Staff Report #6
April 29, 2020
To All Commissioners
Re: Recosted 2020 Operating Budget Program
Recommendations
The Commission:
- APPROVE the recosted 2020 operating expenditure budget for London’s public transit services of $87,005,700 as summarized on the following table;
| Description | Conventional Transit | Specialized Transit | Total | |
| Revenue | ||||
| Transportation revenue | $37,334,200 | $ 621,100 | $37,955,300 | |
| Operating revenue | 1,337,200 | – | 1,337,200 | |
| Transfer from reserves | 621,600 | – | 621,600 | |
| Provincial funding | 7,500,700 | 1,731,100 | 9,231,800 | |
| Total Revenue | 46,793,700 | 2,352,200 | 49,145,900 | |
| Expenditure | ||||
| Personnel cost | 52,684,400 | 1,180,400 | 54,044,800 | |
| Fuel | 7,296,400 | – | 7,296,400 | |
| Direct bus maintenance | 6,516,100 | – | 6,516,100 | |
| Facility | 3,285,300 | – | 3,285,300 | |
| Insurance | 2,526.300 | – | 2,526,300 | |
| Contribution to reserves | 1,038,400 | – | 1,038,400 | |
| Contracted service costs | – | 8,820,000 | 8,820,000 | |
| All other material costs | 3,223,700 | 254,700 | 3,478,400 | |
| Total Expenditures | 76,750,600 | 10,255,100 | 87,005,700 | |
| City of London | $29,956,900 | $7,902,900 | $37,859,800 | |
noting the recosted budget:
- reflects the impact of removing the 2020 service growth included in the original budget and submitted to the City of London as an Assessment Growth business case during the 2020-2023 multi-year budget process; and
- maintains the 2020 City of London operating investment as approved by Municipal Council as London Transit’s base budget during the 2020-2023 multi-year budget process.
Background
The Commission approved the 2020-2023 operating budget programs for conventional and specialized transit services in August 2019. The table below sets out the original budget made up of the Base Budget (as subsequently approved by Municipal council in March 2020) as well as the Assessment Growth portion which was submitted to civic administration and yet to be approved by Municipal Council.
| City of London Investment | 2020 Base Budget | 2020 Assessment Growth | 2020 Commission Approved Budget
(Original) |
| Conventional transit services | $29,956,900 | $ 856,400 | $30,813,300 |
| Specialized transit services | 7,902,900 | 238,900 | 8,141,800 |
| Total public transit services | $37,859,800 | $1,095,300 | $38,955,100 |
Consistent with established practices, the 2020 budget is subject to a recosting exercise, noting any net revenue/expenditure change resulting from the recosting would be accommodated within the approved budget via a re-alignment of programs/priorities and/or be supported by funding transferred from Commission reserves and/or reserve funds. The City of London requested and approved investment is not typically subject to recosting consideration unless an amended business case for material items is submitted and approved by Municipal Council, or as is the case in 2020, Assessment Growth funding has yet to be approved.
The exercise takes into consideration significant trends and/or emergent issues that have developed since the budget was first prepared (May to July 2019) and approved including 2019 operating budget performance results.
Conventional Transit Service
The process to recost the operating budget for 2020 was undertaken similar to that of prior years. 2019 final year end results were compared to the 2019 projected actual used in the creation of the 2020 budget, with particular attention paid to trends relating to ridership and revenue, fuel pricing and volume fluctuations, as well as labour and benefit trends and service update impacts. Further, January 2020 also witnessed the implementation of a significant fare increase impacting cash, ticket, stored value usage and monthly pass ridership. Although a level of fluctuation in fuel prices, ridership and employee benefits were noted, none were considered material enough to warrant a formal update to the budget at this time.
The original 2020 budget, as in prior years, includes a portion funding requested of the City in excess of the base budget. This portion is historically approved through the City of London’s Assessment Growth budget approval process. A business case was submitted that included a request to cover expenditures relating to the 2020 service growth as laid out in the Commission’s Five Year Service Plan Framework, covering the period of 2020-2024. Also included was the recovery of costs necessary to implement an alternative service delivery model for the industrial service areas. Recommendations with respect to the use of assessment growth in 2020 have not been brought before Municipal Council at this time, noting that civic administration has recommended that only urgent essential growth requests be considered in 2020, and that these funds may then be utilized to mitigate financial impacts relating to COVID-19. Given the uncertainties with respect to how and when ridership will rebound subsequent to the emergency orders being lifted, the service improvements included in the 2020 Service Plan are not considered urgent nor essential at this time, and as such, the associated funding for same has been removed from the operating budget.
The table below sets out the recosted 2020 operating budget noting the elimination of the planned service growth and applicable assessment growth funding is the only item reduced, noting this reduction in funding will result in a reduction of approximately 100,000 riders in 2020. Given the level of uncertainty of the financial impacts of COVID-19, unanticipated costs and lost revenues at this time are not included in this recosting and will be the subject of further staff reports to the Commission.
Recosted 2020 Conventional Transit Service Operating Budget
| Description | 2020 Budget | 2020 Service Growth
(Eliminated) |
2020 Recosted |
| Revenue | |||
| Transportation revenue | $37,467,700 | $(133,500) | $37,334,200 |
| Operating revenue | 1,337,200 | – | 1,337,200 |
| Transfer from reserves | 621,600 | – | 621,600 |
| Provincial funding | 7,500,700 | – | 7,500,700 |
| Total Revenue | 46,927,200 | (133,500) | 46,793,700 |
| Expenditure | |||
| Personnel cost | 53,472,200 | (607,800) | 52,864,400 |
| Fuel | 7,361,500 | (65,100) | 7,296,400 |
| Direct bus maintenance | 6,569,500 | (53,400) | 6,516,100 |
| Facility | 3,285,300 | – | 3,285,300 |
| Insurance | 2,528,800 | (2,500) | 2,526,300 |
| Contribution to reserves | 1,038,400 | – | 1,038,400 |
| All other material costs | 3,484,800 | (261,100) | 3,223,700 |
| Total Expenditures | 77,740,500 | (989,900) | 76,750,600 |
| City of London | $30,813,300 | $(856,400) | $29,956,900 |
Specialized Transit Service
Similar to the recosting for conventional services, the same review was performed for specialized transit. As above, there were no material impacts other than the COVID-19 impact on the ability to implement service growth in 2020 and the need to utilize the applicable funding for anticipated revenue loss and expenditure increases.
The table below sets out the recosted 2020 operating budget, noting the elimination of the planned service growth and applicable assessment growth funding is the only item reduced, noting this reduction will result in the reduction of approximately 7,400 rides in 2020.
Recosted 2020 Specialized Transit Service Operating Budget
| Description | 2020 Budget | 2020 Service Growth
(Eliminated) |
2020 Recosted |
| Revenue | |||
| Passenger fares | $ 635,300 | $ (14,200) | $ 621,100 |
| Provincial funding | 1,731,100 | – | 1,731,100 |
| Total Revenue | 2,366,400 | (14,200) | 2,352,200 |
| Expenditure | |||
| Personnel cost | 1,261,000 | (80,600) | 1,180,400 |
| Contracted services | 8,991,500 | (171,500) | 8,820,000 |
| All other material costs | 255,700 | (1,000) | 254,700 |
| Total Expenditures | 10,508,200 | (253,100) | 10,255,100 |
| City of London | $8,141,800 | $(238,900) | $ 7,902,900 |
The administration will continue to monitor the operating budget performance, reporting on same on a monthly basis throughout 2020, noting that as more details with respect to COVID-19 related impacts are available, update reports will include the manner in which ongoing budget shortfalls are being addressed.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager