Every year at budget time, there are many arguments about the coming year’s budget, fares and subsidy. Inevitably this concentrates on the current year just completing and the new year to come. Looking back over several years provides more context and is worthwhile in assessing where Toronto’s transit operations might go from here.
An important part of the budget, but one that is not revealed in most public reports, is the service budget. This gives the planned hours of service per week for the various schedule periods (aka “boards”) through the year.
Values in this budget can evolve between the original versions in the preliminary operating budget and the final versions after the Commission and Council have hacked away to set fares and subsidies at the level they desire. The history of the service budgets reveals quite clearly how the possible growth in transit service has been throttled.
I have chosen 2006 as a starting point because this predates the rollout of the Ridership Growth Strategy (RGS) service improvements in fall 2008.
Each set of bars within this chart shows the budgeted weekly hours of service for five schedule periods: January, March-April, May, September and November. These are months that are not affected by seasonal service reductions, and they are also months when service changes tend to show up. November is typically a high point because major service improvements are rolled out when they have only a few weeks left to affect the current year’s financial budget.
Service is budgeted in operator hours because this is the largest component of costs, especially variable ones caused by service changes. (Costs of vehicles and infrastructure tend to relate more closely to the size of the system, not to the amount of service.) The actual breakdown of hours by mode for January 2013 is roughly 77% bus, 12% streetcar, 11% subway, and less than .5% RT.
For 2006, the three versions of the budget are almost identical showing that there was only minor “tweaking” over the course of the year. The two versions in 2007 show a similar pattern.
In 2008, the rollout of new service under the RGS kicked in. The original budget is quite different from the one adopted for RGS, and this shows up with a jump in budgeted service in November.
Further increases were planned in 2009, but the version that was eventually adopted shows the result of a tug-of-war between the Giambrone Commission and the Miller Budget Committee. Some new proposed services — notably the Transit City Bus Plan — were not approved by Council, and so the service budget was cut back. The final version, however, was still an improvement on 2008.
2010 was the last year of the Miller administration. Although the TTC planned to increase service in the fall, these plans were cut back in light of constraints imposed at the Budget Committee.
By 2011, the Ford administration was in control. The original 2011 budget had service at a level similar to the original 2010 proposal, but cutbacks in “poor performing” routes trimmed these ambitions. Even so, the actual budgeted service that was operated in 2011 was slightly better than the 2010 numbers. However, this was mainly a case of shifting service between routes and time periods to keep up with ridership growth.
The original 2012 budget included a cutback in the early part of the year as the RGS service standards were dropped and the TTC reverted to pre-RGS standards for vehicle loads. Midway through 2012, the budget was revised in light of strong ridership and unexpectedly high fare revenue.
Plans for 2013 are more aggressive and will return the TTC to roughly the originally planned 2009 level. However, this will be with less generous loading standards and with no restoration of lightly used services. (Indeed the TTC has not even revisited those cuts to determine whether some routes should regain service in light of overall growth in demand.) Whether this budget actually survives at Council remains to be seen.
In summary, the implementation of RGS led to a rise in budgeted service in late 2008, but the service has not grown during a period when ridership was rising a few percent annually. The TTC has used less generous loading standards and service reallocation to absorb demand rather than deliberately courting riders with service improvements.
TTC financial results have evolved over the period from 2006 to 2013 (budget).
The lion’s share of revenue comes from fares which are now running just over $1b annually. Various smaller income streams contribute about 5% to the total operating budget and the remainder comes from City subsidy. In turn, about $91m of that subsidy is funded by provincial gas tax, but from a bookkeeping point of view, the money all flows from the City.
Outside City Services are provided by the TTC for York Region Transit. Their income offsets the operating costs of running the service, and if YRT decided to operate these routes on its own, both the revenue and costs would disappear from the budget.
Operating Budget Depreciation recovers the amortized cost of capital assets acquired by the TTC with its own money. This annual charge against the operating budget is used to fund current capital purchases that are not eligible for subsidy (typically items with a comparatively short lifespan).
Accident Claims have declined substantially in recent years thanks to changes in No Fault Insurance legislation. Because this change only affects claims for accidents after the legislation was implemented, and some claims take many years to settle, the full value of the new rules has taken a few years to work its way into the financial results. This is not an “efficiency” in TTC management per se, but rather a one-time reduction in costs thanks to a legal framework. To put it another way, this is not a “saving” that can be replicated in future years.
The Net Operating Loss reached its height in 2009, the first full year of the Ridership Growth Strategy and its enhanced service levels. Fares were unchanged from 2007-2009. In 2009 the number of trips went up, but the average fare declined slightly as did farebox revenue. The 2010 fare increase shows up in increased revenue and a declining net loss despite higher operating expenses.
In 2012, the total revenue rose more than the expenses (which were themselves moderated by service cuts through a return to pre-RGS loading standards), with the result that the net loss went down. The 2013 budget was drawn up on the basis of a zero increase in the net loss (hence the City subsidy).
Although accident claims, as noted above, are declining in 2013, this is largely offset by increased depreciation charges.
All of the funding to cover additional service and inflationary increase in operations comes from higher revenue. This is made up of the effect of the 2013 fare increase on existing riders (about 2/3) and added revenue from new riders (about 1/3).
The Revenue/Cost (R/C) ratio for the TTC was 70.7% (farebox income only) in 2006. As a matter of policy this was driven down by service improvements and fare freezes to the point that it bottomed out at 62.8% in 2009 (the first full year of RGS). For 2013, it will be at 69.0%, almost the level of 2006.
About 4.5% of TTC operations is funded by non-farebox revenue. Often the R/C ratio is quoted including this number, but with the implication that fares are carrying the full load. When this factor is included, the R/C ratio for 2013 will be 73.3%.
This distinction is important when advocates of greater transit funding talk of the days when 1/3 of TTC operating costs were shared equally by Queen’s Park and Toronto. If that were the case, then the R/C ratio including miscellaneous revenue would be 66.7%, and for fares only would be about 62%, roughly the level achieved in 2009 almost entirely with City-only subsidy.
Fuel and Traction Power
The cost of fuel and power to propel TTC vehicles is often raised in debates about diesel and electric propulsion.
Since 2006, the annual mileage of bus operations has risen from 105.9m to 123.6m km, or 17%, while the cost of diesel fuel per km operated has risen by 49%.
During the same period, the annual mileage of rail (electric) operations was almost unchanged. A small increase in streetcar mileage was offset by a reduction in subway mileage. Electric traction power costs per km operated rose by 26%.
The ratio of diesel to electric cost/km has risen from 1.612 to 1.914 or 19%.
These numbers must be taken with care because a bus kilometer is not the same as a subway or streetcar kilometer. Power costs are dominated by the subway which runs by far the most electrified mileage of service. Buses cannot substitute for any of the rail modes on a 1:1 basis, and moreover buses running on rail routes will tend to get worse than average mileage due to traffic conditions and stop service times for heavier than average demand.
In 2013, diesel costs will be down slightly from 2012 even though more bus service will be operated. This is the result of advantageous hedging by the TTC in the futures market for fuel.
2014 and Beyond
In future years, the TTC will likely continue to gain riders, but it is unclear that they will pay the full cost of inflation and service improvements through fares. Additional initiatives such as the mothballed Transit City Bus Plan (a network of express routes plus a designated “frequent service” network) or a return to the less-crowded RGS loading standards have not been priced into TTC budget planning.
Some TTC managers observe that the cheapest additional capacity can be had through improved service reliability. This will require a degree of commitment to line management and service quality well beyond anything we have ever seen in Toronto. It will also require advocacy for transit priority on City streets — not just the odd traffic signal with extended green time, but parking and turn restrictions that will improve overall road capacity. Toronto has never had the stomach for this sort of true “priority”.
Better service also affects the capital budget because it will drive requirements for more vehicles and the garage/carhouse space to stable and maintain them. Spending like this is usually overlooked in the rush to draw lines on maps and formulate the next megaproject, but it will be the lifeblood of bringing transit to a wider market in Toronto.