A Curious Study of Fare Options

Updated January 29, 2021: The reference to Metrolinx fare integration studies has been updated to include a link to their late 2017 Draft Business Case and to my commentary on it.

The TTC has a study underway to look at future fare options that will lead, in about a year’s time, to a Five Year Fare Policy and Ten Year Outlook.

The study includes a questionnaire seeking feedback about what people would like to see in a new fare system. Curious fellow that I am, I took the study to see what questions might be posed, and whether there was any inherent bias in the options offered.

Imagine my surprise when I saw the list of things I might prioritize as a new way to spend fare revenue.

What is mind-boggling is the presence of four topics that are clearly part of the capital, not the operating budget, and which are never funded from the farebox:

  • Accessibility: New elevators, etc.
  • New vehicles
  • Critical repairs: All items shown in the list above are capital repairs.
  • Extending routes or building new ones: With the exception of bus routes where there is little infrastructure, these are substantial, multi-year commitments of capital often with subsidies from other governments.

Of particular note here is that the dollar value of each type of work is not shown, and so a respondent has no way to know what the effect on fares would be if these items were charged to fare revenue.

For example, in the 2020 Budget year, before the pandemic slashed ridership and revenues, the anticipated farebox take was $1.25 billion. This is less than the total capital spending, some of which is not yet funded, in each year for the coming decade. A big rise in fares would be required to make a substantial contribution to capital.

To put this in context, a five per cent fare increase (taking the adult Presto fare from $3.20 to $3.36 with proportionate increases in other fares) would generate about $62.5 million per year (with no allowance for lost ridership due to the higher cost).

The City’s property tax bill for 2021 includes a 1.5 per cent increase for John Tory’s City Building Fund, and this tax will increase at an additional 1.5 per cent each year to 2025. The new revenue it will generate in 2021 is estimated at about $50 million. This fund is intended to underwrite over $7 billion worth of the City’s share of various transit and housing projects. Most if not all of the projected funding is already allocated.

Is the TTC considering fare increases that would help fund the Capital Budget, and if so, how much do they hope to raise? What type of projects might be funded out of this new revenue stream?

Even more critically, what operational improvements such as better service would not be funded because fare revenue was paying for things like new signal systems and vehicles?

Two other topics also beg the question of just what riders are expected to pay for out of the farebox:

  • Fare Equity
  • Fare and Service Integration (Regional)

These are noble goals, but they should be funded from general revenues as City and Provincial priorities, not by taxing riders with a fare increase.

Many riders complain today that service in parts of the network is crowded and unreliable, but the TTC claims to be operating service at close to historic levels. Moreover, the classic TTC claim is that service levels are bounded by the size of the fleet. Both of these are not entirely true.

  • Because the traditional peak periods have yet to return on most routes, service operates at lower than historic levels.
  • The total scheduled peak vehicles (see table below) is well below the size of the fleet.
    • In the case of the streetcars, this is partly due to construction projects and to major vehicle overhauls that take advantage of reduced vehicle needs during 2021.
    • In the case of the buses, the requirements include the replacement of streetcars on some routes, but these vehicles will become available as construction projects wind down later in 2021. Even allowing for this, the fleet is substantially bigger than would be needed for industry-standard maintenance allowances.
Source: TTC Scheduled Service Summary, January 3, 2021

The bus fleet now numbers over 2,000 vehicles, and there are 204 streetcars. Buses required to substitute for streetcars are:

  • 501 Queen: 46
  • 504 King: 19
  • 505 Dundas: 8 (*)
  • 506 Carlton: 22 (*)
  • Total: 95

(*) Of the 30 buses on Dundas and Carlton, 12 of them also serve as trippers on bus routes.

The primary constraint on running more service is the provision of staff and the associated budget (or subsidy) to run more of the buses more of the time. There is some headroom for more “peak” period service, and outside of those few hours a day, there is much capacity for better service if only Toronto had the will to fund it. If new money is found anywhere for transit, that is where it should go. “Service” is what riders pay for.

Notable by its absence from the survey is any mention of a new fare system based on the distance travelled. Various proposals have floated from quarters such as Metrolinx and the Toronto Region Board of Trade.

Although Metrolinx has not shown its hand publicly, they are still set on imposing a distance-based model on the GTHA to entrench their view of how fares should be calculated. This fits nicely with the prevailing political wisdom of “user pay”, but it utterly ignores other policy goals for transit and the long-standing fare structures in local transit systems.

In the Metrolinx view, rapid transit lines are considered as “premium” services and should attract a higher fare just as GO trains do today. Short trips would pay a flat rate, but at roughly 10km, fares would increase proportionate to distance travelled. The two-hour transfer would almost certainly disappear. Such a scheme would make long trips within Toronto more expensive, and reinstate the penalty on a series of short-hop trips or “trip chaining”. The goal? Subsidize cross-border trips to and from the 905 regions.

Metrolinx presented three schemes back in early 2016, and prepared to launch public consultation, but that was short-lived. I wrote about this situation at the time:

A big problem in Metrolinx fare proposals was their hope for a “zero sum” solution where new revenues (from riders lured to transit by cheaper fares, and higher fares charged to some existing riders) would offset losses (from cheaper rides for some existing riders, and lost ridership from fare increases on some trips).

[Added January 29, 2021] By late 2017, Metrolinx published a Draft Business Case for fare integration exploring various alternative fare structures, and I reviewed this in The Bogus Case for Fare Integration. In this report, Metrolinx at least acknowledges that there are two options: one is the zero sum arrangement of 2016, and the other requires “investment” (read “subsidy”) to offset new, lower fares for those who are penalized by the existing arrangement.

In due course, work on this appeared to stop, but it has not been forgotten.

The Board of Trade’s scheme uses a zonal system that is designed to allow trips inside Toronto, as well as short trips across the 416/905 boundary, to be taken for one fare, while longer trips (e.g. inner 905 to central Toronto) would pay more, although less than today’s completely separate fare on each side of the boundary. In this scheme too the two-hour transfer would probably disappear.

The fundamental problem here is that none of this is discussed in the TTC’s fare study. One of the most important questions riders might be asked is not even in the survey, nor is there any discussion of what various potential new fare schemes would do to riders’ day-to-day costs.

The TTC risks conducting a grand study without discussing a critical effect of “regional integration”. The problem is compounded by muddying the question of fares with potential support for capital projects and policy options that should not be funded from day-to-day operating revenue.

Does the TTC Board, and behind them the City of Toronto, have a hidden agenda to stiff riders for the cost of system and fare policy improvements? Or is this simply a case where nobody is paying attention?