Staff Report #8
March 27, 2024
To All Commissioners
Re: Recosted 2024 Operating Budget Program
Recommendation
The Commission APPROVE the recosted 2024 operating expenditure budget for London’s public transit services of $111,800,400 as summarized on the following table noting the recosting includes updates for the recently approved 2024 growth in addition to the original base budget.
| Description | Conventional Transit | Specialized Transit | Total | |
| Revenue | ||||
| Transportation revenue | $ 39,093,300 | $ 839,100 | $ 39,932,400 | |
| Operating revenue | 1,990,600 | – | 1,990,600 | |
| Transfer from reserves | 1,661,400 | – | 1,661,400 | |
| Provincial gas tax funding | 11,200,000 | – | 11,200,000 | |
| Total Revenue | 53,945,300 | 839,100 | 54,784,400 | |
| Expenditure | ||||
| Personnel cost | 64,474,400 | 1,519,200 | 65,993,600 | |
| Fuel | 10,635,000 | – | 10,635,200 | |
| Direct bus maintenance | 9,049,300 | – | 9,049,300 | |
| Facility | 3,439,900 | – | 3,439,900 | |
| Insurance | 4,516,100 | – | 4,516,100 | |
| Contribution to reserves | 1,398,800 | – | 1,398,800 | |
| Contracted service costs | – | 12,791,400 | 12,791,400 | |
| All other material costs | 3,624,900 | 351,200 | 3,976,100 | |
| Total Expenditures | 97,138,600 | 14,661,800 | 111,800,400 | |
| City of London | $ 43,193,300 | $ 13,822,700 | $ 57,016,000 | |
Background
At the August 30, 2023 meeting, the Commission approved the 2024-2027 status quo (base) operating budget programs for conventional and specialized transit services and directed administration to submit to the City of London for inclusion in its multi-year budget. Subsequent to Council’s budget deliberations, the base operating budget for 2024-2027 was approved at its March 5, 2024 meeting. Details for the 2024 base budget are set out in the table below.
2024 Commission Approved – Status Quo (Base) Operating Budget
| Category | Conventional | Specialized | Total |
| Revenue | $ 53,201,400 | $ 778,400 | $ 53,979,800 |
| Expenditures | 95,667,800 | 14,221,800 | 109,889,600 |
| City of London | $ 42,466,400 | $ 13,443,400 | $ 55,909,800 |
Also debated and approved by the Commission at the August 30, 2023 meeting were the details to be included as growth business cases for the multi-year budget submission. Programs approved by the Commission for submission included (i) incremental service hours – conventional, (ii) incremental service hours – specialized, and (iii) enhanced shelter cleaning. Similar to the process for the base budget, Council deliberated on growth business cases as well. The final approval for incremental service hours in both conventional and specialized were reduced from the Commission’s request, and the enhanced shelter cleaning program was excluded from approval. Details of the 2024 growth budget, including the original Commission submission and subsequent Council approvals are set out in the table below.
2024 Growth Operating Budget Requests for City of London Funding
| Program | Commission Submission | City Approved | ||
| City Investment | Hours | City Investment | Hours | |
| Service Hours – Conventional | $ 2,535,600 | 25,000 | $ 1,646,600 | 18,000 |
| Service Hours – Specialized | 1,682,300 | 20,000 | 792,500 | 10,000 |
| Enhanced Shelter Cleaning | 107,900 | – | – | – |
| $ 4,325,800 | 45,000 | $ 2,439,100 | 28,000 | |
As noted above, the Commission’s 2024 status quo (base) operating budget for each of the conventional and specialized transit was approved by Council while growth submissions were amended for a reduction in service hours as submitted.
It should be noted that growth hours and its applicable funding approved by Council are annualized, meaning the hours assume implementation of all the hours beginning in January of each year. As a result, the recosting process pertaining to the addition of growth to the base budget will include a portion of the annualized hours and resulting expenditures supported by the additional city funding. 2025 will see the full year impact of the annualized growth funding, or referred to as flow-thru.
Consistent with established practices, the 2024 budget goes through a recosting exercise after Council has completed the budget approval process. The timing provides an opportunity to update for any revenue or expenditure trends that have emerged since the tabling of the original budget in August of the prior year.
The remainder of the report provides detailed recosting of the conventional and specialized transit service operating budgets for 2024, including both 2024 growth and recosting updates.
Conventional Transit Service
In order to complete the 2024 budget, a number of key assumptions had been applied, many of which have been refined given updated trending post pandemic, including the stabilizing of ridership since August 2023 as well as other contractual and price updates pertaining to expenditures. Also included as previously noted, is an update to the base budget for the approved growth in service. The following table sets out the updates that have been applied to the conventional transit service operating budget as the result of the recosting exercise.
2024 Recosted Conventional Transit Service Operating Budget
| Description | 2024 Budget | 2024 Growth | Recosting Updates | 2024 Recosted |
| Revenue | ||||
| Transportation Revenue | $ 38,405,400 | $ 93,000 | $ 594,900 | $ 39,093,300 |
| Operating Revenue | 1,990,600 | – | 1,990,600 | |
| Transfer from Reserves | 1,605,400 | 56,000 | 1,661,400 | |
| Provincial Gas Tax | 11,200,000 | – | – | 11,200,000 |
| Total Revenue | 53,201,400 | 93,000 | 650,900 | 53,945,300 |
| Expenditure | ||||
| Personnel | 63,487,300 | 624,800 | 362,300 | 64,474,400 |
| Fuel | 10,301,400 | 87,400 | 246,400 | 10,635,200 |
| Direct Bus Maintenance | 8,975,000 | 74,300 | – | 9,049,300 |
| Facility | 3,430,800 | – | 9,100 | 3,439,900 |
| Insurance | 4,498,100 | 18,000 | – | 4,516,100 |
| Contribution to Reserves | 1,398,800 | – | – | 1,398,800 |
| All Other Material Costs | 3,576,400 | 15,400 | 33,100 | 3,624,900 |
| Total Expenditures | 95,667,800 | 819,900 | 650,900 | 97,138,600 |
| City of London | $ 42,466,400 | $ 726,900 | – | $ 43,193,300 |
The following table sets out the 2024 city-approved service hour growth as noted in the above section, by category along with the split between the annualized and 2024 only portion.
2024 City Approved – Conventional Growth Operating Budget
| Category | Annualized | 2024 Only |
| Revenue | $ 288,300 | $ 93,000 |
| Expenditures | 1,934,900 | 819,900 |
| City of London | $ 1,646,600 | $ 726,900 |
| Statistics: | ||
| Service Hours | 18,000 | 6,000 |
| Ridership | 270,000 | 90,000 |
Given the time required to undertake the work associated with the implementation of additional hours (new hires, procure buses, prepare schedules, define stops for new routing, etc.) service improvements are scheduled to be implemented in September of each year following budget approval. Updates for 2024 growth include only the portion of annualized growth hours that will be implemented in 2024. As such, only $726,900 of the approved $1,646,600 in City of London funding will be required in 2024 given the service improvements will be implemented in September 2024. The annualized costs of the service improvements were required to be included in the growth business cases in order to ensure the full annualized cost of the growth was being captured. The 6,000 hours of service that will be added to the total service hours in 2024 will translate to 18,000 hours of service in 2025 when they are operating for a full year. Further details with respect to this update include the following:
2024 Growth:
- Transportation revenue – level of ridership and resulting revenue that is anticipated to increase as a result of the service hour and service level improvements;
- Personnel – labour, training and benefit costs pertaining the increase in complement required to deliver the new service;
- Fuel & Direct Bus Maintenance – diesel fuel and direct bus maintenance costs for the incremental increase in kilometres driven;
- Insurance – additional premiums associated with the increase in fleet necessary to deliver service growth; and
- Other Material Costs – additional costs for the recruitment and hiring of new Operators including uniforms and recruiting costs.
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. Fortunately, the results of positive ridership trends since August have led to an increase in transportation revenue of $594,900, which for the most part, offsets the updated expenditure impacts. 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 2023. Since that point, ridership has continued to grow, and the application of the new ridership projections result in an update to transportation revenue of $594,900, along with an additional 341,800 in ridership. It should be noted that the original budget did include an 18% fare increase that has now been allocated to the various fare categories;
- Transfer from reserves – additional internal funding that is required to balance the recosting updates, noting the anticipated transportation revenue increase does not completely offset the projected increases in operating expenditures;
- Personnel costs – updates to the original budget of $362,300 include an increase in labour hours pertaining to the recently negotiated collective agreement along with the requisite impact on source deductions and company benefits;
- Fuel – fuel prices in the original budget have been slightly amended based on current fuel price trends, the impact of the fuel contract extension and the April 1st increase in carbon fuel tax. The overall net impact is a 2.6¢ per litre increase in fuel rates, or $246,400; and
- Direct Bus Maintenance, Facility & Other Material Costs – updates relate to contractual price increases pertaining to bus maintenance costs (parts), contracted services and energy costs.
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 2024 specialized operating budget and the resulting recosted budget.
Recosted 2024 Specialized Transit Service Operating Budget
| Description | 2024 Budget | 2024 Growth | Recosting Updates | 2024 Recosted |
| Revenue | ||||
| Passenger fares | $ 778,400 | $ 19,700 | $ 41,000 | $ 839,100 |
| Provincial funding | – | – | – | – |
| Total Revenue | 778,400 | 19,700 | 41,000 | 839,100 |
| Expenditure | ||||
| Personnel cost | 1,436,900 | 82,300 | – | 1,519,200 |
| Contracted services | 12,471,000 | 310,300 | 10,100 | 12,791,400 |
| All other material costs | 313,900 | 6,400 | 30,900 | 351,200 |
| Total Expenditures | 14,221,800 | 399,000 | 41,000 | 14,661,800 |
| City of London | $ 13,443,400 | $ 379,300 | $ – | $ 13,822,700 |
The following table sets out the 2024 City approved growth service hour growth as noted in the above section, by category along with the split between the annualized and 2024 only portion.
2024 City Approved – Specialized Growth Operating Budget
| Category | Annualized | 2024 Only |
| Revenue | $ 46,000 | $ 19,700 |
| Expenditures | 838,500 | 399,000 |
| City of London | $ 792,500 | $ 379,300 |
| Statistics: | ||
| Service Hours | 10,000 | 4,300 |
| Ridership | 21,200 | 9,000 |
Updates for 2024 growth include only the portion of annualized growth hours that will be implemented in 2024. The implementation of service improvements on the specialized service are much less involved than that for conventional, and as such, can be implemented more quickly following budget approval.
As the table above indicates, for 2024, 4,300 of the approved 10,000 hours will be implemented. Based on the trip demand periods, the majority of the service improvements for 2024 will be applied to shifts operating Monday through Friday between 7:30am and 6:00pm. Given the current service levels in operation require all of the available vehicles during this peak operating time, additional vehicles will be required to implement these additional hours. The contractor has been notified of the approved increase and has ordered the vehicles, noting no commitment to service hours could be provided until final budget approval. Based on the projected delivery of the vehicles, it is anticipated these additional shifts will be added in the late summer/early fall of 2024. Other planned improvements, which will operate during off-peak times when vehicles are currently available will be implemented in April. These improvements include one additional vehicle operating from 9:00am to 6:00pm on Saturdays and two additional vehicles operating from 8:00am to 2:00pm on Sundays.
Based on this implementation schedule, $379,300 of the approved $792,500 in City of London funding will be required in 2024. The annualized costs of the service improvements were required to be included in the growth business cases in order to ensure the full cost of the growth was being captured. The 4,300 hours of service that will be added in 2024 will translate to 10,000 hours of service in 2025 when they are operating for a full year. Further details with respect to each of these updates include the following:
- Transportation revenue – level of ridership and resulting revenue that is anticipated to increase as a result of the service level improvement;
- Personnel costs – increase in complement of one for the addition of a call taker;
- Contracted services – outsourced costs for the delivery of additional service hours; and
- Other material costs – additional costs for systems and administration.
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. Further details with respect to each of these updates include the following:
Recosting Updates:
- Transportation revenue – for many of the specialized fare categories, allocations are made from conventional sales, including passes and tickets as these fares are used on both systems. Updates to the rates during the recosting process have resulted in an increase in specialized transportation revenue;
- Contracted services – slight updates to the contracted services rate; and
- Other material costs – additional costs relating to the annual maintenance agreement for the specialized scheduling system update.
Administration will continue to monitor the operating budget performance, reporting on same on a monthly basis throughout 2024.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager