Staff Report #1
August 26, 2020
To All Commissioners
Re: Advocacy Update
That the report be NOTED and FILED.
Since the onset of the COVID-19 pandemic in Canada, both the Federal and Provincial levels of government have made clear, through commentary and emergency orders, that public transit services are considered essential in order to keep communities moving, and to continue to provide transportation for essential workers as well as customers that rely on public transit for access to the community.
While these comments and orders call for the continuation of services, they do not provide transit operators with any form of relief funding to cover the negative operating budget implications relating to continuing to provide service during the pandemic, including but not limited to reduced ridership levels, rear door boarding (and resulting waiving of fares), the provision of higher service levels than warranted by ridership in an effort to provide physical distancing, and increased costs associated with the provision of appropriate personal protective equipment to employees and the increased cleaning protocols put in place for buses and facilities. These issues, among others have been impacting every transit system in the country to varying degrees since the onset of the pandemic declaration.
Given that municipalities and transit systems by extension are not allowed to operate at a deficit as a requirement of the Municipal Act, both the Ontario Public Transit Association (OPTA) and the Canadian Urban Transit Association (CUTA) have been working in partnership with the Association of Municipalities of Ontario (AMO) and the Federation of Municipalities of Canada (FCM) respectively in an effort to seek funding relief from both the Provincial and Federal governments. Most systems were creative in managing shortfalls in the short term; however, as time progresses the situation is becoming critical. Many transit systems have been forced to further reduce service levels at a time when the Province begins to loosen restrictions and demand for ridership increases. This approach will place increased pressure on the limited resources that are on the road, and have the potential to result in a loss of ridership that will be extremely difficult to get back.
Subsequent to the last update report, a number of announcements have occurred that respond to the call for relief funding, each of which is discussed in greater detail below.
Province of Ontario – Municipal Transit Enhanced Cleaning Program
On June 29, 2020, the Province of Ontario announced a program that will provide $15 million in funding to municipalities across the province to support the enhanced cleaning of their public transit systems and help reduce the spread of COVID-19. The funding envelope was allocated to every jurisdiction that provides public transit, with the City of London allocation being up to $433,025.
Subsequent to the announcement, the Ontario Public Transit Association (OPTA) has held discussions with Ministry of Transportation staff with respect to the details of this program. At time of report writing, the following details have been confirmed:
- this program provides a one-time allocation to jurisdictions, intended to offset costs associated with enhanced cleaning requirements during the initial period of the pandemic declaration;
- the allocation provided to each jurisdiction is a maximum amount that can be claimed against, noting actual paid invoices for purchases meeting the criteria for spending must be submitted to support the claim;
- eligible expenditures will be limited to those directly relating to cleaning of buses and facilities;
- eligible expenditures will need to have been incurred between April 1, 2020 and December 31, 2020
- Proof of expenditure must be submitted to the Province for reimbursement up to the total allocation received
Given uncertainty with respect to alternative options that may be considered to undertake the required disinfection of buses going forward, and the costs associated with same, it is unknown at this time, the manner in which this allocation will be utilized. Administration will continue to assess options over the coming months in an effort to implement a sustainable cleaning program going forward, and to utilize this funding to the greatest extent possible.
Federal/Provincial/Territorial Safe Restart Program
An agreement between senior levels of government has been reached for the Safe Restart Program, which includes $19 billion in new federal funding. The program includes seven funding envelopes, with one specific to transit which includes a dedicated envelope for public transit of $2 billion, made up of matching $1 billion contributions from both the federal and provincial governments.
On August 12, 2020, the Province announced the first phase of the funding for transit, allocating a total of $666 million to transit systems across the Province. The allocation was based on 2018 ridership, and resulted in an allocation of $18,523,658 for London Transit. The following bullets provide an overview of the details with respect to this phase of the program:
- Financial pressures that are eligible for reimbursement under this program include both financial pressures associated with the need to continue to operate with reduced revenue and new expenses resulting from COVID-19.
- Reduced revenue includes pressures related to farebox, advertising, parking, and contracts (i.e. school charters)
- New expenses incurred in the response to the COVID-19 outbreak would include cleaning costs, new contracts, labour costs, driver protection, passenger protection and other capital costs
- The Phase I allocation is intended to cover COVID-related budget pressures for the period April 1, 2020 through September 30, 2020
- Any funds that are not utilized for this period are to be placed into a reserve for use in covering budget shortfalls relating to COVID-19 up to and including March 31, 2021
- A reporting form, setting out budget impacts and use of funds up to September 30, 2020, as well as projected impacts through to March 31, 2021 must be submitted to the Province no later than October 30, 2020.
- Any Phase II allocations will be based on the October report, and will require a Transfer Payment Agreement (TPA) to be executed, which will include the requirement for municipalities to demonstrate their participation and progress in the following areas:
- Engage in consolidated procurement opportunities leveraging Metrolinx and other provincial procurement tools (all municipalities)
- Review the lowest performing bus routes and consider whether they may be better serviced by microtransit (all municipalities)
- Work with the Province and Metrolinx where appropriate to determine the feasibility of implementing microtransit options on viable routes (all municipalities)
- Participate in discussions with the Province on advancing fare and service integration (GTHA and select municipalities)
- Participate in discussions with the Province to optimize transit through new possible governance structures (GTHA and select municipalities)
OPTA will continue to work with Ministry staff in an effort to confirm eligible expenditures under this program as well as to create the appropriate reporting forms for use with the program.
As set out in Staff Reports #2, 3, and 4 dated August 26, 2020, administration is assessing all opportunities to utilize this and any additional required funding under this program in an effort to balance both the 2020 and 2021 operating budgets; as well as give consideration to utilizing this funding where appropriate for capital projects relating to COVID-19 (i.e. Operator barriers).
While the aforementioned programs are both welcomed, and will provide significant relief with respect to the budget concerns relating to the pandemic, they will not solve the budgetary issues projected for 2021. While it is the common hope that a second wave of the pandemic is avoided, it is anticipated that the lasting effects of the first wave will continue to impact public transit services through the 2021 calendar year, whether that be through increased costs associated with responding to the pandemic, or reduced revenues associated with lower than budgeted ridership levels. The Safe Restart Program funding for transit expires on March 31, 2021, leaving the remainder of the budget year in jeopardy. Both CUTA, at the federal level, and OPTA at the provincial level are continuing discussions with respect to the anticipated longer term impacts of the pandemic on public transit services, noting the manner in which they traditionally operate, and are funded, may not be feasible for some time, and as such, continued relief will be required.
In addition to the budgetary concerns relating to the pandemic impacts, another significant issue on the horizon relates to the Provincial Gas Tax for Transit Program. The program distributes $0.02 for every litre of fuel purchased in the previous year to transit systems based on a formula of ridership and population. The most recent allocation totaled $365 million in total, with London’s allocation being approximately $10.7 million (approximately 3% of the total based on a combination of ridership and population). Given the extended period of lock-down and business closure experienced during the pandemic period in 2020, it is reasonable to believe that much less gasoline was sold, and as such, the pot of funding for the next distribution period will be much less. The multi-year base operating budget that has been approved by municipal council included reliance on Provincial Gas Tax funding to offset operating costs, based on the assumption that annual allocations would continue to be close to the $10.7 million allocation for 2019/20. This assumption is consistent for transit systems province wide, and as such, has the potential to create another significant shortfall going forward. OPTA has begun dialogue with the Ministry of Transportation with respect to this issue in an effort to determine a path forward. This will continue to be a focus of discussion in the coming months.
Kelly S. Paleczny, General Manager