Staff Report #12
August 27, 2025
To All Commissioners
Re: 2026 Operating Budget Program
Recommendations
That the Commission:
i) APPROVE the 2026 Operating Budget Program for public transit services allocated as follows:
| Category | Conventional | Specialized | Total |
| Revenue | $ 52,909,700 | $ 932,000 | $ 53,841,700 |
| Expenditures | 105,242,500 | 18,139,800 | 123,382,300 |
| City of London | $ 52,332,800 | $ 17,207,800 | $ 69,540,600 |
ii) DIRECT administration to submit the approved 2026 public transit services operating budget to civic administration consistent with the City of London’s reporting format; and
iii) DIRECT administration to submit a Budget Amendment Case reducing the City of London investment by $0.700 million for 2026.
Background
In May 2025, the Commission received a delegation from Budget Chair Peloza with respect to efforts to reduce the 2026 tax rate adjustment. In response, the Commission requested administration bring forward a report outlining the following:
- Opportunities for savings for 2026 budget
- Items for joint advocacy with the City of London
- Opportunities for group procurement
- Ideas for revenue generation
- Opportunities for delayed capital planning
In addition, the Commission also directed administration to continue working with civic administration to find appropriate service growth opportunities for inclusion in an Assessment Growth Business Case to be considered as part of the 2026 budget process.
At the June 23, 2025 meeting, the Commission held discussions with respect to Staff Report #8, dated June 23, 2025 which ultimately led to the following motions being approved.
- DIRECT administration to prepare a 2026 operating budget for public transit services which provides for a $700,000 reduction in City of London funding from the previously approved 2026 budget in the 2024-2027 multi-year budget, noting that the savings are the result of decreased fuel and insurance costs;
- DIRECT administration to finalize the 2026 operating and capital budgets for presentation and consideration at the August 27, 2025 meeting; and
- DIRECT administration to prepare a Business Case for providing for the $700,000 reduction in City of London funding for submission to Council’s Budget Committee.
Subsequent to the June meeting, and consistent with past practice, administration completed a detailed review of the 2026 Operating Budget Program, the details of which are provided in Enclosures I , II and III dated August 27, 2025. The detail in the enclosures includes analysis between 2025 projected actual figures and 2026 budget by area of operation. The analysis breaks down variances into four categories, each of which is explained below.
- Unit Price Change – numbers in this column indicate a general price increase in the item being analysed. By way of example, a unit price fluctuation in transportation revenue would suggest a fare change and a unit price fluctuation in a material expenditure would suggest a shift in the cost of the commodity as compared to the 2025 projected actual figure.
- 2025 Growth Flow Through – numbers in this column reflect the additional costs incurred in the year following the implementation of service growth. Given that conventional service improvements are typically implemented in the fall, the costs associated with the growth in the implementation year reflect approximately 30% of the annualized cost of the growth. These flow through costs are identified in all areas of the operation that are impacted by service growth.
- 2026 Growth – numbers in this column reflect the costs directly attributable to the approved service growth being implemented in 2026, and will be identified in all areas of the operation that are impacted by the growth.
- Base Program Changes – numbers in this column reflect a fundamental change in a program that has resulted in a fluctuation from the 2025 projected actual. By way of example, a decrease in transportation revenue identified as a base program change in 2026 is the decline in enrollment at post secondary institutions relating to the cap on foreign students.
In addition to the analysis, information with respect to the items included in each line account are included in Enclosures II and III. On sections dealing with labour costs, details with respect to the number of employees is provided, and on sections dealing with material costs, details with respect to what is included in line accounts is provided where applicable.
The remainder of this report provides further details with respect to the more significant fluctuations in line item accounts that have the net impact on the overall operating budgets for the conventional and specialized services which has resulted in a one-time reduction in City of London funding for 2026 of $700,000. It should be noted that the reduction has been achieved without negatively impacting the number of service hours approved for 2026 on the conventional and specialized services, and as such, there is no anticipated impacts to service as the result of this reduction.
When reviewing the following discussion and analysis included in the report enclosures, it is important to recognize that the variances being analysed are between the 2025 project actual budget and 2026 proposed budget. This approach is consistent with the manner in which the annual budgets are assessed and updated throughout the MYB period. As discussed in Staff Report #8, dated June 23, 2025, the original MYB was prepared in 2023, and it is expected that variances will occur in each of the four years as the budgets are reassessed given current trends and economic conditions.
Conventional Service
As indicated earlier, Enclosure II, dated August 27, 2025 includes a detailed breakdown of the 2026 Conventional Transit service operating budget, with variance comparisons to the 2025 projected actual figures. The enclosure document provides summary information on the first several pages followed by detailed breakdowns of each revenue and expenditure area including analysis of variances. This section of the report provides further discussion relating to the key drivers in the 2026 conventional services operating budget as compared to 2025 project actual.
Transportation Revenue
As part of the 2026 budget assessment, administration worked with representatives from both Fanshawe and Western to identify estimated September 2025 enrolments as they relate to the tuition pass programs. As detailed in the report enclosures, transportation revenue is forecasted to decline by $645,800 in 2026 as compared with 2025. The decline in revenue and associated estimated decline in ridership of 1.134 million are directly attributable to the tuition pass program’s decline in enrolment. The fluctuation for 2026 is being recognized as 2026 only given the uncertainty with respect to how enrolment in 2027 may differ.
Provincial Gas Tax Revenue
The annual contribution from Provincial Gas Tax for Transit (PGT) program is increasing from the 2025 projected actual, however is in line with the 2025 budget. The projected actual for 2025 has been adjusted downward given the projected surplus on the operating budget. As part of the year end process, any actual surplus is allocated to the Commission’s reserves/reserve funds based on the various administrative guidelines. The decision to utilize the full annual allocation of PGT to offset conventional service operating expenditures was made as part of the 2024-2027 Multi-Year Budget (MYB) in an effort to mitigate significant increases in City of London investment requirements over the period of the MYB. While this approach has placed increased pressure on capital programs that had traditionally been funded in part with PGT, the impacts have been manageable.
Fuel Expenditures
The 2026 budget calls for the purchase of 7.8 million litres of diesel fuel. Given that fuel is one of the most volatile commodities in the operating budget, predicting the budget for this line item is challenging. To mitigate the in-year risks associated with price fluctuations beyond those included in a budget, the Commission maintains an Energy Management Reserve, which can be relied upon in-year to cover unanticipated fluctuations.
The 2026 fuel budget is based on the estimated price of $1.196 per litre of fuel, noting the projected actual for the average price paid in 2025 is $1.165 per litre. This represents an approximate 3% increase in diesel fuel prices in 2026 as compared to 2025. The overall requirement for diesel fuel is impacted by the fuel efficiency of the bus fleet, and as such, the kilometres per litre for all buses in the fleet are closely monitored and utilized for budgeting. The 2026 budget includes a slight decline in fuel efficiency over 2025 given the delay in receipt of the new bus order and resulting requirement to maintain older buses in the fleet (new buses have better fuel efficiency).
General Insurance Expenditures
As set out in Staff Report #6, dated June 23, 2025, the general insurance renewal for 2025 resulted in a decrease in premiums in the auto liability category, which is projected to result in an approximate $0.250 million annual savings in premiums. While the Commission’s insurance program is subject to renewal each year, the decrease in premiums in 2025 is projected to remain in place for 2026. As part of the auto liability coverage, the Commission pays a per-claim deductible of $100,000. These claims are managed from the Claims Management Reserve, and trends are indicating annual deductible payouts in the range of $0.65 million. The reserve currently maintains a balance that is sufficient to fund these claim payments and remain within administrative guidelines through the end of this multi-year budget period.
Software Maintenance Agreements
The Commission holds a number of maintenance agreements with various software providers for the systems that support public transit operations. A number of agreements are in the process of being renewed, or have been recently renewed, and the cost increases associated with these renewals have been reflected in the 2026 budget. Software contract costs are reflected in the various department’s material budgets in order to ensure the costs are directly associated with the area of service being supported. The most significant increases have been experienced in the Operations department and are the result of both general price increases as well as the growth in fleet size noting these contracts are directly affected by the number of buses on which the software/hardware is deployed.
Customer Information
Availability of real-time service information has been in the top five priorities identified by respondents in the previous three Voice of the Customer surveys on the conventional service. In the 2024 survey, respondents indicated only a 45% level of satisfaction with access to real time information. As such, it was identified as an area for improvement in the 2025 Customer Service Report (See Staff Report #5 dated February 26, 2025).
In addition to the real-time information portal on the Commission’s website, real time information can also be obtained by customers via the Interactive Voice Response (IVR) system utilizing a telephone, speaking directly with customer service representatives, utilizing Google Transit, or utilizing various third-party apps that access LTC’s real-time data through the GTFS feed. As the result of updates to the systems providing the real-time data, the current IVR system no longer provides real-time updates or access to detour-related information. As such, the IVR system is only providing scheduled arrival times. In 2024, the IVR handled approximately 79,000 calls from customers seeking service information.
While those customers who have access to data on their devices can utilize either the Real Time system or Google Transit, many prefer to rely on third party applications. Unfortunately, London Transit has no control on whether these applications are maintained in a manner that ensures they are updated with each schedule change. London Transit has received numerous reports from customers relating to inaccurate information being provided on third party applications.
The 2026 budget includes funding to cover the anticipated cost of a new solution(s) that will continue to meet the needs of the various methods customers use to interact, but in a manner that ensures accurate and real-time information is being provided. A detailed assessment of options will be completed later this year, followed by a detailed report and recommendations for implementation being tabled with the Commission for consideration. The inclusion of $300,000 in funding in the 2026 budget for this initiative will ensure ability to move forward on the recommended solution.
Specialized Service
As indicated earlier, Enclosure III, dated August 27, 2025 includes a detailed breakdown of the 2026 Specialized Transit service operating budget, with variance comparisons to the 2025 projected actual figures. The enclosure document provides summary information on the first several pages followed by detailed breakdowns of each revenue and expenditure area including analysis of variances. This section of the report provides further discussion relating to the key drivers in the 2026 specialized services operating budget as compared to 2025 project actual.
Transportation Revenue
The transportation revenue on the specialized service is projected to increase by 9.9% over 2025 which is directly attributable to the increased ridership resulting from the additional 10,000 service growth hours to be added in 2026.
Transfers from Reserves
The transfer from reserves included in the 2025 projected actual is related to budget housekeeping that transferred personnel costs relating to the specialized service from the conventional operating budget in 2025. This transfer ensures the accurate reflection of the costs associated with the operation of each of the respective services. There is no overall impact on City of London funding or budget programs as the result of this shift.
Contracted Service Expenditures
The 2026 budget has been updated to reflect best estimates of the annual contractual increases which are tied to the consumer price index. As communicated in Staff Report #8, dated June 23, 2025, the inflationary assumptions included in the original multi-year budget were higher than has been experienced and projected going forward. The 2026 budget has been adjusted to better reflect the anticipated hourly rate for service including the required CPI adjustments. Also included in this budget are the increased costs associated with the additional 10,000 service hours, which will be implemented on January 1, 2026.
Contribution to Reserves
During discussion at the June 23, 2025 meeting, the Commission indicated a desire to maintain the level of City of London investment in the specialized operating budget that was included in the MYB. Given the annual budgeted increase in contracted service is less than what was included in the MYB (see further explanation above), this results in approximately $0.5 million in funding that is not required to provide the approved service hours for 2026. This funding would be utilized to cover any additional costs associated with the delivery of specialized services in 2026, and should it not be required, would be allocated to a reserve as part of the year end process.
Next Steps
Subsequent to Commission approval of the report recommendations, Administration will prepare the budget documents in the requisite City of London format for submission, noting the City of London finance department has been provided with the numbers included in the report recommendation for their forecasting purposes.
Enclosures
I – 2026 Operating Budget Public Transit Services
II – 2026 Detailed Operating Budget Analysis – Conventional (Commissioners only)
III – 2026 Detailed Operating Budget Analysis – Specialized (Commissioners only)
Recommended by:
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
David Butler, Manager of Operations Administration
Concurred in by:
Kelly S. Paleczny, General Manager