Allocating Transit Costs and Revenues

This post arises from a discussion at Toronto Council’s budget debates in which the question of the profitability of various parts of the system came up.  This triggered a Twitter thread in which I eventually said “2 big 4 tweets”, and offered to write about this issue here.

Please note that this discussion will be theoretical, not a specific examination of TTC or any other system’s costs because (a) I don’t have the raw data, and (b) the level of analysis needed to ferret out the level of info needed is something requiring inside knowledge of each agency’s accounting practices.

In effect, this article is a caveat:  anyone who tells you they can produce a profit and loss statement on a line-by-line basis in a system where fares and costs cannot be accurately subdivided between system components is, to be gentle, full of hot air.  Politicians and bureaucrats love metrics, numbers that purport to allow comparison between portions of a system, between cities, etc, in the elusive search for a “more efficient” operation.  They have wet dreams about metrics that can reduce a complex universe to a single dimensional value with a “traffic light” to indicate current status.

This misses the point that “value” can be a subjective measurement depending on your goals.  For example, an 80% farebox cost recovery number is boy-scout-badge-worthy if your goal is to provide the most service at the lowest net cost, but it could mask the rejection of any new services that would not contribute to the target level of recovery.  Services that might be desirable for other benefits such as time of day or geographic coverage could be rejected because they will spoil the overall system numbers.  Moreover, a metric might have a different target depending on the type of service it measures — we expect far more from a subway line because of its high capital cost than we do from a local bus route.

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