To All Commissioners
Re: Recosted 2018 Operating Budget Program
Recommendations
The Commission:
- APPROVE the recosted 2018 operating expenditure budget for London’s public transit services of $78,321,600 as summarized on the following table;
| Conventional | Specialized | |||
| Description | Transit | Transit | Total | |
| Revenue | ||||
| Transportation revenue | $ 34,374,700 | $ 644,900 | $ 35,019,600 | |
| Operating revenue | 1,383,700 | – | 1,383,700 | |
| Transfer from reserves | 780,000 | – | 780,000 | |
| Provincial funding | 7,832,600 | 2,110,500 | 9,943,100 | |
| Total Revenue | 44,371,000 | 2,755,400 | 47,126,400 | |
| Expenditure | ||||
| Personnel cost | 48,271,100 | 924,600 | 49,195,700 | |
| Fuel | 7,089,100 | – | 7,089,100 | |
| Direct bus maintenance | 5,783,100 | – | 5,783,100 | |
| Facility | 3,080,500 | – | 3,080,500 | |
| Insurance | 1,995,000 | – | 1,995,000 | |
| Contribution to reserves | 1,455,400 | – | 1,455,400 | |
| Contracted service costs | – | 6,903,900 | 6,903,900 | |
| All other material costs | 2,684,200 | 134,700 | 2,818,900 | |
| Total Expenditures | 70,358,400 | 7,963,200 | 78,321,600 | |
| City of London | $ 25,987,400 | $ 5,207,800 | $ 31,195,200 | |
noting the recosted budget:
- reflects the impact of emergent issues/trends arising since the 2018 operating budget was first prepared and approved including consideration of actual to budget 2017 operating performance results;
- includes a placeholder amount relating to the 2017 fare increase deferral as well as the 2018 fare increase which was included in the multi-year budget totaling $1,783,800; and
- maintains the 2018 City of London operating investment as initially approved by the Commission at $30,913,200 and approved by Municipal Council with an additional $282,000 associated with Municipal Council’s prior approval of the Business Case relating to the Dundas Place project and the removal of buses off Dundas Street.
Background
In August 2015, the Commission approved the first ever multi-year operating budget, spanning the years 2016 through 2019. The approved multi-year budget was consistent with the Commission’s 2015-2018 Business Plan and associated Financial Plan.
The budget process for the third year in the multi-year cycle commenced in August 2017 with the Commission confirming the 2018 Operating Budget Submission at the August 30, 2017 Commission meeting.
Consistent with established practices, the 2018 budget is subject to a recosting exercise, 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 investment is not subject to recosting consideration unless an amendment business case for material items is submitted and approved by Municipal Council.
The exercise takes into consideration significant trends and/or emergent issues that have developed since the budget was first prepared (May to July 2017) and approved including 2017 operating budget performance results.
Conventional Transit Service
Recosted 2018 Conventional Transit Service Operating Budget
| Explanation of Increase (Decrease) | |||||||
| Description | 2018 Budget | 2018 Recosted | Increase (Decrease) | ESA / Bill 148 Impact | Buses off Dundas | Revenue Updates | |
| Revenue | |||||||
| Transportation revenue | $ 34,063,700 | $34,374,700 | $ 311,000 | $ – | $ – | $ 311,000 | |
| Operating revenue | 1,383,700 | 1,383,700 | – | – | – | – | |
| Transfer from reserves | 780,000 | 780,000 | – | – | – | – | |
| Provincial funding | 8,115,800 | 7,832,600 | (283,200) | 27,800 | – | (311,000) | |
| Total Revenue | 44,343,200 | 44,371,000 | 27,800 | 27,800 | – | – | |
| Expenditure | |||||||
| Personnel cost | 48,074,800 | 48,271,100 | 196,300 | 196,300 | |||
| Fuel | 7,038,900 | 7,089,100 | 50,200 | 50,200 | |||
| Direct bus maintenance | 5,754,800 | 5,783,100 | 28,300 | 28,300 | |||
| Facility | 3,052,700 | 3,080,500 | 27,800 | 27,800 | |||
| Insurance | 1,987,800 | 1,995,000 | 7,200 | 7,200 | |||
| Contribution to reserves | 1,455,400 | 1,455,400 | – | ||||
| All other material costs | 2,684,200 | 2,684,200 | – | ||||
| Total Expenditures | 70,048,600 | 70,358,400 | 309,800 | 27,800 | 282,000 | – | |
| City of London | $ 25,705,400 | $25,987,400 | $ 282,000 | $ – | $ 282,000 | $ – | |
As set out in the table above, the first contributing factor to the recosting relates to the impacts of the recent changes to the Employment Standards Act. On November 22, 2017, the Ontario government passed Bill 148, the Fair Workplaces, Better Jobs Act, 2017 (Bill 148), the response to the Final Report from the Changing Workplaces Review. The bill introduces broad ranging amendments to Ontario’s Employment Standards Act (ESA) and Labour Relations Act including increases in minimum wage from $11.40 currently to $14.00 on January 1, 2018, $15.00 on January 1, 2019 and after 2019 tied to inflation. The reforms also include changes to paid vacations, emergency and sick leave, and equal pay for part-time or casual workers doing the same job as full-time employees. The changes reflected in the table above relate specifically to third party contractors who have requested rate amendments to address the impact of the legislation.
In addition to the contractual changes, a comprehensive business case was submitted to council as an amendment to the approved multi-year budget. Civic administration has indicated that expenditures will be monitored from various departments and Boards and Commissions with funding adjustments to be updated as required. The following table highlights the expenditure areas where administration will be monitoring to measure the impacts of the changed legislation.
Estimated Impacts of Proposed Changes to Employment Standards Act
| Proposed Change | Recosted Amount | Estimate (Not Recosted) | Explanation |
| Increase to minimum wage | $ 27,800 | $ – | Impact on third party contractors who request price increases |
| Equal wages for temp employees for doing same work as permanent employees | – | 16,500 | Summer student in garage and casual customer service employees |
| Scheduling – min 3 hours pay if a shift is cancelled within 48 hours | – | TBD | |
| Scheduling – 3 hours pay for every 24 hour period on call | – | – | Potential 2019 impact |
| Paid Emergency Leave – 2 paid days per year per employee | – | 449,000 | |
| Total | $ 27,800 | TBD |
The second impacting factor on the recosted conventional operating budget is the removal of buses from Dundas Street. A business case for Dundas Place was included in the multi-year budget deliberations, which included the costs associated with the operating impact of removing buses from Dundas Street and rerouting to King and Queens. The estimated impact included in the business case the requirement for 3 additional buses and an annual operating impact of $282,000. The three additional bus purchases were completed in 2017 and are available for the service changes. Operating costs totalling $282,000 for operator labour, and operating and maintenance costs associated with the additional buses and service hours have been included in the recosting. As indicated in Staff Report #8, dated March 28, 2018, buses will be operating on detour beginning April 3, and will be permanently removed from Dundas and operating on King and Queens beginning April 29, 2018.
In January 2017 the City began fully subsidizing ridership for kids 12 and under. Given the relative short notice prior to program implementation, and the inability to implement a tracking mechanism in time for the January 1 program start, an agreement between LTC and the City of London called for the first year of the program to assume ridership for this group to be 10% higher than ridership recorded for the previous year. In 2017, fobs (smart card technology) were dispersed, which provided for the ability to track actual ridership noting riders 12 and under were required to tap the fob to permit boarding. Consistent with the agreement, beginning January 2018, ridership and related invoicing has been tied to actual ridership and the budget has been recosted to reflect this change. The revenue and ridership impact is $311,000 and 270,000 rides respectively, noting actual ridership in the first two months of 2018 is approximately 3 times that of 2016 ridership in this category.
Subsidies by the City of London for income based passes began in January 2018 coinciding with the elimination of pass and ticket subsidies for seniors. An additional subsidy for youth passes will also be introduced in September 2018 as an additional pilot program. Given the minimal level of historical data and difficulties in predicting the levels of ridership as a result of the changes, these categories have not been recosted, with ridership and revenue remaining at a constant level. Updates will be provided throughout 2018 as trends emerge.
Fuel price and its impact on expenditures is often an area that is recosted during this process. Prices in January and February have come in greater than originally budgeted (i.e. $1.01 actual per litre vs. $0.94 budgeted) resulting in an initial shortfall of nearly $80,000. Given prices in March have been much closer to budgeted levels, it was determined that the appropriate approach to this expenditure is to maintain the original budget with the caveat that any shortfall at year end would be funded by the Commission’s Energy Management Reserve.
The transportation revenue reported in the original 2018 budget includes a placeholder amount relating to the 2017 fare increase deferral as well as the 2018 fare increase which was included in the multi-year budget. The amount of revenue that is actually required from a fare adjustment in 2018 will be dependent upon many factors including actual ridership performance in all categories with specific attention to the newly introduced subsidy based categories such as the introduction of income based passes, kids 12 and under, youth passes offset by the elimination of senior based passes and tickets. The potential $1.8 million dollar revenue line has been left as a placeholder amount but not extrapolated into the operating budget lines given the number of fare programs that will have a potential impact.
Specialized Transit Service
The impact of Bill 148, as discussed above, also necessitates the recosting of contracted service required to deliver specialized transit. The Commission at its November 1, 2017 meeting approved a 10% rate increase to Voyageur for its primary and secondary services delivery contracts (Staff Report #2, November 1, 2017). The increase was required given the impact of minimum wage increases and results in a $473,000 cost increase.
When administration provided estimated costs related to the passing of the ESA amendments to civic administration for inclusion in a summary business case, this figure was unknown, and as such was not included. The table below indicates this increase in expenditures and currently has been offset by an increase to the provincial gas tax funding to offset; however civic administration has not yet indicated the level of funding available for cost increases as a result of the ESA changes.
Recosted 2017 Specialized Transit Service Operating Budget
| Description | 2018 Budget | 2018 Recosted | Increase (Decrease) | |
| Revenue | ||||
| Passenger fares | $ 644,900 | $ 644,900 | $ – | |
| Provincial funding | 1,636,700 | 2,110,500 | 473,800 | |
| Total Revenue | 2,281,600 | 2,755,400 | 473,800 | |
| Expenditure | ||||
| Personnel cost | 924,600 | 924,600 | – | |
| Contracted services | 6,430,100 | 6,903,900 | 473,800 | |
| All other material costs | 134,700 | 134,700 | – | |
| Total Expenditures | 7,489,400 | 7,963,200 | 473,800 | |
| City of London | $ 5,207,800 | $ 5,207,800 | $ – | |
The administration will continue to monitor the operating budget performance, reporting on same on a monthly basis throughout 2018.
Recommended by:
Mike Gregor – Director of Finance
Concurred in by:
Kelly S. Paleczny – General Manager