Politicians and transit leaders call for a new approach to funding public transport
Around the world, the annual budgets of public transport agencies are normally supported by generous injections of funds from the government, which pays for everything that passenger fares cannot cover on their own. In Canada, this is less true: although transit agencies there receive government subsidies, the largest of them rely more on fares to fund their operating expenses than many of their international counterparts. .
Depending on how you look at it, it’s either a sign that the agencies are run very efficiently or a sign that they’re underfunded. Maybe both things are true. Either way, when the pandemic hit, this reliance on tariffs became a massive vulnerability.
Transit agencies around the world have suffered catastrophic drops in ridership as people increasingly stay at home. The agencies most dependent on rate boxes to cover their operational expenses have seen their bottom lines devastated. During the pandemic, budget deficits have become multi-hundred-million dollar sinkholes, raising questions about the sustainability of future services.
Canadian governments have masked transit agency shortcomings with one-time cash transfers. Just last month, Ottawa announced it would provide $750 million in funding to the agencies, provided the provinces meet several conditions.
But with declining ridership expected to continue at least this year and next, transit advocates, politicians and leaders are calling for a new approach to funding public transit. in Canada – which does not require agencies to approach governments as passenger numbers fluctuate.
“We don’t want to be in the position, and the upper levels of government also don’t want to be in the position, where you know we constantly come in, having to ask for funds,” said Kevin Quinn, CEO of TransLink, which provides public transit in Metro Vancouver.
“I think there’s a recognition at all levels of government that more sustainable financing solutions are going to be needed.”
Just a few months ago, people were starting to return to their offices and transit ridership was picking up. Then the Omicron variant hit and ridership plummeted again. How long people will be away from the office and how often they will attend on their return are pressing concerns for fare-dependent transit agencies.
“The monthly pass, where you match it with your photo and it’s tied to you alone and you use it 45 times a month and break even – that model has failed at the moment, and everybody, I think, is aware 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 those that have traditionally focused on transporting commuters to city centers. Metrolinx, which oversees the Toronto area’s GO Transit commuter network, did not release its financial statements for the current fiscal year, which ends this month. It is expected to suffer massive losses as a result of traffic less than 5% of the pre-pandemic normal of the system.
Toronto Transit Commission said he believed working from home was a permanent phenomenon and that nearly half of city employees would continue to do so with some frequency. The agency expects to miss $561 million this year, $250 million in 2023 and $176 million in 2024. But the TTC warned in a statement that the ridership assumptions behind its projections of revenues are very preliminary.
The ARTM, which oversees regional transit in Montreal, said in a statement it also believes working from home is here to stay and regaining full ridership will take years, but more detailed comments would be forthcoming. speculative.
Calgary Transit was unwilling to project beyond this year, when the agency believes it will experience an $89 million shortfall.
Vancouver’s Translink forecasts a range of $500 million in lost revenue this year and next, with best, average and worst-case scenarios. Mr Quinn said it reflected an agency “still very much figuring out the new normal”.
The tariff dependent the funding model was starting to crack even before the pandemic. Governments subsidize public transit in part through gas tax revenues, which are variable and expected to decline as vehicle electrification accelerates.
The loss of the gas tax would not be as severe as the impact of the pandemic on transit agency budgets, but it is a structural change that will need to be considered. And while the full effect of the pandemic remains to be seen, further shortcomings over the next few years would strain agencies across the country.
CUTA’s D’Angelo outlined ways for transit agencies to address funding challenges, including improving service efficiency. He also cited factors that could make people less dependent on the car and more likely to use public transport, including the growth of bike-sharing schemes and a reduction in the number of parking spaces that property developers have to to construct.
None of this, however, can replace the amount of fare 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 broader annual economic benefits, although this figure drops to approximately $1.75 billion if we assume that some TTC trips would still be made by others. means,” the CD Howe Institute said in an April report. from last year.
Toronto City Councilor Jaye Robinson, who chairs the TTC’s board, said the city should rely on the economic case when making its funding case to higher levels of government.
“The TTC will play a vital role in our city’s recovery and future success, so I think that’s the way to get them involved and get them to do that annual check,” 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, a random handout. Instead, it’s built into our annual budget and we know it happens every year. And that’s what we need.
If this does not happen, higher levels of government could lose patience with annual demands for emergency funding and start demanding service cuts to cut costs. Reduced service makes public transit less useful, reducing ridership and eating away at revenue, leading to new calls to cut costs.
The industry term for this is “transit death spiral”.
“Even though it looks like a dimmer that could be dimmed to save money in the short term and then boosted once the audience returns, it doesn’t work that way,” D’Angelo said. “It is an essential public service. It would be like saying, you know, denying a hospital when it’s not. [as busy]. That’s not how it works, and it’s in nature to be essential.
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