Staff Report #1
August 30, 2023
To All Commissioners
Re: 2024-2027 Status Quo Operating Budget Program
i) APPROVE the 2024 operating expenditure investment program for status quo public transit services as set out in Enclosure I, of $109,889,500 allocated as follows:
- conventional transit $ 95,667,800
- specialized transit $ 14,221,800
ii) APPROVE the 2024 operating budget revenue program, comprised of transportation, operating revenues and transfers from reserves including Provincial Gas Tax for public transit services of $11,200,000 allocated as follows:
- conventional transit $ 53,201,400
- specialized transit $ 778,400
iii) APPROVE a request for City of London investment in support of the 2024 operating budget program for transit services of $55,909,800 allocated as follows:
- conventional transit $ 42,466,400
- specialized transit $ 13,443,400
iv) APPROVE the 2025-2027 operating budget estimates (revenue and expenditure investment) as summarized in Enclosure I, for London’s public transit services noting they exclude consideration of any growth in service levels; and
v) DIRECT administration to submit the approved 2024 status quo public transit services operating budget and the approved provisional operating estimates for 2025-2027 to civic administration consistent with the City of London’s reporting format.
2020-2023 Multi-Year Budget Review
As discussed in Staff Report #3 dated May 31, 2023, the multi-year budget covering the period of 2020-2023 was approved just prior to the onset of the global pandemic, and as such, did not contemplate the myriad of impacts on operating and capital budgets experienced over the four-year period. Public transit services continued throughout the pandemic period, albeit at lesser service levels, in order to ensure access to the community for riders dependent upon public transit as their mode of transportation. The service levels that remained in place were possible due to the Safe Restart Funding program provided through a partnership between the federal and provincial governments. This funding was made available to offset the pandemic-related impacts on operating budgets as well as to support any capital projects directly related to the pandemic. Over the period of 2020 through 2022, $27.9 million of Safe Restart funding was utilized to offset pandemic-related budget impacts, which avoided the need to seek additional funding from the City of London and/or reduce service levels to balance the budget. The Safe Restart funding ended as of December 31, 2022 and as such, the 2023 operating budget shortfall will be managed through the use of the Commissions reserves and reserve funds.
While the Safe Restart funding provided relief from pandemic-related budget impacts, the significant inflationary pressures experienced during the pandemic period were not considered eligible for this funding program. Both the 2022 and 2023 operating budgets faced significant inflationary pressures, which were offset in part to the lower than budgeted service hours in place, with the remainder being offset by transfers from the Commission’s reserves and reserve funds. Additionally, funding from the Provincial Gas Tax Reserve was utilized in both 2022 and 2023 to offset the significant increases in bus pricing versus seeking an increase in City of London investment.
The 2023 operating budget, as approved by the Commission at the April 13, 2023 meeting, includes a shortfall of $6.9 million which will be offset by a transfer from reserves/reserve funds to the extent necessary to balance the budget. This approach was recommended given 2023 was the last year in the current multi-year budget and the relatively healthy status of the Commission’s reserves and reserve funds allowed for this approach versus seeking a budget amendment in 2023 for additional City of London funding to cover the shortfall. This approach also provided the opportunity to gain a better understanding of ridership patterns and levels and their impact on transportation revenue going forward noting that transportation revenue has historically provided approximately 48% of the total public transit service operating budget and any permanent shifts in this share will need to be addressed in the multi-year budget through increased fares, increased investment from the City of London, or a combination of both.
While the Commission’s reserves and reserve funds were deemed to be in a healthy status at the end of 2022, the required drawdowns totalling a projected $8.1 million to balance the 2023 operating budget will result in the balances in a number of the reserves being well below administrative guidelines. While the final determination with respect to which reserves/reserve funds will be utilized to address the shortfall at year end, the table below provides an impact analysis based on current projections relating to both budgeted transfers from reserves as well as the additional transfers required to balance the budget.
Reserves and Reserve Funds Projected Balances at Dec 31, 2023
|Description||Balance at Dec 31 2022||Net 2023 Projected Activity||Projected Balance Dec 31 2023||Status at Dec 31 2023|
|Provincial Gas Tax Reserve Fund||$ 12.955||$ (11.233)||$ 1.722||Depleted|
|Capital Program Reserve Fund||7.872||(1.762)||6.110||Good Standing|
|Public Liability Reserve Fund||5.608||(1.477)||4.131||Below Guidelines|
|Energy Management Reserve||1.665||(1.000)||0.665||Below Guidelines|
|General Operating Reserve||2.999||(1.999)||1.000||Below Guidelines|
|Health Care Management Reserve||4.854||–||4.371||Good Standing|
|Total Reserves/Reserve Funds||$ 35.954||$ (17.954)||$ 17.999|
Given the status of the Commission’s remaining reserves and reserve funds projected at December 31, 2023, there is no opportunity to continue the approach of utilizing reserves to offset inflationary pressures and decreased transportation revenue going forward.
2024-2027 Multi-Year Budget Approach
The operating budget has been split into two components for Commission consideration; status quo and growth, consistent with direction from civic administration relating to the multi-year budget process. This report deals with the status quo operating budget for the period of 2024-2027. With the exception of any flow-through implications from adjustments in 2023, there is no growth in service included in the status quo budget estimates for the period of 2024-2027. As such, the approval of the recommendations in this report would result in the provision of the same service levels for both the conventional and specialized services. Staff Report #2, dated August 30, 2023 provides a number of growth scenarios for each of the conventional and specialized services consistent with the direction provided from the Commission at the May 31, 2023 meeting.
Given the significant shifts in a number of key budget lines over the previous multi-year budget period, and in an effort to ensure budget allocations in all line items are consistent with current realities, administration utilized a zero-based budget approach in building the status quo budgets for the 2024-2027 period. The finance department worked directly with each department to review all budget line items for 2024 to be used as the base, and then identified the factors that should be applied for the remaining three years.
In addition, consideration was given to the items included in the City of London Strategic Plan that directly impact public transit services. The majority of the items included in the Strategic Plan require growth in service levels to achieve the intended targets, they are addressed specifically in Staff Report #2, dated August 31, 2023. The status quo budget as recommended does include consideration of the following two items from the City of London Strategic Plan.
Mobility and Transportation – item 1.2c – Continue to support the London Transit Commission’s Zero Emission Bus Fleet Implementation Framework – Included in the 2024 status quo budget is the addition of one management and one administrative position that are anticipated to be required to provide oversight on the ZEB Implementation. These positions are intended to provide oversight for the Highbury Facility Rebuild project in 2024 as well. Further additions to management and support staff complement relating to this project have been included in the growth budget estimates set out in Staff Report #2 dated August 31, 2023.
Mobility and Transportation – item 1.4c – Support transit rider survey initiatives to improve rider satisfaction – The annual Voice of the Customer survey, while put on hold during the pandemic is set to resume in 2023 and has been included in the status quo budget as presented.
In an effort to mitigate, to the greatest extent possible, the increase in City of London funding required in 2024 and future years, the following initiatives were undertaken as part of the budget preparation process:
- Fare Increase – A fare increase has been included in 2024, which is targeted to increase transportation revenues by approximately $3.3 million. In order to generate this amount of revenue from a fare increase, an across the board increase of between 18% and 20% will be required (an increase which affects all fare categories).
- Provincial Gas Tax – Given the status of the Provincial Gas Tax (PGT) reserve, going forward, the annual allocation received from the Province will be utilized 100% to fund the conventional operating budget. While advocacy efforts continue at the Provincial level to increase the annual allocations for this program, until such time as that occurs, the annual allocation received (approximately $11 million) will not be adequate to support operating offsets on the specialized budget nor any offsets on capital projects.
- Expenditure Control – All expenditures were reviewed in detail, and, where possible, reduced or held to 2023 levels. With respect to increases in administrative support, all new position budgets are considered placeholders and will be subject to detailed review prior to being filled.
When reviewing expenditure line item increases in Enclosure I, it is important to recognize that the variances illustrated are between 2023 projections and 2024 budget. A number of expenditure areas were significantly impacted over the 2020-2023 multi-year budget period which were addressed through increased reliance on LTC reserves.
The table below provides a comparison between the direct operating cost per hour that was anticipated for 2023 in the originally approved multi-year budget and the projected actual for 2023 noting these costs include all elements of the budget directly relating to the provision of service.
Operating Cost Per Hour Change
|Service||2023 Original MYB Estimate||2023 Projected Actual||Percent Variance|
|Conventional Service – Direct Operating Cost/Hr||$124.50||$132.60||6.5%|
|Specialized Service – Direct Operating Cost/Hr||$ 74.16||$ 82.77||11.6%|
The increases in operating cost per service hour on both the conventional and specialized budget illustrate the inflationary impacts experienced over and above what was anticipated in the original multi-year budgets. As indicated earlier in this report, these increases were addressed through utilization of the Commission’s reserves and reserve funds versus seeking annual budget adjustments from the City of London.
The following table sets out the funding requirements for the total public transit services for 2024 in comparison to 2023 projected actual figures.
2024 Status Quo Operating Budget Summary – Total Public Transit Services
|Funding Source (millions)||2023 Projected Actual||2024 Budget||Total Variance||% Variance||Unit Price/ Base Change||2023 Flow Through||Base Program Changes|
|Transportation Revenue||$ 34.188||$ 39.184||$ 4.996||14.6 %||$ 3.698||$ 0.539||$0.758|
|Transfers from Reserves||9.754||1.605||(8.149)||(83.5)%||(8.149)|
|Provincial Gas Tax||9.972||11.200||1.328||13.4 %||1.327|
|City of London||45.837||55.910||10.073||22.0 %||0.534||3.233||6.036|
|$102.049||$109.890||$ 7.840||7.7 %||$ 4.232||$3.772||$(0.163)|
|Provincial Gas Tax||9.7%||10.2%||0.5 %||5.4 %|
|City of London||44.9%||50.9%||6.0 %||13.3 %|
|Ridership (millions)||18.068||18.940||0.872||4.8 %|
As indicated in the table above, in light of the aforementioned issues and approach to preparation of the 2024-2027 multi-year budget, an increase of 22.0% in City of London funding is required for 2024. The details with respect to the annual increases to maintain a status quo level of service in the remaining years of the multi-year budget are set out in Enclosure I. Administration has shared these projections with civic administration consistent with the multi-year budget process and related expectations, noting a final submission will be provided to civic administration upon Commission approval of the status quo budget.
In light of the substantial increase in City of London funding required for the 2024 transit services budget, a number of options to reduce the requirement were assessed as part of the budget preparation process. The following provides an overview of the options that were assessed but not included in the recommended budget.
- Fare Increase – Consideration was given to a more significant fare increase in 2024, above the approximate 20% that is already included. An increase beyond 20% was not recommended given, increases of that magnitude would be expected to result in ridership losses in the 5% to 10% range based on industry experience. Losses in ridership ultimately result in reductions to the annual Provincial Gas Tax allocation received by London given the allocation formula is based primarily on total ridership. Any loses in Provincial Gas Tax funding would need to be made up by an additional fare increase, increased City of London investment, or reductions in service.
- Expenditure Reductions – As highlighted later in this report, the proportion of the operating budget that supports “on-road” services is 87% and 98% for the conventional and specialized services respectively. This results in limited ability to identify and/or implement any expenditure reductions that do not negatively impact service.
- Review of Reserves and Reserve Funds – as discussed earlier in this report, based on projections for 2023, the Commission’s reserves and reserve funds will, for the most part be well below the administrative guidelines established to identify requirements for healthy balances.
Advocacy efforts with respect to increasing the annual allocations associated with the Provincial Gas Tax for Transit fund continue through the Ontario Public Transit Association. Should annual allocations increase going forward, the option of utilizing reserves to a greater extent to support operating costs can be revisited.
Discussion regarding the 2024-2027 recommended operating budgets for conventional and specialized transit services is set out below.
Conventional Transit Services – 2024-2027 Operating Budget Program
The conventional transit operating budget accounts for 87% or $95.668 million of the total $109.890 million transit operating investment. The balance applies to the specialized transit service which is discussed later in this report. Summary particulars of the make-up of the conventional transit operating budget are provided on page 2 of Enclosure I.
The following table sets out the operating investment share breakdown for 2024 as compared to 2023 projected actual results.
2024 Status Quo Operating Budget Summary – Conventional Transit Services
|Funding Source (millions)||2023 Projected Actual||2024 Budget||Total Variance||% Variance||Unit Price Changes||2023 Flow Through||Base Program Changes|
|Transportation Revenue||$ 33.686||$ 38.405||$ 4.720||14.0 %||$ 3.579||$ 0.411||$ 0.729|
|Provincial Gas Tax||8.872||11.200||2.327||26.2 %||2.328|
|City of London||36.043||42.468||6.423||17.8 %||0.071||1.038||5.314|
|$ 90.752||$ 95.668||$ 4.916||5.4 %||$ 3.650||$ 1.449||$ (0.184)|
|Provincial Gas Tax||9.8%||11.7%||1.9 %||19.8 %|
|City of London||39.7%||44.4%||4.7 %||11.8 %|
Operating Expenditure Investment
The overall operating expenditure investment for 2024 is budgeted to increase by 5.4% or approximately $4.916 million vs. 2023 projected actual results. The 5.4% increase is comprised of:
- $3.651 million in unit price and base program increases for such items as fuel, energy, insurance and personnel costs. These increases account for a 4% increase in overall investment;
- $1.449 million increase in expenditure relating to the flow through impacts of the incremental service hours added in 2023; and
- $0.184 million in net expenditure reductions relating to base program changes with the two most significant components being an increase in labour costs and a decrease in direct bus maintenance costs both discussed in greater detail later in the report
The following provides further discussion with respect to the most significant drivers in the increase of the expenditure budget for conventional transit services for 2024 versus 2023.
Personnel costs include salaries, wages and employment benefits for 623 full time equivalent conventional transit employees. Personnel cost accounts for approximately 67% of the annual operating expenditure investment for conventional transit.
As set out in Enclosure I (page 2), personnel cost investment is budgeted to increase by 7.6% or some $4.5 million. The increase is comprised of the following:
- $3.310 million relating to unit price adjustments and base program changes. The unit price respecting salaries, wages, including movement along the pay grid is as provided by the Collective Agreement and Employment Policy Statements as well as new positions. The unit price relating to employment benefits, both Commission provided and statutory benefits is as determined by supplier contracts, benefit utilization experience or as set by governing authority;
- Two new positions (one management and one administrative) associated with the oversight of the Zero Emission Bus Implementation and the Highbury Facility rebuild projects; two new Mechanic Apprentice positions required to address the ongoing difficulty in meeting required complement for mechanics, the provision for a co-op student for eight months a year in the Planning department to help address the workload issues associated with construction related detours and communications, and one additional position to be determined based on priority departmental needs resulting from the annual organizational structure review; and
- $1.172 million relating to the flow through costs of the service hours added in 2023.
Fuel expenditure accounts for approximately 11% of the total operating expenditure investment. For 2024, fuel expenditure is budgeted at $10.301 million. The cost inputs are mileage travelled (which is directly impacted by the extent of service provided), rate of consumption (litres per kilometre) and price.
Fuel prices are volatile and subject to significant fluctuations within a given budget year. Historically any significant fluctuations in fuel prices from budget have been addressed through use of the Commission’s Energy Management Reserve. As indicated earlier in this report, the balance of that reserve is anticipated to fall below administrative guidelines after 2023, and as such, the ability to address price fluctuations within a budget year will be limited.
Direct Bus Maintenance and Servicing
Direct bus maintenance and servicing investment for 2024 totals approximately $8.975 million, representing a slight decrease of 2.9%. There are two components that net out to this overall reduction:
- approximately $0.659 million increase in parts costs; and
- approximately $0.939 million reduction in costs associated with the utilization of outsourced services required to maintain the fleet in a state of good repair through 2023. This outsourcing has been required given the difficulties with maintaining full complement in the Fleet and Facilities department; however, it is not included in the 2024 budget based on the assumption that complement levels in the department will return to full.
As indicated earlier in this report, general insurance costs have increased significantly over the past four years, and are anticipated to continue to increase, albeit at a lesser rate going forward. For 2024, insurance costs are anticipated to increase by approximately 7%. Over the past number of years, administration has worked closely with the Commission’s Broker to assess opportunities to reduce insurance costs however given the nature of public transit service delivery, it is not viewed as an attractive book of business for most insurers, resulting in the need to negotiate with the current insurer each year versus going to market. Administration will continue to assess opportunities in this area going forward.
Operating Revenue Investment
The approximate $53.201 million in identified operating revenues is comprised of:
- $38.405 million in transportation revenue which is directly related to ridership and fares and inclusive of an approximate 20% fare increase;
- $1.991 million in operating revenues – primarily associated with advertising contracts for shelters, buses and benches and investment income including that earned on reserve funds;
- $1.605 million transferred from reserves in support of operating investment; and
- $11.200 million Provincial Gas Tax allocation.
The above sources support 43.9% of budget operating expenditure investment in 2024.
Operating revenues have declined given the reduced interest earned on the Commission’s reserves and reserve funds due to declining balances. The other operating revenues are largely driven by contract and market conditions. As set out in Staff Report #5 dated August 30, 2023, the revenues associated with the shelter contract have been reduced consistent with the revised guarantees included in the contract extension for shelter advertising.
The funds transferred from reserves include:
- transfer from the public liability reserve fund offsetting accident benefit and public liability deductible costs; and
- transfer from Health Care Management reserve offsetting return to work program costs, which is a critical element of LTC’s disability management program costs.
In 2024, $11.200 million is allocated from the Provincial Gas Tax reserve to the conventional services operating budget. This is consistent with the expected annual allocation London will receive going forward should there be no increases to the overall annual Provincial allocation.
Transportation revenues support approximately 40% of operating expenditure investment.
Revenue from fares has two related components i.e. price and volume. At the onset of the last multi-year budget (January 1, 2020), an approximate 15% fare increase was implemented in an effort to mitigate the extent of the increase in funding required from the City of London. The previous fare adjustment occurred in 2008, making it 12 years between the adjustments. Given the extended period between the fare adjustments, there was no estimated loss of ridership projected to occur as the result of increased fares. Unfortunately, the overall impact of that fare increase on ridership is not possible to measure given the impacts of the global pandemic beginning in April 2020.
In an effort to balance the required increase in investment in 2024 between the City of London and the rider, the 2024 budget includes $3.3 million in additional transportation revenue which will require a fare increase in the range of 18% to 20% effective January 1, 2024. The nature and extent of the fare changes will be finalized subsequent to Commission approval of the 2024 Operating budget program, with a detailed report provided to the Commission at the September 2023 meeting. The table below provides the impacts of both an 18% and 20% increase on the fare structure as well as a comparison to Ontario system peer group average fares.
Approximate Impact of 18% and 20% Fare Increases
|Fare Category||Current Fare||Adjusted Fare 18%||Adjusted Fare 20%||Peer Group Average||Peer Group Low||Peer Group High|
|Ticket – Adult||$2.25||$2.65||$2.70||$3.02||$2.60||$3.40|
|Ticket – Student||$1.80||$2.12||$2.16|
|Ticket – Senior||$1.70||$2.00||$2.04|
The adjusted fares included in the table do not represent the final recommended fare structure, rather provide an indication of the level of increases required to meet the 2024 budget expectations. As the table illustrates, the fare increases contemplated do not vary significantly with the peer group averages of fares currently in place.
The aforementioned fare increase does not apply to the tuition pass programs, given they are subject to a contract between the parties. The fare report that will be presented to the Commission at the September meeting will include a detailed assessment of the tuition pass program parameters and recommendations for consideration going forward into the next multi-year tuition pass contracts scheduled to be confirmed by early 2024.
The transportation revenue budget also assumes that the City of London will maintain the subsidy programs associated with child, senior, youth, blind and income-related fares going forward. Any changes to these programs will result in the need to reassess the fare structure.
2024 -2027 Operating Budget Estimates – Conventional Transit
The following table summarizes the conventional transit operating budget estimates for each of the years 2024 through 2027, with comparative amounts for 2023. Building the summaries for 2025-2027 was predicated on using the 2024 recommended budget as the base and incorporating inflationary impacts as well as any other known or expected changes.
2024-2027 Conventional Transit Service Operating Budget Estimates
|Funding Source (millions)||2023 Proj||2024||2025||2026||2027|
|Transportation/Operating/Reserve Revenue||$ 45.837||$42.001||$ 42.345||$ 42.696||$ 43.054|
|Provincial Gas Tax||8.872||11.200||11.424||11.653||11.886|
|City of London||36.043||42.466||44.919||47.131||49.402|
|Total Operating Budget||$ 90.752||$ 95.668||$ 98.688||$ 101.479||$ 104.341|
|City of London Increase||17.8%||5.3%||4.7%||4.6%|
|Investment Share||2023 Proj||2024||2025||2026||2027|
|Provincial Gas Tax||9.8%||11.7%||11.6%||11.5%||11.3%|
|City of London||39.7%||44.4%||45.5%||46.4%||47.3%|
As illustrated in the table, the transportation/operating/reserve revenues available to support the operating budget are declining significantly beginning in 2024. This decline is directly related to the inability to continue to utilize reserves and reserve funds to offset expenditure increases.
The transportation revenue component is based on the assumption of limited growth in ridership given this is considered a status quo budget. Should ridership outperform budget expectations going forward resulting in increased transportation revenues, the City of London investment can be adjusted downward. This assessment will be part of the annual budget process in each of the years 2025 through 2027.
Make-up of Expenditure
The table below sets out the breakdown of expenditures by function and demonstrates the upward trend of the percent of the operating budget directly related to on-road service while also lowering vehicle maintenance and servicing costs as a percent of total investment.
Summary Allocation of Conventional Transit Operating Investment by Function
|Vehicle Maintenance and Servicing||22.7%||22.2%||22.2%||22.2%||22.1%|
|Total “on road” investment||86.3%||86.6%||86.6%||86.7%||86.7%|
|General and Administrative||7.0%||7.2%||7.1%||7.1%||7.1%|
|Total Direct Operating Costs||98.2%||98.5%||98.7%||98.6%||98.7%|
|Total Operating Investment||100.0%||100.0%||100.0%||100.0%||100.0%|
|Operating Expenditure (millions)||$ 90.752||$ 95.668||$ 98.688||$101.479||$104.341|
|Total Revenue Service Hours||684,400||707,500||707,500||707,500||707,500|
|Total Cost per Service Hour||$132.60||$135.22||$139.49||$143.43||$147.48|
As indicated earlier in this report, the table above sets out the percentage of the operating budget that is allocated to “on-road” service. The average budget share that is allocated to service on the road is approximately 86.6%. This level of investment makes it extremely difficult to find budget reductions that will not impact service. Adding the costs associated with facility maintenance brings the average annual investment to approximately 92%, all of which cannot be reduced without having a negative impact on service.
The table below sets out the ridership budgets over the period of 2024-2027, noting the budget being presented is considered status quo, and as such ridership is not anticipated to grow beyond that which is anticipated in 2024 relating to the remaining 2023 service improvements that will be implemented in early 2024.
Conventional Transit Services – Status Quo Ridership Budget
|Ridership (millions)||2023 Proj||2024||2025||2026||2027|
|Rides per Capita||40.5||41.5||40.7||40.0||39.3|
|Rides per Revenue Service Hour||26.0||26.3||26.3||26.3||26.3|
Given the assumption of no ridership growth with the status quo budget, the rides per capita decrease as the population increases. Similarly, the rides per revenue service hour remain consistent over the period given both ridership and service hours remain static.
Specialized Transit Services – 2024 – 2027 Status Quo Operating Budget Program
The specialized transit operating budget accounts for 13% or $14.222 million of the total $109.890 million transit operating investment. Summary particulars of the make-up of the specialized transit status quo operating budget are set out on page 3 of Enclosure I.
The following table sets out the operating investment share breakdown for 2024 as compared to 2023 projected actual results.
2024 Status Quo Operating Budget Summary – Specialized Transit Services
|Funding Source (millions)||2023 Projected Actual||2024 Budget||Total Variance||% Variance||Unit price||2023 Flow Through||Base Program Changes|
|Passenger Fares||$ 0.503||$ 0.778||$ 0.276||54.8%||$ 0.119||$ 0.128||$ 0.029|
|Provincial Gas Tax||1.000||(1.000)||(100.0)%||(1.000)|
|City of London||9.794||13.443||3.650||37.3%||0.463||2.195||0.992|
|$11.297||$ 14.222||$ 2.925||25.9%||$ 0.581||$ 2.323||$ 0.021|
|Provincial Gas Tax||8.9%||0%||-8.9%||-100.0%|
|City of London||86.7%||94.5%||7.8%||9.0%|
|Funding Source (millions)||2023 Projected Actual||2024 Budget||Total Variance||% Variance|
|Eligible Passenger Trips||256,300||337,900||81,600||31.8%|
Operating Expenditure Investment
As set out in Enclosure I, overall operating expenditure investment for the 2024 specialized transit service is budgeted to increase by 25.9% or $2.925 million versus the 2023 projected actual results bringing the total operating investment to $14.222 million. The 25.9% increase results from:
- $0.581 million in unit price increases for contracted service and personnel costs, noting the increased hourly costs associated with the primary service provider contract provisions and personnel costs are subject to the administrative policy statement provisions; and
- $2.323 million increase in service growth associated with the annualized flow through impacts of returning to full service levels which is not anticipated to occur until late fall of 2023, making the flow through impacts significant.
The following provides further discussion with respect to the most significant drivers in the increase in the expenditure budget for specialized transit services for 2024 versus 2023.
Personnel costs (relating to the brokerage operations) cover salaries, wages and employment benefits for 13 staff. The unit price respecting salaries and wages includes movement along the pay grid is as provided by the respective Employment Policy Statements and benefit contracts. The unit price relating to employee benefits, both Commission provided and statutory benefits, is as determined by supplier contracts, benefit utilization experience or as set by governing authority.
Contracted Service Delivery Costs
The delivery of the specialized service is provided via a service contract which covers the provision of drivers and vehicles. The contract is based on an hourly rate for service, which is subject to annual increases based on the change in consumer price index relating to transportation costs. Enclosure I sets out a summary analysis of the change in contract service delivery costs. As noted, contract delivery costs are expected to increase by $2.863 million or 29.8%. The increase is comprised of:
- $0.519 million in unit price increases as provided by service contracts;
- $2.323 million increase in flow through service growth resulting from reaching full service levels late in 2023; and
- $0.021 million increase in net base program changes.
2024 -2027 Status Quo Operating Budget Estimates – Specialized Transit
As indicated earlier in the report, the methodology employed for budget preparation was to first develop the 2024 budget and analyze trends and variances so they could be applied as appropriate going forward. The following table sets out the specialized transit operating budget for each of the years 2024 through 2027.
2024-2027 Specialized Transit Service Status Quo Operating Budgets
|Funding Source (millions)||2023 Proj||2024||2025||2026||2027|
|Passenger Revenue||$ 0.503||$ 0.778||$ 0.794||$ 0.794||$ 0.794|
|Provincial Gas Tax||1.000|
|City of London||9.794||13.443||13.975||14.547||15.140|
|Total Operating Budget||$ 11.297||$ 14.222||$ 14.769||$ 15.341||$ 15.934|
|City of London Increase||37.3%||4.0%||4.1%||4.1%|
|Investment Share||2023 Proj||2024||2025||2026||2027|
|Provincial Gas Tax||8.9%|
|City of London||86.7%||94.5%||94.6%||94.8%||95.0%|
As set out in the table, the City of London investment share is set to increase to 94.5% in 2024. This increase is directly related to the decision to allocate 100% of the annual Provincial Gas Tax for Transit allocation to the conventional service operating budget. Given this is a status quo budget, with no increases in ridership or related revenue post-2024, the City of London share progressively increases as the static transportation revenue covers less of the total expenditure. As indicated earlier in this report, should annual Provincial Gas Tax allocations increase, the opportunity to utilize the additional funds to offset the specialized operating budget will be considered and the City of London share will be adjusted accordingly.
The following table provides a breakdown of the specialized service budget by expenditure function. As indicated, on-road service accounts for 98% of total investment, with general administrative accounting for the balance. The concentration of investment in on road service is unique to the manner in which specialized transit service is structured (brokerage) and service delivered.
Summary Allocation of Specialized Transit Operating Investment by Function
|Contract Service Delivery Costs||85.1%||87.7%||87.8%||87.9%||88.0%|
|Total “on road” investment||98.9%||99.1%||99.1%||99.1%||99.1%|
|General and Administrative||1.1%||0.9%||0.9%||0.9%||0.9%|
|Total Direct Operating Costs||100.0%||100.0%||100.0%||100.0%||100.0%|
|Operating Expenditure (millions)||$ 11.297||$14.222||$ 14.770||$ 15.341||$ 15.934|
|Total Revenue Service Hours||136,500||169,800||169,800||169,800||169,800|
|Total Cost per Service Hour||$82.76||$ 83.76||$ 86.98||$ 90.35||$ 93.84|
Similar to the conventional transit operating budget, the majority of the operating expenditure is directed to on-road service and as such, there is limited ability to identify expenditure reductions without negatively impacting service levels.
The following table provides the status quo ridership budget for the specialized service over the period of 2024-2027 with comparative figures for 2023.
Specialized Transit Services – Summary Ridership Budget
|Ridership (millions)||2023 Proj||2024||2025||2026||2027|
|Eligible Passenger Trips||256,300||337,900||337,900||337,900||337,900|
|Rides per Capita||0.62||0.80||0.79||0.77||0.76|
|Rides per Revenue Service Hour||2.00||2.11||2.11||2.11||2.11|
Given this is a status quo budget with no ridership growth included beyond 2024, the rides per capita will steadily decline as population grows and ridership remains consistent.
Reconciliation City of London Budget Presentation
In an effort to provide additional transparency between the Commission-approved budget and that presented to Municipal Council, the operating budgets for conventional and specialized transit have been split into two separate reports. The recommendations in this report deal specifically with the status quo budget request for the next multi-year budget period covering the years 2024 through 2027.
Subsequent to Commission approval of the 2024-2027 status quo operating budget, administration will reformat the presentation to be consistent with the standard presentation format utilized for all civic departments, boards and commissions.
The Commission direction relating to any growth budget requests as discussed in Staff Report #2, dated August 30, 2023, will be submitted to the multi-year budget process as a Growth Business Case.
II – Detailed Operating Budget Analysis – Conventional (Commissioners only)
III – Detailed Operating Budget Analysis – Specialized (Commissioners only)
Mike Gregor, Director of Finance
Shawn Wilson, Director of Operations
Joanne Galloway, Director of Human Resources
Craig Morneau, Director of Fleet & Facilities
Katie Burns, Director of Planning
Concurred in by:
Kelly S. Paleczny, General Manager