Staff Report #1
March 26, 2025
To All Commissioners
Re: Recosted 2025 Operating Budget Program
Recommendation
The Commission APPROVE the recosted 2025 operating expenditure budget for London’s public transit services of $117,877,900 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 | $ 40,218,600 | $ 939,300 | $ 41,157,900 | |
| Operating revenue | 2,006,100 | – | 2,006,100 | |
| Transfer from reserves | 1,754,800 | – | 1,754,800 | |
| Provincial gas tax funding | 9,988,200 | – | 9,988,200 | |
| Total Revenue | 53,967,700 | 939,300 | 54,907,000 | |
| Expenditure | ||||
| Personnel cost | 68,500,200 | 1,555,400 | 70,055,600 | |
| Fuel | 10,558,100 | – | 10,558,100 | |
| Direct bus maintenance | 9,373,400 | – | 9,373,400 | |
| Facility | 3,697,700 | – | 3,697,700 | |
| Insurance | 4,618,500 | – | 4,618,500 | |
| Contribution to reserves | 1,276,600 | – | 1,276,600 | |
| Contracted service costs | – | 14,049,600 | 14,049,600 | |
| All other material costs | 3,879,700 | 368,700 | 4,248,400 | |
| Total Expenditures | 101,904,200 | 15,973,700 | 117,877,900 | |
| City of London | $ 47,936,500 | $ 15,034,400 | $ 62,970,900 | |
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 2025, 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 2025 operating budget approved by the Commission at the August 28, 2024 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 2025 on both the conventional and specialized services.
2025 Commission Approved Operating Budget
| Category | Conventional | Specialized | Total |
| Revenue | $ 54,089,900 | $ 939,300 | $ 55,029,200 |
| Expenditures | 102,026,400 | 15,973,700 | 118,000,100 |
| City of London | $ 47,936,500 | $ 15,034,400 | $ 62,970,900 |
As outlined in Staff Report #1, dated August 28, 2024, and reflected in the table above, material updates to revenue and expenditures resulted in a net reduction in the required City funding by $1.495 million. This reduction was submitted to civic administration and included in the 2025 budget process as an amendment business case which was subsequently approved by Council. The reduction was reflected as a one-time reduction, noting the trends that resulted in the budget reductions were uncertain as to whether they would continue through 2026 and 2027.
Consistent with established practices, the 2025 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 2024) and approved including 2024 year-end operating financial results.
Conventional Transit Service
In order to complete the 2025 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 2024 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.
2025 Recosted Conventional Transit Service Operating Budget
| Description | 2025 Budget | Recosting Updates | 2025 Recosted |
| Revenue | |||
| Transportation revenue | $ 40,892,400 | $ (673,800) | $ 40,218,600 |
| Operating revenue | 2,087,700 | (81,600) | 2,006,100 |
| Transfer from reserves | 1,121,600 | 633,200 | 1,754,800 |
| Provincial gas tax funding | 9,988,200 | – | 9,988,200 |
| Total Revenue | 54,089,900 | (122,200) | 53,967,700 |
| Expenditure | |||
| Personnel | 68,500,200 | – | 68,500,200 |
| Fuel | 10,690,700 | (132,600) | 10,558,100 |
| Direct bus maintenance | 9,350,200 | 23,200 | 9,373,400 |
| Facility | 3,664,600 | 33,100 | 3,697,700 |
| Insurance | 4,618,500 | – | 4,618,500 |
| Contribution to reserves | 1,398,800 | (122,300) | 1,276,600 |
| All other material costs | 3,803,400 | 76,300 | 3,879,700 |
| Total Expenditures | 102,026,400 | 122,200 | 101,904,200 |
| City of London | $ 47,936,500 | $ – | $ 47,936,500 |
Recosting updates 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 $633,200. The adjustment to the Transfer from Reserves includes the required internal reserve support necessary at this time 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 June 2024. As a significant fare increase had been implemented in January 2024, the full impact on ridership was not fully known (see Staff Report #5, dated March 26, 2025). These trends have been reflected in the recosting with some categorical shifts reflected in the update. During the multi-year budget setting process, concerns regarding the potential capping on the number of international students at Fanshawe College were included in the forecast and thus a significant reduction in revenues was anticipated. During the update for the 2025 operating budget last August, details from Fanshawe Students’ Union (FSU) indicated that the drop in students wasn’t going to be as significant as anticipated. This update in revenue was the significant contributor to the one-time City funding reduction offered by the Commission as noted above. Recent news regarding the level of international students anticipated at Fanshawe and ongoing discussions with the FSU, have necessitated an update to the number of students in the tuition pass program and thus a reduction in revenue anticipated for 2025. The reduction in students is anticipated to not only impact the 2024-2025 tuition program year but also 2025-2026. As a result, transportation revenue is projected to decline by $673,800 compared to the initial budget;
- Operating revenue – interest income on operating accounts as well as reserve funds are captured within this category. The significant rise in interest rates set by the Bank of Canada to combat inflation over the last few years has positively impacted the Commission’s return on its cash and cash equivalents. With the recent decline in interest rates, interest income for 2025 is projected to be $81,600 lower than initially budgeted, noting that $122,200 relates to lower interest income on the reserve funds, and is thus offset by a lower contribution required to reserves as noted below;
- Transfer from reserves – as discussed above, the $633,200 net unfavourable result in the recosting is not subject to additional City 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;
- Fuel – fuel prices in the original budget have been slightly amended based on current fuel price trends, along with the overall fuel economy resulting in a projected decline in fuel costs by $132,600. As previously noted, fuel prices can be volatile and as such difficult to predict. The impact of the ongoing trade war (i.e. tariffs) and political climate (i.e. carbon tax) is expected to continue to impact the fuel prices going forward. Given the position in the Energy Management Reserve (see Staff Report #3, dated March 26, 2025) the opportunity to mitigate unanticipated fuel and energy price increases exists;
- Direct Bus Maintenance, Facility & Other Material Costs – updates relate to contractual price increases pertaining to bus maintenance costs (parts), contracted services and energy costs; and
- Contribution to reserves – as noted above within operating revenue, the impact of the anticipated reduction in interest income on reserve fund accounts directly results in a lower contribution to the reserve, noting the net impact on operations is nil.
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 2025 specialized operating budget and the resulting recosted budget.
Recosted 2025 Specialized Transit Service Operating Budget
| Description | 2025 Budget | Recosting Updates | 2024 Recosted |
| Revenue | |||
| Passenger fares | $ 933,300 | $ – | $ 933,300 |
| Provincial funding | – | – | – |
| Total Revenue | 933,300 | – | 933,300 |
| Expenditure | |||
| Personnel cost | 1,555,400 | – | 1,555,400 |
| Contracted services | 14,049,600 | – | 14,049,600 |
| All other material costs | 368,700 | – | 368,700 |
| Total Expenditures | 15,973,700 | – | 15,973,700 |
| City of London | $ 15,034,400 | $ – | $ 15,034,400 |
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 2025.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager