Staff Report #8
March 30, 2026
To All Commissioners
Re: Recosted 2026 Operating Budget Program
Recommendation
The Commission APPROVE the recosted 2026 operating expenditure budget for London’s public transit services of $124,082,100 as summarized on the following table noting the recosting has not resulted in any changes to the City of London funding;
| Description | Conventional Transit | Specialized Transit | Total | |
| Revenue | ||||
| Transportation revenue | $ 39,872,600 | $ 932,000 | $ 40,804,600 | |
| Operating revenue | 2,045,800 | – | 2,045,800 | |
| Transfer from reserves | 1,600,300 | – | 1,600,300 | |
| Provincial gas tax funding | 10,090,800 | – | 10,090,800 | |
| Total Revenue | 53,609,500 | 932,000 | 54,541,500 | |
| Expenditure | ||||
| Personnel cost | 72,600,100 | 1,897,400 | 74,497,500 | |
| Fuel | 9,357,700 | – | 9,357,700 | |
| Direct bus maintenance | 10,221,900 | – | 10,221,900 | |
| Facility | 3,868,000 | – | 3,868,000 | |
| Insurance | 3,955,300 | – | 3,955,200 | |
| Contribution to reserves | 1,269,500 | 509,000 | 1,778,500 | |
| Contracted service costs | – | 15,284,300 | 15,284,300 | |
| All other material costs | 4,669,800 | 449,100 | 5,118,900 | |
| Total Expenditures | 105,942,300 | 18,139,800 | 124,082,100 | |
| City of London | $ 52,332,800 | $ 17,207,800 | $ 69,540,600 | |
Background
As part of the 2024-2027 multi-year budget setting process in 2023, the Commission approved the 2024-2027 status quo (base) operating budget programs for conventional and specialized transit services and subsequent to Council’s budget deliberations, the base operating budget for 2024-2027 was approved as submitted. Also debated and approved by the Commission at the time were the details to be included as growth business cases for the multi-year budget submission. Similar to the process for the base budget, Council considered growth business cases, and ultimately approved the operating costs for incremental service hours in both conventional (18,000 hours) and specialized (10,000 hours) for 2026, noting the conventional service hours were reduced from the 25,000 as requested and approved by the Commission.
When the multi-year budget is prepared, it is based on inputs available at the time, and as such, fluctuations are likely to occur in subsequent budget years. As the annual budgets are updated each year, 2025 through 2027, the opportunity to address any such discrepancies through the submission of an updated annual budget and accompanying amendment business case to Council exists.
Notwithstanding the zero-based budget approach utilized in the creation of the multi-year budget, each year administration re-evaluates the budget on a line-by-line basis to ensure any trends or issues that were not contemplated during the preparation of the multi-year budget are addressed. Material changes to annual budgets are most likely to occur in the areas which account for the most significant portions of the budget (transportation revenue, fuel, insurance, contracted service costs, etc.).
The 2026 operating budget approved by the Commission at the August 27, 2025 meeting set out in the table below reflects the result of this budget approach, outlining what was required, in terms of operating budget, to deliver the service hours contemplated for 2026 on both the conventional and specialized services.
2026 Commission Approved Operating Budget
| 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 |
During the 2026 budget process, Council requested all agencies, boards and commissions to review expenditures and propose budget reductions to reduce the 2026 tax rate adjustment. As outlined in Staff Report #8 dated June 23, 2025, the Commission endorsed a $700,000 one-time reduction in City of London funding from the previously approved 2026 budget in the 2024-2027 multi-year budget. The savings were a result of projected fuel and insurance cost decreases identified at the time. An amendment business case was provided to Council and approved during the 2026 budget process, noting these reductions are included in the table above.
Consistent with established practices, the 2026 budget is subject to a recosting exercise in Q1, 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 funding is not subject to recosting consideration at this point in the process.
The exercise takes into consideration significant trends and/or emergent issues that have developed since the budget was first prepared (May to July 2025) and approved, including 2025 year-end operating financial results. Also included in the recosting process if necessary, are any program updates, including service hour improvements, subsequently approved by the commission. Details are included in the respective section.
Conventional Transit Service
In order to complete the 2026 budget, a number of key assumptions had been applied, many of which have been refined given updated trending since the approval of the budget and subsequent to the finalization of 2025 year-end including the continuing ridership trends since the significant fare increase in January 2024, as well as other contractual and price updates pertaining to expenditures. The following table sets out the updates that have been applied to the conventional transit service operating budget as a result of the recosting exercise, nothing the impact of updated trends, contractual changes and emergent issues (recosting updates) have been separated from the impact of any program updates (service hours).
2026 Recosted Conventional Transit Service Operating Budget
| Description | 2026 Budget | Recosting Updates | Service Hours | 2026 Recosted |
| Revenue | ||||
| Transportation revenue | $ 39,577,200 | $ 284,100 | $ 11,300 | $ 39,872,600 |
| Operating revenue | 2,045,800 | – | – | 2,045,800 |
| Transfer from reserves | 1,195,900 | 263,200 | 141,200 | 1,600,300 |
| Provincial gas tax funding | 10,090,800 | – | – | 10,090,800 |
| Total Revenue | 52,909,700 | 547,300 | 152,500 | 53,609,500 |
| Expenditure | ||||
| Personnel | 72,000,700 | 476,000 | 123,400 | 72,600,100 |
| Fuel | 9,347,400 | – | 10,300 | 9,357,700 |
| Direct bus maintenance | 10,169,100 | 42,000 | 10,800 | 10,221,900 |
| Facility | 3,855,600 | 12,400 | – | 3,868,000 |
| Insurance | 3,951,100 | – | 4,200 | 3,955,300 |
| Contribution to reserves | 1,269,500 | – | – | 1,269,500 |
| All other material costs | 4,649,100 | 16,900 | 3,800 | 4,669,800 |
| Total Expenditures | 105,242,500 | 547,300 | 152,500 | 105,942,300 |
| City of London | $ 52,332,800 | $ – | $ – | $ 52,332,800 |
Recosting updates, highlighted in the second column above, include a comprehensive review of all the items whose assumptions, trends, costs, rates, etc. have changed since the original budget was presented in August, including transportation revenue, operating revenue, personnel costs, fuel, direct bus maintenance and contribution to reserves. Unfortunately, the results of the update have projected a shortfall of $263,200. The adjustment to Transfer from Reserves includes the required internal reserve support necessary to balance the budget. Further details with respect to each of these updates include the following:
- Transportation revenue – the original budget was set based on trends in ridership up to and including July 2025. During this recosting process, ridership trends are updated through February 2026 with pass sales updated through March. These updates to the forecasting model have resulted in a projected revenue increase of $284,100 due mainly to positive trends in tickets / stored value rides, along with improved pass sales. The increase is slightly offset by an anticipated further decline in tuition pass sales for the 2025-2026 tuition pass year.
- Transfer from reserves – as noted in the table above, recosting updates have resulted in total expenditure increases of $547,300, offset by increased transportation revenue of $284,100. The difference is a net deficit of $263,200 pertaining to these updates. This recosting exercise is not subject to additional City of London investment, and thus requires managing the shortfall via the Commission’s reserve funds. Although identified at this time as a required contribution from reserves, the overall requirement will be assessed at year end, noting that favourable operating results, contributions from reserve funds, or a combination of both could be utilized.
- Personnel cost – recosting updates to the original budget have resulted in a $476,000 increase in personnel costs. The majority of the increase relates to contractual agreement updates including additional benefit premiums and wage rates (premiums for mechanics) along with ongoing training program updates.
- Fuel – during the original 2026 budget setting process last August, budget savings were requested by Council. At the time fuel prices had trended down significantly compared to those projected and included in the original multi-year budget for 2026, providing an opportunity to reduce fuel costs by $1,700,000 (approximately $0.20 per litre). Through February 2026, fuel prices remained consistent with those included in the original projection, however, with the recently developed conflict in the Middle East, prices have been significantly impacted. Since the onset of the conflict, daily fuel prices have ranged been 20% and 40% higher than those prior. Although fuel costs are a significant portion of the Commission’s expenditures, and changes to prices would materially impact the recosting exercise, the ongoing volatility and uncertainty of fuel prices would lead to a somewhat arbitrary update. For reasons such as this price uncertainty, the Commission’s reserves are designed to manage such challenges, see Staff Report #1, dated March 30, 2026. As noted in the report, the Energy Management Reserve is intended to support unanticipated fluctuations in energy costs, including fuel, and currently is able to support an annual diesel fuel increase of over $0.50 per litre, after which the reserve would be depleted. Given the reserve levels and uncertainty of ongoing prices, diesel fuel expenditures have not been recosted, noting any material fluctuations are expected to be managed through the reserve funds at year end.
- Direct Bus Maintenance, Facility & Other Material Costs – updates relate to contractual price increases pertaining to bus maintenance costs (parts) and contracted services (Facilities and IT).
The additional costs included in the column titled ‘Service Hours’ in the table above pertain to those required to improve service beyond the 18,000 hours included in the original budget. At its November 17, 2025 meeting, the Commission approved the addition of 2,000 annual service hours, allocated to improvements included in the draft 2026 Conventional Service Plan, with implementation of 700 hours in 2026 at a net operating cost of $119,000 to be supported through the Commission’s General Operating Reserve. The Commission directed administration to determine whether the 2027 costs associated with the addition of 2,000 hours can be accommodated within the 2027 budget, including potential sources of funding for the shortfall in the 2027 budget approval process.
A further improvement was also identified by the Commission during the review and approval of the 2026 Conventional Transit Service Plan at its January 26, 2026 meeting. Additional hours required to accommodate further modifications to Route 27 and / or 127, not to exceed $50,000 annually, along with the addition of service hours to extend Route 6 on Saturdays until 1AM were also approved.
As highlighted in the table above, operating expenditures are expected in increase by $152,500 for these service hour improvements, mostly relating to the increase in personnel costs (operator labour, training requirements, direct bus maintenance and servicing labour along with corresponding benefits). Costs are also included for increased fuel and direct bus maintenance costs, insurance and other materials such as uniforms. Growth hours are generally projected to attract additional ridership, with the impact of improved transportation revenue estimated at $11,300. The net operating cost of $141,200, as directed by the Commission, has been funded by the General Operating Reserve in 2026.
Specialized Transit Service
Similar to the recosting for conventional services, the same review was performed for specialized transit. The table below sets out the adjustments to the 2026 specialized operating budget and the resulting recosted budget.
Recosted 2026 Specialized Transit Service Operating Budget
| Description | 2026 Budget | Recosting Updates | 2026 Recosted |
| Revenue | |||
| Passenger fares | $ 932,000 | $ – | $ 932,000 |
| Provincial funding | – | – | – |
| Total Revenue | 932,000 | – | 932,000 |
| Expenditure | |||
| Personnel cost | 1,897,400 | – | 1,897,400 |
| Contracted services | 15,284,300 | – | 15,284,300 |
| Contributions to reserves | 509,000 | 509,000 | |
| All other material costs | 449,100 | – | 449,100 |
| Total Expenditures | 18,139,800 | – | 18,139,800 |
| City of London | $ 17,207,800 | $ – | $ 17,207,800 |
As with conventional transit, recosting updates for specialized transit also follow a comprehensive review of the items whose assumptions, trends, costs, rates, etc. have changed since the original budget was presented in August. Upon review, it was determined that no material updates are necessary at this time.
Administration will continue to monitor the operating budget performance, reporting on same on a monthly basis throughout 2026.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager