The Metrolinx Board met on June 21 with a full agenda. As is unfortunately the case with this quasi-public board, the fatter the agenda, the less time is spent on actual discussion of the material in it, at least in public. Presentations were rushed, and there were few questions from the Board to staff. Many issues on the public agenda have counterparts in the private session where, one might hope, there is more robust debate.
[This article has been in the hopper a bit longer than I had hoped while I chased some details from Metrolinx.]
The most important GO news is the ongoing ridership growth for both the rail and bus networks. Rail travel is up by 4% on weekdays, and buses are up by 9%. Weekend bus ridership is up 19%, although the underlying reasons (service improvements and/or stronger demand) and the base number (a large increase on a small base does not contribute very much to the system) were not given.
On an annual basis (see pages 11-12 of the 2012/13 Business Plan), the rail increase is even more impressive at 7.8% varying from 13.1% on the Barrie corridor down to 4.1% on the Milton line.
As of March 31, 2012, average weekday ridership on the system was 239k. As of May 2012, 38% of GO fare revenue came via Presto cards and this figure will likely jump with the elimination of 2-ride and 10-ride tickets effective June 1.
GO has issued about 143k Presto cards as of June 2012, and the total cards in circulation number 266k. Different numbers are reported in various places, and these figures were supplied by Metrolinx in reply to a request for current data.
The strong ridership numbers make GO’s target of a seated ride for 80% of rush hour passengers difficult if not impossible to achieve. The combination of capacity constraints at Union, the desire to maintain high farebox recoveries and the clear backlog of demand for new service will make crowded trains a fact of life for many years, if not permanently.
GO’s Customer Service Committee discussed the challenges of parking at GO stations at its meeting on June 20. While the committee acknowledges the need for more parking in some areas, they are turning their focus to “sustainable” ways to handle growing passenger demand.
Balancing parking expansion with investment in other access options, as appropriate, including kiss and ride facilities, improved transit connections, and safe and direct walking and cycling links. [Page 2]
Storing cars beside a commuter rail station is a quick, easy way to establish service, but there comes a point when pavement and parking structures simply cannot handle the demand. True “regional integration” for GO will require much better local transit service especially in support of two-way, all day operations.
The big issue for the meeting was the Presto fare card and the botched rollout in Ottawa. Only a day earlier, Metrolinx CEO Bruce McCuaig and his staff had attended an OCTranspo board meeting where they were thoroughly roasted over foul-ups in the “Presto Next Generation” rollout. Originally planned for July 2012, the go-live date has been pushed back to February 2013 and there is no firm indication this will actually be achieved.
From the Ottawa Citizen:
- June 22: Presto questions demand an audit to get answers
- June 22: Presto readers failing because designers made wrong assumption, says councillor
- June 21: Presto cards delayed until 2013; city withhholds $4M payment
- June 21: Eco-pass revived as Presto woes continue
- June 20: Presto questions being posed too late
- June 20: Why Metrolinx should pay city’s Presto costs
- June 19: Presto questions
- June 8: City bogged down in province’s Presto mess
There are many more articles, and these are not the sort of “all news is good news” image Metrolinx prefers. The message put out for the benefit of Toronto media and the Metrolinx Board members was that Ottawa’s problems are entirely confined to the card readers installed on the buses. Although the vendor is well-established, the Ottawa readers are the first of a new generation.
Ottawa’s problems were not trivial (pages 7-9) and included devices that malfunctioned in various ways and improper wiring on the buses.
Metrolinx states that there is no problem with the “back end” systems that handle the processing of data from the readers or the billing to the Presto accounts. For Metrolinx, most of the system investment is in that back end, and so from an expenditure point of view, problems with the readers don’t represent a large potential loss. (Page 11 of the Ottawa presentation refers to a problem with the banking interface, but Metrolinx has advised me that this is a question of improving the ability to trace transactions, not a flaw in the back end itself.)
That completely ignores two basic questions: why was the Ottawa rollout’s cancellation left until the last minute when problems could not be ignored, and why has all Presto news in Toronto given no hint of difficulties elsewhere?
Whether problems that might exist on the back end are masked by the failure of the onboard equipment remains to be seen. Of particular interest will be the handling of non-Presto cards (e.g. credit cards) and devices such as smart phones. There is a fundamental difference between carrying a balance and offering loyalty discounts with a proprietary card, and doing so using, say, a credit card as the means of identifying customers.
Metrolinx will start a trial of credit cards at selected TTC stations this summer (College first, later Dundas and Bloor-Yonge). The TTC “fare structure” for this trial is quite simple — a full adult fare — and this will only test the convenience factor of using a credit card to access the subway. Still to come are the problems of multiple trip discounts and bulking up charges to avoid transaction-level service charges.
A Toronto deal for Presto is still under negotiation, but TTC staff are under great pressure politically (“use our system or forget any subsidies”) to accept whatever Metrolinx provides. On-board equipment for Toronto will be tendered anew, and the Ottawa experience may affect the evaluation.
Issues with Presto go beyond the Ottawa rollout, but we hear about them rarely from Metrolinx. Buried in the draft financial report for 2011/12, we learn:
Metrolinx received approximately $99.7M in operating subsidies from the Province of Ontario, of which $19.6M was allocated to PRESTO operations. [page 26 of the pdf]
Also in the financial statements, we learn that of the $2.03-billion in capital spending, $122m went to Presto. I asked about this and received the following reply:
The $122 million is for the development of the PRESTO next generation system.
The PRESTO next generation system will be an enhanced system that builds on the existing PRESTO platform to offer new products and services. It should be noted that PRESTO next generation will move PRESTO to open architecture, which means more logic in the back-end system and less complexity on tap devices, and device independence to allow for more open procurement.
The next generation platform has also been developed for future payment options, such as credit and debit cards, and mobile phones.
A further $98m is included in the 2012/13 budget for Presto.
Presto may be a wonderful system, but it is soaking up 20% of the Metrolinx operating subsidy from Queen’s Park. Is this representative of future requirements as Presto ramps up to serve large transit systems? I asked this in the scrum following the meeting, and got a roundabout answer that Metrolinx is hoping for “future partnerships” to offset costs. Today they are just focusing on the rollout. What these partnerships might be, and how Metrolinx hopes to compete with services offered by the banking industry, we don’t know.
Metrolinx also hopes to reduce its costs by bringing some Presto functions inhouse from its current contracted provider, Accenture. However, the contract isn’t up for renewal until 2016, after the big Ottawa and Toronto rollouts. Will Accenture invest in the technology needed to support these cities without some guarantee that their contract would continue well into the future?
The more difficult question for Metrolinx will be the evolution of the payment industry generally and the move away from proprietary cards or devices. Canada may not have standards for this in place today, but four years is an eternity in technology evolution. Presto’s “next generation” in support of Ottawa’s and Toronto’s functional requirements could well be its last.
Queen’s Park has not yet given official blessing to the recent agreement between Toronto and Metrolinx for the four LRT lines, but work continues on them in anticipation of approval soon (the government has no doubt been distracted of late). The master agreement with Toronto and the TTC for the delivery of these projects is still being negotiated, but it will include provision for design reviews by the TTC.
The community relations function will move from the TTC to Metrolinx later in 2012.
The TTC will be the operator of the lines. At the press scrum, Metrolinx CEO Bruce McCuaig was asked about claims by TTC Chair Karen Stintz that the new lines would have no net cost to the TTC. Metrolinx was guarded in its reply saying, rightly, that the cost of operating a line is in part a question of the service plan the TTC adopts. This implies that any decision about service standards will remain with TTC/Toronto provided that they are prepared to pay the cost. Still to be worked out is the question of revenue sharing between Metrolinx and TTC.
The new lines and vehicles will be owned by Ontario. I asked who would be responsible for maintaining them, particularly as we know from TTC budgets that this cost increases substantially as tunnels, track, vehicles and other systems age. McCuaig replied that, by analogy to the contracts already in place for the Viva infrastructure, Metrolinx would pay the maintenance costs. For systems with track, tunnels and underground stations, that is not a trivial commitment, and it will entail a significant shift in capital maintenance funding from the city/TTC budgets to Queen’s Park.
Five Year Plan
Metrolinx VP Leslie Woo presented an update on the Five Year Plan at a blistering pace in an attempt to live within Chair Rob Prichard’s artificial deadline for a short public meeting. What should be an important issue was blown through at amazing speed.
This might have been a problem if the report contained any real information, but it was as superficial as its presentation. The slide deck is not available on Metrolinx’ website, but I have scanned the meat, such as it is.
Emerging trends suggest a cooling of the Ontario economy which might be expected to dampen growth on transit services. However, we know that there has been sustained growth on both TTC and GO for some years and this shows no sign of stopping. Government revenues may be less than hoped in years past, but that does not make demand for services go away.
On the service front, GO looks to become a regional rapid transit provider rather than just a commuter system. That’s a tall order especially without any announced funding support for significant expansion of services. Needless to say, there are few specifics about future improvements to the network.
Plans call for a 30% growth in bus service to 21m rides annually. Rail service is planned to carry 20% more rides growing to 58m annually.
The percentages may look impressive, but it’s important to keep in mind that the increases are small change in the regional context and it will not represent a huge shift of travel from autos to transit. Moreover, current growth is running at a higher rate and the obvious funding question will be whether the system will be constrained more by policy and financial decisions at Queen’s Park than by physical constraints on the network.
By 2015, the Air Rail Link will open, and its goal is to carry 2m passengers in the first year of operation. It’s worth remembering that the 192 Airport Rocket from Kipling Station now carries about 1.25m per year.
The Big Move
A formal review of The Big Move, the GTA’s regional transit plan, is mandated by legislation for 2016, but there will be an update in September to reflect recent changes. These include plans for electrification, integration of the GO2020 plan, and updates to technical backgrounders for Express Rail service and transit forecasts. (Ref Metrolinx Annual Report at page 14).
Metrolinx activities are reported on a consolidated basis making it difficult to know performance of its smaller divisions — Presto and the Air Rail Link. However, there is a one-page financial report in which Presto’s operating costs are reported as $19.588m against revenue of $0.832m (fees from local transit agencies for use of Presto). At this point, the ARL has only small operating costs ($0.386m) as it was in startup for 11/12.
Commuter revenue is the single largest item in Metrolinx operations. For 11/12 it rose 8.1% over 10/11, and has been running at a compound rate of 6.6% since 05/06. Part of this increase comes from stronger ridership, part from fare increases and part from increased average trip length. Riding was up 7.9% in 11/12 with a compound increase of 4.0% since 05/06.
Although operating revenues outran the target for 11/12 by about $17.6m, this was offset by higher expenses of $19.3m. Those increases were not due to added service, but to a variety of expense lines running over budget. Presto contributed a $4.0m saving in its operating expenses relative to the original budget. Whether these results can be continued in future years, or are one-time effects, is not discussed in the report.
I asked Metrolinx about the degree to which the strong revenue is used to offset higher than budgeted costs. They replied:
For 2011-2012, GO Transit has had strong ridership, which has resulted in strong fare revenue used to offset expected costs. Some of these expected costs are associated with increased service levels and customer satisfaction.
The strong ridership from this past year has also been attributed to unexpected and miscellaneous costs associated with ridership, as well as unexpected costs due to unforeseen circumstances, such as diesel fuel prices.
One of Metrolinx’s key mandates is to increase ridership with the expectation that the region will benefit from decreased traffic congestion. One way we are encouraging increased ridership is by improving customer satisfaction.
Our improvements to customer satisfaction include better train and bus service, more reliability, and better front-line customer service. As our customer satisfaction increases, we expect there will be increased ridership levels, which, in turn, could mean increased revenues.
Costs associated with these customer satisfaction improvements include increased maintenance and facility costs for better reliability and an on-time performance of 95%, increased diesel fuel costs for better service level and expansion, and increased front-line customer service staff costs for improved customer service.
We believe these efforts at improvement were a success as GO Transit has had a significant increase in ridership and revenues, while operating subsidies were below our forecast expectation.
Diesel fuel represents about 11.3% of total operating costs. Although it is subject to fluctuations in the world market, it is not an overwhelming driver of total expenses for GO (this is also the case for TTC). Major changes in energy costs (either from supply pricing or from a mode change) would be needed to produce more than a small change in the overall GO operating budget.
Metrolinx uses several indices to track its financial and operating performance including the familiar farebox recovery ratio. For 11/12, this was 78% in line with the past three fiscal years. This number, of course, is as much a product of provincial policy, fare levels, and decisions on which services will or won’t be operated as it is any measure of management “efficiency”.
Choosing only to run trains where there is strong demand makes the numbers look good, but it is no indication of whether service can be expanded into less robust markets or time periods at the same recovery rate. Even if new services could achieve the same 78%, there remains that pesky 22% which must be made up from somewhere. Queen’s Park is showing no signs of increasing GO subsidies to drive major service improvements, and we will likely have to wait for new revenue streams to cover these costs.
Direct costs per revenue km of train operation took a big jump in 11/12 from $6.72 to $8.07 (20%) and this is claimed to be mainly due to diesel costs. That does not accord with the earlier statement that diesel fuel is only 11.3% of the total, nor with the claim that increased fuel costs for GO as a whole were about $7m, or less than 2% of the total operating expenses. Oddly enough, bus costs per revenue km only rose from $3.53 to $3.72 (5.4%) suggesting that something else was at work on the rail side of the shop.
Direct costs per passenger were essential flat for rail (down from $4.92 to $4.89) while for bus they were up slightly (from $7.54 to $7.89). This is partly explained by the increase utilization of rail services with passengers per km and per hour up in 11/12.
Metrolinx has a very large unfunded liability for pensions and benefits, one that appears to be proportionately much larger than the one at TTC. Recently, accounting for the TTC’s liability was changed to a “going concern” basis so that it would not have to top up the reserves to pay future liabilities, and there is no reference in the Metrolinx statements to a similar need. Whether these costs will grow on an ongoing basis is not covered in the statements.
Finally, a matter of some discussion during recent LRT vs Subway debates in Toronto was the amount of sunk costs at Metrolinx that might be recoverable from Toronto if the original LRT plan were abandoned. From the financial statements (Note 8), we now know that Metrolinx carried a receivable of almost $53m on its books, and this has now been reclassified as “work-in-progress” because the value of work on the LRT projects can once again be considered a capital asset.
This report provides the view forward for the current fiscal year, and in some ways is a counterpart to the financial statements for 2011/12.
The subsidy requirement (page 15) for Metrolinx will rise to $131m compared with the budget figure of $114m and the actual for 2011/12 of $100m. In the breakdown of operating expenses (page 16), we learn that “Customer Services” will consume $78m, about 15% of the $522m total expenses. Presto’s expense budget is $31m (partly offset by $3m in revenue from client transit systems). Overall, about 20% of Metrolinx budget is dedicated to customer-related functions separate from actually operating trains and buses.
Capital spending totals almost $2b with details in the table on page 18. Notable in this table is the balance between new construction and state of good repair. This is typical of the comparative youth of much of Metrolinx’ activities, but as the system and its infrastructure grow and age, repairs will become a significant part of the total budget and will eat into capital available for expansion. We already see this problem on the TTC where the burden of maintaining infrastructure falls almost entirely on the City of Toronto’s budget.
- State of good repair: $331m
- GO Optimization (includes parking expansion): $208m
- GO Foundation (maintenance facilities and Union Station): $60m
- Presto: $98m
- ARL and Georgetown South Corridor: $313m
- Regional Rapid Transit: $522m
- GO Expansion: $458m
The plan includes a detailed list of objectives for 2012/13 (pages 19-22) which I will leave for readers’ perusal.
Appendix C discusses capacity at Union Station from the point of view of train occupancy. Extension of trains from 10 to 12 cars has helped somewhat, but the ongoing ridership increases quickly offset this.