November 19, 1999

To: Planning and Transportation Committee

From: Chief Financial Officer and Treasurer

Subject: Free Transit on Air Quality Advisory Days

Purpose:

To respond to the request on the source of revenue to finance the initiative of providing free transit on air quality advisory days.

Financial Implications and Impact Statement:

It is estimated that a $2 million revenue loss would be incurred for each day that free transit was provided on Air Quality Advisory Days. At an average of five Air Quality days per year, the loss in TTC revenues is estimated at $10 million.

Recommendations:

It is recommended that this report be received for information.

Background:

At its meeting on September 13, 1999, the Planning and Transportation Committee adopted, in principle, the recommendation from the Toronto Cycling Committee that free transit be available on air quality advisory days and requested the Chief Financial Officer and Treasurer, in consultation with the TTC, to identify the source of revenue to finance the initiative in the recommendation and report thereon to the Planning and Transportation Committee

Comments:

Funding for the TTC expenditures is currently provided by two sources: Fares and the Property Tax. In the 1999 budget, the total gross expenditure for conventional transit and Wheel Trans services is $720 million, 79 percent funded from passenger and other TTC revenue, and the remaining 21 percent funded by the City. Passenger revenues by themselves represent more than 76 percent of the total gross expenditure.

The funding of TTC activities heavily relies on fare revenue. Any reduction in this revenue directly impacts the tax levy, given that no other sources of revenue are available. The Province of Ontario previously funded approximately 50 percent of the TTC net operating expenditures until 1998, when all Provincial subsidies to transit were eliminated. The Federal Government does not provide any subsidy, operating or capital, for this purpose.

The total TTC passenger revenue on an average weekday is approximately $2 million. There seems to be no pattern in terms of week or weekend days in relation to the air quality advisory days, as per staff of Environment and Energy. Therefore, the loss of revenue for each free-transit day can be reasonably estimated as $ 2 million on the basis of a weekday's revenue. Concurrently, no expenditure savings can be anticipated as a result of the initiative. In fact, if there is a significant shift in demand from automobiles to public transit (it should be noted, however, that GO transit services would not be included in this measure) there may be a requirement for an increase in services and therefore increased expenditures will result.

The number of air quality advisories that were called per year in the Metro Toronto area since its implementation in 1993, and the days they lasted are as follows:

Year Air Advisory Days

1993 1

1994 5

1995 8

1996 3

1997 5

1998 7

1999 9

Average 5.4

The resulting loss of revenue can therefore be estimated as approximately $10 million per year (5 days at $2 million per day).

No other sources of revenue could be identified for this type of measures under current Federal and Provincial policies. The possibility of obtaining sponsorship revenues for this purpose would depend on the interest of corporations and other organizations to fund a project of this magnitude. However the availability of sponsorship funding for this initiative would compete with similar needs for other City services for which sponsorship is also being pursued

In the future, in the context of the Federal Government implementation of the Kyoto Protocol, i.e. the reduction of emissions to 6% below 1990 levels by the period 2008-2012, there could be measures that would make available alternative sources of funds for these types of initiatives. In the meantime, the only source of financing for this initiative would be from the property tax levy.

Conclusions:

The funding of TTC activities heavily relies on fare revenue. No other sources of revenue could be identified for these types of measures under current Federal and Provincial policies. The loss of revenue as a result of providing free transit on air quality advisory days can be estimated as approximately $10 million per year (5 days at $2 million per day), which would require financing from the tax levy. The TTC concurs with the conclusions of this report.

Contact:

Andres Hachard

Senior Budget Analyst

392-5377

Wanda A. Liczyk

Chief Financial Officer and Treasurer