The Toronto Transit Commission will meet on May 30, 2012.
The scoreboard which begins the CEO’s Report includes the Key Performance Indicators (KPIs) about which I have written elsewhere. Subway performance continues to be monitored against schedule ±3 minutes 96% of the time. It remains unclear how a systemic delay — where many trains are one or more headways out of place but service is otherwise well-spaced — affects this metric. Surface routes aim to be within 3 minutes of the scheduled headway 65% of the time for buses and 70% of the time for streetcars. Considering the headway on which all major routes operate, 3 minutes represents close to if not more than one headway, and much service will easily hit that target even though the rider sees disorganized bunching service with many short turns. I will address this problem in separate articles looking in detail at specific routes’ behaviour.
Riding is up relative both to actual results in 2011 and to budget in 2012 (see following section on additional service to handle growth), and the offpeak increase is running ahead of peak as it has for some years.
The top source of complaints continues to be “Other” with “Surface Delays” and “Discourtesy” coming next in that order. The TTC has initiated a rolling survey of customer satisfaction, but it has not yet accumulated enough data to produce a metric that shows a trend over time. One big challenge of “customer service” is that some initiatives have an effect at limited points — clean and well-maintained washrooms may be appreciated by those who use them, but they don’t make any difference to overall service for most riders. Pervasive changes — more frequent and regularly spaced buses, improved station cleaning and escalator/elevator maintenance — require changes in how the system thinks about its operation as a whole, not in discrete chunks that are easily targeted.
Operator wages drive an increase in costs:
Operator Wage Rates: $2 million increase. An arbitration decision earlier this year related to the collective agreement provision that TTC Operators will receive 5¢ more on an hourly basis than the highest paid property in the GTA will increase labour expenses by $2 million.
Although the declaration of the TTC as an “Essential Service” has prevented labour interruptions, the arbitration award described here leaves TTC wages tied to rates GTA-wide.
The first prototype of the new Low Floor Light Rail Vehicle (LFLRV) for the streetcar system is expected to arrive in September 2012 with two more by year-end. Production deliveries will start in September 2013. The Ashbridges Bay Maintenance Facility and its connection track to Queen via Leslie should be available by fall 2014.
Although few details have emerged into public sessions, there appear to be serious problems with construction of the north end of the line. Some info about this is in the CEO’s Report, but there is no indication of whether the completion date for the project is threatened.
This report recommends that the Commission request Council’s approval for an increase to the 2012 Operating Budget of $2.1-million to pay for additional service beginning in Fall 2012. Ridership is running well ahead of 2011 actual (500m) and 2012 budget (503m). This is no surprise considering that the budget low-balled ridership, service and workforce needs suiting the agenda of a Commission dominated by Ford’s budget hacking minions. The total for 2012 is expected to be 512-million rides rising to 520m in 2013. Even this seems conservative considering that riding has grown at 3% annually, and an 8m bump is half of that rate.
Council policies require any “in year” changes to budgets to be approved at Council even though an agency like the TTC may “find” revenues to pay for them. This is intended to prevent spending changes that would become part of future base budgets but for which revenue may not be available. Ironically, this policy was implemented for the TTC in an attempt by the Miller-era Council to rein in policy initiatives by former Chair Giambrone.
What is missing from this report is any sense of the need to return to pre-Ford era Service Standards, the cost of doing so, and the effect on quality of service that continuing with the current regime will entail. The report notes that ridership has grown 34% since its low point in 1996, and this growth is accelerating as more people switch to transit (4.8% in 2011 over 2010). Off-peak growth at 6% is stronger than the peak period at 3%. This is advantageous because the marginal cost of a new off-peak rider is much lower than in the peak because the infrastructure (and to some extent the workforce) needed to carry that off-peak rider already exists.
The danger the TTC faces is that over two years the Commission implemented ad hoc changes to Service Standards with the effect of blunting the need for service improvements to handle growth and, in some cases, cutting back on less-used routes. These are one-time budget fixes that cannot be repeated in future years, and where they result in increased crowding, they may actually be counter-productive.
For coming years, the TTC potentially faces inflationary increases in its costs, growth in riding that will require more service, and potentially the resumption of the Ridership Growth Strategy service standards and other initiatives such as the Transit City Bus Plan. All of these will drive the cost of operating the TTC (and it subsidy) up at a rate higher than inflation and we will hear much about how transit spending is “out of control”. Oddly enough, nobody talked about politicians being “out of control” when they cut subsidies, packed more riders onto already-busy buses and streetcars, and passed budgets that underestimated demand to produce an artificially low subsidy requirement.
Page 3 of the report cites various examples of underserved routes, and the affected periods are mainly outside of the peak. This is not a question of vehicle shortages (the common excuse used for limiting peak additions to service) but to the inadequacy of the TTC’s budget to keep up with demand. Moreover, these are routes that have crowding problems today that will only get worse as ridership grows through 2012 and beyond. A few million this fall will not fix the problem, and Council must be prepared to fund substantial increases in TTC service.
This problem is compounded by changes to crowding standards that defer but do not eliminate the need to expand the fleet to handle peak period growth. The report is silent on the fact that the TTC’s capital needs for buses and a new garage vanished into thin air with the change in loading standards and a low-balled estimate of future growth. Actual growth puts the lie to that estimate. A policy discussion on whether to return to the Ridership Growth Strategy’s standards must occur as part of the 2013 budget planning.
The CEO’s report includes the comment:
To address this issue, a report will be submitted to the Commission that will outline the operating and capital requirements necessary to provide adequate service levels to accommodate these projected ridership levels.
This report is silent on capital requirements including the scale of additional bus and streetcar purchases, not to mention garage space, needed to handle peak growth at 3% for the foreseeable future.
The Commission now asks for additional budget headroom to operate service when earlier this year it diverted $5-million in extra City funding to offset service cuts into the Wheel-Trans budget. This money was intended for regular operations to offset some of the service cuts (and changes to service standards), but the Commission chose to ignore Council’s will. The now-reconstituted Commission is no longer dominated by friends of Mayor Ford although Chair Stintz must shoulder part of the blame for thwarting Council’s desire.
The Draft Financial Statement for 2011 is in the agenda. The lion’s share of the information is in the extensive footnotes, and this year we have lots of arcane detail. The largest change for 2011 is the move to Public Sector Accounting Standards which causes both changes in how financial information is presented and a restatement of 2010 to put it on an equal footing.
Capital revenue, expenses and assets are shown differently than in the past. Capital subsidies are treated as revenue when they are received and they contribute to the “accumulated surplus” (the equivalent of shareholder’s equity) if they are not offset by spending or liabilities. Previously the TTC did not recognize capital revenue until the matching expenditure came through the books with the effect that they always cancelled each other out.
The “surplus” is largely comprised of the undepreciated value of capital assets, over $5-billion, (see Note 11) and this does not represent money sitting in a bank somewhere. The contribution from the operating budget (what would be called “retained earnings” in a private sector financial statement) is only $14m. This is partly offset by deficits in TTC subsidiaries.
It is not clear exactly how this change improves our view into TTC finances given that the capital programs are almost entirely funded through various subsidies. What this does reveal is the effect on the TTC’s cash position as it pays for capital works with its working capital and does not necessarily receive a matching subsidy in the same fiscal period. In 2011, the TTC used about $36-million of its cash, net, to fund capital projects. This was offset substantially by a cash surplus in operations.
Assets and liabilities from benefit plans and pensions are also consolidated into the financial statement. An accounting problem in previous years relating to unfunded pension benefits was resolved by a change in the province’s classification of the TTC Pension so that it is treated as an ongoing concern, not one that must have enough money in the bank “today” to pay for all future liabilities. This eliminates the need for a large cash transfer from the TTC’s funding partners (now primarily the City) into the pension fund’s assets.
The accounts include a receivable from the City for future benefits costs. This practice has been in place for a few years and its effect is to defer payment of subsidy related to costs that have not yet been incurred. For example, a current employee’s pension and some benefits will not actually be paid out in 2011. If funding for these were paid as subsidy in 2011, cash would accumulate in the TTC’s accounts. Instead, the City treats this as a liability to the TTC, holds onto the cash to use as part of its own operations.
Details of the operating and capital subsidies are shown in Notes 12 and 13. These notes in financial statements from year to year are the only place where the fine details of subsidy dollar flows can be found. Note 16 includes a table of the various reserves held in City accounts for the many capital subsidy programs that accumulated from various provincial announcements over the years. Most of these are winding down and the balance in most reserves will go to zero in a few years. Provincial subsidy is now concentrated in gas taxes over half of which go to the operating budget, not to capital.
Provincial accounting requirements have shifted the way capital subsidies for major projects are handled and these projects (Transit City for now, but more to come in the future) remain as provincial assets. The funding related to them does not appear in the TTC’s books. Eventually this should result in capital funding showing up only as an annual transfer (like the gas tax) rather than in many reserves related to lump sum payments.
The consolidated financial statement at the end breaks out the TTC’s various subsidiaries.
- Toronto Transit Infrastructure Limited was a dormant company with $162,000 sitting in its accounts at the beginning of 2011. All but $1k of this was used to pay for the Sheppard Subway study. Because it was sitting in a subsidiary’s accounts, it did not require Commission or Council approval as part of the budget process. However, the expenditure did contribute to the consolidated financial position of the TTC by burning up $161k that could otherwise have been collapsed into the parent’s accounts by closing the inactive company.
- Toronto Coach Terminal Inc. is the corporate remnant of Gray Coach Lines, and its only asset is the Bay Street bus terminal. Over the years, this company has been kept afloat by cash infusions from the TTC, and there is an “amount owing to parent” of $16-million. The company’s accumulated deficit was reduced from $4.3m to $3.6m in 2011 by its finally showing a profit. Some of the ongoing expenses of TCTI have been shifted to others most recently through an arrangement where a consortium of private bus companies operates the terminal. As and when the terminal property is sold for redevelopment, this could clear TCTI’s debt off of the TTC’s books, but the “profit” from such a transaction will not be as high as one might expect given the accumulated deficit and debt to the TTC. If the city proceeds as it has in the past by simply transferring the property to Build Toronto, the potential profit on sale relative to the terminal’s book value will not be to the TTC’s benefit and TCTI will have no assets to offset its debt to the TTC.
The 352 Lawrence West bus will be extended on a trial basis starting July 29 from its current loop in Weston to Royal York. The route will use a large on-street loop westbound on Lawrence, north on Royal York, east on Dixon Road and south on Scarlett Road to Lawrence. This will provide service to the Village of Humber Heights Retirement Community.
The extension does not require any additional buses on the route.