At its September 24 meeting, the TTC board considered several items, among them the quarterly financial update and a preview of the 2025 budget.
2024 Projected Results
The TTC expects to end the year with a lower than budgeted gap between revenue and expenses. Revenues are running ahead of projections because of strong ridership and a higher than expected average fare. For the six months to June, revenues are $15.6-million above budget. In turn, this translates to a better position going into the 2025 budget cycle.
Expenses are running below budget through a combination of unfilled vacancies and savings due to timing changes in some work. The projected year-end position is that the TTC will come in $52.2-million below its net budget (the portion requiring subsidy).
Ridership reached 81{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} of pre-covid levels in fiscal period 6 (most of the month of June) and is expected to hit 81.5{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} by the fourth quarter.
Note that ridership and revenue recovery are not the same thing because, allowing for inflation, the value of a fare has dropped while operating costs continued to rise.
Looking ahead to the next two years, there continue to be pressures on the TTC’s operating budget. As things currently stand, service increases will be small with the major changes coming when Lines 5 and 6 open, a date that is still not announced by Metrolinx.
The City’s target is for a 0{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} change in TTC funding. This is not as straightforward as it seems. Budgets are struck on a budget-to-budget basis, not actual-to-budget, and so the starting point is the budgeted subsidy in 2024. This arrangement has been in place for many years, and it gives an incentive for the TTC to end the year in a “surplus” position. Other aspects are changes, if any, in external subsidies and which aspects of TTC costs these offset. For example, the extra cost of Lines 5 and 6 are substantially covered by a new, albeit temporary, provincial subsidy and the City does not face this cost at least for 2025 and 2026.
The “Reserve Draw Reversal” is an accounting adjustment. Originally, the 2024 budget included a $15-million withdrawal from a reserve, but this was not required and will not be carried forward into 2025. Therefore, on a budget-to-budget basis this item shows up as reduced revenue. Like the “surplus”, this tactic is also fairly common in TTC budget planning.
Challenges the TTC recognizes going into 2025 include:
- The need for attracting riders through “customer experience and satisfaction”
- Changing demographics of Toronto
- The ability to meet the 0{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} target without affecting service
- Limited funding for state of good repair (this is the Operating Budget component that covers day-to-day work as opposed to major overhauls and asset replacement)
The Mayor’s Vision
The meeting agenda includes a letter from Mayor Chow regarding the hiring of a new permanent CEO.
We must be a city where people choose transit first because it’s the fastest, safest and most convenient choice to get to work, school or run errands – everywhere.
Imagine a city where a commuter taps their card to enter, paying an affordable fare, and then takes a working escalator or elevator down to the subway platform. The station is clean and well-maintained, the message board is working and tells them their train is on time. People aren’t crowded shoulder to shoulder waiting to get on the train, only to be shoulder to shoulder during their ride. If while they wait they feel unsafe, there’s someone there to help them. And they can rely on high quality public WiFi or cell service to chat with a friend or send that important text to a family member.
Imagine a system with far-reaching, frequent bus service. Where riders aren’t bundled up for 20-30 minutes outdoors, waiting for bunched buses to arrive. Where transfers are easy and reliable. Where there is always room to get on board. Where people can trust their bus to get them to work and home to their families on time.
In short, to make the TTC the better way again it needs to be reliable, safe and remain affordable.
People have to be able to count on their train, streetcar or bus to arrive on time, and to get them where they are going quickly – without surprise route changes, delays or bunching. Vehicles, tracks, stations and stops should be proactively maintained and in a state of good repair. Riders and transit workers should feel safe and respected on the system.
That’s a fine vision for what transit should be, but it does not align with the budget process now underway, nor with the projected level of service additions in the next few years.
The Service Budget
Although this is a busy chart, it shows the many factors involved in planning the service budget. On the left are options that keep scheduled hours at current levels, or reduce them. On the right are factors that will drive increased cost (described here as “investment”). The point about off-peak capacity standards refers to a reversal of management’s decision to increase crowding in the off-peak even though the board-approved standards were not amended. Whether these changes occur depends on future year budgets and competing demand for financial support such as fares and maintenance.
Congestion is often discussed as if it were only a downtown problem, but affects most of the network, and many locations have routes with very frequent, well-used service.
Congestion has two potential effects on service and budgets as shown below. There is a choice of running the same buses less often and reducing service, or of adding buses to maintain headways. A secondary consideration not mentioned here is that congestion can also lead to less reliable travel times and more erratic service as demonstrated by the King Street priority corridor.
Generally speaking, travel times have increased since 2020 (the values shown are from the January 2020 schedules before the effects of the pandemic set in.
Toronto Budget History
Problems with ridership and revenue began before the pandemic in part thanks to political decisions to limit transit subsidy growth and keep property taxes down. The TTC Board never discussed this effect, and indeed rarely talked about budgets at all except in the most superficial terms. In 2019, the last full pre-pandemic year, ridership growth was stagnant. Revenue per trip actually grew in 2020 because fewer rides were taken at a monthly pass discount, but revenue per vehicle kilometer dropped because ridership fell by over half while service was maintained thanks to special subsidies.
Total service operated in 2023, measured in vehicle kilometres, sits at roughly the 2014 level. TTC reports service recovery on the basis of service hours, but thanks to congestion and slower overall operating speeds, 100 service hours today provide less actual service than 100 hours did 10 years ago.
| Year | Revenue ($M) | Trips (M) | Revenue/Trip | Veh. Km (M) | Revenue/Km |
|---|---|---|---|---|---|
| 2023 | $1,019.3 | 396.3 | $2.57 | 229.5 | $4.44 |
| 2022 | $789.2 | 318.8 | $2.48 | 230.3 | $3.43 |
| 2021 | $513.4 | 197.8 | $2.60 | 225.0 | $2.28 |
| 2020 | $583.7 | 225.0 | $2.59 | 229.7 | $2.54 |
| 2019 | $1,253.9 | 525.5 | $2.39 | 254.0 | $4.94 |
| 2018 | $1,226.2 | 521.4 | $2.35 | 250.6 | $4.89 |
| 2017 | $1,234.5 | 533.2 | $2.32 | 239.8 | $5.15 |
| 2016 | $1,196.3 | 538.1 | $2.22 | 238.2 | $5.02 |
| 2015 | $1,179.1 | 537.6 | $2.19 | 231.1 | $5.10 |
| 2014 | $1,157.5 | 534.8 | $2.16 | 228.4 | $5.07 |
A comparison of the TTC 2020 and 2024 budgets shows the evolution over the pandemic era. The 2020 budget was based on pre-covid conditions although, of course, the actual outcome for the year was much different.
Total revenue (excluding City subsidy) in 2024 is expected to be about the same as the original plan for 2020, but this is only thanks to about $240 million in special provincial subsidy and a much larger reserve draw. Most other revenue sources, especially fares, are down from 2020’s expected level.
On the expense side, the budget structure for the major operations branches has changed since 2020, and so the relevant lines are shown separately for each year.
Total expenses are up by 21{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} with notable jumps in areas outside of direct service delivery. Security-related costs are not broken out, and so we cannot see how much this has added to the overall cost of providing transit service since 2020.
Note that the figures below are as they appear in the budgets without any inflation. The items have been reordered to show the most prominent first, and to group related lines together. The 2024 actual results are expected to be better than the budget numbers as discussed earlier.
| 2020 (Original) | 2024 ($M) | |
|---|---|---|
| Revenue | ||
| Fares | $1,246.2 | $998.2 |
| Advertising | $29.5 | $26.0 |
| Rent | $13.3 | $11.9 |
| Parking | $11.6 | $7.5 |
| Other | $34.7 | $43.4 |
| Sub-Total | $1,335.3 | $1,087.0 |
| Provincial New Deal | $175.3 | |
| Reserve Draw | $9.3 | $66.5 |
| Total Revenue | $1,344.6 | $1,328.8 |
| Expenses | ||
| Operations | $669.5 | |
| Vehicles | $297.2 | |
| Infrastructure & Engineering | $167.0 | |
| Transportation & Vehicles | $985.5 | |
| Operations & Infrastructure | $314.6 | |
| People Group (HR) | $97.3 | $48.3 |
| Strategy & Customer Experience | $23.2 | $87.8 |
| Corporate Services | $103.3 | |
| Employee Benefits | $331.1 | $462.3 |
| Fuel | $85.6 | $101.1 |
| Traction Power | $60.4 | $51.2 |
| Utilities | $29.4 | $33.0 |
| Presto Commissions | $54.2 | $44.4 |
| Other Expenses | $172.3 | $172.9 |
| Total Expenses | $1,987.2 | $2,404.4 |
| Subsidy Required | $642.6 | $1,075.6 |
Within the municipal subsidy, $93-million comes from provincial gas tax transferred to Toronto. This amount has not changed in many years.
Toronto is particularly vulnerable to revenue loss from fares because a large proportion, 62.7{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c}, came from this source pre-pandemic. Whether future budgets will see an increase back to this level remains to be seen. The year-end forecast is that fares will account for $1.035-billion out of total expenses of $2.553-billion, or 40.5{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} percent. [Source: Financial and Major Projects Update at p. 3]
The Capital Budget
Long-time budget watchers will remember a regular chart in annual City budget presentations showing the “iceberg” of future capital requirements moving inexorably across the page from year to year. The iceberg has arrived, and the TTC’s capital needs vastly exceed known funding sources. This has dire implications for transit’s future over the next decade. Note that the projects captured here are only those requiring a City contribution, not those undertaken directly by the Ontario government.
One recent bright light, if only a small one, is the “new deal” arrangement between Toronto and Ontario including expected savings from the provincial takeover of the Gardiner Expressway and Don Valley Parkway.
The expressway maintenance savings will be invested in the bus, streetcar and subway fleets as shown below.
The gaping hole lies in major projects and provision for considerable expansion of service to shift more demand from motoring to the transit system. The details of each project were not broken down in the presentation.
Major Capital Projects
Several major projects are underway, but many face funding issues in coming years. The report breaks them down into “portfolios” for each part of the transit system. Streetcars have a 30{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} share of the 2024 budget, but this is much lower on a ten-year horizon where the subway dominates. Buses also have a large share in 2024, but this falls off because the purchase of new buses is not funded beyond the end of the current eBus procurement.
The project portfolios are summarized below. Considerable added detail is available in the Financial and Major Projects Update, and interested readers should look there for items of interest.
Within the subway portfolio there is a substantial unfunded total over the next 15 years that is over 50{996a0067a2ef9e05c4c765c3f2eddd6229568dd81b868c67202910a8b56ae36c} of the total projected cost.
The bus portfolio has a large funding gap beyond the next few years. Note that there is no provision for fleet growth to address the City’s Net Zero initiative. The shortfall here is almost entirely for the replacement of buses as they reach retirement.
- Supply chain issues are affecting both vendors. The TTC will monitor the supply chain issues closely with the vendors and determine a recovery plan, as required.
- The current eBus contract has an escalation clause tied to a producer price index for heavy-duty bus manufacturing. Should the index increase, there will be a corresponding price increase for any buses delivered in 2025 and beyond. This also applies to any contract options for additional buses procured, subject to funding, for 2026 and beyond. The TTC will continue to forecast costs and identify potential offsets to the greatest extent possible.
- There is no funding post-2025 for the 1,840 zero-emission buses to be delivered between 2026 and 2035, which is critical to maintain service levels and the TTC’s ability to meet the City’s TransformTO goals.
The streetcar portfolio is much smaller than the other modes. It contains three fully-funded projects: the purchase of 60 additional streetcars (now underway), the repurposing of space at Hillcrest as a new carhouse (contract award imminent), and the reconstruction of Russell Carhouse and Yard (in progress).
Three network-wide projects are in various stages.
