The TTC’s Ridership Update report will be discussed at the March 23, 2016 Board meeting. Its publication triggered an unwelcome round of hand-wringing about transit service and financing that could well undo momentum seemingly regained by the Tory regime at City Hall. How did we get so quickly from a pro-transit stance to one where just avoiding cuts will seem a victory?

Fun With Budgets at City Hall

During the Ford years, TTC ridership continued to climb despite the best efforts of Council to throttle the TTC budget, but a good deal of that growth came at the margins, filling up less crowded routes and time periods, and stuffing the busier ones to the extent any new riding was possible. John Tory ran on a platform that SmartTrack would fix absolutely everything, but once in office acknowledged that day-to-day service had taken a hit and needed fixing. Improvements to date have not addressed peak capacity for the simple reason that there were no spare vehicles, and that is only now being addressed.

Some of the new buses bought by the TTC will not directly address capacity shortfalls, but instead will be used to bolster the pool of spare buses so that maintenance standards can improve and fewer vehicles will fail in service. The streetcar system remains hobbled by a car shortage thanks to Bombardier’s missed deliveries, and this cascades down into the bus fleet. On the subway it is physically impossible to run more trains, a problem that will not be eliminated until 2019-20, and then only on Line 1 YUS. Riders might be forgiven for wondering if things will ever improve, especially for peak period travel.

Schedule adjustments have reduced the amount of short-turning on some routes, but gaps and bunching of vehicles remain a problem.

The TTC is far from out of the woods on service quantity and quality, and this situation cannot be fixed overnight.

The problem with a shortfall in ridership has been with us for some time, although it is important to define just what “shortfall” means.

• In 2013, ridership was 2.4% over 2012, but 0.5% below the budget target (525 million actual vs 528m budget).
• In 2014, ridership was 1.8% over 2012, but 1.0% below the budget target (535m vs 540m).
• For almost all of 2015, ridership was consistently below the budget target, but it also began to fall below previous year actuals in June. This situation persisted through to January 2016. Ridership was 0.1% below 2014 (not including the extra one-time Pan Am trips), and 2.0% below budget (534m vs 545m).

[Sources: CEO Reports for February 2014, 2015 and 2016]

Despite this situation, the TTC planned aggressively with a budget target of 555 million for 2016. It is no surprise that this target will be extremely hard to reach.

An important factor in budget presentations is that there is an advantage in aiming high because this inflates the projected fare revenue by about $2 per rider. On a base of 500m rides, 5m extra (1.0%) is worth $10m in revenue. Whether that is actually achieved is less important than simply putting a high number there as a starting point. Why would the TTC do this? It all has to do with City budget controls.

If the TTC aims low and does better than expected, the temptation in past years was to use the money to improve service. However, Council has reserved to itself the right to say what happens, and the TTC Board cannot just launch new services that could affect future year subsidy requests. To put it another way, Council wants any “surplus” to come back to reduce overall spending and tax requirements rather than leaving it in the TTC. If the revenue (and projected high ridership) are in the budget to start with, the TTC has the elbow room to make or defer improvements based on actual conditions.

An important factor over the years when ridership fell short of budget is that on the expense side of the ledger, the TTC more than compensated for the missing revenue. Fuel prices have been consistently lower, and other cost areas have balanced out in the TTC’s favour in some cases simply by deferral of spending, in others by the luck of actual costs being lower than projected.

However, the 2016 budget tried too hard to pull off this trick in the face of stagnating ridership and at a time when Council, for all their fine words about supporting transit, actually stripped $30m out of the TTC’s budget request leaving only a $20m increase instead of the expected $50m. Now there is a sense of panic because the TTC projects that revenues will be $30m below budget thanks to a shortfall of 13-18m rides (year end projected at 535-540m rather than the adjusted budget of 553m allowing for effects of the fare increase).

That number represents more than a 1% tax increase if it were funded fully through subsidies. The problem is not just for 2016, but for future years when new costs such as the TYSSE (Vaughan subway) and better Wheel Trans service will land on the City’s budget table without enough new fare revenue to pay for them.

Politicians who wish to seem both as friends to transit and hard nosed tax fighters will be challenged to reconcile their two personae.

In short, yes there is a “shortfall” in ridership, but its severity is magnified by the presentation of an unduly optimistic TTC budget and by Council funding cuts that removed headroom within which the TTC might have adapted to what could be a short-term situation.

Does The TTC Understand Its Ridership?

The Ridership Update identifies several possible factors for their falling numbers.

• The rate of economic growth has fallen below projections, although it is still positive. The degree to which this growth affects ridership is not quite as direct a link as TTC management often claims, and there have actually been years where the two factors headed in opposite directions.
  • Depending on the physical location of growth or loss of jobs, the effect on TTC ridership could vary depending on transit market share in the affected areas.
  • Over half of TTC riding occurs outside of the peak period where there has been room for growth, and riding during this period is not necessarily tied to the economy.
  • Factors affecting the cost of auto use could push more demand to the TTC even if job growth weakens.
  • The TTC estimates that the lower growth rate could cut 2m rides from the 2016 projection.
• Metropass sales were down in January 2016 by 6% over 2015, and in February by 2%. The TTC hopes that the Metropass price freeze in 2016 will arrest this fall and possibly even turn it around.
  • There is a basic statistical problem with reporting of Metropass ridership. The pass is priced at the equivalent of 49 fares although the typical user takes about 73 trips per month. The TTC counts ridership for pass holders by the simple formula of (Pass Sales x 73).
  • If someone decides that buying a pass is no longer worthwhile, they revert to token purchases, and the TTC sees this as a “loss” of about 20 rides. However, the people who would make such a decision were almost certainly not taking 73 rides to begin with, and there is no real “loss” of riding. If this effect is big enough, it should show up as a rise in the average trips/pass for all remaining users, but that number will not be recalibrated until later in 2016.
  • The TTC estimates the lost trips for 2016 at about 3 million, or by their methodology, the equivalent of 150,000 passes at 20 rides per pass. This does not represent a loss of $2 per ride ($6m for the year) because the “lost” rides might never have existed. Only if a frequent TTC rider decided both to abandon their pass and cut back substantially on transit travel would this mean an actual loss of trips, and the revenue side could still come out equal if those fewer trips were paid for with higher cost/trip tokens or Presto.
• Service improvements made by the TTC in 2015 (with more just beginning in 2016) are estimated to account for 3m rides out of the shortfall, although this number is not based on any analysis in the report.
  • In reviewing the system for possible slowdown of better service or even for future cuts, the TTC needs to understand just where ridership is lost. Is it a case that improvements have not attracted the expected demand, or that riding is down on existing routes and/or periods of operation? There is no sense in the Ridership Update that the TTC understands its changing demand at a granular level.
• The factors above total a drop of 8m rides, and the TTC cites a range of 8-13m in their report leading to a projected 2016 ridership of 540m.

A fundamental question at the heart of any transit operation should be “are the buses full”, but this does not appear anywhere in the “ridership update”. Moreover, “full” is a relative term as it is linked to Service Standards regarding the quality and comfort of service provided to riders. The Ford years absorbed more demand simply by relaxing the standards and stuffing more riders on transit vehicles. This can be counterproductive both in making transit less attractive as an option, and slowing service because vehicles spend more time squeezing riders on and off at stops.

Among the concerns raised by management (and routinely by members of the TTC Board) is the question of fare evasion which can take many forms:

• Abuse of Proof-of-Payment to enter vehicles without paying
• Abuse of reduced fares or free rides by passengers who are not eligible for them
• Abuse of transfer privileges

A common thread through all of these must be the matter of enforcement. Both the TTC and Council have been loathe to increase the number of fare inspectors as “head count avoidance” is a classic, if simplistic, way to control costs. The problem is that the fare system will increasingly rely on some form of inspection with the move to PoP and with the transition from fare media that can be quickly “eyeballed” as passengers enter vehicles.

The TTC plans to take riding counts to determine whether fares collected match revenue, but this is a challenge without doing fare inspections at the same time. Many people on the system do not pay their fare on the vehicles they ride, and raw riding counts and farebox revenues will not necessarily mean much when the combined effect of boardings with passes, transfers, and free entry at subway stations are all taken into account.

Abuse of concession passes will sort itself out with the transition to Presto assuming that a mechanism to audit eligibility is included. For seniors, this is a one-time check. For post-secondary students, the status could be refreshed annually based on eligibility.

Transfer abuse has two aspects: outright fraud (a transfer that is clearly invalid) and the bending of transfer rules to squeeze more travel out of one fare than is strictly allowed. A move to a time-based transfer embedded in Presto would eliminate both of these problems. There would be no question about validity based on location and elapsed time, and “recycling” of old transfers would be impossible.

Where do we go from here?

The Ridership Update contains some troubling observations:

• The impact of low gasoline prices and ridesharing is difficult to quantify; however, both factors are generally seen by GTA transit agencies as contributors to declining ridership;
• The consensus opinion from GTA transit agencies is that the main driver of ridership is economic growth, in particular, employment growth, which is beyond the control of transit agencies and could potentially have a long-lasting impact on ridership growth; and
• If current trends persist, TTC’s current service levels may be higher than is required to accommodate future ridership.

This has an air of resignation, a sense that transit demand will simply stop growing and with that the need for better service. This plays right into the hands of those who say we do not need to spend more on transit, not to mention those who claim that subway extensions will not overload the network.

Before Toronto goes down that path, TTC management might like to check with riders who cannot get on buses, streetcars and subway trains because there is no room.

Their is an air of panic, the idea that the TTC must “do something” to prevent a catastrophic budget shortfall even at a time when the politicians claim that they want to encourage more transit use. They just don’t want to pay for it.

TTC management makes two proposals for dealing with the supposed excess of service:

• A freeze on further service additions until it can be determined if the year-to-date ridership results are only temporary or more indicative of a lasting trend;
• Expense reductions that would be achieved from across-the-board service reductions in 2016 and 2017.

Just what the doctor ordered – a return to the simplistic service cuts of the Ford era without the bother of finding out where, when and why ridership is down, or where, if anywhere, the system can actually absorb service cuts.

The alternative, also cited by management, would be an increase in the operating subsidy, not to mention adjustments to fare levels. The fare debate will be further complicated by the as yet undefined effects of regional fare integration and proposals for zones, distance fares, and making rapid transit a separate fare class.

The TTC Board has long abdicated its responsibility for conducting such a debate, and Council prefers to save on taxes except to the level needed to produce a few photo-ops and small-scale improvements. Nobody shows up to trumpet higher fares or taxes.

Meanwhile, Toronto is on the verge of debating a huge transit expansion plan, one with a chicken in almost every pot, all to be funded from a magical combination of new provincial and federal spending and dubious schemes such as tax increment financing.

If your bus doesn’t show up as often as you would like, or you still can’t get on the subway, don’t worry, in a decade or so there will be a shiny new train.