TTC Operating Budget 2021

Updated December 21, 2020 at 5:50 pm: This article has been updated with additional and replacement illustrations from TTC management’s presentation to the Board at its meeting today. Explanatory text has been added or modified as needed. (The illustrations from this presentation are clearly identified by the date on them.)

Other issues were raised both by deputations and by Board members. I will deal with these in a separate article.

On Monday, December 21, the TTC Board will consider its Operating and Capital Budgets for 2021. This article deals with the Operating budget that pays for day-to-day service and maintenance. I will turn to the Capital budget that pays for major repairs and system expansion in a separate article.

Tracking the budget can be challenging even in normal times because there are so many moving parts. This year we have the collapse of demand thanks to the pandemic, together with an uncertain future for both economic and ridership recovery, not to mention government support to bridge the gap.

The table below shows how the budget has evolved over the past year. It begins, as all budgets do, with the prior year’s budget as a starting point. Normally, there would be much hand-wringing if the probable outcome were off by a tiny amount. Covid has blown such a hole in our finances that projections made a year ago bear no relation to the year as it evolved.

Along the way, there were many changes to operations through the year, but the TTC managed to keep service overall at about 85 per cent of the planned level. This percentage was not uniform across the system. Some bus routes, the very part of the network that suffered the least from ridership loss, saw substantial service cuts through the loss of their express services. As the TTC gradually restores the network, these problems will be reversed, but there is no guarantee that the system will have enough resources to deal with the combined effect of returning demand and a continued desire for social distancing.

The 2021 base budget includes various changes between 2020 and 2021. For 2021 there is a combination of new and enhanced services (a paltry amount compared to the overall budget) and a very large requirement (almost $800 million) to cover for Covid effects.

Fare and other miscellaneous revenue such as commuter parking and advertising will be down about 58 per cent over the 2021 year. This is not as deep as the losses at their worst in 2020, but ridership is projected to grow slowly through the year improving the TTC’s revenue picture, although it remains far from the pink of health.

Absent in the 2021 budget is any provision for a fare increase. Under normal circumstances this would generate about $30 million in added revenue, but fares now account for less than half of their former contribution. Mayor Tory has announced that there will be no fare increase, and this is a year in which that is a comparatively inexpensive decision. A longer-term problem will be a decision on the target level of fare revenue as operations and ridership return to normal in future years especially as covid-related subsidies disappear.

Expenses will rise by 2.4 per cent on the conventional system, although on a dollar basis, this is substantially offset by Wheel-Trans budget cuts in response to reduced demand.

The bottom line is that almost $800 million will be needed to supplement TTC’s normal revenue streams while maintaining service as planned. The arrival of such funding is far from certain, and detailed announcements probably await provincial and federal budgets for the fiscal year beginning April 1, 2021. Committed funding to date only gets the City and TTC to March 31, 2021.

Recent announcements might have sounded as if this were all new money, but in fact the status of transit funding is unknown for three quarters of 2021 starting, appropriately enough, on April 1st.

Unless otherwise noted, all tables and charts in this article come from the TTC’s Operating Budget report or from the Presentation at the Board Meeting of December 21, 2020.

Revenue and Ridership

The revenue to pay for the planned level of service is broken apart in the chart below. The rabbit-in-the-hat here is that the “City Base Funding” is unchanged from 2020. On paper, this means that the TTC does not have a begging bowl out on Nathan Phillips’ Square asking “please, Sir, can I have some more” for 2021. That assumes the Feds and Queen’s Park come through, and if they do not, The City will run into a very hard, thick brick wall in the spring.

Note that Ancillary Revenue, (commuter parking, advertising) is not a huge contributor, but it does represent a few percent. At times there are competing claims about the proportion of expenses that riders cover, and this arises because total revenue includes more than fares.

Ridership began to bounce back through the summer, but with recent changes in regulations to curb virus spread, it has begun to drop again.

Ridership is running at different levels for each part of the system and for each type of passenger, compared to pre-pandemic times. The chart below has appeared in various forms before showing that the bus network is running at about half its usual demand while the streetcar and subway networks, disproportionately affected by lost riding downtown, are at about a quarter. However, these changes are not evenly distributed by route, by time of day and by type of rider.

In the budget presentation on December 21, 2020, the modal breakdown chart was extended into 2021 showing projected changes.

The ratio of lost to retained riders is different for each fare type. Proportionately, the drop in adult riders is lower than for youth and post secondary riders, but the more numerous adults pay full fare and their loss has greater effect. Getting them back onto transit is key to the TTC’s revenue recovery. (Children are shown here as an indication of riding, although they pay no fare.)

Looked at another way, the chart below breaks down ridership by frequency of use. Frequent riders have not, for the most part, returned to the system and the largest group is now the “infrequent” rider. This reflects a shift in riding patterns where previous “frequent flyers” now use the system much less than before. Even this group has declined in recent days as the effect of more stringent lockdowns deters travel.

Pass sales have fallen substantially because with fewer frequent riders, the monthly pass is no longer attractively priced. Pass sales are at 20 percent of their former level. Less frequent users of the TTC get the benefit of the two-hour transfer for multi-leg trips without the expense of a month’s unlimited riding.

The Financial Effect of Covid

The lost revenue and incremental expenses have a very substantial effect on the TTC’s budget. Out of a total of roughly $2 billion, nearly $800 million is needed in both 2020 and 2021 due to Covid effects.

In 2020, these effects were partly covered by TTC “Cost Containment” which included both the deferral of planned service improvements and the redirection of provincial gas tax from the capital to the operating budget. Much of the rest came from federal-provincial “safe restart” funding, and a small amount (“MTEC”) of special funding for sanitization activities.

In 2021, part of the shortfall will be covered by the safe restart program, although the TTC has yet to confirm that money from the 2020-21 provincial fiscal year can be spent after March 31, 2021. The remaining $184.7 million is not, as yet, funded and this gap could present a problem later in 2021.

Getting from 2020 to 2021

The 2021 budget is based on a gradual return of passengers, although not to pre-pandemic levels. Growth later in 2021 depends on the resumption of activity in the core area for the office, education and entertainment sectors. Also key, of course, is a very substantial reduction in the risk of infection through vaccination and better virus control efforts by society in general.

Ridership and Service Budgets

Another way of looking at projected ridership is shown in the chart below.

The service budget is stated in hours, not in dollars, although there is an obvious link between the two. The process begins with the 2020 level overall and is then adjusted for planned changes.

Although the TTC refers to operating at 85 percent of pre-pandemic levels in 2020, the deepest cut to scheduled service was just under 12 percent. This was not evenly distributed across the system. Additional savings came from reduced construction-related service.

Source: November 2020 Service Change Memo

The projected hours for 2021 show the ongoing difference in overall service. There is an increase in January relative to November due to restoration of some services, but little change thereafter until a summer lull and a planned fall increase. By November 2021, the weekly scheduled service hours are budgeted to roughly match the level in March 2020 before the Covid-related cuts (2021: 186.7k planned vs 2020: 186.2k scheduled). Whether this will actually happen depends on the pace of demand recovery and on a fully-funded operating budget.

(For those unfamiliar with TTC scheduling practices, “December” refers to the short holiday period spanning Christmas and New Year’s Day, not to the entire month which is covered by the November schedules. This period always sees considerably reduced service due to lighter demand.)

Source: January 2021 Service Change Memo

In 2021, the bus network’s service will be affected by:

  • A slight increase due to projected demand,
  • A reduction from efficiencies in scheduling and the benefit of McNicoll Garage,
  • A shorter, 365-day year, and other calendar effects, and
  • Reduced construction delays from Metrolinx work on Lines 5 and 6.

The streetcar and subway systems will have fewer budget hours because they do not yet require full service. Overall there is a 3.7 per cent reduction in service hours in the 2021 budget compared to 2020.

An updated version of this table appeared in the budget presentation, and it shows the probable total of service operated to the end of 2020. Although the service budgeted for 2021 is 3.7 percent below the 2020 budget, it is 4.1 per cent above the level actually operated.

The restoration of service to pre-pandemic levels will proceed differently for each mode based on the different assumed rates of recovered demand.

Factors in 2021 Costs

Some cost changes coming into a new year are unavoidable either because they are effects of changes already made (a midyear fare or service change in 2020 will be in effect for a full year), or because past decisions or external forces bring changes to the cost base.

A few points in the table below bear some explaining:

  • The Operating Impact of Capital is caused partly by the opening of McNicoll Garage which adds $3.7 million in 2021. The garage is already partly occupied and will begin revenue service operations at the end of March schedule change. The largest component, at $7.2 million, is the effect of buses and streetcars coming off warranty. When this happens, some ongoing costs shift to the TTC operating budget. The warranty savings from new vehicles in 2022 is not sufficient to offset the loss of coverage on purchases in recent years, notably the new streetcars. [Text corrected Dec. 22, 2020.]
  • Many routes are operating on less than full, pre-covid service although that is expected to change gradually through 2021 as services are restored. The effect is shown under Demand Responsive Service Changes which save $53.9 million, but which are expected to lose about $5 million in fare revenue from discouraged riders.
  • LRT construction costs (alternate services and schedule adjustments) will go up in 2021 because Metrolinx will no longer cover them as part of a recent and as-yet undisclosed settlement. There is a one-time payment coming from Metrolinx that will be banked in a reserve fund.
  • In 2020, the TTC made a $9.3 million draw from reserves. In setting up the opening version of the budget, this is reversed because it is one-time money. A separate 2021 draw show up later in the process.

The total effect is that an additional $56.5 million in expenses is baked into the budget before any 2021 changes are contemplated.

Note that in all budgets, costs due to wage and salary increases are only included to the extent that they are covered by contracts in place. Any future contract changes will be handled by an amended budget. This is standard practice for all City budgets so that any provision for labour settlements is not advertised in advance. 2021 will be a bargaining year for the TTC and its unions. In the current economic circumstances, it is likely that wage increases will be small, particularly for early years of any new contract.

Various cost reductions offset the 2021 pressures. An important distinction among these costs is that some of them are not “sustainable” in the sense that these are one-time changes, or that future events will reverse the effect.

  • Fuel and utilities will decline both because of advantageous pricing and because the TTC will use less fuel and electricity to operate less service in 2021.
  • Accident claims were lower than budgeted in 2020 because of lower ridership, and this benefit is reflected in a lower provision for claims in 2021.
  • Service efficiencies arise from opening McNicoll Garage (less dead head mileage to and from service), the reduced operating costs from the RapidTO bus lanes and planned changes to schedules on Line 1 YUS to take advantage of Automatic Train Control.
  • Other “efficiency measures” include contracting out some garage activities, a plan that is currently in negotiation under the Collective Agreement.
  • Overtime reductions in 2020 were substantial, but this was made possible by structural changes in schedules and in the workforce. With more spare operators and the absence of traditional “peak periods”, service could be operated with much less overtime. Another contribution was the absence of special events requiring short-term extra service. This situation will not continue if the system returns to a more tradition pattern of demand and service.

These changes collectively contribute $53.7 million to reducing the 2021 budgeted costs, but they are not enough to offset other pressures in the budget, and a reserve draw of $15.8 million is included. This will be partly funded from monies from the Metrolinx settlement.

The budget contains a small provision for New Requests and Initiatives. The two largest parts of this are:

  • Provision for the Eglinton LRT (Line 5). Although this will not open until 2022, the training and preliminary staffing for the portion of operations the TTC will cover will begin in late 2021, assuming that the opening date of early 2022 cited by Metrolinx is achieved. If the project slips to fall 2022, then these costs will shift into the 2022 budget and will show up as a “saving” of unspent budget headroom in 2021.
  • Additional maintenance staff for vehicles are also included.

The elephant in the room is the cost of the pandemic. This shows up both in lost revenue and ridership, as well as operating costs specific to the Covid era. These costs have been covered by special subsidies in the past and should, eventually, disappear from the budget to the extent that “normal” times return.

The combined effect of these changes is shown in the table below. There is a very small change, 0.4 per cent, in the total budget, but achieving this depends on commitments from supporting governments that we have not yet seen.

All of this was condensed into the version below for the Board presentation.

Beyond 2021

The TTC does not expect its operations to fully recover from the pandemic until late 2023. Revenues will remain below pre-Covid levels on a year-by-year basis until 2024 (assuming no fare increases).

The overall budget projections for 2022 and 2023 are shown below. Note that to the extent there is any provision for additional service, this comes in restoration to 2020 budget levels and the changes associated with opening two new LRT lines. Any other service improvements would come by shuffling resources among routes and periods of service.

There is no provision here for the ongoing cost of the Scarborough RT or any interim replacement service before the planned subway opening in 2030. These costs are carried in the capital budget as part of the overall system expansion cost because, today, they consist of SRT vehicle and infrastructure overhauls. If a conversion to bus operation is needed, this will affect both bus fleet planning and the operating budgets for many years.

Wheel-Trans Operating Budget

Ridership on Wheel-Trans dropped to only 17 per cent of budgeted levels as the pandemic took hold. Note that it was already at only 81 per cent of budget in Q1 of 2020, and so proportionately the drop was similar to that seen on the “conventional” system. Demand has since recovered somewhat and is projected to grow through 2021 especially in the latter part of the year.

A related issue for WT is the problem of social distancing on vehicles which reduces the capacity of the fleet by forcing an end to shared rides until the risk of infection is eliminated. Lower demand counted as trips does not translate to a lower requirement for service.

The budget pressure going into 2021 contains a mix of savings and new costs, but overall the “pressure” is actually a negative number. The primary cause is a large reduction due to lower planned service ($40.4 million, or about 25 per cent of the total).

That saving comes from a reduction in contracted taxi services in line with actual results in 2020, offset by higher costs on the van service due to reduced ride sharing and extra time needed for vehicle cleaning between trips.

This saving in the WT budget request partly offsets the increase in conventional system subsidies shown earlier in this article.

Staffing

The total staff funded from the Operating Budget will increase by 101 in 2021, less than one per cent. The changes are dominated by the extra staffing for the Eglinton LRT Line 5 build-up late in the year. This will add 235 positions more than offsetting reductions in other areas.

3 thoughts on “TTC Operating Budget 2021

  1. There are no photo-ops in the operating budget. There are no ribbon cutting, no first sod turning, no last spike, no laying the cornerstone…

    Steve: Stop the presses! Breaking news! The Queen car ran on time!

    On average … looked at over the entire month … 70 per cent of the time … within six minutes of schedule … or so.

    Liked by 1 person

  2. In the article you said they are not purchasing any new vehicles in 2022. Isn’t 2022 when the 300 Hybrid buses are to be delivered?

    Steve: No. Service requirements for 2022 will be met with buses released by the opening of Line 5 Crosstown. Following the trial of the eBuses over this winter (20-21), the TTC will decide on the next round of bus purchases. Whatever they buy, they will be timed for 2023 delivery. An unknown in this process is the degree to which Covid will affect future riding and fleet requirements, but the TTC hopes to be back to “normal” by 2024.

    Like

  3. Steve: An update. My apologies. Yes there are 300 buses in the fleet plan for delivery in 2022. However, they are for replacement of existing vehicles, not expansion of service. Buses needed for any additional service will come from reallocations after line 5 opens.

    I will correct the article. Thanks.

    Like

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