At its recent meeting, the TTC Board approved a report launching reviews of fare policy and technology. These will run on an overlapped timetable beginning in fall 2020 with a goal of reporting to the Board in October 2021. The topics are linked in that policy choices can be held hostage by technology options. Nowhere is that clearer than in the TTC’s experience with Presto:

• The range of options and capabilities specified by the TTC was constrained, in part, by the policy and financial framework in which Toronto operates, especially the avoidance of proposals that would increase costs.
• The provider, Metrolinx and its partner Accenture, failed to deliver to the requirement knowing that the iron fist of Queen’s Park and threats to subsidy funding would overrule any complaints about functional problems. Metrolinx is on record now as refusing to meet all of the contracted requirements for the simple reason that they will not invest more development funding in a system that they hope to replace.
• Any modifications to Presto functionality are treated as billable change orders, even if the TTC could argue that the “change” is a contracted feature. Metrolinx enforces its billings by withholding fare revenue from the TTC.

This poisonous relationship colours any discussion of the future of fare structures, levels, technology and subsidies not just in Toronto but across the GTHA.

A further problem, and this is common to studies of the future of TTC service design, is the pre-emption of options by the catch-all “we can’t afford it” line that pushes aside consideration of options that require more than small adjustments within existing funding.

Years ago, in the Miller-era Ridership Growth Strategy of 2003, the starting point was not “what can we afford”, but “what can we do, and how much would it cost”. This left the policy decisions where they belonged in the political realm where the TTC Board, Council and the public could balance investment in better transit with costs and expected benefits. Options were not swept off of the table by management second guessing the politicians, or, worse, protecting politicians from options they might not want to know about.

With fare policy, there is an added layer of the rivalry with Metrolinx and its role as a regional agency. If Metrolinx were actually doing its job, there would be little need for a TTC study because Metrolinx would look at fare and technology policy:

• including the needs of local transit, not just commuter service, and how this will grow into a wider network;
• without prejudice for the preservation of its existing technology investment in Presto nor its existing partnership with a service provider;
• without attempting a zero-sum “solution” where no new money is committed, especially by Queen’s Park; and
• without the doctrinaire belief that the private sector will magically pay for everything, and by implication that change can only happen with private funding.

We have been around this bush before with a previous TTC Fare Policy Study in 2015 that was itself hobbled by Presto limitations, the then co-existence of legacy fare media and policies, and utter paranoia about changing fare structures. Toronto could have had a two hour transfer years sooner but for political foot-dragging and the assumption that the revenue loss would severely damage the TTC (and by extension the City). Eventually the Mayor needed some good news beyond free rides for kiddies, and the two-hour transfer became a reality.

There is a surreal feeling to a discussion of fare options to enable a wider embrace of transit at a time when the system is running with a fraction of its pre-covid demand. Metrolinx is in even worse shape than the TTC. But, yes, we are going to have studies to look at fare options and technologies aiming at the point in 2027 when the Presto contract will expire, assuming the then-government at Queen’s Park will allow this to happen.

(A little aside: These studies are planned to begin in fall 2020, but were originally scheduled for much earlier in the year. Although $1 million was reserved in the budget to pay for them, $660 thousand of this is now booked as a “saving” against the TTC’s huge deficit. This is a matter of timing, and the money will be spent in 2021. Moreover, it is shown as an accumulated saving to Labour Day in financial projections, but the saving will not exist beyond that point. This is similar to the accounting used with the TTC capital subsidy from provincial gas tax which is booked entirely in the period up to Labour Day, but will not exist thereafter. The TTC faces a jump in its deficit after Labour Day thanks to a possible increase in service coupled with the end of “funding” from these accounting changes. See also Toronto Takes a Financial Hit From Lost Transit Riding Part II.)

The scope of the 5-year fare policy study is described as follows:

The key objective of the 5-Year Fare Policy is to develop a comprehensive fare policy while considering all fare options, and identifying policy goals through market research, industry best practices, and stakeholder engagement.

The 5-Year Fare Policy will explore all fare options ranging from zero-fare to full-cost recovery. The work will identify and establish the relative priorities of policy goals, such as equity, affordability, revenue, and ridership. It will also identify constraints and opportunities in the current fare structure that influence fare policy decision making. All TTC fare policies, some of which date back decades will be reconsidered. This approach is consistent with the City’s User Fee Policy’s principles. [p 6]

There will be three phases:

• Situation analysis (three months). “This analysis will identify any gaps in the current fare structure, and identify existing conditions, perspectives and best practices in order to inform the development of future fare media, structure and pricing models. The review will include the affordability and access to fares, choice and flexibility in fare options, the overall customer experience, the range of policy goals that could be met, and potential changes to revenue, ridership and service levels.”
• Future direction (five months): “This phase will establish a fare policy statement, based on the findings of the situation analysis. The identified range of policy goals will be prioritized and weighted (based on, but not limited to, affordability; equity; fare integration; revenue; and ridership) and any gaps between current practices and the established goals will be highlighted and addressed. The public and key stakeholders will also be engaged at this stage to gain perspectives on the established policy goals.”
• Policy document (four months): “The objective of this phase is a policy document that outlines the preferred fare structure, fare media offerings, and fare pricing. The goal is to establish a fare policy that achieves the established goals identified in Phase 2. The 5-Year Fare Policy will also include an implementation plan with action steps for the next five years; a forecast of revenue and ridership impacts, as well as capital and operating budgets; and a monitoring and evaluation framework to ensure all established goals are being achieved.” [pp 6-7]

A core problem of this approach is that the real decision, that of setting fare policy, actually occurs part way through, not at the end, by which time there is a strong chance, based on past experience, that the opportunity for review of alternatives will be past. A common tactic with “public participation” is to say “this is too soon for details” at an “interim” stage of a project, but to claim that the time for alternatives analysis has passed by the time of the final report.

The 10-year fare collection review is intended to study and understand industry trends and best practices, and how these might be applied to changes in fare strategy. Like the fare study, it will have three phases:

• Situation analysis (four months): “An extensive review will be undertaken of Canadian and international trends on fare collection and industry best practice, through a Request for Information as directed by the Board at it’s October 24, 2019 meeting. A situation analysis will be completed to understand the current fare collection model, which will be compared against the findings of the industry review. This information will be used to develop a framework for requirements for a new fare collection model.”
• Future direction (four months): “This work will be guided by policy goals from the fare policy work, and will identify, develop and evaluate fare collection options and fare revenue controls. The range of options will incorporate the findings from the situation analysis to ensure that the strategy will be a policy-led and modernized model based on industry best practices.”
• Outlook (four months): “The objective will be to produce a modernized fare collection approach based on industry best practices, while also achieving TTC’s policy goals and objectives. The model will be accompanied by actionable short- and long-term recommendations for implementation, and will be technologically flexible in implementing policy changes over a 10-year period. A timeline and requirements for all long-term recommendations will be established.” [pp 7-8]

The two studies will overlap and will inform each other.

The staggered approach of the phases … are [sic] designed to first understand the current state and identify gaps and potential improvements to the current fare structure and collection model. Staff will then be able to build on these goals to develop a comprehensive fare policy. Once the direction and relative priorities of fare policy goals have been identified, fare collection models can begin to be developed in parallel. Identified approaches will be guided by the identified policy goals and the information derived from the fare collection RFI.

Staff will report to the Board mid-way through the project to provide an update in Q2 2021. The recommended 5-Year Fare Policy and 10-Year Fare Collection Outlook will be before the Board in October 2021. [p 6]

That interim update will be vital. There must be a public discussion of whether the study is on the right track, or if it has left out or excluded options that deserve discussion. We should not arrive at the end of the study with only one “solution”, a fait accompli which cannot be challenged. Ideally, the study should produce not a single outcome, but a menu from which politicians responsible for transit funding can choose. Very bluntly, this choice should not be in management’s hands.

[The studies] … will help the TTC and City of Toronto ensure fares appropriately reflect customer needs and encourage future ridership. The need to maintain alignment on fare policy goals, access and equity is at the forefront of this strategy, as well as the principles of the City’s User Fee Policy. This work is timely as it will address the gaps in the current fare structure and the potential lasting impacts of COVID-19 on overall ridership.

The 5-Year Fare Policy will also support the TTC’s move to multi-year financial planning by providing a longer term view of fare changes and guiding deliberations in the annual budget process. [p. 2]

There is a fundamental disconnect between this view of future fares and budgets, and the manner in which policy changes are actually implemented. For example, there was a time when the TTC Board endorsed the idea of regular fare increases at roughly the level of inflation. This would guard against periods of frozen fares followed by a big, unpopular and ridership-killing jump. That scheme didn’t last long in the face of politicians who saw freezing fees and taxes as their political mantra.

A related issue to fare structure is the question of service level. For many years, Toronto has been able to avoid growth in transit costs by strangling the growth of the transit fleet. Even when more buses were ordered, they were used mainly to increase the maintenance pool, not to add on-street service. If Toronto intends to address transit goals through better service, this will have a cost, and the balance between higher subsidies and higher fares must be addressed. That debate will be complicated by the effects of covid on short-term ridership and economic recovery of the city.

Another issue is the problem of who “deserves” lower transit fares. Most discounts arose thanks to a special pleading for one group of riders, not from an overall policy decision.

Children’s and scholars’ fares predate the TTC, although for children they dropped to zero as quick fix when John Tory needed to show he cared about transit. Seniors’ are more recent, and we also now have post-secondary student fares and the “fair pass” for very low income residents. Zone fares were dropped about five decades ago in response to suburbanites’ complaints that they were paying more to use the transit system their taxes paid for, and the subway expansion made the definition of “zone one” increasingly murky. Monthly passes date to 1980 when the TTC was forced to admit that if they could work in Hamilton, it was hard to claim they would not work here in Toronto.

The most recent change, one that benefits all riders, was the two-hour transfer which represents both a boon to those who make multiple short-hop trips in a brief time, and the TTC itself by eliminating a major source of fare disputes, the validity of a paper transfer. Unfortunately, this happened after the Presto transition, and so that system began life on the TTC with the byzantine collection of rules about when and where a valid connection between vehicles was possible without payment of an additional fare. Presto could have started off in Toronto with a two-hour fare, but TTC fears of lost revenue forced the old policies onto the new system.

This brings us to a common problem with all past discussions about fares, a perception by both politicians and some in TTC management that fare discounts are not deserved, that they are a “loss” for the transit system. This is completely opposite to thinking of fare policy as an investment first in mobility for all, and as a form of assistance to those for whom full fares would be a burden. Any new fare policy forces this debate with questions such as:

• Should discounts be means-tested in the sense that nobody would automatically get cheaper fares by virtue of age or status?
• Should “frequent flyer” discounts applied by way of passes, capped fares, or multi-ticket purchases reward regular riders?
• Should the base fare be set at a “break-even” level as a starting point?
• Should long trips cost more than short ones?

It does not take long for the interplay of these and other policy decision to create a situation where nobody pays full fare. In fact that is the situation today where only those who opt to pay cash pay the highest fare, and the cost steps down depending on which group one belongs to and the size of bulk purchases.

These options, all of which have to do with the sticker price for transit, have nothing to do with policy decisions such as providing an alternative to car ownership and use, of aiding specific groups, or providing transportation that supports all aspects of city life. Inevitably, no matter what scheme might be adopted, there will be pressure for change.

All this assumes, of course, that there is some new stable funding mechanism and service level for transit.

The fare policy review will address various fare options, including ensuring all forms of fare media are readily available and accessible to customers. Understanding the current barriers or gaps in the system will help the TTC create fare policies and collection models that are equitable and address the needs of all customers and equity-seeking groups. [p 2]

This is a noble statement, but it would mean more if the TTC were already addressing issues of accessibility and equity in access to Presto, notably in the challenge of loading value and maintaining one’s account despite the scarcity of locations. This comes up in deputations at Board meetings, and it is rare that this gets a sympathetic response from the Board or management. It’s hard to fix problems when you don’t acknowledge that they exist.

Affordability is a separate issue tied directly to fare structures, subsidies and discounts. This may seem churlish, but there will always be people for whom any payment is a burden. The policy challenge is to find a point of balance between reduced fares as the means of addressing this burden, and supplementing income via other means. For example, the two hour transfer was a big help for riders doing “trip chaining”, but it was introduced only for Presto users. It is not specifically an anti-poverty tool, but it is of benefit to riders who live by hop-on, hop-off travel much as auto drivers think nothing of stopping at multiple locations enroute on a longer trip.

The “Fair Pass” for low-income riders comes with the Seniors’ fare tariff, but this means that it has no value to low-income seniors (or students) who already get that discount. A technical issue here is the number of fare structures Presto can support and the fact that there is only really one available for any class of discounted fare. Toronto could not reduce the “fair pass” pricing even if it wanted to. (As a separate matter, it is doubtful whether that pass will be extended to a much wider group as originally planned given the city’s financial state.)

On October 24, 2019, the Board moved a motion to complete a Fare Collection Request for Information (RFI). The RFI will help the TTC determine new service providers and technologies, including open payment, being used by transit properties worldwide. The intent is to provide customers with a modern, efficient and customer focused fare collection system. [p 3]

There is no polite way to say this. Assuming that industry players will even bother to respond, this is an indictment of Presto’s current relationship with the TTC and a clear statement that the TTC does not expect improvements from that quarter. Unfortunately Ontario has a long history of confusing “innovation” with development of technology products that are almost inevitably out of date before they go to market, as opposed to making the best use of what is available with strong, established performance and capabilities in other cities.

Since 2012, the TTC has had an agreement with Metrolinx for the PRESTO fare card system, with the contract ending in 2027. The agreement also has an option to extend for one additional year at Metrolinx’s discretion and an additional four years by mutual agreement. The implementation of this system was based on existing fare structures and fare collection models. The TTC did not have a comprehensive fare strategy that had clearly-defined goals, which over time has showed some limitations in addressing customer needs. There have also been delays in implementing critical functionalities, including open payments, that have further limited customer fare choices and the implementation of new fare policies.

“The TTC is continuing to work with PRESTO in the interim on upgrades and modernizing the TTC’s fare collection system, including the implementation of open payments. However major changes or new developments to fare collection must be informed by the work being completed on the 5-Year Fare Policy and 10-Year Fare Collection Outlook. It is imperative that future fare policy goals are clearly identified through this strategy development, and from key stakeholder discussions. [p 4]

This is not entirely true. There are functionalities in the Presto/TTC contract that have never been implemented either because of foot-dragging by the TTC or because Metrolinx refuses to honour its contract, at least without supplementary development charges. The existence of some contract requirements shows that the TTC was thinking ahead, but for various reasons never pursued these goals.

It is also crucial to consider the implications that the current circumstances with COVID-19 may have on future fare policy goals and collection approaches. Customers may change transit behaviours as a result of the pandemic and it is important for TTC to understand those changes to encourage current and future ridership on the system.

The mandate of the 5-Year Fare Policy and 10-Year Fare Collection Outlook is to understand the gaps in the current system and find opportunities for improvement in the fare structure, policies and collection practices. This is particularly important when planning for the future in response to the impacts of the COVID-19 pandemic and the potential lasting effects on the overall future of transit. [pp 4-5]

An important issue here will be to distinguish between short/medium term considerations and a longer term when a return to something like pre-covid conditions will apply. For example, one might argue that the concept of “frequent flyer” discounts makes little sense if people use transit sparingly. If that is our future, transit has much bigger problems in remaining relevant.

The TTC is committed to collaborating with its 905 transit partners as a part of the fare policy and collection strategy. The TTC already operates a number of cross-boundary services, including the Line 1 subway extension into York Region. The TTC has, and will continue to engage in discussions with neighbouring transit agencies and with Metrolinx to address fare integration. [p 5]

This is not just a fare collection issue, but a regional question about what “fare integration” means. A Metrolinx study of this question floundered for years by attempting a “zero sum” solution where the total revenue was redistributed among agencies with no additional subsidy from local or provincial governments. This inevitably meant that the much more numerous Toronto riders would subsidize cheaper fares for cross-border 905/416 trips. That was a non-starter, but Metrolinx took a long time to acknowledge this, and even then it came at the political level, not as a staff recommendation.

Eliminating the effect of fare boundaries will cost money either in better subsidies or higher base fares or both. This brings us to questions of fare zones, time based fares across the GTHA (as already exist between some systems), and the thorny question of GO fares and transfer rights for “local” trips. These are not questions the TTC can address on its own, but many Toronto projects such as the Ontario Line and SmartTrack are intimately linked to GO’s potential role.

Again, we come to the issue that with a high recovery rate for costs from fares, there inevitably will be pressure for transit to “pay its way” and for fares to somehow reflect the cost of service consumed. Oddly enough, this discussion rarely includes capital costs and the immense burden of subways on the regional network. The assumption has always been that the capital investment (including ongoing replacement costs for various subsystems, fleet and structures) is part of the cost of making Toronto an attractive place for business. Some critics of transit will decry “empty buses” but are blind to empty trains serving outlying areas where the subway exists as much for local vanity and politics as it does as a valuable service.

Both fare structure and service quality are key issues for Toronto’s future as it contemplates recovery from the effects of the covid pandemic. In the current environment, “we cannot afford this” is a phrase we will hear often, and it will be used to shut down debate. The real issues should be “when can we afford it” and “what is the effect of inaction”. Those are difficult questions seen from the nadir of a lockdown, but they must be asked.