a fare increase to cover this, why did they order 100 more bus to be delivered next year when the majority of those buses probably won’t be used because of: a)ridership decreasing and b)another shortfall that will most likely happen next year and the elimination of bus services might be brought up to the table again. If the TTC didn’t order those buses or even decreased the number of buses they ordered, they wouldn’t be in as big as a hole they’re in now.
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@Vic:
The idea with ordering more buses is to improve service. The goal is to reduce overcrowding, not make money.
You are right in that improved service costs more.
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Of course, if mayor Miller had actually asked for funds to fix roads and infrastructure (Steeles Ave, Station revitalization program) instead of trying to buy new streetcars, the TTC might actually break even this year. Buying those streetcars ate up any money in the emergency fund. This is an example of bureaucratic incompetence (NO Stimulus funds for other projects e.g. public housing) and political porkbarreling (Mayor Miller does live in High Park, which is in a ward served by streetcars). Sometimes I think Mayor Miller is sweeping away these problems under the carpet using the broom that got him elected.
P.S. when the new HST comes into effect, the TTC has to fork over another 8% to the feds, meaning there is less revenue for the TTC. This is your MPs and MPPs at work, defending your interest folks. Looks like Infrastructure Minister John Baird really meant it when he told Toronto to F**k off.
Steve: There are so many things wrong in this comment, it’s hard to know where to start. The new streetcars come out of the capital budget, not operating, and most of that expense lies in future years when they are delivered, not 2010. The stimulus money Toronto asked for is coming to us anyhow, just for other projects (including road works). Public housing is funded through another program that has been tied up in red tape at Ottawa and Queen’s Park, but that money is finally starting to flow.
Mayor Miller lives in Parkdale — High Park, which is served (barely) by the 506 Carlton car (only High Park Loop itself is in the ward) as well as the 501 Queen car down on The Queensway. Miller lives north of Bloor close to High Park subway station. I doubt that getting new streetcars will make any difference to transit service near his home. Even the newest subway trains coming in 2010 will run on the Yonge line, not Bloor-Danforth.
Transit fares are not subject to HST, and the TTC expects to actually save about $4-million in 2010 relative to their original budget thanks to the HST. The saving will be higher in 2011 because the new tax will be in place for a full year.
It’s easy to criticize politicians when you make up the “facts” in your argument.
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For the Federal Stimulus package in 2009, which of the 3 out of the 23 were canelled? I know one of them was Warden Station, but what were the other two.
Because I read out it on the TTC Coupler magazine issue, the latest one as of right now.
Steve: Projects that had been planned as part of the stimulus program, but which were dropped or cut back were the Yonge BRT, Warden Station Phase 1, some bus replacements and some IT projects.
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Here we go again…Steve Munro (a.k.a. Mr. LRT) rushing to the aid of terrbile Mayor Miller and constantly kissing his NDP butt. The NDP nightmare is quickly coming to an end and most of us cannot wait to run you, Miller, and Giambrone out of town!
I would appreciate if you stop telling neighbourhoods what is best for them. You do not live in Scarborough or Etobicoke so keep your nose out of these woods! I will be very happy to tell the new Mayor and TTC to stop taking advice from you because most of the time you are wrong!!
You have yourself a Merry Christmas and a Happy New Year!
Steve: And I who live in “old Toronto” will thank you to stay in your suburbs and rot with lousy transit service and horrendous traffic congestion.
Some people really don’t pay attention to the fact that I often disagree with both Miller and Giambrone, and tell them so. For example, there are changes that should be made to Transit City to make it more credible and address some basic faults, but to them, that’s something for the future. For me it is critical and undermines the continued implementation by a new regime.
In the case of this article on budgetary projections, I regard some of the material coming from TTC finance staff as at best creative fiction because there is usually enough spin to require careful study of what exactly is going on. They should be challenged on this by the politicians, and they are not.
Probably the worst problem is that far too many politicians in Toronto defer to the “professional staff” who can BS their way through any argument, and on occasion simply ignore the political input. This is a leftover from the old “Metro Toronto” government that was a lot less inclusive and responsive than that in the old City of Toronto. It came along for the ride with a wonderful suburban mayor from that Potemkin village calling itself a downtown up at Yonge and Sheppard.
Have I insulted you enough yet?
Merry Christmas!
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Here’s another reason YRT didn’t raise its fares… they’re already higher than the TTC. $3.25 for a ride in York Region? Seems funny that more money buys you less service. MT also charges $3.00 cash fare, so it would seem that the TTC is just leveling the playing field here.
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@Steven
Can’t speak for Mississauga, but this the first year in AT LEAST 5 years that fares have been frozen for the YRT, as every January they have always increased. Last year they raised ticket prices by 20 cents rather than 10 cents, which helps to explain this “freeze.” The media just doesn’t make a big deal about it because it’s not the TTC.
On a side note, the TTC really needs to figure out a new way of counting rides per person. If someone makes a transfer, is the TTC counting that as two rides or one? If someone gets off the Yonge subway to get something to eat, then gets on the Bloor train is the TTC counting that as two rides or one? If someone gets off the bus at an intersection, gets something to eat, then gets on another bus route with his transfer, is the TTC counting that as two rides or one? etc.
It is because of this broken and anti-customer setup that keeps us from 2 hour transfers and/or reasonably priced monthly passes (40 rides, give or take). The TTC claims that offering either would be “too expensive”, but the current system treats us as statistics and not as human beings.
Steve: Adam Giambrone has stated (on one of his “On the Rocket” shows on CP24) that the cost of a 2 hour transfer has been estimated at $15-million. That’s a long way, in my mind, from being “too expensive”. However, given the work needed to issue transfers on that basis (especially in the subway where transfer machines are not integrated with fare payment), this scheme will probably not see the light of day until we have a smart card in place.
How does the TTC count trips? In theory, every time you make a stopover of some kind, that’s a new “trip”. This relates to the whole issue of the trip multiple for Metropass users and the claim the system is losing a bundle on them. The TTC forgets that in a non-pass world, people would either cheat on their transfer, or would not make the stopover in the first place. Either way, they would not see the “lost revenue” in the farebox.
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Between “Ernie says” and “Rodney says” I think that you two need to check your facts before you go charging through the China Shop. It was a combination of the provincial Reformatories under Harris and the federal Liberals under Chretien and his finance minister Martin who cut all the transfer payments and dumped the cost of many programmes onto the municipal governments. Perhaps before you two go off on a rant you should check your facts and not rely on the Globe and the National Post. The Sun is a better source than those two rags. At least their articles are short enough to keep the number of errors to a minimum.
If you have read Steve’s Blog with regularity you would know that he is not a TTC apologist and that he favours the best form of transit whatever it maybe. You can disagree with his choice but you cannot in honesty call him a butt kisser. He has pissed off more members of the commission than any ten politicians that I can think of. He is not out to win personal favours or glory, just good transit. Oh, he also supports a heavy rapid transit line the downtown relief line.
Have I insulted you two enough yet?
Merry Christmas!
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Forgot to add, it makes you wonder if Toronto would have handled the recession better if affordable passes or a new transfer system if were implemented in the last 12 months. This way, one could make a stopover and spend some money and not be penalized for it*. Or even do some shopping and make a short round trip on a single fare, rather than possibly drive if they have the option.
Merry Christmas BTW 🙂
*In all fairness, in most transit systems where it is implemented, the service is so poor that unless you have timed it properly you wouldn’t want to make a stopover anyways.
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What is IT short for in IT projects?
Steve: Information Technology.
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Shouldn’t new revenue also include a whack of cash from parking, for which they started charging this year?
Steve: Actually, the new revenue from parking, which is only a few million dollars, is offset by the loss of advertising. Both of these are comparatively small earners, and yet they seem to draw undue focus in debates about transit funding as if both of them could “solve” all our problems. Advertising in all media, including transit, is falling off, and it contributes barely one percent to the total operating budget. Parking is in the same league although it can be argued that at least parking attracts riders. However, even the scope of TTC parking will be cut back in coming years as lots that are no longer in the “outer” parts of the subway network are redeveloped for residential and commercial buildings. These are expected to bring more riders than the parking lots they replace.
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