Staff Report #1
September 14, 2021
To All Members of the Accessible Public Transit Services Advisory Committee
Re: 2022 Operating Budget Program
Recommendation
That the report be NOTED and FILED.
Background
At the August 25, 2021 meeting, the Commission approved the 2022 base operating budget program for public transit services allocated as follows:
| Category | Conventional | Specialized | Total |
| Revenue | $ 47,672,700 | $ 2,365,700 | $ 50,038,400 |
| Expenditures | 83,607,300 | 11,625,400 | 95,232,700 |
| City of London | $ 33,197,500 | $ 9,223,900 | $ 42,421,400 |
| Budget Shortfall | $ 2,737,100 | $ 35,800 | $ 2,772,900 |
Given that municipalities and transit systems by extension are not allowed to operate at a deficit as a requirement of the Municipal Act, the recommendation of a budget with a projected shortfall is not a normal practice; however, the onset of the COVID-19 pandemic has resulted in many aspects of operations being far from normal. As was the method in 2021, the 2022 budget is presented with a shortfall that is attributed to the anticipated impact of the pandemic in 2022. The Safe Restart Funding program has been approved to cover approved shortfalls for the period up to December 31, 2021 with the ability to apply for an extension for use of any unutilized Safe Restart funding from Phase 3 to cover the period of January 1, 2022 through March 31, 2022. Given the application to extend the funding has not been completed and the fact it currently is only slated to support shortfalls through March 31, 2022, a shortfall is being presented.
Consistent with past practise, the operating budget will be subject to a recosting exercise in early 2022, and a report will be provided to the Commission with recommendations to address any projected shortfall at that time noting there are a number of options that can be utilized to address the shortfall, including the following:
- Funding from the Safe Restart Program, noting the current parameters of this funding program will only cover budget shortfalls relating to COVID-19 for the period January 1, 2022 through March 31, 2022;
- Use of Commission reserves, to the extent necessary;
- Reductions in service levels given slower than anticipated ridership rebound;
- Reductions in other expenditure programs;
- Increased investment from the City of London;
- Use of any new funding programs established by senior levels of government noting advocacy efforts continue in earnest given the anticipated longer-term nature of the COVID-19 related budget implications. Both the Provincial and Federal governments have recognized the impacts on public transit to be longer term than the current funding programs provide for, and conversations with respect to this are ongoing.
Conventional Transit Service – Base Operating Budget
In order to complete the 2022 budget, a number of key assumptions were applied, most of which are consistent with those utilized to complete the 2021 operating projected actual.
Key assumptions include:
- ridership and related revenue in the cash, ticket and monthly pass categories would begin the year at 75% of what would normally be expected, growing to approximately 100% of normal expectations by the end of August;
- ridership and related revenue in the tuition pass programs is based on the estimated number of students anticipated to attend campus for the 2021/2022 academic year. Projections provided by the institutions call for Western University participation to be 100% of 2019 levels and Fanshawe College to be at 30% in the fall of 2021 and 100% by Winter (January) 2022; and
- service levels would return to 100% of what would normally be in place for the year based on an annualized 2021 service.
The following table sets out the operating investment share breakdown for 2022 as compared to 2021 projected actual results.
2022 Base Operating Budget Summary – Conventional Transit Services
| Category | 2021 Projected Actual | 2022 Budget | Total Variance | % Variance |
| Revenue | ||||
| Transportation revenue | $ 22.080 | $ 35.702 | $ 13.622 | 61.7% |
| Operating revenue | 1.189 | 1.264 | 0.074 | 6.3% |
| Transfer from reserves | 1.122 | 1.122 | 0.000 | 0.0% |
| Provincial Gas Tax | 8.758 | 9.585 | 0.827 | 9.4% |
| $ 33.149 | $ 47.673 | $ 14.523 | 43.8% | |
| Expenditures | ||||
| Personnel cost | $ 54.235 | $ 57.127 | $ 2.892 | 5.3% |
| Fuel | 6.517 | 7.872 | 1.355 | 20.8% |
| Direct bus maintenance/servicing | 6.552 | 6.880 | 0.328 | 5.0% |
| Facility | 3.273 | 3.323 | 0.050 | 1.5% |
| Insurance | 3.764 | 3.875 | 0.111 | 2.9% |
| Contributions to reserves | 1.045 | 0.945 | (0.100) | (9.6)% |
| All other material costs | 3.769 | 3.586 | (0.183) | (4.8)% |
| Total Expenditure | $ 79.154 | $ 83.607 | $ 4.453 | 5.6% |
| City of London | $ 31.978 | $ 33.198 | $ 1.220 | 3.8% |
| Safe Restart Funding | $ 14.027 | – | $(14.027) | |
| Operating Shortfall | $ – | $ 2.737 | $2.737 |
Operating Revenue Investment
The approximate $47.673 million in identified operating revenues is comprised of:
- $35.702 million in transportation revenue which is directly related to ridership and fares, noting this projection is down slightly relating to the continued impacts of COVID through the first half of 2022;
- $1.264 million in operating revenues – primarily associated with advertising contracts for shelters, buses and benches and investment income including earned on reserve funds;
- $1.122 million transferred from reserves in support of operating investment; and
- $9.585 million Provincial Gas Tax allocation.
Operating Expenditure Investment
The overall operating expenditure investment for 2022 is budgeted to increase by 5.6% or approximately $4.453 million vs. 2021 projected actual results. The 5.6% increase is comprised of:
- $1.478 million in unit price and base program increases for such items as fuel, energy, insurance and personnel costs. These increases account for a 1.9% increase in overall investment;
- $1.292 million in 2021 COVID-19 related impacts, primarily relating to service levels increasing over those provided in 2021, resulting in the associated costs in personnel, fuel, direct bus maintenance all increasing at a proportionate rate;
- $1.405 million pertaining to the 2021 service implemented in 2022, noting the 2022 budget includes the addition of approximately 18,000 additional service hours, 6,000 of which had been budgeted to commence in 2021; and
- $0.278 million in base program changes, primarily relating to additional fuel and insurance cost increases.
Specialized Transit Services – 2022 Base Operating Budget Program
In order to complete the 2022 budget, a number of key assumptions were applied, including:
- ridership and related revenue will rebound to approximately 90% of normal expectations by the end of 2021 and 100% in 2022; and
- service levels return to what would normally be in place for 2022, including 2021 growth for the full year.
The following table sets out the 2022 Base Operating Budget as compared to 2021 projected actual results.
2022 Base Operating Budget Summary – Specialized Transit Services
| Category | 2021 Projected Actual | 2022 Budget | Total Variance | % Variance |
| Revenue | ||||
| Transportation revenue | $ 0.301 | $ 0.597 | $ 0.296 | 98.2% |
| Provincial Gas Tax | 1.519 | 1.769 | 0.249 | 16.4% |
| $ 1.821 | $ 2.366 | $ 0.545 | 29.9% | |
| Expenditures | ||||
| Personnel cost | $ 1.191 | $ 1.223 | $ 0.032 | 2.7% |
| All other material costs | 0.258 | 0.259 | 0.001 | 0.3% |
| Contracted services | 8.237 | 10.143 | 1.907 | 23.2% |
| Total Expenditure | $ 9.685 | $ 11.625 | $ 1.939 | 20.0% |
| City of London | $ 8.854 | $ 9.224 | $ 0.370 | 4.2% |
| Safe Restart Funding | $ (0.990) | $ – | $ 0.990 | |
| Operating Deficit | $ – | $ 0.035 | $ 0.035 | |
| Investment Share | ||||
| Trans/Operating/Revenue | 3.1% | 5.1% | 2.0% | 64.5% |
| Provincial Gas Tax | 15.7% | 15.2% | (0.5)% | (3.2)% |
| City of London | 91.4% | 79.3% | (12.1)% | (13.2)% |
| Safe Restart | (10.2)% | 0.0% | 10.2% | 100.0% |
| Unfunded Shortfall | 0.0% | 0.3% | 0.3% | 0.0% |
| 100.0% | 100.0% | — | — | |
| Ridership (millions) | 0.150 | 0.299 | 0.149 | 99.3% |
Operating Expenditure Investment
As set out above, overall operating expenditure investment for the 2022 specialized transit service is budgeted to increase by 20.0% or $1.939 million versus the 2021 projected actual results bringing the total operating investment to $11.625 million. The 20.0% increase results from:
- $0.233 million in unit price increases for contracted service and personnel costs;
- $1.336 million in 2021 COVID-19 related impacts, related solely to service level increases over reduced levels provided in 2021;
- $0.380 million increase pertaining to the 2021 service growth planned for implementation in 2022, noting the 2022 budget includes the addition of 6,000 additional service hours, 3,000 of which had previously been budgeted to commence in 2021; and
- $0.009 million reduction in base program changes.
Conventional Transit Service – Growth Budget
The growth component of the conventional transit service represents the reconsideration of the growth components that were included the 5 Year Conventional Service Plan Framework for 2022, noting, it calls for a total increased investment of $0.806 million. The 2022 growth budget is made up of:
- the addition of 18,000 service hours, 6,000 of which are planned for implementation in 2022 with the residual occurring in 2023 (flow thru hours). The increased service is budgeted to result in a related increase in ridership of approximately 93,000, noting the service improvements would not be implemented until September 2022; and
- the addition of approximately $150,000 to cover the additional operating costs associated with the introduction of an alternative service delivery model to serve the Innovation Park industrial area.
Specialized Transit Service – Growth Budget
The growth component of the specialized transit service represents the annual level included in the 2020-2023 multi-year budget, at an increased investment cost of $191,600.
Unlike the Conventional service, the increase of hours on the Specialized service can be introduced prior to September; however, given that ridership demand on the Specialized service is generally lower in the summer months, improvements are generally made within the same time period.
Recommended by:
Kelly S. Paleczny, General Manager