Staff Report #2 – 2025 – 2034 Capital Budget Program

Staff Report #2

August 28, 2024

To All Commissioners

Re: 2025 – 2034 Capital Budget Program

Recommendation

The Commission:

i. APPROVE the 2025 capital budget program of $20,084,900 comprised of the following programs:

Program Units Amount
Bus replacement 17 $ 16,273,900
Facility upgrades 500,000
Highbury Facility Rebuild 2,500,000
Information system software and hardware 500,000
Shop and garage equipment 200,000
Service fleet replacement 65,000
Stop upgrades 46,000
Total 17  $ 20,084,900
Funding  Amount
Province of Ontario (Provincial gas tax) $ 832,100
LTC Capital Program Reserve Fund 811,000
City of London 13,609,300
Federal gas tax program – C/L 3,000,000
Provincial – ICIP Project Funding 832,500
Federal – ICIP Project Funding 1,000,000
Total  $ 20,084,900

noting identified funding from the City of London of $13,609,300 and Federal Gas Tax program of $3,000,000 is subject to the approval of Municipal Council as part of the City of London’s 2025 budget approval process;

ii. DIRECT administration to submit a Budget Amendment to realign funding sources to address the shortfall in the 2025 Bus Replacement program resulting from high than anticipated bus pricing; and

iii. DIRECT administration to submit the recommended 2025 Capital Budget Program, and provisional estimates for 2026 to 2034 to civic administration consistent with the City of London’s reporting format.

Background

The recommended 2025-2034 capital budget program as summarized in Enclosure I is predicated on a strategy that focuses investment on maintaining infrastructure in a state of good repair and providing growth capital investment necessary to support the provisional operating estimates for 2024-2027, as set out in Staff Reports #1 and #2, dated August 30, 2023, and updated for 2025 in Staff Report #1, dated August 28, 2024 and are in keeping with the Commission’s Asset Management Plan, 2024-2027 Business Plan and support the Five Year Service Plans.

The following sets out discussion specific to each of the more significant areas of the Capital Budget Program.

New Bus Program

The capital budget for the ten-year period of 2025-2034 calls for the purchase of a total of 220 new replacement and expansion buses at an estimated cost of approximately $244.3 million. As the business case included in the 2024-2027 multi-year budget to fully electrify the fleet at a total cost of $188.1 million was not approved by Municipal Council, costs to do so were excluded from the Recosted 2024 Capital Budget Program and are not included in the 2025-2034 capital program presented in this report.

2025-2034 New Bus Purchases

Description Total Units Amount
Bus Replacement 170  $ 189,702,000
Bus Expansion (ICIP) 12 11,737,100
Bus Expansion (City funded) 38 42,842,600
Total 220  $ 244,281,700

The bus costs included in the table above are based on the 2024 base price of 40’ and 60’ foot diesel buses contracted for 2024-2027 with New Flyer Industries Canada, plus estimated CPI per the contract. Further discussion with respect to the funding allocations is provided below in each of the specific programs relating to new bus purchases.

Bus Replacement Program

A key component of the fleet management strategy was the establishment of a progressive fleet replacement program targeted to reach and maintain an average fleet age of six years, consistent with the Commission’s Asset Management Plan. Based on this strategy, over the period of 2025-2034, a total of 170 replacement buses are scheduled to be purchased requiring a total investment of approximately $189.7 million.

The table below sets out the breakdown of the Bus Replacement program as well as a summary of the funding requirements over the period of 2025-2034.

Summary 2025-2034 Bus Replacement Program

2025 2026-2034 Total
Description Units Amount Units Amount Units Amount
40’ Diesel Bus 15 $ 13,084,500 147 $ 158,886,100 162 $ 171,970,600
60’ Diesel Bus 2 2,665,800 6 8,870,800 8 11,536,800
Ancillary Equipment 523,600 5,671,200 6,194,800
$ 16,273,900 $ 173,428,100 170 $ 189,702,000
Funding Amount Amount   Amount
Provincial Gas Tax $ 832,100  $ 2,916,200 $ 3,748,300
City of London 12,441,800 136,739,400 149,181,200
Federal Gas Tax – C/L 3,000,000 22,587,500 25,587,500
Funding TBD 11,185,000 11,185,000
Total $ 16,273,900  $ 173,428,100  $ 189,702,000

Historically, Provincial Gas Tax (PGT) was utilized to cover approximately 1/3 of the costs of this program. However, during the 2024-2027 multi-year budget setting process for both the operating and capital budget programs, a shift away from utilizing PGT to fund ongoing capital programs was approved given ongoing funding was not sufficient to cover both capital and operating requirements. As a result, funding for this program for 2024 going forward was budgeted to be funded from the City of London, either by way of the capital levy or non-rate supported sources such as Federal Gas Tax.

The contract for London Transit Commission’s 2024-2027 diesel bus requirements was tendered and awarded in April 2024, subsequent to the development and approval of the 2024-2033 multi-year budget (MYB) capital budget program. The resulting bus price from the contract award was greater than the levels included in the approved plan, as were the costs associated with additional requirements for ancillary equipment necessary when outfitting the buses for service. The updated prices have been reflected in each of the Bus Replacement Program’s costs (as noted in the table above), as well as the Bus Expansion Program discussed below.

As the result of this pricing update and noting the program is fully funded by the City of London, administration has been advised by civic administration that an amended business case, outlining these updates needs to be submitted as part of the 2025 budget process. The business case proposes the increases be covered from Provincial Gas Tax (PGT). Given the entirety of the estimated PGT receipts expected for 2024-2027 has been fully allocated to LTC’s operating budget within the MYB, an equivalent reduction to the funding utilized to support the conventional transit operating budget is required.

To offset this shortfall, the ongoing surplus that results from the delayed implementation in service growth hours will be utilized. Note that in each of 2024-2027, the implementation of LTC’s conventional service hour growth commences in September, rather than January. This planned delay has always resulted with an in-year surplus compared to the approved annualized funding levels. The amounts included as PGT funding in the table above reflect this change.

Bus Expansion (Existing and New Growth Areas)

The 2025-2034 capital budgets for bus expansion support the continued growth and expansion of the conventional transit service. Bus expansion is broken into two programs in the 10-year capital forecast; expansion buses funded under the current Investing in Canada Infrastructure Program (ICIP) Bus Expansion Program, and those required once the ICIP program is completed.

Subsequent to the completion of the 10-year capital forecast associated with the multi-year budget process, the Commission approved the 2024-2027 Business Plan and supporting Five Year Service Plans for the conventional and specialized services. The expansion bus requirements associated with service improvements set out in the 2025-2029 Conventional Service Plan are significantly higher than estimates included in the 10-year capital forecast. The need for additional expansion buses is due to the nature of the service improvements being recommended, noting they primarily occur during weekdays and peak operating times, when there is no ability to increase service levels without the addition of a bus.

The table below sets out the breakdown of the two programs as well as a summary of the total bus expansion requirements over the period of 2025-2034, which has been updated to reflect the expansion bus requirements set out in the 2025-2029 Conventional Service Plan.

Summary 2025-2034 Bus Expansion Program

  2025 2026-2034 Total
Description Units Amount Units Amount Units Amount
Bus Expansion (ICIP) $ – 12  $ 11,737,100 12  $ 11,737,100
Bus Expansion (City funded) 38 42,842,600 38 42,842,600
$ – 50 $ 54,579,700 50 $ 54,579,700
Funding   Amount   Amount   Amount
City of London $ – $ 16,781,900 $ 16,781,900
City of London DC’s 9,101,500 9,101,500
Province of Ontario (ICIP)  3,908,500  3,908,500
Government of Canada (ICIP) 4,698,700 4,698,700
Funding TBD 20,089,100 20,089,100
Total $ –  $ 54,579,700  $ 54,579,700

As illustrated in the table above, the changes to the bus expansion program do not impact 2025. This is due to the Commission’s direction to order ten expansion buses in 2024, which were anticipated to cover the 2024 and 2025 service expansion needs. Four of the ten buses are required for the 2024 service improvements being implemented September 1, 2024, leaving six available for the 2025 improvements. The Conventional Transit Five Year Service Plan calls for the addition of nine buses to implement the intended changes. Given the extended delivery times for new buses and the need to await budget confirmation prior to ordering same, expansion buses ordered at the end of this year would not be available for the fall service improvements in 2025.

Also noted in the table above, is the $20 million of funding required for the expansion buses for which a source has not been confirmed. As set out in Staff Report #4, dated August 28, 2024, the Canadian Permanent Transit Fund may be a suitable source of funding for the bus expansion program going forward; however, until such time as the annual allocations have been determined, it is not possible to predict to what extent this funding can be utilized for this program.

Given the aforementioned factors impacting the bus expansion program, service improvements for 2025 may need to be adjusted from the plan to ensure bus availability matches service improvements. This may require adjustments between the years of implementation set out in the Five Year Service Plan. It is anticipated that the annual allocations from the Baseline stream of the Canada Permanent Transit Fund will be confirmed prior to the completion of the 2025 Service Plan, and additional commentary with respect to any required adjustments to the Five-Year Plan will be provided at that time.

The Expansion Bus Program does not include the additional bus requirements related to the implementation of bus rapid transit as this is included in the Rapid Transit Business Case, which has been approved by Municipal Council.

Facility Upgrades – Demolish/Rebuild Highbury Facility

Summary particulars for the 2025-2034 facility upgrade programs are set out in the table below.

Summary 2025-2034 Facility Upgrade Program

Description 2025 2026-2034 Total
Annual Facility Upgrades  $ 500,000  $ 4,590,400  $ 5,090,400
Demolish/Rebuild Highbury Facility 2,500,000 327,500,000 330,000,000
$ 3,000,000  $ 332,090,400  $ 335,090,400
Funding
City of London $ 1,167,500  $ 149,955,400  $ 151,122,900
ICIP – Provincial 832,500 52,235,000 53,067,500
ICIP – Federal 1,000,000 63,400,000 64,400,000
Senior Government 66,500,000 66,500,000
$ 3,000,000 $ 322,090,400 $ 335,090,400

Notwithstanding the Highbury Facility Replacement Project, regular maintenance is still required at both the Highbury and Wonderland facilities. This program covers costs associated with building structure, building systems (heat, light, water, air, etc.) as well as grounds. The annual $500,000 allocation is generally split between the two facilities depending on where the need is in any given year. For 2025, anticipated work under this project includes asphalt and concrete repair, overhead exhaust replacements, heating and air conditioning system maintenance, maintenance of security cameras, and an additional fuel lane at the Wonderland facility.

Phase I of the Highbury facility replacement project ($199,500,000) is yet to receive approval from the Federal Government to proceed. As such, the allocation in 2024 & 2025 is related to the detailed design work and preparation of the request for proposal for the work based on the assumption the project will be approved some time in 2024. It is not anticipated that actual construction work will begin until late 2026/early 2027 given the work that is required is subsequent to funding approval and in advance of contract award. Phase II of this project represents the portion of the rebuild that could not be completed within the available funding envelope when the project was approved. Phase II is budgeted to begin in 2029 at a projected cost of $133,000,000 with funding yet to be determined (noting the budget projections assume 50% city funding and 50% senior government funding).

Information System Software and Hardware

For 2025-2034, $5.0 million has been identified for both new and upgraded system software as well as for new and replacement network/server/workstation infrastructure requirements as set out in the table below.

Summary 2025-2034 Information System Hardware/Software

Description 2025 2026-2034 Total
Annual Facility Upgrades  $ 500,000  $ 4,500,000  $ 5,000,000
Funding
LTC Capital Program Reserve  $ 500,000  $ 4,500,000  $ 5,000,000

In addition to the regularly required hardware replacements, a number of larger projects have been identified for consideration in 2025 including:

  • Interactive Voice Response system replacement
  • ESRI GIS upgrade
  • Website Update/Revamp
  • Parklane software replacement (HR Employee tracking system)
  • Platimum Accounting Replacement

The Information System software and hardware program is directly linked to London Transit’s Technology Plan, and all expenditures are fully funded from the LTC capital program reserve fund.

Shop and Garage Equipment

The table below sets out the budgeted requirements for the Shop and Garage Equipment Program for 2025 as well as the remaining nine years covering 2026-2034.

Summary 2025-2034 Shop and Garage Equipment

Description 2025 2026-2034 Total
Shop and Garage Equipment  $ 200,000  $ 1,800,000  $ 2,000,000
Funding
LTC Capital Program Reserve  $ 200,000  $ 1,800,000  $ 2,000,000

Shop and garage equipment includes such items as steam cleaners, skid steer, forklift, pallet trucks, lifting equipment/systems, floor sweeper/scrubber as well as bus maintenance and servicing tools. The items purchased are based upon need (for new equipment) and useful life assessment when dealing with equipment replacement. The expenditure covers shop and equipment needs at both the Highbury and Wonderland facilities. The program expenditures are fully funded from the capital program reserve fund.

Service Fleet Replacement

London Transit maintains a service fleet of ten vehicles. The vehicles are used by Operations staff (Inspectors) as well as Planning and Maintenance staff e.g., mobile mechanic. The replacement of the vehicles is generally based upon a five-to-10-year lifespan dependent upon the nature and use of the vehicle. The vehicles to be replaced are subject to mechanical and structural assessment. Vehicle replacements range between one and two vehicles per year, based on the state of repair. The table below sets out the budget allocation for the Service Fleet Replacement project covering 2025 as well as the period from 2026-2034, noting all investment in this program is fully funded from the capital program reserve fund.

Summary 2025-2034 Service Fleet Replacement

Description 2025 2026-2034 Total
Service Fleet Replacement  $ 65,000  $ 855,000  $ 920,000
Funding
LTC Capital Program Reserve  $ 65,000  $ 855,000  $ 920,000

Stop Upgrades

The Stop Upgrade Program covers the costs associated with installing new stop locations as well as the annual expansion of the passenger shelter program and installation of cement pads. The program budget as set out in the table below provides for approximately five new cement pads and three new shelters per year as well as the costs associated with the relocation of two shelters each year. The budget allocation is adjusted annually to coincide with the work required based on the annual service plan. The table below sets out the budget allocations noting this program is fully funded from the Capital Program Reserve Fund.

Summary 2025-2034 Stop Upgrades

Description 2025 2026-2034 Total
Annual Facility Upgrades  $ 46,000  $ 414,000  $ 460,000
Funding
LTC Capital Program Reserve  $ 46,000  $ 414,000  $ 460,000

Reconciliation with City of London Format

Subsequent to Commission approval, administration will work to reformat the 2025-2034 Capital Budget Program to be consistent with the standard presentation format utilized for all civic departments, boards and commissions, noting that amendment business cases for both the Bus Replacement Program and the Bus Expansion Program will also be submitted reflecting the changes noted above.

Enclosure

I – Summary 2025-2034 Capital Budget Program

Recommended by:

Mike Gregor, Director of Finance

Shawn Wilson, Director of Operations

Joanne Galloway, Director of Human Resources

Craig Morneau, Director of Fleet & Facilities

Katie Burns, Director of Planning

Concurred in by:

Kelly S. Paleczny, General Manager