TTC Operating Budget 2014 (Update 2)

Updated November 26, 2013 at 5:50 pm:

I have written a commentary on the City of Toronto budget as it affects the TTC on the Torontoist website.

For further information please see:

I will add comments here on some of the details at a later date.

Updated November 21, 2013 at 10:50 am:

The TTC Board approved a fare increase effective January 1, 2014 at its meeting on November 20.  The new fares together with a comparison to 2013 fares appear in the following table.


As expected, the Commission opted to freeze cash fares on the premise that these are  most commonly paid by people for whom large volume purchases are difficult (i.e. the poor) and who would be disproportionately affected by an increase to $3.25 (8.3%).  Instead, the Metropass trip multiple is bumped by 1 so that the breakeven point for the adult pass is now 49.5 rather than 48.5 trips.

The result of this scheme, detailed in the table, is that single fare media go up by about 1.9% while adult passes rise by about 4.1%.  The claim is that passes are purchased predominantly by people who are employed and who can afford the larger increase.  The increased multiple does not apply to Students/Seniors whose trip multiple actually falls slightly because the pass prices are rounded.

TTC Management argues that the average number of trips taken by a pass holder, as determined by trip diaries that a sample of users keep, has risen from 70.5 in 2010 to 74.3 in 2013 with the result that there has been a drop in revenue per trip.  The increased multiple is supposed to partly compensate for this.  What management fails to establish is whether the extra riding imposes any real cost on the TTC through service needs, or if these are simply “convenience” trips that would not be taken if a full fare were required just to ride a short distance.

The table shows the effective fare for each pass type presuming that the holder of the pass takes 74 trips/month.

The discussion about fares took some odd twists as Commissioners tried to establish that sticking the extra cost to pass holders could be justified.  Glenn De Baeremaeker reasoned that moving to a $3.25 cash fare would create extra lineups at collectors’ booths in the subway as people asked for change.  He completely misses the fact that the token fare, at either $2.65 or $2.70 is difficult to purchase with exact change as is the Metropass during the flurry of sales at month end.  When the proportion of fares paid by cash is considered, the amount of “extra” delay at booths will be trivial, but if this makes the Commissioner sleep more easily for his decision, so be it.

Commissioner Anju Virmani, not usually the most talkative member of the Board, spoke from her private sector background and asked about internal efficiencies.  Although she only joined the Board as a “citizen member” recently and this is her first budget cycle, I find it astounding that she appeared to be unaware of the years of cost-cutting measures and reviews of TTC practices under the Ford/Stintz regime.  She even brought up ideas such as naming rights and philanthropic support for the transit system, something that tends more to address capital than operating budgets, and which in any event cannot possible produce revenue on the scale needed to sustain the transit system.  Moreover, such “donations” create a tax expenditure for the federal and provincial governments, and so the net cost of the contributions would not fall wholly to the private sector donors.

Completely absent from the budget debate (or from Management’s report) was any information about alternative fare strategies or service designs and their effect on budgets or fares.  It is no secret that the TTC will roll out Presto in 2014, and yet there is no mention of the need to shift away from the existing Byzantine transfer rules that cannot be implemented in the smartcard medium.

Among the options that should have been included in the report, but were not, are:

  • Move to a time-based fare of two hours.  At a meeting on November 19, 2013, in Southern Etobicoke (which will be the subject of a separate article), the TTC’s Mitch Stambler stated that the cost of a time-based fare could be $20m/year.
  • When the Service Standards were rolled back to the pre-Ridership Growth Strategy level, the estimated saving in operating costs was about $14m/year.  Even allowing for a backlog of needed improvements, an allowance of $20m/year to return to the RGS standards would be reasonable.
  • The operating subsidy per ride has fallen from $0.93 in 2010 to $0.78 in 2013 (with an expected rise to $0.79 in 2014).  If the 2014 subsidy were at the same per-rider level as in 2010 (17.72% higher), the subsidy would be $76m higher than the level actually proposed by the City Manager.  If inflation at 1.5%/yr were included, the per rider subsidy for 2014 would be $0.986 and the added subsidy would be about $80m.

Chair Karen Stintz was surprised to learn about the drop in per-rider subsidy because she had thought that it was to be maintained at a higher level, about $0.82.  Her own policies, however, with continued support of subsidy cuts (if only through the inflation effects of a frozen subsidy) during a period of riding growth directly led to the lower subsidy per ride.

Commissioner Josh Colle proposed , as part of an amended budget approval motion, that the City return their operating subsidy per rider to 2010 levels or higher.  This is unlikely to fly for 2014, but it sets the stage for a debate on restoration of TTC funding cuts in future years.  Colle also proposed that both the Provincial and Federal governments be approached to increase transit funding.

Although the budget as passed still has a $6m gap that is nominally to be filled by additional savings to be found as the year goes on, Chair Stintz indicated that she will push for the City to increase the 2014 from the City Manager’s proposed $428m to $434m to cover this.  In the new world of a City Hall with Mayor Ford’s influence and moral sway deeply eroded, the City budget debates in general will take on a new tone as the artificial austerity of a regime unduly focused on tax cuts begins to unwind.

I will return to this topic as the City budget process continues through early 2014.

Original article from November 13:

The TTC will consider its Operating Budget on Monday, November 18.  Included in the proposed budget are:

  • Options for a fare increase
  • Plans for service improvements to cope with rising demand
  • Increased operating subsidy from the City of Toronto

This article is a preview in advance of the Commission meeting.  I will update it with additional information from debates and from a review of the detailed budget documents when I have access to them.

Budget Overview

The total Operating Budget for the “conventional” system (Wheel-Trans is separately funded) is projected to increase in 2014:

($000)                          2013         2014
Budget                      $1,540,948   $1,600,559
Subsidy Required               410,951      434,081

The proposed subsidy from the City of Toronto falls short by $6-million and this must come either from better than expected operating results or from a Council decision to increase the subsidy beyond the level that will be recommended by the City Manager in the City’s forthcoming budget.

With the total operating budget going up by almost $60m, and a requested subsidy increase of $23m, the remainder must come from other sources, primarily fares.

Fare Increase

Ridership in 2014 is expected to increase from 528-million in 2013 to 540m in 2014.  The subsidy per rider will increase from $0.78 to $0.79, but will still be below the level of $0.93 in 2010.  In that year, the subsidy was at roughly the same dollar level as proposed for 2014, but was a larger proportion of the overall budget.  The subsidy’s value has been cut both in absolute terms and from the effects of inflation.

TTC Management examined three scenarios for a fare increase, and recommends that the Commission choose between two of them.  Common to the three options is a five-cent increase in the adult token fare from $2.65 to $2.70 (1.9%) with proportionate increases in other classes of fare.  The three variants are:

  • Cash fares stay at $3.00 (not recommended)
  • Cash fares rise to $3.25 (8.3%)
  • Metropass trip multiple increased to 49 from 48 which, combined with the base fare increase, would take a Metropass from $128.50 to $133.75 (4.1%)

The cash fare has been frozen since 2010, and the proposed increase makes up for inflation over the interim period.  This will almost certainly be strongly opposed on the grounds that cash fares are disproportionately paid by those least able to afford them.

On the Metropass side, sales of passes have been climbing in recent years, and the number of trips taken by passholders is also growing.  The effect has been that TTC revenues are slightly below expectation because more trips are taken at the flat rate a pass offers, and the effective fare per trip is lower than expected.  TTC management continually attempts to bump the “trip multiple” for the Metropass (the number of full fares represented by the price of a pass), and this year they argue that the increased use of passes justifies asking passholders for more than an inflationary increase in pricing.

Depending on whether you are a token user, pay cash, or ride with a pass, you will view these proposals unhappily. Management appears to be asking the Commission to decide whether it wants to stick part of the extra cost to heavy users of the transit system, or to put the burden on the less frequent cash-based riders.  Making this an either-or choice is an odd approach.

The underlying question is the philosophy of what fares are supposed to do.  If they are regarded primarily as a way to raise revenue, then anything that looks like an opportunity to get more money from riders is attractive.  If fares are regarded as a tool to increase transit riding with all of the attendant benefits to the city’s mobility, then pricing should avoid discouraging transit use.

The argument for low trip multiples on passes is that they encourage the “transit habit” as there is no marginal cost for an additional trip to the rider.  Indeed, some of those “trips” that the TTC counts as “lost revenue” would not occur if riders had to pay a separate fare for them, and analyses purporting to show riders are somehow taking advantage of the system are misleading.

This will become more important if the TTC moves to time-based fares and throws out its restrictive transfer and stopover policies.  At that point, the link between a “fare” and a “trip” will be broken because even the single cash fare will confer the ability to take multiple “trips” for a flat price.  Management’s fetish with trip multiples represents a system view based on single fares be they cash, tokens or tickets, that will soon be replaced by one in which riders buy the ability to travel by time.

Experience in recent years suggests that transit service takes precedence over fares, and that small fare increases will not have much or any effect on continued growth in system usage.  The inevitable debate, especially in the run-up to 2014 elections, will be over a fare freeze.  This could be counterproductive as it would almost certainly lead to further service cuts unless the lost fare revenue is made up from increased subsidies.

Expenses and Service

The TTC responded to the Ford/Stintz era’s subsidy cuts with some internal efficiencies but most notably with service cuts both in the extent and frequency on some routes, and in reduced service standards (greater crowding).  Both of these changes are “one time fixes” that control costs by paring what some regard as “fat” or “gravy” off of the system, but they cannot be repeated year after year.  Once the marginal routes with nearly empty buses are cut, they cannot be cut again unless we redefine what is “marginal”.  Once a bus or streetcar is full, it is full, and trying to cram more onto the service is counter-productive.

One might argue that if only the TTC operated its routes more efficiently, they could provide better service with the same number of vehicles.  This is certainly true to some extent, but some service problems arise from issues – such as inadequate scheduled running time – that cost money to fix.  Other problems are external effects – such as the poor use of road space with severe congestion arising from traffic regulations that favour parked vehicles over moving ones.  Neither of these will be addressed overnight.

The total expense budget for 2014 is projected to be $59.6m greater than in 2013.  Of this increase, $17.1m is service-related mainly to keep pace with growing demand while staying within the Commission’s service standards.  Details of where the service increases will occur have not yet been announced, but unless there is a change on the subway (such as the long-planned extension of the St. Clair West short turn to Glencairn), it is likely that this money will be spent on surface routes.

Peak service is constrained by fleet size, but in 2014 there will be both new buses and, finally, new streetcars although these will be partly offset by the retirement of older vehicles.  The fleet plans, which form part of the Capital Budget, are not part of the online versions and I will not be able to comment on them until I review the detailed budget papers.

The TTC expects some of the cost of service increases to be offset by lower operating costs through the use of larger vehicles (buses and streetcars).  Details of replacement ratios and the degree to which additional capacity will be provided as part of the articulated bus and streetcar rollouts are not yet clear.  (TTC Management plans to bring a streetcar rollout plan to the December Commission meeting.)

I will leave further review of the budget until after the Commission meeting and a perusal of the detailed budget papers.

47 thoughts on “TTC Operating Budget 2014 (Update 2)

  1. Steve Dore said:

    Indeed, but the “external force” was Queen’s Park, not the old City of Toronto, which is why the Ford Nation-style suburban hatred of Toronto is such a bizarre result.

    On the other hand, I suspect that logic and “Ford Nation” are two streetcar lines that never cross. Case in point, look at their desire to cut the number of council members in half and stop to consider which part of the city would benefit the most from such a ward reduction.


  2. Scarbs vs. Old City of Toronto Argument is so outdated. What happened during those years before amalgamation, when the City Mayors of the Boroughs and Townships didn’t do anything significant for rapid transit?

    Oh wait …… I know what happened, strip malls and more strip malls….


  3. I am a downtowner who works at Victoria Park and Eglinton area and would like to see the Eglinton LRT completely buried. It is a waste to build the Eglinton Line on surface in Scarborough since whether people like it or not, it will be buried in the foreseeable future and so why not reduce costs and construction headaches by burying it from the start? Why build median lane LRT and then demolish it soon after thereby causing too much environmental waste and pollution and worsening the air quality and health?

    Steve: The cost and environmental waste are considerably higher if we bury the entire line. By presuming that it will be buried “eventually”, you create a dubious justification for doing this now. I could equally argue that future conditions will demand more medium capacity transit far sooner than we can possibly afford to build subways, and that presuming this is the only option will constrain transit’s ability to grow.


  4. Is there any indication that the fare hike that is proposed would be overturned by council? We are heading into an election year, after all.

    And, is there any indication that council might actually increase the subsidy?

    Steve: If Council were to alter the proposed fare scheme, they would also have to come up with some way to replace the revenue. Simply telling the TTC to “live within its means” or “find further efficiencies” simply is not acceptable when service all over the city is bulging with riders.

    Karen Stintz has already claimed that she will be looking for an added $6-million so that the subsidy will match the TTC’s budget requirement, but that is equivalent to a further 0.25% tax increase if offsetting cuts are not found in other City budget lines.

    For three years, the budget has been a simplistic exercise in spending cuts and limited growth of taxes while services declined. In an election year, Council faces the effect of those policies and of blindly following Rob Ford’s fiscal “leadership”. Ford is already attacking what he sees as an abandonment of his approach and a return to the “gravy train” years. Much of this is rhetoric, but it resonates with some voters.


  5. I understand increased ridership means in some cases needing to add service.

    But I do not buy for one minute the TTC’s claim that increased riding means more subsidy. If anything, increase ridership brings down subsidy as more people are packing buses and trains, even if you have added some service.

    Steve: Actually, the additional revenue from more riding does not come close to paying for the cost of additional service and the inflationary pressure of costs beyond the TTC’s control. Riders do not pay their way. In the short term, much of the new riding has been accommodated by squeezing more people on buses, streetcars and subway trains, but that’s a one time fix. Once the vehicles are full, we need a larger fleet, more operators and more subsidy just to stay on top of increasing demand, never mind to undo the effect of service cuts of the past few years.


  6. Michael said:

    “But I do not buy for one minute the TTC’s claim that increased riding means more subsidy. If anything, increase ridership brings down subsidy as more people are packing buses and trains, even if you have added some service.”

    Michael, I am surprised that someone like you doesn’t know that ridership growth during already-busy periods strictly demands more capacity at an increased cost (which offsets the increase in revenue).


  7. For the 2011 operating year, the TTC had a projected operating budget of $1.45 billion. Revenue from fares covered approximately 70% of the budget, whereas the remaining 30% originated from the city. In 2009 through 2011, provincial and federal subsidies amounted to 0% of the budget.

    Steve: Actually, a portion of the provincial gas tax, roughly $90m annually, is used by the City to fund its share of the TTC’s operating budget. The remainder, about $70m, funds capital. All the same, it’s a small contribution from Queen’s Park compared to the roughly $200m they would have paid under the old Davis formula.

    Also, for accuracy, that 70% includes fares and other revenue such as advertising and rentals which together contribute about 4% of the total.


Comments are closed.