This article provides additional details on the TTC’s 2011 Operating Budget including information in a presentation given at the January 12 meeting, but not available online.
Updated January 17, 2011 at 2:30 pm:
A table listing cost recoveries for Canadian transit systems has been added at the end of this article.
Updated January 15, 2011 at 10:30 am:
On January 14, the TTC made its presentation to the City’s Budget Committee. The linked document covers all three budgets: operating, Wheel Trans and capital.
The budget information is reformatted into the standard layout for City departments and agencies starting at page 26. A projection through 2012-13 on page 30 shows the estimated growth in revenue, expenses and subsidy requirements, and the effect of a fare freeze on total cost recovery. (Note that the projections do not include the effect of cancelling the proposed 2011 fare increase.)
Much supporting detail that was included in the TTC’s own budget presentation on January 12 is not in this document. The detailed presentation is still not available online.
I will comment on the Capital Budget in a separate article.
Updated January 14, 2011 at 9:45 am:
Information has been added to the “Cuts & Additions” section regarding the annual savings from proposed cuts and their value expressed on a per vehicle hour and per passenger basis.
[Original post from January 13 below]
The TTC’s revenue/cost ratio continues to run well above that of other cities and for 2011 will be about 70%. Farebox revenue for 2011 is budgeted to rise by about $53.5-million relative to the 2010 budget which underestimated ridership. Actual farebox revenue for 2010 is expected to be $40m above budget and, therefore, almost 80% of the jump for 2011 is attributable to strong ridership in 2010.
Advertising revenue for 2011 is expected to rise from $15m in 2010 to $20m in 2011 as a direct result of the improving economy and stronger demand for ad space on transit vehicles. This is an example of a revenue stream where the ebb and flow of income has a non-trivial effect on fare and subsidy debates, although it is rarely mentioned.
With a projected farebox revenue of $941.5m and expenses of $1,429.1m, the farebox will account for 65.88% of total expenses. Other non-subsidy revenues will bring in $58.7m or 4.11% of the total. The remaining 30.01% will come from city-funded operating subsidy.
The question of TTC’s headcount comes up regularly, and this year management presented a comparison from 1992 (early in the 90s recession but not at its nadir) to 2011.
- Operating workforce up 14.3% from 9,442 to 10,791
- Service kilometres up 20.3% from 187.1m to 225.0m
- Revenue hours up 20.3% from 6.9m to 8.3m
- Passengers up 20.5% from 404.3m to 487.0m
- Toronto population up 20.8% from 2.276m to 2.750m
The headcount does not include staff (or fractional staff) allocated to capital projects as these are paid from a separate budget. However, as a reference year 1992 probably lags the full effect of the recession and staffing may not yet have fallen proportionately to service and riding. Therefore the smaller increase coming back to 2011 as compared to service and demand may be a question of timing in the statistics as much as a reflection of system efficiencies.
Getting from the 2010 Budget to the 2011 Projection
In September 2010, TTC management projected an increase in costs for 2011 of $53m. This budget gap was adjusted downward as follows:
- Elimination of a provision for new public sector accounting standards: $20m. This change has been agreed to by the City Manager and relates to the manner in which the TTC accounts for some future liabilities. They will be booked in a manner that does not contribute to the operating deficit.
- Service reallocations: $7m. Instead of paying for new service with new money, the TTC proposed to shift service from little-used periods on some routes. This topic has been covered elsewhere.
- Station Managers program phasing: $6m. This rollout of this program will be stretched out to reduce the cost in 2011.
- Advertising revenue: $5m. Discussed above.
- Diesel fuel cost reduction: $3m. In 2010, diesel fuel cost $14m less than expected. Much of this saving is expected to be lost again in 2011, but the total price to be paid is still $3m below the 2010 budget level.
- Elimination of 10 hour rest period for operators: $2m. This brings TTC practice into line with the Labour Standards Act which requires than a driver have an 8-hour break between successive days’ work.
- Elimination of costs for new Head Office: $2m. It is unclear whether this is simply a deferral, or if this suggests that something is afoot with the proposed Head Office move to Yonge & York Mills.
- Elimination of Transit City Bus Plan: $1m. This would have been the beginning of the TCBP rollout in fall 2011.
The list above totals $46m. This leaves $7m to be found, and this corresponds, allowing for rounding, with the “unspecified reduction” of $8m to cover revenue increases or cost savings as yet unknown.
Ridership & Service
Riding for 2010 was budgeted at 462m but actually came in at 477m. TTC management expects an additional 8m rides due to economic and employment growth, 1m because there will not be a G20 in 2011, and 1m from the Post-Secondary Pass. The proposed 10-cent fare increase would have generated a 4m projected loss of riding, but this is no longer included, resulting in a budgeted 487m rides.
The Service Budget was prepared on the basis of 483m rides, the target when the fare increase was still on the table. It assumed that $7m worth of service with low demand would be replaced by an equivalent value of new service on routes requiring more capacity, but only for the last four months of 2011.
There are two problems with this scheme. First, there is no mention of how the full $21m value of the new service will be funded in 2012. Second, there is no provision for revenue lost from riders driven away by service cuts.
Part of the additional cost of service comes for the continued replacement of high-floor by low-floor buses. According to the fleet summary (part of the regular TTC Service Summary), there remain 63 non-accessible high floor buses and 227 lift-equipped high-floors. The design capacity of high floor vehicles is greater than the new low-floor buses, and as the fleet moves to 100% low floor, more service must be operated to provide the same capacity.
The continuing rise in traffic congestion drives changes in running times on affected routes, and this requires more vehicles to maintain service. In 2011 this will be offset somewhat by a reduction in the provision for construction delays as the Federal and Provincial stimulus-related spending on roadwork will wind down from the high level in 2010.
Service Cuts and Additions
Although I have discussed this elsewhere, I didn’t include maps, and the only place that the TTC has identified the routes where improvements might happen is in the presentation material. Here are maps of the route sections affected by proposed cuts and additions.
Update January 14, 2011
The total vehicle hours to be saved by the service cuts is approximately 132k. The dollar value of this is stated by the TTC as $7m, and this implies an allocated cost per vehicle hour of about $53.
The number of passengers to be affected annually is about 1.3-million. This means that the cost per passenger is about $5.37. Note that this is a gross cost before a route’s share of a passenger fare. That number is impossible to calculate because there is no reliable way to subdivide passenger revenue among the routes in a flat fare, free transfer system.
The estimated passenger loss is about 276k per year. At an average fare of, say, $1.90, this represents about $525k in lost revenue. However, a lost late night trip may have a counterpart earlier in the day which also no longer uses transit.
In the motion deferring a decision on the service cuts, the Commission asked that staff “find other transportation alternatives”. This is a thinly veiled reference to taxis and jitneys. Considering that the cost just to get into a cab these days is over $4, I will be amused to see whether any company is ready to try to provide an “alternative” service at a net cost lower than what the TTC is paying already. By comparison, the average cost per passenger for a Wheel Trans taxi trip is $30 although to be fair, these trips would tend to be longer and require more driver assistance than rides on the route segments removed under this proposal.
[End of update]
Details of the Expense Budget
Many changes affect the expense budget. Normally, I would not write up so much detail, but given the level of interest in the minutia, here we go.
- Collective Bargaining Agreements ($13m):
- This includes $7m for the effect of the April 2010 3% wage increase carrying over into 2011. Note that there is no provision for further wage increases, and funding of any settlement on a new contract will have to be handled by the TTC and City whenever that occurs.
- $2m is added for Group Life benefits.
- $4m is added for a 0.5% increase in the pension contribution rate.
- Operator wage progression ($7m):
- In 2009 there was a larger-than-normal amount of new operator hiring that is not duplicated in 2011. The “bulge” in new hires has now reached the seniority level where they are paid at the top rate, and there is no offsetting block of new operators coming in at the starting rate. The average cost/hour for operators will go up as a result.
- Other employee costs ($18m):
- This category includes a variety of existing benefits whose cost rises with the number of employees, the utilization of the benefits (e.g. drug and dental insurance), growth of post-employment benefits and higher employer payroll costs for CPP and EI.
- The base budget for this area, collectively, is about $250m meaning that the increase is about 7.2%.
- Service ($5m):
- This is the full year effect (relative to the 2010 budget) of the fact that service cuts planned for fall 2010 were not implemented due to increased riding.
- Service adjustments ($6m reduction):
- With less construction to cause traffic congestion, there will be about $5m less provision required for extra service in 2011 compared to 2010.
- York Region Transit has reduced the amount of contracted service by $1m in 2011. There will be an offsetting reduction in the Revenue Budget.
- Vehicle & Facility maintenance ($7.2m, 14 positions):
- More vehicle maintainers are required for the bus fleet’s increased complexity (1), reliability of the ALRV streetcar fleet (2), and replacement of cracked torque arms on the 372-car fleet of T1 subway cars (4).
- More facility maintainers are required for track (3) and signals (2) safety and reliability, and for a backlog of sheet metal repairs (2).
- These two areas will require 7 new positions each, or 14 in total. It is quite clear that most of the cost increase here is for materials in these areas overall, not for the additional labour.
- Maintaining existing service levels ($4m, 67 positions):
- With the average seniority of the workforce growing, vacation entitlements rise. This requires 18 more staff to cover for vacation absences.
- 17 staff will be added for route management.
- 17 staff will be added to reduce the bus recertification training cycle from 5 to 3 years to be in line with the practice for rail vehicles.
- 7 staff will be added to maintain new and existing emergency and fire systems, as well as to deal with a backlog of work in this area.
- 6 track patrollers will be added to provide 365-day coverage for this area. These staff walk the rapid transit system checking for safety and maintenance issues along the lines.
- 1 position will be added for safety training.
- 1 position will be added to support the growth of the pass vending machines from 10 to 60 units.
- Inflation in goods and services ($3m):
- This allowance is based on the City of Toronto budget guideline of 1.8%.
- Accident claims ($3m):
- This increase reflects expected cost escalation and the effect of legislation implemented in September 1, 2010. The TTC and other transit agencies are pursuing changes in No Fault Insurance regulations to minimize the threat of insurance fraud through faked injuries.
- Customer Service ($2m):
- This area was originally planned to receive 44 Station Managers, 14 Customer Service Trainers, a Customer Service Officer and a Customer Service Representative (total 58). This has been cut back to 22 Station Managers and 7 Trainers plus the two senior positions.
- With an allocation of only $2m, it is clear that this program, even at its original size, will not begin until late 2011.
- Training ($2m, 14 positions):
- The introduction of the Toronto Rocket subway cars will require a great deal of staff training for the new equipment. This creates a need for 18 new trainers. This will be partly offset by a reduction of 8 trainers for new operators as hiring will be at a lower level in 2011 than in 2010.
- Three trainers are added so that escalator maintainers can also perform work now done by electricians to simplify and consolidate this work.
- One trainer will be added to support the bus rebuild program which is part of the Capital Budget.
- Depreciation ($2m):
- The City does not finance capital projects with a life of less than 10 years. This affects IT projects (partly), tools and shop equipment, automotive non-revenue vehicles (rail work cars have a much longer lifespan), furniture and office equipment. These capital items are carried on the TTC’s books and paid for with depreciation charges to the Operating Budget.
- As the total value of such items rises, so does the depreciation allowance. (Note that subsidized capital items such as passenger vehicles and infrastructure are not depreciated in the TTC’s accounts because the TTC didn’t pay for them.)
- Energy ($1m):
- This is the combined effect of changes in anticipated pricing for diesel fuel, hydro and water, plus the fact that implementation of the HST increased energy costs relative to the previous tax and rebate scheme.
- Health & Safety ($1m):
- Changes to the Occupational Health & Safety Act in June 2010 require that employees in Revenue Operations be protected against workplace violence. This will be provided by contracted armed guard services.
- IT Support ($1m, 10 positions):
- Three new IT systems replacing old technology will go into production in 2011. Ten of the development staff, previously funded through the capital budget, will be transferred to the operating budget.
- Subway Station Cleanliness ($1m):
- The cleaning blitz begin in 2010 will continue using temporary employees (typically summer students).
- Other Expenses ($2m net):
- There is one less weekday and one more weekend day in 2011 versus 2010 ($2m saving).
- Telephone service costs and IT maintenance/license costs will go up (the latter because of projects noted above moving from development/capital to production/operating budgets) ($2m).
- Lease for Revenue Operations facility ($1m). Because of the weight of the new tokens, Revenue Operations must be relocated from its current site at Hillcrest to another building. The long-term requirement for this section depends on the rollout of self-service fare collection.
- Office space leases ($1m). Increased costs for space leased by the TTC.
- The total increase in budgeted expenses is $66m with 221 additional positions in the workforce.
If you have read this far, you will probably notice that there are almost no references to increased “efficiency” in the deployment of staff. This attracts the attention of those who go through TTC budgets looking for the hidden “gravy” with which to trim the budget.
What is not mentioned (and here I will sound like an apologist for management) is that despite the continued growth of the system, there are comparatively few areas of the budget receiving more funding or headcount. This indicates that the growth is to a fair extent being handled within the existing system except where the function (e.g. driving a bus) cannot be provided simply by getting more work out of existing staff and facilities.
This aspect of TTC operations, assuming it exists, is not documented in the budget presentation and I feel that this is a shortcoming, especially in the political and financial climate. If there are ongoing productivity gains within the TTC, this should be shown as a saving against what the budget might otherwise have been. Conversely, if “productivity” causes areas to be squeezed or has reached the end of productive changes in certain areas, this too should be flagged for future planning. There may be good news here, but we’re not hearing it.
Looking at the overall scope of TTC operations, the $7m in “poor performing routes” is small change. This is not to say that we should not set standards and say “here is the line”, but we must also not devote disproportionate energy to debate over .5% of a $1.4-billion budget. Next year, we will have to find much more just to pay for the full year effect of changes implemented in 2011, and there isn’t a shred of evidence to suggest that the new Commission knows how they will do this. Meanwhile, Commissioners and Councillors who want businesslike analysis and standards need to address their own love for unproductive services whose purpose is to placate their own constituents.
Some argue that the TTC is a “social service”, an unfortunate choice of words considering that the phrase is usually applied to services for the poor, aged and frail. The ability to move around the city is as much a part of “city service” as building roads and clearing snow. Transit is vital for many who cannot afford to drive or to drive everywhere, and the fact that Toronto has hard-to-serve pockets where transit demand is comparatively low is simply part of the evolving cost of serving the city overall.
Updated January 17, 2011:
The following table of cost recoveries for Canadian transit systems was provided [with thanks] by a reader. The data appear sorted by recovery level (left side) and city/province name (right side).