At the TTC Board Meeting on June 23, 2022, the quarterly financial update reviews the status of the 2022 operating and capital budgets together with the status of major capital projects. This report is one of the more valuable contributions to understanding the state of the TTC, certainly in more detail than the superficial CEO’s Report. But even at that, its concern is primarily with the current year.
For 2022 the TTC is not out of the woods on its operating budget and political efforts continue to “shake the tree” at the federal and provincial level for funding to make up the Covid deficit caused by running nearly full service with less than 60 per cent of historical ridership. To the degree that governments recognize that the country is still in a pandemic and provide backstop funding, the TTC can continue to appear close to normal to its riders. However, that level of support will not last forever and 2023 will bring hard decisions to Toronto Council about how much service they can afford to provide, and whether a continued freeze on fares is affordable.
Lurking out of sight is a much larger deficit in capital program support. Before the pandemic, the TTC published its capital plan including many, many items that had previously not been publicly disclosed or which were listed “below the line” in the budget as being without funding commitments from governments. The heart-stopping total was three times the level historically acknowledged as the TTC’s capital needs, and this did not include major new transit projects. Ontario took over some of the largest, but also inflated their cost with design decisions such as undergrounding the Eglinton Crosstown West Extension (ECWE). Meanwhile, the Eglinton East LRT to Malvern and the Waterfront East LRT do not show up on TTC’s books beyond a modest amount of design funding.
This chart from the 2022 Capital Budget shows the severity of the problem. In the short term, money is available from one-time, project-oriented subsidies. In the long term, funding depends on finding political support for transit spending at a much higher rate than in past years and largely on projects that do not involve system expansion.
For many years, Toronto and the TTC have muddled through the Capital Budget cycle by scraping together enough money to fund near term requirements and hoping for a better tomorrow. Concurrently, the focus of transit debates has been on new builds, the “we deserve” school of transit planning, while funding for other projects is left for another debate. Two special levies, one implemented during Rob Ford’s mayoralty to fund the Scarborough Subway, and one under John Tory to fund other transit projects, placed an additional charge on the property tax base over and above the so-called inflationary increase. Tory’s City Building Fund is still not at its full level, and there will be little desire to add even more transit taxes in the medium term.
This problem is not unique to transit, and other calls for funding by various governments are obvious: housing, health care, education, just for starters. Transit neither gets nor deserves all of the pie. What we do not really know is how big that pie is, and when governments will say “enough”.
When the feds were handing out large transit subsidies both as a city building and economic stimulus, a question asked by some transit advocates and community groups was “why are you not imposing conditions on which projects are built” including environmental responsibility and overall transit needs. The response was simple: Toronto Council identified its priorities, that’s where the money is going and, by the way, do you really want the feds dictating which transit projects are funded?
There are many key projects without funding, and at some point the obvious response will be “but we already gave you billions” out of a national program that is shared across the country.
The TTC Board appears particularly unwilling to discuss these matters in public and is generally overwhelmed by the size and complexity of the budget. Once upon a time, the TTC had a Budget Committee that almost never met, and recent attempts to re-establish one were voted down by the Board. This is an abdication of responsibility for a core function.
The 2022 Operating Budget
Ridership and revenue have been trending above the level used in the Council-approved Operating Budget. The lines are projected to converge over the summer and through the fall hitting an 80 per cent recovery level late in the year
Looked at by mode, all three are recovering but at different rates. As of the week of June 4, the bus network is carrying 65 per cent of pre-covid demand while streetcars sit at 53 per cent and the subway at 50 percent. The rate of growth since early February when most of the Omicron-related restrictions were eased has been strong at 34 per cent on the system as a whole, and 44 per cent on the subway.
Further growth is expected in the fall as office workers return and post-secondary students come back to in person classes. Even so, the TTC will still be running close to full service while ridership is 20 per cent below normal and fares have been frozen for two years.
The projected year-end deficit remains high.
Because riding is tracking above budget, there is a forecast surplus of $66 million for fare revenue, although two thirds of this has already accumulated during the period when actuals have been higher than budget values.
Expenses are running slightly below budget because TTC is operating service at roughly 6 per cent below budget levels. This is offset by the higher cost of diesel fuel than originally foreseen. Covid-related costs are also expected to come in below budget.
The TTC projects that the shortfall due to Covid will be $74 million less than budgeted, down from $559 to $485 million, primarily because of stronger ridership. The amount of committed funding at the City is, at this point, uncertain because of ongoing negotiations with the provincial and federal governments. Any shortfall will require backfilling by the city, or last minute cuts by the TTC. The longer such a decision is deferred, the fewer months remain for the TTC to pull its costs down, and the more crucial that funding requested from other governments materializes.
The 2023 budget will be challenging because Covid operating support is likely to disappear at the end of the provincial and federal fiscal years on March 31 if the current “covid is finished” attitude prevails. TTC will not be back at 100 per cent of demand, and will face new costs from the opening of Line 5 Crosstown. Some combination of fare increase and constraint on service growth is inevitable.
This is precisely the area where informed public discussion should be happening going into the municipal election cycle, but instead all is silence.
Deferred 2022 Capital Spending
Three large items in the 2022 Capital Budget have been deferred to 2023:
- Yonge-Bloor Capacity Improvement: $50 million
- Other Buildings and Structures: $48 million
- Spadina Subway Extension: $26 million
Due to the increased complexity surrounding planned property acquisitions that will not be finalized this year, and the acceleration of projects ahead of schedule with projects experiencing delays, a total of $128.1 million is being reduced in 2022 and a total of $132.4 million is being deferred to 2023, as summarized in Table 12 below and itemized in Appendix 2 of this report. [p. 16]
Yes, the Spadina extension is still an open capital project because property acquisitions have not been finalized years after the line opened.
“Other Buildings and Structures” is a grab-bag within the overall budget, and the report does not identify which component projects are affected.
A further deferral will occur due to delays in bus procurements:
The TTC will be submitting a subsequent adjustment to the 2022 Capital Budget and Capital Plan at the first opportunity post Council recess to account for the hybrid bus procurement delays as a result of supply chain issues. [p. 16]
The deferral of Waterfront Transit design work is odd considering that Council recently asked staff to review ways to accelerate this work, and it is already known that substantial changes in scope for work on the Bay Street segment (for which the TTC is responsible) will be needed to contain project costs.
These deferrals relieve pressure on the City’s 2022 budget (including spending on capital works from the current operating budget), but add to problems in future years.
The Iceberg: Unfunded Multi-Year Capital Projects
An updated 15 year capital plan was presented to the Board in December 2021. It includes an extensive list of future projects and their funding status. A critical table lists major unfunded projects and the timing of necessary approvals.
In the years 2022-2024, several projects require approval and funding, and cherry-picking is not an option because of the linked nature of many works.
In some cases, the due dates for funding are misleading because for multi-year programs such as bus purchases and scheduled maintenance the future year spending does not have to be nailed down today.
Subway Trains and Facilities
The purchase of subway trains (primarily replacements for the existing T-1 fleet on Line 2 BD) must be fully funded before the TTC signs a contract lest the City be on the hook for funding that was assumed to be available from others.
The total project cost is $2.3 billion of which only $619 million in City funding has been nailed down. No provincial nor federal contribution has arrived.
If TTC is unsuccessful in receiving funding for the subway car purchase, then the existing funding of $619 million will need to be increased by $100 million and utilized for T1 Life Extension Overhaul instead, to extend the useful life of the T1 trains from 30 to 40 years, thereby deferring the cost of subway trains that will inevitably be required. [p. 25]
The TTC has an RFP on the street for supply of these trains, but it is unclear if they will be able to award the contract. If the decision is taken to rebuild the existing fleet, this carries two major risks:
- Whether the fleet will last reliably to 2040. The TTC’s experience with life extension programs has mixed results notably with the CLRV/ALRV streetcar fleets, and of course with the SRT fleet.
- What will be done about the signal system on Line 2. ATC conversion is a funded project, but retrofitting the T-1 fleet for ATC operation would be expensive and add to the complexity of any overhaul. The SSE to Sheppard is planned to operate with ATC. Conversely if the existing system is left in place, it would be over 70 years old by 2040.
This is not simply a question of shuffling money around in the budget, but of potentially boxing in the TTC’s options for the future of the Bloor-Danforth subway.
Related unfunded projects include changes to Greenwood Yard and additional storage to accommodate the co-existence of old and new fleets. Further in the future is a new subway yard west of Kipling Station that could be either a standalone project or built as part of a western extension of Line 2.
Meanwhile on Line 1 YUS, the TTC plans a new yard in York Region to supplement storage for that line. However, this yard is not part of the Yonge North Extension project and it is not funded. Funding for additional trains both to extend Line 1 and to increase service is likewise not part of the YNSE project.
The purchase of new buses and conversion to electrification is another major area that is not fully funded. The TTC has enough money committed to get them through the first few years, but not for complete fleet replacement nor for the full rollout of charging infrastructure. There is also a tenth bus garage for which property will be acquired soon, but which will not be built until much later in the 2020s. (As an interim step, some TTC functions will be relocated from property where existing leases are expiring.) The bus garage would be the first purpose-built eBus facility, but this project is not funded.
Various factors have contributed to a bulge in the spending rate on buses:
- eBuses are more expensive than hybrids, and so more capital is required to provision the same number of buses.
- With the TTC’s change to a 12-year replacement cycle, the number of buses that must be bought each year is higher than when the cycle was 18 years.
- Depending on the charging scheme, more buses might be required to provide a given level of service because they cannot remain on the road for long periods without recharging.
- Charging infrastructure is a net new item until the network is fully converted.
The shift to a shorter life cycle avoids the need to rebuild buses more than once in their lifetime. That policy was implemented based on the declining benefit of rebuilds for diesel buses, and yet electric buses should have a longer lifespan. We will not know until the mid 2030s whether it will be possible to return to a longer replacement cycle for eBuses.
On top of this, a recent green policy initiative at the City seeks to increase the level of transit service and attract more people to the system. These would either be exiting car users, or people dissuaded from acquiring a car by the convenience and quality of transit service. More buses means more drivers, mechanics and garage space. None of this is provided for in the TTC’s plans which assume only modest fleet growth with some offset from conversion of major routes from bus to LRT.
The big emission saving from transit comes from trips diverted from autos, and that means more service. The contribution achieved through electrification of the fleet is relatively small.
Streetcars and LRT
The TTC has 60 additional streetcars on order, and this is a funded project. Also funded is the conversion of a portion of Harvey Shops as a streetcar yard to expand system capacity and supplement Leslie, Russell and Roncesvalles.
Some of these cars will go to improved service on the existing network and some will likely go to new Waterfront lines. However, construction of the Waterfront projects is unfunded, and there is a tangle of overlapping projects that could delay implementation of much new in the medium term. Various options for early implementation of some portions of the Waterfront plan are now under consideration.
The proposed Eglinton East LRT to Malvern is not fully funded, as its anticipated cost is now well above the amount of City funding reclaimed from the Scarborough Subway project when the province took over full responsibility for it.
GO Transit & SmartTrack
For better or worse, the City is on the hook for about $1.5 billion worth of GO Transit stations including the major hub at East Harbour. Under the rubric of SmartTrack, this is the remnant of John Tory’s original campaign promise for one line that would solve all of our transit problems.
There is still no provincial commitment to provide full, free transfers between TTC and GO trains, a factor that would have been key in making SmartTrack an integral, attractive portion of the network.
Note that SmartTrack spending does not appear in the TTC budget, but does compete on the City budget for funding with other portfolios.
The 15 Year plan includes a table of projects and their funding beginning on page 28. I leave it to readers to peruse the details, but here is a summary of the situation as it was reported in December 2021. (Some values do not add due to rounding.)
|Line 1 YUS||$8.64||$2.79||$5.84|
|Line 2 BD||$12.63||$3.20||$9.46|