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
  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’ naïve 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.

55 thoughts on “Understanding the Scale of Proposed TTC Budget Cuts

  1. Steve said:

    “It is not enough to have all of the pols ride the system because that is a sure path to promises of subways for everybody (except for downtown relief, of course). Just because pols see and experience a problem, this does not mean that they understand it or will be well-advised on the ways to fix it. All they know is that “heads will roll”, and the new crew, probably friends/consultants of the administration, will have a few years to show “results”.”

    While you are correct, I would like to point out, there would at least be the opportunity to discuss what the issues really are. Yes you need to go fast, but well, is there really that many people going there?? You have a point, in terms of they would not perforce understand the solution, but maybe they would at least be aware there is a service issue. One can hope that they would also be looking for a solution not out in the distant future, and have a sense that there is real money available, but not enough to build subway all over the place. However, I guess that is a little much to expect.

    Steve: If only we scrimp and save and cut 2.6% from everything else, we can afford anything!


  2. There is a perfect storm with respect to Bike Share, Bike Lanes, Uber and Presto brewing …

    The last month from Castle Frank I have used the subway only 2-3 days, historically I am over the Metropass ride ratio – but with a Bike Share station and bike lanes the calculus has changed … given that at least 4 months of the year this is now possible, it is likely that if I were switched to a “GO/Presto style X number of rides and its free” the TTC would lose money for those 4 months (around 400$). However, if they even switch me to a non-discounted monthly pass Presto, I would likely cancel it for 4 months of the year and just go with single rides (again loss of around 400$). I might even think of cancelling it for the shoulder season and would really only need it for 4 months of the year.The only reason I might keep it for all 12 months is if there is a discount on a 12 month plan which makes sense … that number needs to be about $40 … and it needs to be convenient (ie. not standing in line or playing around on their website).

    Bike share and bike lanes will decimate the downtown ridership during at least 6 months of the year if pass pricing is not competitive and service (particularly loading in the core) is not dealt with.


  3. What I don’t understand with the TTC and the City of Toronto is, how they get away with $400+ M in over runs on the Spadina Extension, then another $400 M waste in the South Yonge re signalling project, that is now being scrapped (man hours and subway closures not included), plus $200+ M in operating over runs, with absolutely no backlash from the Toronto press, and how the Heads at the TTC retain their employment?

    The TTC under its current leadership seems to be able to burn through over a billion dollars of taxpayer money with complete immunity, and zero backlash from the Toronto press. All the while city council threatens fare hikes and service cuts? All this month’s after receiving federal and provincial handouts for transit and infrastructure upgrades… seems to me, that money was long spent before it came.

    Steve: A few points here. First, the federal money is not here yet, and we still don’t know what it’s going to pay for. There are only a few provincial “handouts” and they relate to studies of new lines (notably the DRL), not to current operations.

    Next, there have already been some heads rolling at the TTC about both the Spadina and signalling projects. That said, the politicians cannot entirely escape the blame for the following reasons:

    • There was a desire for showpiece architecture on the Spadina line, and this resulted in complex designs that have been hard to build. Although the photos look impressive, there have been some cutbacks to try to stay on budget.
    • Delays in approval of funding by Ottawa caused the project to start over a year late, pushing up cost, but with no inflation adjustment in budget.
    • Project contingency budget was completely consumed by inflation plus dealing with actual stuff (unexpected events) contingencies are intended for.
    • City policy (not TTC) dictated that contracts be kept small enough that a medium size company could bid rather than work just going to the big players. Result was too many overlapping contracts and some contractors whose performance was not up to snuff.
    • Signal contract was a mess because it was awarded in stages to keep total cost down. TTC did not expect to get it thru Council and receive Fed/Prov support for one big project. On TTC’s end, mix-and-match technology choices led to big problems and eventual requirement to stop and consolidate project. This one is half political, half technical.

    It’s easy to blame the bureaucrats, but unrealistic expectations/demands by the pols create situations where the staff have to try to make the best of a bad situation. We are now in an era where those subways that “last 100 years” are wearing out and require major reinvestment. However, neither Council nor Queen’s Park has been interested in this aspect of transit funding, and we are years behind. The Feds want to give us money, but it will (a) require matching municipal funding that we don’t have (i.e. don’t want to tax for) and (b) be able to complete within a few fiscal years so the Feds can point to “completed” projects and get the commitments off of their books quickly.

    John Tory should know all of this stuff (there certainly have been enough reports, and he claims to read everything), but it’s easier to blame someone else, a bloated, inefficient organization to divert attention from his own incompetent policies and the bad advice he gets from “advisors”.


  4. Have to copy and paste from this link by DSC:

    “I wrote to Tory to tell him that many people do not think we pay too little tax and would actually pay more if iot was used for transit, affordable housing and other City priorities. I got this in reply!

    “The Mayor expects the TTC, along with all other City programs, agencies and corporations, to take further efforts to reduce the budget and meet the Council directive. This will allow the City to spend money wisely and invest in the priorities of the city like transit, infrastructure and housing.


    Daniela Magisano
    Special Assistant
    Office of the Mayor”

    So, the TTC cuts its budget so it can have more money?”

    So the cuts are to be made to the TTC so that we can “invest in the priorities of the city like transit…”. Can someone explain the logic in this?…

    I have a headache …

    Steve: This is the kind of gobbledygook that comes out of Tory’s office showing his prowess as a Businessman.


  5. Depending on how the TTC implements Presto it could indeed have a hit on revenues.

    When I was living and working in downtown Ottawa I got fed up with my route having so many runs cuts that I could easily wait for an hour. It’s a 30 min walk. With my health issues I should not have been walking that much but neither standing was good. So I gave up part of my opposition to Presto and got one. Took the bus in the morning and walk in the evening. Weekends I often got a daypass for one day. I would save 35-45$ a month easy.

    Media started asking about Presto popularity and OC Transpo said really popular. But worked hard at not releasing any numbers.

    Some speculated that quite a few people were doing like I did and gave up the pass to pay per passage (even though the multiple is better in Ottawa than Toronto).

    Come 2018 there will only be a 5 cents difference between the cash fare and the Presto pay per passage while they are unifying the express and regular fares. That says a lot about how much revenue OC Transpo is losing and really want people back to the monthly pass.


  6. Steve, I still think that certain areas of city hall are still listening to some people who are saying something on the lines of…..I don’t use it, so why should my taxes pay for it? Had a neighbour that used to talk like that!! Funny thing is that he never wanted to pay taxes or pay for the services…..but heaven help anyone if he needed a particular city service and it wasn’t there or was slow. I guess the one in charge might be called, “Ford Lite”!!

    Liked by 1 person

  7. George Bell, switching to bike sharing will save you money, make you healthier, reduce pressure on the TTC where it is most overloaded, reduce greenhouse gas emissions, save healthcare costs and make you happier. Congratulations, you’ve made the city a better place and I’m sure the municipal government appreciates it.

    There are two bike share stations by Broadview, in case anyone else wants to try it.


  8. DavidAH_Ca said:

    “If an inefficient manager has 5% ‘fat’ in his department, he can cut 2.6% with no real pain; whereas an efficient manager who is running a tight ship cannot cut without damaging the department, such as letting productive workers go while overloading those that remain.”

    Not only that, but the inefficient manager ends up looking “good” to the higher-ups since he was able to make the cuts while maintaining the same level of performance, while the efficient manager ends up looking “bad” since he either screams that the cuts are impossible or the performance of his department worsens.

    It’s the classic efficient vs. inefficient worker problem: the efficient worker gets everything done 9-5, takes a 1 hour lunchbreak and probably has time to read the newspaper for a couple of minutes at work. The inefficient worker comes early, stays late, eats lunch at his desk and is constantly staring at his screen/papers or fidgeting with his tools or whatever. The inefficient worker gets praised by the manager for “being committed”, “going beyond the call of duty”, “putting in the extra hours”, etc., while the efficient worker is chided for “having low morale”, “just waiting for the time to punch out his card and leave”, “not being fully committed” and so on. It’s all backwards.

    I’ve only rarely met managers who say openly that if their worker can’t do what he’s supposed to do 9-5, either the worker is at the wrong job or the manager screwed up by giving him too much to do (or both).


  9. Steve said:

    “The Feds want to give us money, but it will (a) require matching municipal funding that we don’t have (i.e. don’t want to tax for) and (b) be able to complete within a few fiscal years so the Feds can point to “completed” projects and get the commitments off of their books quickly.

    John Tory should know all of this stuff (there certainly have been enough reports, and he claims to read everything), but it’s easier to blame someone else, a bloated, inefficient organization to divert attention from his own incompetent policies and the bad advice he gets from “advisors”.”

    They will also have a strong interest in having it have a visible impact on a number of ridings, and be something that people see and are aware of. To the extent that it is an attempt to implement a green policy, they will also be very interested in it being a piece that can be seen as the way to substantially alter the shape of things, and what the city can do going forward to address the environment. The further extension of subway does not meet this. If you think about the federal government and the scope of spending capacity, funding an LRT even with a couple km chunk of tunnel, is not a fiscal challenge, if it can be shown to be the way forward. However funding an extension of subway at this juncture fails this test. Getting federal money for the build out of Etobicoke’s portion of transit city, would likely be fairly simple, especially if it includes the extension of a couple of LRT lines to the airport. There is and has been a reasonable game plan on the table that requires funding. I think the province has in effect punted by focusing first on GO, however that end runs the need to get municipal cooperation.

    How many of these notions in this article would actually take that long? How many would provide the basis for GO to act as a carrier between points? How many are building the basis of a network that can be in filled later. I would suggest the city pick 3 that create a web anywhere, and push them, but do not ask or push for any additional subway.


  10. PS. We also need to remind ourselves in terms of impact a network increases in value based on the number of nodes connected. The extension of the Crosstown to the airport area, and a connection with the Mississauga Transitway and the extension of the Finch West LRT to meet both, means many more nodes are effectively connected, radically increasing the value of both Finch West and the Mississauga Transitway, and even quite notably the Crosstown, in terms of having use to more commuters and hence possibly acting to limit the growth in drivers.

    Connecting them all to a frequent service in the GO corridor linking to core, would increase the value of each notably again, and provide an anchor point for a Brampton connection to TTC of huge value.


  11. Malcolm N says

    “The extension of the Crosstown to the airport area, and a connection with the Mississauga Transitway and the extension of the Finch West LRT to meet both, means many more nodes are effectively connected, radically increasing the value of both Finch West… in terms of having use to more commuters and hence possibly acting to limit the growth in drivers.”

    Don’t tell Ward 7 Councillor Giorgio Mammoliti about how the Finch West LRT will “radically increase the value of” anything to commuters in his part of the city. If Rob Ford had demanded these TTC cuts as Mayor Tory has just done, Mammo. would have been right behind RoFo doing the same, while in the same breath demanding that his constituents deserve nothing less than the subway he has been proposing for months now. (This, remember, is the former NDP MPP in Bob Rae’s government, the man of the never-ending “No property tax increases” rants and the large flag pole proposed for his ward’s Emery Village – the same Emery Village BIA members who disagree with him, saying that LRT is the best option for the neighbourhood).

    Some councillors have absolutely no clue what actually goes on with large-scale transit planning or how large systems like the TTC actually work, and yet, they will express small-town opinions on how things “should be”. They get caught up in the parochial mentality that there is waste *everywhere* without analyzing the service itself or maybe taking a ride on the vehicles themselves to see just how bad it might be. Pronouncements in Toronto are a dime a dozen but from City Council, no dimes are forthcoming when people regularly complain they can’t get on a bus because it’s too full or it’s not even there, vehicle management issues aside. We are a “world class” city and only subways will do for a world class city. Never mind that the budget to run a “world class” city’s “world class” transit system costs “world class” cash!

    Councillors don’t have the stones to tell constituents that the Ford-inspired era of “no new taxes” has now led to mean that there are no new services – maybe even no further *current* services when the system should be expanding and broadening its reach.

    Between the lack of consistent Federal and provincial transit funding; of responsible, ongoing local transit planning by councillors and city staff; of management of the day-to-day system by TTC brass; and a realistic understanding by everyone – including those blessedly myopic “taxpayers” – of how much stuff actually costs to run, it surprises me that the mess that is the transit system in this city is actually as good as it is!


  12. If we want better councilors we need more engaged citizens … I think a lot of people don’t think of municipal politics as important (although they will immediately whine and complain when a municipal service is unsatisfactory). For the last election there was a record turnout (60%) driven probably by the publicity of Ford’s antics.

    For both mayor and the councilors, we use the antiquated first past the post system, some councilors get elected with around 35% of the vote. Tory won the mayor’s office with slightly over 40%. In such a system (f.p.t.p., low turnout, split votes) you can win a council seat simply by pandering to one demographic that is very loud. For example the “no more property taxes!!!!” demographic.

    For example I’ve never voted in a Board of Education Trustee election (I don’t have children yet, so I never think much about), but I just got a catalogue from TDSB advertising educational courses for adults, and one of them offers astrology … yes astrology. Another teaches you all about ghosts … no it’s not a cultural/folk studies course, it’s advertised as “Think your house is haunted and don’t know what to do? Learn all about ghosts!”. There’s a bunch more peddling different types of pseudo-science. So I’m gonna sit down and write my trustee a letter … and tell him it’s outrageous tax payers are subsidizing pseudo-science and quackery being taught at public schools, and make a point that anyone who supports this is not going to get my vote, nor the vote of my friends & family (who are as “scandalized” about this as I am).

    Steve: I believe that the Continuing Education program operates on a cost recovery basis, so your tax dollars are not funding ghosts trading info about their star signs. But, yes, it’s a rather odd thing for TDSB to be offering.


  13. Dean Gerard said:

    “Between the lack of consistent Federal and provincial transit funding; of responsible, ongoing local transit planning by councillors and city staff; of management of the day-to-day system by TTC brass; and a realistic understanding by everyone – including those blessedly myopic “taxpayers” – of how much stuff actually costs to run, it surprises me that the mess that is the transit system in this city is actually as good as it is!”

    I would say, in a roundabout way agreeing with Andre, the voter is in the end the real issue. We are too quick in general to vote for what we want to hear, and not listen to the guy telling us the bad news. I would note that Tory did not start by pushing ST in his campaign, but rather figured out the DRL would not win votes. He changed everything in the transit portfolio, because he was losing. Well we as voters need to start to pay attention, especially when a politician is not telling us something kneejerk, and it doesn’t sound or feel like pandering, and we agree it might just make sense, when they are talking about another part of the city. When nobody actually loves it, but it might just work, and well, isn’t what we dreamed of, well it maybe is not pandering.

    Steve: Actually, ST was dreamed up by one of Tory’s advisors who had been flogging the idea as a way of developing suburban (Airport/Markham) commercial property with frequent rapid transit on the GO network. His campaign ran with it as the one line to solve all problems. Tory was very badly advised, as we now know from the major changes and cutbacks in the scope of ST.


  14. Steve said:

    “Tory was very badly advised, as we now know from the major changes and cutbacks in the scope of ST.”

    I beg to differ, the advice was about winning an election, a good plan was dropped in favor of a stupid one, from the perspective of transit, but clearly from the perspective of winning the election it worked great, and that was what the advice was about. He sold what the voter wanted to hear, sooner, cheaper and closer to you, functional reality has nothing to do with elections until the voter, is prepared to hear things they are not thrilled about, and prepared to be critical.


  15. According to a recent Star article, the feds are giving $500 million to the TTC for maintenance projects; yet, it seems that little or none of that money addresses the $190 million shortfall to cover new operating expenses. How is that so???

    Steve: The federal money goes to capital projects, not operations. Ottawa prefers time-limited commitments, and any operating subsidy is open-ended. Also, it’s hard to put a sign on frequent service. A new bus, yes. but not the service it provides.


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