At its meeting on April 14, 2022, the TTC Board will consider a report about the arrangements with Metrolinx for operation of Line 5 Crosstown. This line, at least from a budgetary standpoint, is expected to open late in 2022.
There is a long agreement between Toronto and Metrolinx about how the costs are shared and who does what, and a much longer Project Agreement between the province and Crosslinx, the private consortium that built and is responsible for maintenance of the infrastructure and equipment.
- Line 5 Eglinton – Train Operating and Funding Agreement
- Project Agreement between Ontario/Metrolinx and Crosslinx
Within the TTC report, these two documents are referred to as the “TOFA” and the “PA”.
Even with Toronto keeping any revenue the line generates, the net result will be an increase in the TTC’s costs. On an annualized basis, the net new cost to Toronto is $62.6 million annually. This is not surprising, but a fascinating point about this table is that the maintenance contract and other non-labour costs total $52.8 million while the labour and benefits for TTC staff (station, on-train, supervision) amounts to only $26.4 million.
This illustrates the substantial cost of owning and maintaining infrastructure as opposed to running the trains.
Responsibility for aspects of the route are divided among the parties as shown below.
A Question of Service Levels
The costs shown above are “based on commencing service at Service Level 1 and moving to Service Level 2 in 2023 … as outlined in the Project Agreement” [TTC report at p. 3]. However,
… discussions between TTC and Metrolinx are on-going about opening the Line at a higher service level, particularly Service Level 6. The TTC will update the Board if there is any change to the opening day service level and implications to TTC’s plans with service commencing at a higher service level. The commencement of service at a higher service level will not impact the terms of the TOFA [Train Operating and Funding Agreement], which is the subject of this report.TTC Report at p. 5
And what, you might ask, are these “Service Levels”? They are supposed to appear in Schedule 15-1 of the Project Agreement. Here is what that schedule looks like. Yes, the entire schedule is redacted. And, no, despite the injunction in the footer, I have not asked for permission to reproduce it here. Bite me.
From another reference in the agreement, it appears that there are to be nine Service Levels, but we do not know what these are. However, they play a role in various formulae that determine how much the consortium will be paid. If Toronto and the TTC wants more service, the bill will go up. However, we don’t know by how much, or even if the budgetary figures shown above represent what will be operated in 2023.
We are in a situation where the cost of running better service, indeed even the base level of service against which a change might be measured, is redacted in the “economic interests of Ontario”. Remember this while you wait for a train to show up, or if the TTC has to make service cuts elsewhere in the network to pay for Line 5.
The proposed TOFA includes:
5. Lifecycle Costs
• Metrolinx is responsible for all lifecycle maintenance costs of the Line 5 Eglinton, including lifecycle maintenance costs associated with acceleration of service levels due to increases in ridership demand.
• In the event changes to service levels are requested solely by each Party, which are not driven by ridership demand, the Parties will work together to mutually determine the associated incremental costs, including operations, non-lifecycle maintenance and lifecycle maintenance that will be paid for by the Party requesting the change.
11. Service Levels
• The TTC conducts an annual service plan review, and will include Line 5 Eglinton to observe the entire TTC network.TTC Report at p. 19
• Service levels will be established in accordance with the pre-determined service levels in the Project Agreement.
• Any service level changes recommended or requested by each Party will be reviewed and agreed between the TTC and Metrolinx, with final authorization provided to CTS by Metrolinx in accordance with its role as owner of Line 5 Eglinton.
It is not at all clear whether Line 5 will operate to TTC service standards either for surface or rapid transit lines, of if a lower standard imposed by Metrolinx will apply unless Toronto shells out for better service.
The Complexity of a Multi-Party Agreement
Ontario, with a love for public-private partnerships, has created a structure where much of what, on a consolidated system like the TTC, would not have to be specified in detail. The difficulties lie in contractual responsibilities for who does what, who manages whom, and who pays. The Train Operating and Funding Agreement is still in development even though, if earlier schedules were to be believed, we would be only months from opening. Note the future tense in the following text:
[…] the TTC is currently working closely with its partners at the City of Toronto and Metrolinx to develop the TOFA, which will consist of an operations scope (service to be performed by the TTC), and a commercial scope that will address the funding of O&M expenditures of Line 5 Eglinton.TTC Report at p. 7
The co-ordination between parties is described here:
It is critical to note that Project Co. has a contractual relationship only with Metrolinx. The TTC and Project Co. do not have a direct contractual relationship. However, the TTC is building working relationships with Project Co. through the joint goal of delivering the LRT lines safely and efficiently.
In this model, Metrolinx has full control over the Maintainer of the Line, and the TTC is reliant upon Metrolinx for the enforcement of maintenance standards, including but not limited to maintenance of equipment, infrastructure, assets, fleet, etc. Metrolinx, through Project Co., is responsible for corrective and preventive maintenance of Line 5 Eglinton, and for resolving any maintenance-related issues observed by the TTC that are brought to the attention of Metrolinx and Project Co.TTC Report at p. 7
Co-ordinating with the Maintainer – The TTC will not be responsible for any maintenance-related activities or functions of Line 5 Eglinton, as this will be under the purview of Metrolinx, and based on obligations outlined in the Project Agreement (PA), which exists between Metrolinx and Project Co. To ensure all parties continue to deliver a seamless customer experience, the TOFA and PA have specified various meetings and committees to ensure collaboration amongst the TTC, Metrolinx and Project Co. For example, the parties are required to meet on a daily basis to co-ordinate daily operations and maintenance activities, and any special events, and to discuss previous day’s performance of Line 5 Eglinton. These forums will provide the TTC with the ability to communicate any issues or concerns with maintenance activities to mitigate any impact on operations. Metrolinx will be responsible for the enforcement of the maintenance standards with Project Co. through the various mechanisms outlined in the PA.
To ensure the delivery of its Operator Services, the TTC is developing a Quality Management System (QMS) to manage and oversee the quality of its Operator Services for Line 5 Eglinton. The QMS will define processes, methods, key performance indicators, etc. to ensure quality assurance and quality control of the TTC’s processes.
The TTC continues to collaborate with Metrolinx to ensure that there is co-operation between the parties in anticipation of the opening of Line 5 Eglinton, with the over-arching objective of ensuring a seamless customer experience.TTC Report at p. 8
Some of these activities, such as a daily review of performance, would (or should) occur even if the whole operation were within the TTC. On Line 5, however, each party will be checking whether they actually bear responsibility and/or costs. The litigious relationship demonstrated to date by Metrolinx and Crosslinx does not bode well for this process.
It is mildly amusing that the TTC is responsible for a “Quality Management System” for Line 5 considering that it is woefully unable (or unwilling) to do the same for its own network as shown in many articles about service quality on this site.
The lack of transparency in this process is identified as a “key risk”.
The other major component of the overall TOFA is the commercial scope, which defines the City’s obligation to fund all operating and non-lifecycle maintenance costs of Line 5 Eglinton, in exchange for receipt of farebox revenues and non-farebox revenue. The City (with support from the TTC) has led the negotiation and development of the commercial terms (see Attachment 1).
The commercial terms of the TOFA expand upon the principles of the 2016 AIP [Agreement in Principle], specifying the parameters for the City’s funding obligations, such as renewal and dispute terms, liabilities for non-fulfillment of obligations, and revenue and payment processes. The commercial terms also outline the TTC’s role in fare and service-level setting. For example, the commercial terms note that TTC will have the ability to set fares on Line 5 Eglinton in accordance with TTC Fare Policy and structure that is used for the entire TTC network. This will ensure a seamless customer experience, as any fare policy changes that apply to the TTC network will include Line 5 Eglinton.
A key risk that the City and the TTC continue to navigate through is transparency regarding obligations in the Project Agreement that would be assumed by the City and the TTC. The publicly available version of the Project Agreement redacts certain areas of the Project Agreement due to the commercially sensitive nature of the information within those sections. Among the redacted sections are a maintenance activities schedule and a payments schedule (inclusive of penalty structure). Metrolinx assures the City and the TTC that the TOFA will clearly outline funding and operating obligations that the City and the TTC will be responsible for, including the applicable maintenance activities and payment schedule, and will be consistent with the attached Term Sheets. The City will not assume obligations from the Project Agreement that are not outlined in the TOFA.TTC Report at p. 9
Even if Toronto and the TTC had been excluded from the operating agreement and this had gone to another private company, the complexity of responsibility and opportunities for finger pointing would remain, albeit under a blanket of Metrolinx confidentiality.
What actually happens over coming years will depend, in part, on whether Metrolinx tries to make these arrangements work to the overall public benefit, or continues with a secretive and combative style evident in so many other parts of its mandate.