Transport Committee on Nov. 16th, 2011

[Gary Webster]

Sure. The short answer is we are. The longer answer is that we reviewed an electronic automatic fare collection system about 10 years ago. You're quite correct. We have a very old-fashioned gravity system. It's simple; it works. It's certainly not as convenient for the customer as the types of systems you're referring to. There's no business case. There's no system in the world we know of that has made a business case to actually transfer its current fare collection system to an electronic fare collection system.

So 10 years ago when we did that work, we said we can't afford it, it's going to cost us too much money, it's going to cost us more, and we're not prepared to go there.

[Mark Adler, Conservative, York Centre, ON]

Is it because of union issues?

[Gary Webster]

No, not at all. There was simply no business case for us to do it, and nobody in the world at that time had, nor currently has, a business case to actually defend why you would make that change.

Having said that, our customers want it. It's the state of the art around the world. Clearly we need to do that, and we are. We're working with the Province of Ontario through Metrolinx on the PRESTO project, and we've been involved in that for a number of years. We're bringing a report forward to our board to indicate that we're prepared to proceed with PRESTO, subject to our business needs being met. So you're absolutely right with your comments. We've been criticized for being one of the last cities of our size in the world that doesn't have that system. We understand that. It simply was a matter of money. That's why we didn't proceed. That's why we're late getting into it. We now have a good arrangement with the Province of Ontario to help us fund that, and there's some CSIF money in that as well.

[Mark Adler, Conservative, York Centre, ON]

Okay, and I suspect there is some room in the budget to save some money. We in the government have a deficit reduction plan. We're trimming 10% from all of the different departments.

Does the TTC have any cost-cutting measures in place to save money?

[Gary Webster]

In the 2012 budget, we were challenged by the City of Toronto to reduce our budget by 10%. That means our subsidy is to be cut by 10% in 2012.

That's at a time when our ridership is growing at 3%, as I mentioned. In order for us to cut 10% from our budget, we first had to address the $20 million increase in our costs by having additional ridership. The bottom line is that we had to cut $85 million from our budget. We did that by reducing our staffing. We're going through a downsizing at the Toronto Transit Commission as we speak. We are cutting service, and we will make a fare increase proposal to our board in December.

So we are going to meet our 10% reduction. It's clearly not intuitive. Most big cities around the world would be thankful for an increase in ridership. Every small city in the world would want that as well. Clearly, we can't afford it, and some people have said that our success is killing us. It is expensive and 70% is a reasonably high revenue-to-cost ratio. We were at over 80% 10 years ago—and I won't tell you that story. But clearly we are challenged with cutting our budget. We have done so and it really is cutting our staff, cutting service, and raising fares. So, effectively, our customers are going to get less service but pay more for it.

[Mark Adler, Conservative, York Centre, ON]

Are you cutting primarily from the 20% and not the 80%? When you say 80%, are those the—

[Gary Webster]

There'll be fewer staff on the management side, and there'll be fewer unionized workers because there'll be less service on the street.

[Mark Adler, Conservative, York Centre, ON]

Do I have any more time?

Is any consideration being given to going back to the zoning system?

[Gary Webster]

We effectively have a zoning system today. It used to be at Lawrence Avenue. It's really at Steeles Avenue now, so we have a two-zone system.

[Mark Adler, Conservative, York Centre, ON]

Within the 416 area, is there any consideration being given to a zoning system?

[Gary Webster]

Not at this time, although PRESTO will give us all the flexibility we need to introduce any kind of zoning system, should we wish to do so. Fare-by-distance and any of those sorts of things are possible with PRESTO.

[The Chair, Conservative, Merv Tweed]

Mr. Sullivan.

[Mike Sullivan, NDP, York South—Weston, ON]

Thank you, Mr. Chair, and thank you, Mr. Webster.

One of the goals of a national public transit strategy is to take politics out of transit decision-making. I'm not sure whether you were around in the mid-nineties when we dug a hole in Eglinton Avenue and filled it in again. We're digging it again, this time with big boring machines.

Do you agree that having some kind of overarching strategy applied to transit decision-making to ensure that funding is transparent and not politically motivated would be a good thing?

[Gary Webster]

Yes. I need to answer the same way I did earlier. I think that's certainly good.

It really depends on whether it's going to be structured in a way that meets the needs of Toronto. I know that it's sometimes challenging at meetings like this to say that Toronto is the largest city in Canada and that we do have unique needs. Sometimes that's not a welcome comment.

The short answer is yes, I would certainly welcome that. I think it's very important for the federal government to have that role. I really encourage you to consider the uniqueness of Toronto in having those needs met.

[Mike Sullivan, NDP, York South—Weston, ON]

Do you believe, as Ms. Chow mentioned, that the decision by the federal government to fund certain projects and not others is hampering the TTC's ability to expand in a progressive way?

[Gary Webster]

We have challenges with all levels of government in the type and quantity of funding we receive. When funding comes to us from the federal government on a project basis, we do welcome it and very much appreciate it. When we add up our project funding and our gas tax funding from all levels of government and it doesn't meet our needs, then that's a problem for us. So I can't say that project funding is a problem for us. I would say that gas tax funding or the way you've provided gas tax funding to us gives us much more flexibility to apply it to whatever our project needs are.

Clearly, the answer is that in spite of everyone's best efforts to put more money into transit at all levels of government, project- or gas tax-wise, it just doesn't add up to meet Toronto's needs.

[Mike Sullivan, NDP, York South—Weston, ON]

The numbers you mentioned earlier were that you had $7.8 billion in capital needs over the next 10 years, of which $5.5 billion has been committed by various levels of government. What happens if that $2.3 billion isn't found? Is this “state of good repair“ capital, or is this expansion capital?

[Gary Webster]

What we've done is this. The approved budget is the 2011 to 2020 one of $7.8 billion, with a shortfall of $2.3 billion. We are in the process of working through our 2012 to 2021 capital budget and in the process of deferring some of that work. As I mentioned earlier, we are cutting our streetcar order by 15 cars, and we're not going to buy the last 10 Toronto rockets that we need. We're not going to replace the signal system on the Bloor-Danforth subway with an automatic train control system, but with a conventional system.

The short answer is no. The state of good repair will not suffer: the rails will be replaced and the signal system will be replaced. But there are opportunities to meet the growth needs that will not be met or won't be satisfied unless we get more funding.

Our challenge in the short term is to reduce that $2.3 million shortfall as much as we can. We can't get it to zero. That goes to my comment earlier that we have streetcar payments to make and a maintenance storage facility to pay for but are not sure how that's going to happen.

No, we're not going to run an unsafe system. We never have. Things like signals and track will always be replaced. We're not going to have a state of good repair issue, but we are deferring and pushing out...and hoping that in a number of years we'll be able to buy those additional cars and replace the signal system with a proper system. Our challenge in the short term is to defer as much as we can without affecting the safety of the system.

[Mike Sullivan, NDP, York South—Weston, ON]

When you make a request for an expansion type of project, do you do a cost-benefit analysis that includes such things as the reduction in travel time in assessing how much efficiency and productivity will be gained by the general population?

[Gary Webster]

Yes, we worked closely with Metrolinx in the original city transit plan—and now with the memorandum of understanding between the mayor and the Province of Ontario. All the corridors that were considered are still in play in the plan. They were all considered in that manner. And Eglinton-Scarborough Crosstown today has a very high capacity for ridership, which is best met with a low-floor streetcar type of mode.

Yes, we do all of that work. It will increase travel times and make the congestion less on all those corridors.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thank you for being here.

One of the questions I've been asking witnesses who regularly come before us on this study is this: What is the fare-box recovery rate that we should expect for a project to be considered viable?

[Gary Webster]

That's an operating and capital question. When we look at any project that we've proposed to meet a growth need on a corridor, such as what we're talking about now, we always project ridership demand on that corridor at the time and 20 or 30 years out. We'll always have a revenue-cost ratio in mind. It's not going to be as high today as it will be in the future with additional ridership on that corridor.

TTC's average ridership growth or revenue-cost ratio is high on a world scale. We don't set a standard by which it must be met. We don't have land use planning demands as part of that. We already know that the corridors being proposed for higher order transit are our heaviest routes and that there's a high ridership capacity on those routes.

We want to make sure that when we plan, build, and operate those services, these services will not have a negative impact on our revenue-cost ratio. We don't do revenue-cost ratios route by route. We can break that down and allocate revenue and cost by route. We do that work, and that's the kind of work we do when we look at corridors, just as you're asking in your question.

We already start with our heaviest routes and those are the routes that we put the higher order transit on. They're already our best performing routes to start with or we wouldn't recommend them.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

My colleagues are going to be exhausted by my repetitiveness, because it's the same question I've been asking everybody. As I've said before, stockbrokers look at price-to-book and price-to-earnings ratios. In every single field, when you're measuring an investment, you have ratios that you consider to determine the viability of the investment. It would seem to me that one of them is the fare-box recovery rate. We can't be involved in micromanaging projects at a federal level, but I would think that we would want to have some basic measurements of what constitutes a good investment for us to make.

I'm wondering if you can give us even a range of what constitutes a good or a necessary fare-box recovery rate.

[Gary Webster]

We drove our revenue cost ratio in the 1990s from 68% to 84% as a result of raising fares, cutting service, and cutting staff. That was really to respond to a pretty bad economy in the 1990s. It was 84% then, and I think that's too high. I don't think that's enough investment for a big city like Toronto to have in transit; it means that people can't get around the city on transit.

When the official plan was brought forward in 2002, it was really a pro transit plan. We invested. We've spent a lot of money on transit in the last five or six years, and we drove the revenue cost ratio down to about 70%. I think that's a bit too low for Toronto. I think somewhere between 70% and 75% is the right answer for the city of Toronto.

It's going to vary in other cities, and in smaller cities. I think you're going to speak to Saskatoon later this afternoon. You can ask them that question. That would be an unrealistic expectation for them. Big cities like Toronto, in my opinion, should be in the order of 70% to 75%.