A TTC bus stops at Dufferin Station in Toronto on Feb. 10, 2021.Aaron Vincent Elkaim/The Globe and Mail
Around the world, the annual budgets of public transportation agencies are normally propped up by generous government cash infusions, which pay for all the things rider fares alone can’t cover. In Canada, that’s less true: While this country’s transit agencies do receive government subsidies, the biggest of them rely more on fares to fund operating expenses than many of their international peers do.
Depending on how you look at it, this is either a sign the agencies are being very efficiently run or a sign they are being starved of funding. Perhaps both things are true. Whatever the case, when the pandemic hit, that reliance on fares became a massive vulnerability.
Transit agencies around the world suffered catastrophic ridership drops as people increasingly stayed home. The agencies most reliant on fare boxes to cover operational expenses saw their bottom lines devastated. Over the course of the pandemic, budget shortfalls have become chasms hundreds of millions of dollars deep, raising questions about the viability of future service.
Canadian governments have papered over transit agencies’ shortfalls with one-time cash transfers. Just last month, Ottawa announced that it would provide $750-million in funding to agencies, as long as provinces met several conditions.
But with ridership slumps expected to continue through at least this year and next, advocates, politicians and transit executives are calling for a new approach to financing public transportation in Canada – one that doesn’t force agencies to go cap in hand to governments as passenger numbers fluctuate.
“We don’t want to be in the position, and nor do senior levels of government want to be in the position, where you know we’re constantly coming, having to ask for funds,” said Kevin Quinn, CEO of TransLink, which provides transit in the Metro Vancouver area.
“I think there’s recognition at all levels of government that more sustainable funding solutions are going to be required.”
Only a few months ago people were beginning to return to their offices, and transit ridership was recovering. Then the Omicron variant struck and ridership plummeted again. How long people will stay away from the office and how frequently they will attend once they return are pressing concerns for fare-reliant transit agencies.
“The monthly pass, where you match it with your photo and it’s linked to only you and you use it 45 times a month and break even – that model has failed for the time being, and everybody, I think, is cognizant of that reality,” said Marco D’Angelo, CEO of the Canadian Urban Transit Association, which counts most of the country’s transit agencies among its members.
The transit agencies most affected by people working from home will be the ones that have traditionally focused on carrying commuters into city centres. Metrolinx, which oversees the Toronto-area GO Transit commuter network, would not reveal its financials for the current fiscal year, which ends this month. It is expected to report massive losses as a result of ridership that is less than 5 per cent of the system’s prepandemic normal.
The Toronto Transit Commission has said it believes working from home is a permanent phenomenon, and that nearly half of the city’s employees will continue doing so with some degree of frequency. The agency expects to be short $561-million this year, $250-million in 2023 and $176-million in 2024. But the TTC cautioned in a statement that the ridership assumptions behind its revenue projections are very preliminary.
The ARTM, which oversees regional transit in Montreal, said in a statement that it also believes working from home is here to stay and that regaining full ridership will take years, but that commenting in more detail would be speculative.
Calgary Transit was unwilling to make a projection beyond this year, when the agency thinks it will register an $89-million shortfall.
Vancouver’s Translink is predicting a $500-million range of shortfalls over this year and next, with best-case, middling and worst-case scenarios. Mr. Quinn said this reflects an agency “still very much figuring out the new normal.”
The fare-reliant funding model was beginning to creak even before the pandemic. Governments subsidize transit partly through gas-tax revenues, which are variable and are expected to decline as vehicle electrification gathers pace.
The loss of the gas tax wouldn’t be as severe as the pandemic’s impact on transit agency budgets, but it is a structural shift that will have to be accounted for. And while the full effect of the pandemic remains to be seen, further shortfalls over the next few years would stress agencies across the country.
CUTA’s Mr. D’Angelo pointed to ways transit agencies could address funding issues, including through increased service efficiency. He also cited factors that could make people less car dependent and more likely to ride public transportation, including the growth of bike-share systems and a reduction in the number of parking spaces property developers are required to build.
None of that, though, can replace the amount of fare-box losses seen recently. And if transit agencies falter, the stakes for cities and the economy are high.
“We estimate that the TTC provides $2.7-billion in annual wider economic benefits, although this figure falls to about $1.75-billion if we assume that some TTC travel would still happen by other means,” the C.D. Howe Institute argued in a report from April of last year.
Toronto city councillor Jaye Robinson, who chairs the TTC board, said the city should lean on the economic argument when making its funding pitch to higher levels of government.
“The TTC will play a critical role in the recovery and the future success of our city, so I think that’s the way to bring them on board and to actually get them to write that annual cheque,” she said.
“It needs to be fixed permanently so that we have a line item in our budget and it’s not like a handout, some random handout. Instead, it’s baked into our annual budget and we know it’s coming every year. And that’s what we need.”
If that doesn’t happen, higher levels of government could lose patience with annual emergency funding requests and start to demand cost-saving service cuts. Reducing service makes transit less useful, which pushes down ridership and eats into revenue, leading to further calls to cut costs.
The industry term for this is “transit death spiral.”
“Even though it sounds like it’s a dimmer switch that could be reduced to make savings in the short term and then be amplified once the public returns, it doesn’t work like that,” Mr. D’Angelo said. “It’s an essential public service. It would be like saying, you know, turn down a hospital when it’s not [as busy]. It’s not how it works, and that’s the nature of being essential.”
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