The TTC’s operating and capital budgets are a major part of the City of Toronto’s overall budget, and a considerable amount of TTC spending is provided directly by Council.
In 2010, the operating subsidy will be paid entirely by the City with no contribution from Queen’s Park. This subsidy will be about $420-million, and in the absence of a fare increase, this will rise to $500-million in 2011. The final 2010 figure will not be known until the year-long effects of ridership growth and the 2010 fare increase are clear. Notwithstanding repeated statements from Queen’s Park and various mayoral candidates, no operating subsidy flows to the TTC from the Province.
The capital budget is complex because there are many sources of subsidy. Some of these are project-specific such as the contributions by Ottawa, Queen’s Park and York Region to the Spadina Subway Extension. Others are intended to support a specific class of project such as security upgrades or vehicle replacements. Still others are not earmarked, and these sources fund projects as needed.
In 2009, the capital subsidies totalled $742-million. Of this, $333-million came from the City, $195-million from Queen’s Park and $208-million from Ottawa. The remaining $6-million came from other sources such as Waterfront Toronto. Gas tax revenues from Ottawa and Queen’s Park amounted to about $320-million in 2009, and of this, slightly more than half of the Provincial money was used as an operating subsidy. In 2010, all of the gas taxes are going to the Capital Budget. (For details on subsidy arrangements, please refer to the TTC Financial Statements for 2009.)
Whatever is left over after all of the external subsidies is funded by the City. These monies are raised partly from debt and partly as “capital from current” in the City’s operating budget.
A critical problem going forward in capital planning for the City is that various funding programs at both senior levels are drying up, and Toronto will be left with only gas taxes and the cost sharing on Metrolinx projects. This leaves the City open to a greater call for TTC capital in future years, a problem compounded by the growth in planned capital spending. Recent announcements of Provincial funding for transit network expansion contribute nothing to ongoing capital requirements for system renewal.
In this context, proper control and oversight by the City over TTC budgeting is essential. However, the TTC has a long history of operating as an independent agency managing its own accounts. This may have been acceptable before the City was the TTC’s primary funder, but not today, especially considering the effect of unexpected changes in TTC financial results and requirements on the City’s books.
Toronto’s Executive Committee will consider a report on August 16 to formalize the protocols for relations between the TTC, City Council and their respective staffs on budgetary matters. Authority for City oversight and control already exists in the City of Toronto Act. A telling paragraph from the report gives a hint of problems that exist between the two bodies:
It is important that the City and the TTC, as a city board, clearly understand their respective roles (including authority and accountability) in financial planning and budget management and that the financial management relationship be clearly and publicly documented. Consequently, it is necessary to codify the responsibilities of the TTC in relation to budgetary matters in a City by-law. [Page 4]
Among the protocols to be implemented are:
- Council approves a 10-year capital plan including current and future planned spending on approved projects, identification of changes in scope, planned funding sources for each project and debt requirements for each year.
- The TTC is not allowed to pay for overruns in, say, a Provincially funded project with savings in a City funded one. Any changes to the budget and plan from items listed below must be funded by reallocation from projects with a similar funding structure.
- accelerated or deferred work,
- scope changes greater than 10% or $500k,
- new projects, or
- unplanned allocations of funding including reserves.
- The TTC will report capital projects that are closed so that unspent balances can be released.
- Council approves the operating budget including total cost of services, service levels and staff complement, total revenue (including external subsidy, if any) and the net expenditure to be funded by the City.
- Any changes to the budget that would affect the City’s financial position must be approved by Council. These include:
- projected gross expenses or revenue
- net expenses (City subsidy required)
- overall staff complement including proposed changes to services or service levels
- The TTC will file a quarterly variance report for both of its budgets.
- Any surplus in the operating budget will be retained by the City, and Council will decide what to do with the funds.
[See Attachment 1, pp. 9-10. The operation of these protocols is set out in more detail in Attachment 2, pp. 11-15.]
The TTC’s capital budget contains a great deal of information already, but the reasons for and effects of scope creep are hard to dig out of the background material. Of particular concern is the budgetary shell game involved when unexpected cost growth in project “A” requires an offsetting saving or deferral in projects “B” and “C”. The trade-offs involved are not always clear. Indeed, the TTC now talks of a backlog of capital projects that have been pushed into future years, but has not documented this problem so the Council can assess its severity.
Another subtle problem with large projects can occur when elements that were expected to be part of the base project become future upgrades (in effect, new unbudgeted projects). The most flagrant of these, a quarter-century ago, was the SRT whose cost ballooned from just under $100-million to about $240-million, not to mention an endless series of fixup projects. More recently, careful watchers have noticed many unexpected cost increases on the Spadina Subway Extension. Although these are officially funded from “contingencies”, there is word that some elements have been deleted. Whether these re-appear as add-ons after the line opens remains to be seen. The problem is that such design changes have been made without any public review.
Some projects seen from the outside as one entity are actually sub-projects of many capital plans. For example, a station renewal may draw on half a dozen separate internal plans including accessibility, fire prevention, structural repair, communications systems, etc. This approach is useful in tracking the cost associated with each type of upgrade, and on occasion this can affect funding (e.g. accessibility may be funded differently from security).
When a project is scheduled, it may not retain all of its components, or they may be stretched out in time, to resolve overall cash flow planning. The project at Broadview Station is a good example of this effect.
Open-ended projects create their own budgetary problems in two ways. A still-open project may continue to draw on a previous capital approval for work that might be difficult to describe as part of the original project. At some point, a project has to be declared “finished” and any additional work approved and budgeted on its own merits.
Another problem arises with projects whose scope is repeatedly modified by the addition of new phases. This muddies the tracking of costs for the original components and those added later.
Council (and City staff) will have their work cut out to understand the inner workings of the TTC’s capital accounts.
Council’s approval of the operating budget and service is not intended to micro-manage TTC operations. For example, if riding growth triggers the need for more service, the TTC is free to add this service provided that the marginal cost is offset by additional fare revenue. Only if additional subsidy is needed would this come to Council for approval.
Changes in overall service quality such as those that would come from the Ridership Growth Strategy or the Transit City Bus Plan must be approved as part of an annual operating budget so that Council explicitly authorizes the new service policy.
An important part of the operating budget will be a 3-year strategic plan. This is the place where future changes in policies should appear so that the overall direction of transit service provision can be debated and approved by Council. A vital part of this plan will be projections of future subsidy requirements, service initiatives and fares.
The TTC and City do medium-to-long range planning for the big capital projects and system expansion, but rarely have comparable debates about operations even though this is transit’s bread-and-butter. Rather than overall discussion of what the transit system might be, what services it could offer, how much it would charge, who should benefit from special fare subsidies, we have the annual “squeaky wheel” debates where line item changes are approved in the heat of the budget sessions.
If Council agrees to implement the new protocols, they will take effect for the 2011 budget year. The new Commission (and its management) will have to adapt to a Council exercising closer budgetary oversight. Conversely, Council will have to take more responsibility for transit decisions, and blaming the TTC for every problem won’t be as easy.
How well this actually works will depend on the new Mayor, Council and TTC. Advocacy for better transit will shift, in part, to Council as part of the budget debates and any work on a strategic plan. A slash-and-burn administration could undo much that is worthwhile in the TTC looking on this only as a Miller legacy. More responsibly, the new Mayor and Council can build on what is good and make the TTC even better.
I’m worried about if the next mayor is one who does not use the TTC and would want to save money by cutting services he/she does not use. I just hope whoever controls the purse strings must be those who also use it.
Who sticks to 10 year plans in politics?
The suburb versus downtown debates will get initially focused on capital issues and then somebody will realise the interpretation of “debt requirements” can be stretched to include almost anything. The subsequent wheeling and dealing will hearken back to the bad old days of Metro Council with Mel and Layton doing secret deals for special projects.
With more control, one would hope there is also a greater understanding among those wielding said control. An understanding of fundamental principles regarding transit is not always present in debates about transit funding and projects, and this can lead to unintended negative consequences.
The onus is on staff to reiterate such fundamentals when they apply so that it is in front of those in control of making the decisions in question, but at the same time this is something that is difficult for staff to do because it is an instinctive knowledge that they don’t consciously think about themselves. The realities embedded in these fundamentals will go against some politicians’ interests, but the facts need to laid out and clear if responsible action is to be taken, and there is no mechanism to ensure that is delivered.
Steve: Yes, the amount of work needed to interpret staff’s work for the politicians can be trying at times, especially when they would rather not lock horns with the staff on technical matters.
I see a few problems with this, first is that it encourages projects to use their entire budget, even if it means wasting large sums that could have been reallocated to other projects that are short on funds.
Second, it raises the question, what is the TTC, either it’s an independent body, or it’s a department of the City of Toronto. If it’s an independent body, it should have control over it’s own funding, and control over it’s own routes. If it’s a department of the City of Toronto, then they could save a lot of money on administration and other costs by using city resources, rather then having it’s own which it does now. I think the TTC has been a zombie half way between independent body and city department for a long time.
Steve: Given the financial controls over the TTC exercised by the City under the City of Toronto Act, I agree that the independence disappeared a long time ago. As a City department, however, the TTC would be immense and would dwarf many other parts of the bureaucracy.
The real problem is that it has suited members of the Commission to operate as independently from Council as possible for their own purposes for years. This only works when there is a strong trust between the two.
Given so much of TTC’s funding comes from the City, it should be treated as a City department, with all the oversight and reporting that come with that status.
Item 7 (“Any surplus in the operating budget will be retained by the City”) makes me wonder whether it refers to surplus for TTC as a whole, or for specific aspects of its operations. For example, if bus operations produced a surplus and subway operations a deficit of equal and opposite size, would TTC have to give the surplus to the City, and then ask for extra funding for the subway?
Steve: The TTC does not track costs and revenues against individual routes as it is impossible to come up with a way to allocate them properly. No, item 7 refers to the overall system. If it requires less subsidy than projected (as it will this year), then the left over is not the TTC’s to spend as it wishes. The intention is to avoid having new services added with the “surplus” that will drive up the deficit in future years without Council ever having a chance to vote on the de facto change in the budget.
Whether the TTC would dwarf the city or not, I think that part of it’s size is due to it’s quasi-independence, operating as a city department could trim that size quite a bit, as it eliminates duplication in the administrative areas. I think as the TTC becomes more integrated with the city, eventually it will simply be absorbed into the city.
Could the intent be to make it harder for the province to subsume the TTC into Metrolinx?
Steve: No. The issue here is that TTC (both the staff and the Commission) has at times put the City in a position where the question of “who’s on top” in setting policy as it affects current and future budgets was unclear.
Subsuming the TTC into Metrolinx would require Queen’s Park to come up with an operating subsidy, something they seem loathe to undertake. Considering that even GO Transit doesn’t have funding for everything it wants to do, I don’t think that Queen’s Park is looking for yet another hungry mouth to feed.
Yet Queen’s Park has Metrolinx keeping the Yonge North Subway Extension as a Top 15 project…
Steve: That list was drawn up when the politicians were still on the Board, and it has not been revisited. However, Metrolinx now seems to be much more aware of how things are linked, and the a proper review of the Richmond Hill line also requires serious contemplation of other related projects that are not in the Top 15.
People complain about Miller’s influence in getting Transit City the priority it has (or seemed to have), but the Richmond Hill line is as bad an example from the 905. On top of this, the RH project has been beset by bad planning at the TTC who seem to want to push the “no DRL” option at all costs because it might undermine their “justification” for projects like Bloor-Yonge expansion, automatic train control, many more new trains, etc. When the downtown transit study now underway finally gets around to having some public sessions, we will see what sort of spin (or not) is placed on the alternatives. That in turn will have to feed back into Metrolinx planning and The Big Move 2.0.
If I may make a prediction about the Downtown Transit Study, I’m guessing that a Bay streetcar is going to be pushed very heavily early on. I’m mostly basing this on the existing anti-DRL feeling that seems to exist at the TTC and that the original DRL studies actually found that such a line would work quite well in the short term. I can see a number of arguments that they may also use (largely relating to integration with the waterfront lines).
To continue looking into my (non existent) crystal ball, I’m guessing that they will in the end be forced into recommending a subway DRL, but that it will be a last minute (in the scale of these studies) change in direction to an option that has been portrayed as massively expensive and unrealistic during most of the consultation. In any case, this may well be one of the most important studies we’ve seen in a long time, both for the significance of the line itself, and the precedent it will set for Metrolinx.
Steve: I don’t agree that a Bay car is in the cards. The connection would be much less attractive for subway riders and would substantially add to their travel times. The Bay route itself has its heaviest demand at the north end, and the service level possible with streetcars is definitely not needed in the financial district.
I agree with your prognostication that the TTC and Metrolinx will come to accepting the need for a DRL late in the game. Getting the TTC to change its mind on major projects is extremely difficult because they are so convinced of their own perfection.
The irony of a coming change in Council and, by extension, the TTC itself, may be a less interventionist relationship and less oversight on staff just at a time when at least some would-be Mayors huff and puff at some length about “efficiency”.
What Bay needs is “always a bus in sight” and then “always an artic bus in sight” before resorting to talk of streetcars. I walked from Elm to Queen before a bus hove into view at 8.30am last week. That might work off peak but if Bay is to handle more of the transit load that’s going to have to be subway equivalent headway, especially in inclement weather.
Artic buses are less than idea for 20m wide streets like Bay. It would have particular fun with the squiggle at Queen along Bay, which has enough problems with traffic backing up into the intersection already.