Staff Report #8
April 29, 2020
To All Commissioners
Re: COVID-19 Financial Impacts
That the Commission DIRECT administration to extend rear-door boarding and free fares for the period of May 1 to May 31, 2020 with the exception that anyone requiring the ramp would continue to be allowed to board at the front doors without payment required.
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 those 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 relief from compliance expectations of any other regulatory requirements including but not limited to the Employment Standards Act, Occupational Health & Safety Act, Accessibility for Ontarians with Disabilities Act, Ontario Human Rights Code, and the Municipal Act. Decisions that have been made with respect to any changes in practices or procedures in responding to the COVID-19 situation have been carefully weighed to ensure continued compliance with all regulatory requirements.
Many new steps have been taken in response to COVID-19, all of which have impacted the manner in which the day to day business of delivering a public transit service in some way, including but not limited to the following:
- enhanced nightly cleaning/disinfection of all high-touch surfaces on all buses
- enhanced cleaning/disinfection of all high-touch surfaces in facilities
- movement of office furniture or employee desks to provide for greater social distancing in the office spaces
- limited capacities in all meeting and gathering rooms to provide for greater social distancing and encouragement for meetings to be held via teleconference versus in-person whenever possible
- modifications of shift and break times to reduce the number of people in lunch rooms and change rooms
- enhancement to washroom availability for Operators in response to business closures
- signage on all buses and all facility access points asking the public and/or employees not to enter same if they are feeling ill and/or experiencing fever, cough or difficulty breathing
- provision of disinfectant on all buses to allow for cleaning the Operator area between shifts
- issuance of hand sanitizer to all Operators for use as required as well as availability for employees working in all facilities
- move to rear-door boarding in an effort to limit passenger/Operator interaction. The only exception to this being passengers who require the lift to board the bus, and all passengers boarding at the front doors are asked to confirm they are not experiencing any COVID-19 symptoms
- installation of social distancing signage and bungee cord on buses in an effort to limit passenger/Operator interaction
- enhanced and ongoing communication reminding the public to use transit for essential trips only
- regular and ongoing service level adjustments in response to ridership levels and resource availability
- extension of Operator sign-up process to reduce the number of people in the room at the same time
Many of the aforementioned changes will remain in effect for the foreseeable future as the organization navigates out of the pandemic period, some will be modified, and others will be phased out. The following provides greater detail on the issues that have arisen and/or actions taken to date that have resulted in financial impacts that were not anticipated in the 2020 operating budget.
Beginning in mid-March, coinciding with the onset of Provincial orders relating to the response to COVID-19 including ‘stay at home’ recommendations and the mandatory closing of many businesses, ridership on transit systems dropped significantly. The two graphs below illustrate the ridership on London’s conventional and specialized services, as a percentage of what would normally be expected.
Conventional Transit Boardings as a Percent of Normal Boardings
Specialized Transit Boardings as a Percent of Normal Boardings
As the charts indicate, conventional transit ridership has levelled out at approximately 20% of normal levels, while specialized ridership has levelled out at approximately 10% of normal levels.
While ridership levels have dropped significantly, service levels have not been reduced to the same extent for a number of reasons, including the following:
- Reducing service levels to the same extent that ridership has decreased would result in a transit service that would be so pared down it would not be useful to the majority of riders, and as such, would not meet the expectations for public transit to continue to provide transportation for essential workers to and from work.
- Reducing service levels too far would result in overcrowding on buses as those who rely on transit as their only option would continue to ride. Transit systems have avoided this in an effort to have adequate service levels on the road to ensure buses are not over-crowded.
- Service level changes take time to be implemented noting Operators must be reassigned to new work, schedules must be created and made available to the public, and real-time information options must be updated to ensure customers have access to the information they require in order to make transit a viable option for them.
- Employee absenteeism during this period has been difficult to predict, and service levels need to be established based on employee availability. To date, London Transit has made two formal service level reductions and one interim measure that lasted for one week. The first reduction was in immediate response to decreased ridership and employee availability, and resulted in an approximate 10% reduction in total service hours. During the period of April 12-18, the public was notified that service on several routes may be impacted depending on the availability of resources. The third reduction took effect on April 19 and resulted in an additional 20% reduction in service hours, resulting in services currently running at 70% of what would normally be operating at this time of year.
On the specialized service, the number of vehicles in service has been reduced by approximately 35%. These reductions attempt to balance the continued need for the service, noting many of the customers who are continuing to utilize the specialized service are dialysis patients travelling to/from treatment and the need to continue to provide access to the service for those customers booking other essential trips.
On March 19, 2020 (effective March 20, 2020), the Commission approved the move to rear door boarding for all riders with the exception of those who require the accessibility features of the bus which are only available at the front door. This move, undertaken to provide greater protection for bus Operators, resulted in the inability to collect fares, given the fare collection equipment is located at the front of the bus. The table below sets out the low and high ranges of the estimated revenue loss for both March and April noting the high end estimates include the revenue associated with the tuition pass programs at Western University and Fanshawe College which are provided under contract and will be the subject of review post-pandemic to determine whether any adjustments to the revenue already collected will be required.
Estimated Revenue Loss – Lows and Highs
|Revenue Loss||March||April||Total to Date||May Estimate|
Enhanced Cleaning of Fleet and Facilities
The enhanced nightly cleaning and disinfecting of buses began in mid-March as well, resulting in labour costs that were not included in the 2020 operating budget. Each night, all high touch areas on every bus that has been in service are treated with a disinfectant and wiped down. This process takes approximately 20 minutes per bus, resulting in an additional 60 hours of work per evening. The additional cleaning taking place in facilities has been incorporated into daily job tasks, and as such, does not have a direct impact on labour budgets. It is estimated that the additional costs associated with this measure are approximately $60,000 per month.
Options to Address Funding Shortfall
This month, communication was received from the civic administration relating to the manner in which any budget shortfalls relating to COVID-19 were to be addressed. The communication clearly indicated that agencies, boards and commissions were expected to manage any shortfalls in their operating budgets on their own, noting the city would not be in a financial position to assist with balancing budgets in 2020. Some of the options that were outlined in the communication with respect to managing budget shortfalls included:
- Review discretionary spending – Consider whether planned spending for 2020 on discretionary spending such as training, replacing office equipment, etc. is necessary and whether those budget dollars can be reallocated to cushion the financial blow of COVID-19.
- Staffing levels – Give consideration to the staffing levels you are maintaining while balancing our most important human resources against the current fiscal realities.
- Review and potential renegotiation of purchased service contracts – Give consideration to whether the same levels of service are required (e.g. janitorial, maintenance, etc.) and whether there are any opportunities to temporarily renegotiate the terms of the contract for the duration of the modified hours of operation.
- Consider whether planned consulting work can be handled by internal staff with capacity to do the work in these modified work arrangements we are currently experiencing.
- Utility usage – Consider any potential actions that can be taken to minimize required utility usage under current modified hours of operation.
- Payment terms – Be mindful of cash flow constraints and consider whether there are any opportunities to lengthen the payment terms with your suppliers.
- Capital plans – Consider whether planned capital projects can be deferred to future years in order to preserve cash resources.
Many of the options above assume that regular business has been interrupted or halted, however this is not the case with public transit services. Service levels have been reduced, however those reductions have only resulted in minimal savings in labour, given most of the employee absenteeism is being paid, either as vacation or through short term disability benefits, which, given the significant increase in claims, result in increased premiums for years to come. The reduced service hours, coupled with lower than budgeted fuel prices have resulted in some minimal savings.
As set out in Staff Report #4 and #5 dated April 29, 2020, the assessment growth funding that was requested to fund the conventional and specialized service plans will be available to assist with covering the 2020 budget shortfall noting the service plans will not be implemented in 2020.
In addition to the 2020 portion of the assessment growth funding, as set out in Staff Report #3 – Reserve and Rerserve Funds, dated April 29, 2020, the Commission has two reserves with balances that could be drawn on in an effort to maintain a balanced 2020 budget.
The table below sets out the high-end estimates for budget shortfalls to date, with options to fund same in the short term.
Budget Shortfalls To Date
|Funding Options||Opening Balance||Closing Balance|
|Assessment Growth from 2020||$1,095,300||$(446,400)||$(648,900)||–|
|General Operating Reserve||2,999,000||(2,265,600)||$(733,400)||–|
|Energy Management Reserve||2,403,000||(1,435,400)||$967,600|
As set out in the table, there are three recommended sources of financing that can be utilized to cover the budget shortfalls through to the end of May, each of which is described below.
- Assessment Growth from 2020 – As set out in Staff Report #4 – 2020 Conventional Service Plan, dated April 29, 2020, the assessment growth funding that was requested to fund growth is no longer being requested. In discussions with civic administration, it was agreed that utilizing the assessment growth dollars from 2020 to offset budget shortfalls relating to COVID-19 is a good approach. As the table indicates, based on a worse-case scenario budget shortfall, the assessment growth funding can cover the shortfall from March and a small portion of April.
- General Operating Reserve – As set out in Staff Report #3 – Reserves and Reserve Funds, dated April 29, 2020, the general operating reserve has been established and maintained in order to provide a funding source for budget shortfalls that are a one-time occurrence versus having to go back to the City to seek additional funding within a budget year. Utilizing these funds to cover the COVID-19 related budget shortfall is well within the administrative guidelines for this reserve. With a balance of just under $3 million, this reserve can fund the remaining April shortfall and approximately 33% of the projected May shortfall. It is important to recognize that while this use is well within administrative guidelines, depleting this reserve to a zero balance leaves the Commission in a much less desirable financial position going forward.
- Energy Management Reserve – As set out in Staff Report #3 – Reserves and Reserve Funds, dated April 29, 2020, the energy management reserve has also been established to provide a funding source for budget shortfalls that are a one-time occurrence, specifically relating to fuel and energy costs. While the COVID-19 related budget shortfalls are not related to fuel/energy costs, the reserve is unrestricted, and as such, can be utilized for other needs as required. With the opening balance of $2.4 million, the balance in this reserve can cover the remaining May projected shortfall, and have a remaining balance of $967,000. Depleting this reserve also leaves the Commission in a much less desirable financial positon going forward.
While the aforementioned funding options will ensure that the operating budget remains balanced through the end of May, without a newly identified source of funding, there is no option to address the projected funding shortfall for June and forward should the current operating scenario remain in effect. Further, while this approach provides for a balanced budget in the short term, it leave the Commission in a less desirable financial position going forward noting the depletion of two reserves that historically have been relied upon to be available for any one-time budget shortfalls.
The issues affecting London Transit as set out earlier in this report are consistent with those impacting every transit system in the country, to varying degrees. 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.
Provincially, OPTA has supported the requests from the Large Urban Mayor’s Caucus of Ontario (LUMCO), which called for the province to begin a dialogue on potential solutions to the issues that transit systems are facing, including emergency relief funding to replace lost operating revenue and/or emergency grants for those facing liquidity issues. OPTA representatives have had the opportunity to speak directly with the Minister of Transportation regarding the issues currently being faced by transit operators in Ontario and the possible role the province could play in providing relief. In addition, it is understood that relief funding for transit systems was a topic of discussion with AMO representatives and the province at a recent meeting.
CUTA has begun dialogue with the federal government, and the initial ask set out in a formal letter to Minister McKenna (Infrastructure and Communities) seeking funding to replace the revenue lost to transit systems during the period of the pandemic (estimated at $400 million per month), provide access to $1.2 billion in relief funding for transit systems facing liquidity challenges, support for the procurement of cleaning agents and disinfectants, and stimulus funding for capital projects providing sustainable transportation options going forward. FCM released their request of the Federal government on April 23, which included a request for a minimum of $7.6 billion in emergency operating funding for municipalities, plus an additional $2.4 billion for those with transit systems.
At time of report writing, there have been no firm commitments from either level of government; however, both have signaled their understanding of the needs identified, as such advocacy efforts will continue in earnest.
Kelly S. Paleczny, General Manager