Understanding the Scale of Proposed TTC Budget Cuts

Recent media reports of the effect of John Tory’s requested 2.6% cut in TTC funding have cited numbers that might confuse readers by giving an incomplete view of TTC revenues and spending. In the interest of better-informed context for the debate, here is the full story.

The TTC Operating Budget contains two separate sections, one for the so-called conventional system and one for Wheel-Trans. That term, “conventional”, is the one used by the TTC to describe its base system, the one used by most riders. Each budget has three major components: fares and other revenues, operating expenses and subsidy. The numbers in the budget are never the same as the year-end actuals, but the TTC is usually within 1%. Here are the numbers as of the July 2016 CEO’s Report [pp 46 & 50].

                  Conventional           Wheel-Trans            Total
                  Projected  Budget      Projected  Budget      Projected  Budget
Revenue
  Fares           $1,150.3   $1,175.3    $    7.1        7.0    $1,157.4   $1,182.3
  Other               66.1       66.8                               66.1       66.9
  Total            1,216.4    1,242.1         7.1        7.0     1,223.5    1,249.1
Expenses           1,726.0    1,736.7       128.4      123.7     1,854.4    1,860.4
Subsidy Required     509.6      494.6       121.3      116.7       630.9      611.3
City Subsidy         493.6      493.6       116.7      116.7       610.3      610.3
Draw From Reserve      1.0        1.0                                1.0        1.0
(Shortfall)       (   15.0)              (    4.6)              (   19.6)

1. All figures in millions of dollars.
2. Other revenue includes contract services, advertising, rent, parking and interest.
3. The reserve contains funds from previous years' "surpluses".

When the City looks for a cut, this is based on the “net” budget, in other words the subsidy that the City pays, not on the gross operating budget including fare revenue. Any shortfall would be covered by a combination of expense reductions and fare increases. In the “other revenue” category, the only item subject to extraordinary year-over-year increases is parking because the remainder are dictated by longer-term contracts. Commuter parking will bring in about $9.2 million in 2016, and even doubling these fees (assuming no loss of demand) would bring in only a tiny amount relative to the entire budget.

The starting point set by the Mayor and approved by Council is a 2.6% across the board cut to all departments and agencies. For the TTC, this translates to 2.6% of $611.3 million (the 2016 budget figure) or $15.89m.

However, the TTC faces many cost pressures including:

  • Inflationary increases in utilities and materials
  • Wage rate increases in the negotiated contract
  • Costs for Presto implementation including the co-existence of old and new fare collection methods and staffing during 2017
  • Increased vehicle maintenance cost (aging bus, streetcar and subway fleets, continued operation of old streetcars due to Bombardier delivery delays)
  • Startup costs for the Spadina Subway Extension including maintenance of completed structures, and pre-opening activities such as training
  • Substantial increase in demand for Wheel-Trans in part due to provincially mandated changes in eligibility, partly due to demographics

Moreover, if ridership for 2017 stays at the 2016 level, then the projected revenue (leaving aside any fare increase) will be lower than the 2016 budgeted level.

According to The Star, the TTC projects that the funding gap in 2017 will be $184m for the conventional system and $31m for Wheel-Trans. That is the difference between projected revenues, subsidies with the 2.6% cut taken into account, and projected expenses just to operate the system at 2016 service levels. One can work backwards from these numbers to see what the 2017 budget looks like before any further adjustments are made.

                  Conventional   Wheel-Trans    Total
2016 Subsidy      $  493.6       $  116.7       $  610.3
2.6% Cut              12.8            3.0           15.9
2017 Subsidy         480.8          113.7          594.4

Added 2017 Costs     184.0           31.0          215.0
Total Shortfall      196.8           34.0          230.9

2016 Budget        1,736.7          123.7        1,860.4
% Cut vs 2016         11.3%          27.5%          12.4%

1. All figures in millions of dollars.
2. Some numbers do not add due to rounding.

An obvious question here is whether Council will attempt to avoid the unpalatable effect of a large cut in the Wheel-Trans budget (one which would likely violate provincial service level requirements) by shifting the lion’s share of the cut to the conventional system. Offsetting this would require an even larger fare increase and/or service cut. The last thing Toronto needs is a fare and service battle between the Wheel-Trans user community and the rest of the system’s ridership.

The average fare currently sits at $2.11 (total probable fare revenue divided by probable ridership of 544m), while the adult token rate sits at $2.90. A ten cent fare increase would raise this to $3.00, or 3.4%. This would translate to $39m in added revenue before allowing for ridership loss (a dubious proposition in an era of limits on service expansion). [This paragraph has been updated to correct the value of the token fare and subsequent calculations.]

Various possible changes to fares and expenses include (according to the Star’s article):

  • Eliminate cash fare discounts (reduced fares would only be available through tickets, tokens, passes and Presto)
    • Total additional fare revenue including fare increase: $40m
  • Controls on Presto, diesel fuel and employee benefits: $7.5m
  • Draw the remaining balance in the Transit Stabilization Reserve: $15.4m
  • Unspecified reductions in the conventional system: $17m
  • Unspecified reductions in Wheel-Trans: $1.8m
  • Total: $81.7m

It is unclear how some of these reductions would actually be achieved, and it is not unusual to see the TTC start off the year facing a challenge of trimming expenses as it goes along to fit the available subsidy.

Further possible cuts include:

  • Elimination of Metropass discounts: $80m
  • Cutting service: $60m
  • Deferral of the Spadina extension opening to 2018: $6m

These are not recommended by TTC management.

The relatively small saving through elimination of Metropass discounts gives a view into how riders actually use the system. Passholders account for over half of all adult “trips”, but one cannot simply assume that they would continue to make all of these journeys if they had to pay for each of them separately. The idea that all pass trips represent a huge subsidy (because the lower average fare one can achieve with very frequent use is “lost revenue”) simply does not hold up. Unfortunately, TTC management has encouraged this view ever since passes were introduced.

The total number of trips taken using any form of pass in 2015 was 292.983 million, or 55% of all ridership. With a projected saving of $80m, the average per pass trip is about 27 cents. However, eliminating pass-level pricing would represent a large fare increase and would affect ridership numbers, a counterproductive move when getting people onto transit is supposed to be one of the City’s priorities. Pass usage as a percentage of total ridership has grown from 25% in 1987 to 50% in 2008, and to 55% in 2015. This is now the primary way in which riders pay for travel, and the bean-counting politicians who agonize over TTC fares should stop thinking in terms of tokens, tickets and cash. Riders prefer to purchase their service in bulk at a fixed price, and this should be encouraged to simplify the fare system for as many riders as possible.

Mayor Tory’s financial schemes have been “running on the fumes” for two years, and the 2017 budget marks the point that his fantasies simply will not be tenable. Does Council have the will to tackle this problem, or will transit riders (not to mention users of many other City services) be forced to suffer through the effects of the tax cutters’ na├»ve belief that they can control costs through searches for “efficiency”? Will voters, especially those represented by Tory’s henchmen on Council, tell their representatives that cuts are unacceptable, or will those who languish awaiting suburban buses put their faith in myths about “waste” that prevents their having frequent, comfortable service?

Remember all of this the next time someone promises you billions in spending on transit, roads and other civic baubles.