Front Burner - Canada’s public transit ‘death spiral’

Episode Date: August 26, 2024

Earlier this month, Ottawa mayor Mark Sutcliffe warned the provincial and federal governments that his city was facing a public transit funding crisis. He says that at this rate, the city won’t have enough money to run the light rail lines currently under construction.From Metro Vancouver to Toronto, we’re seeing similar issues in major cities across Canada.These cities are dealing with what planning experts call a “transit death spiral”. When ridership drops, they can’t keep up with the costs of the current system that commuters rely on, let alone the big projects that could attract new riders.David Cooper is the founder and principal of the Canadian transportation planning firm, Leading Mobility. He co-wrote a recent report on the state of transit funding in Canada’s biggest cities.David talks to guest host Jonathan Montpetit about just how dire the situation is and what solutions are on the table.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcriptsTranscripts of each episode will be made available by the next workday.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jonathan Mopetze, filling in for Jamie Poisson. Earlier this month, Ottawa Mayor Mark Sutcliffe warned the provincial and federal governments that the city is facing a public transit funding crisis. We can't afford to run the transit system we have now.

We have a $140 million hole in our transit budget for the next three or four years, and we need help from other levels of government or we're going to face some very, very tough decisions as a city in the next year. Sutcliffe says at this rate, the city won't have enough money to run the light rail lines currently under construction, and Ottawa is not the only city struggling

to build transit infrastructure and pay for day-to-day service. Vancouver is building out its Skytrain and LRT, but isn't sure it can afford to operate either when they're finished. It's even looking at possibly cutting existing transit services in half next year. Edmonton bought electric buses that don't work well in winter, and now it can't afford to replace the rest of its bus fleet. And 13 years later, commuters in Toronto are still waiting for the Eglinton LRT to open. As the Star pointed out, it took the Romans less time to build the Coliseum. These cities are dealing with what experts call a transit death spiral. When ridership drops, they can't keep up with the costs of the current system that commuters rely on, let alone

the big projects that could attract new riders. Like me, you've probably had times where you'd rather walk or drive than wait for a bus that might never come. David Cooper is a transportation planner with a firm called Leading Mobility. He co-wrote a recent report on the state of transit funding in Canada's biggest cities that found significant budget shortfalls in most of them. So today, I want to talk to him about just how dire the situation is and what solutions are on the table. Hi David, and thanks so much for joining us. Thanks for having me. So I want to start by talking a bit more about what's happening with Ottawa's transit system right now. We just mentioned that they've got this massive budget shortfall. The mayor says they can barely afford to run the system as is.

How did things get to this point? Cities like Ottawa have really two ways to fund transit. One is through property tax. The other one is through transit fares. And then Ottawa, like other cities across Canada Canada were really deeply impacted by the pandemic we had a loss of of significant amounts of revenue because we lost a lot of our ridership and then we've had this ridership recovery and it's been uneven and like a lot of cities are 89% Ottawa at 75 and a lot of that's because we've had a slower return to the office of federal civil servants.

And we have a new transit system that's being built where Ottawa was very fortunate to get substantial funding from the federal government in the province to build the confederation line. And on behalf of all of my colleagues on the city council, past and present, I'm thrilled to join all of you today for this historic event, the launch of the Confederation line LRT. And the Confederation line opened right before the pandemic. And what's occurred is that, you know, we have a system that's being built out for across the light rail network. And we've had changing travel patterns, which has had detrimental impacts on revenue. What ends up happening is you build these new lines,

you have additional operating costs as well. So they're being deeply impacted, not just from the lack of revenue tools or a diverse set of tools that they don't have. Plus you have an uneven return to ridership. Plus you have these new projects opening. And this is really the same story in many other cities across Canada as well. You see this machine?

They're in all the buses across Montreal. You take your credit card information on your phone. Beep, beep. Pays you go. Off we go. But it doesn't work. None of them work. Why is it taking so long?

Well, the answer is bureaucracy. You see, the ARTM, the Regional Transit Authority, it's higher up the food chain than the STM. It took the STM's plan to modernize the payment system, looked at it, said we're going to make it better. Eventually, it killed it. So now, here we are. All right, so you've put a lot of issues on the table right there.

But let's just kind of go back a second and drill down on what the pandemic did to transit ridership across the country. And tell us a little bit how the recovery has been uneven city to city. has been uneven city to city? Sure. So what we've seen is we've seen a return to ridership of 80, 90% in many cities, which has been a good news story. But the business model for transit largely was people coming to the office five days a week. So I'll give an example. So 26% of the transit ridership on the Toronto Transit Commission or the TTC was commuters. And that was five days a week. We don't have that right now. We've had a lot of growth in ridership in the service sector. We've had a lot of growth in ridership in the off-peak period. So this is like weekends, evenings, bid day, the GO train in Toronto. The ridership is fully recovered and then some on the weekends

because people are taking the GO train for more events and specific trips, but less so during the week. So we've seen the service also get reallocated to that. But then if people are coming on the system, maybe in the same numbers numerically, but taking different types of trips, it impacts your fare revenue. And we've not fully recovered from that in most cities in Canada. And so if I can just kind of rephrase that issue a little bit, basically, are commuters using transit differently now than they were before the pandemic? That's correct. And we've had different types of commuting patterns as well that goes along with it, which also does

different types of revenue that you get out of fares, which in most Canadian major cities is about 40% of their revenue comes from fares. So last month, TransLink, the transit authority for Metro Vancouver, they raised similar alarm bells to Ottawa saying that if they don't solve their $600 million deficit by the end of next year, they'll have to cut services by something like 50%. What if I told you that in less than two years, our transit system will come to a screeching halt? What if I told you our system is on the brink of a financial crisis like we've never seen before, and that you will feel the impact, even if you've never stepped foot on transit? Welcome to 2026,

the year TransLink is scheduled to run out of funding. To what extent are we seeing similar challenges across the country? I mean, so I live in Montreal and the transit authority here is anticipating a $560 million shortfall next year. Yes, that's correct. And Montreal has already been doing cuts. So Montreal is permanently parked 155 buses. They don't run them anymore because they can't afford to. That's basically a transit grouch, to give you a perspective, is usually 150, 200 buses. So you basically have lost entire depots worth of buses now permanently because we don't

have the funding to run them. There's been severe cuts on your frequent transit networks, so any sort of major corridor has really seen service reductions all across, especially the island of Montreal. There's been conversations of shutting down the metro early, but this is no different than Ottawa. Ottawa is putting a new network that has service reductions on it. They've cut their LRT service.

Taking a closer look now at one of our top stories, Mayor Mark Sutcliffe issuing a call for help from other levels of government. Sutcliffe says OC Transpo is facing an operating deficit of $140 million a year over the next three or four years. He says without funding, Ottawa taxpayers could see tax hikes, fare increases or more service cuts. Vancouver's having that conversation. Calgary needs additional funding to maintain service levels, let alone grow them. So it's really happening everywhere in our Canadian cities right now. So you mentioned how ridership is one of the big problems we're seeing. Revenues from fares just aren't what they used to be.

And so it's becoming harder and harder for transit operating systems to keep going. Let's talk about solutions for a minute here. What kind of solutions to the funding issues are available to these cities? So when my colleague Chris French, who did a lot of heavy lifting on this report and myself, spoke to the transit agencies, we proposed a number of different tools. And the tools we proposed are things that are actually done in other places. These are not things that are one-off or bespoke. Most of them have been done in other places to pay for transit. So we looked at, for instance, a thing called a benefit area tax, where you pay additional property tax if you're in an area with high transit service, which Halifax does.

Halifax has more diverse revenue tools for transit than cities like Toronto does right now. That's kind of the situation we're in. Montreal gets some transit funding from a vehicle levy. Gatineau is looking at that right now. Some cities are looking at mobility pricing, which is a form of road tolls. There's states in the United States that actually provide sales tax to transit agencies, which is very different and helps to fund direct, not only operating, but also the expansion of service.

And there's also some cities in the United States provide a fee on Uber and Lyft trips to help with transit services, especially with accessible transit services as a funding stream for that. So there's differing tools to do that. The issue we have more so is that is there the political willingness from our leaders at City Hall to one, advocate for these tools to directly pay for transit, and two, the provinces have to agree to it. They have the legislative authority to do it, and they have to agree to this, which some provinces have done that, and some,

I'm not sure they're even interested in even having the conversation. You mentioned the kind of political issues behind funding transit. Back in July, the federal government announced it was creating a fund providing about $3 billion in annual funding to transit agencies. Today's funding is historic. This is $30 billion over 10 years. It's in the budget already, which makes me as finance minister happy. And it's money that cities and transit systems can apply for starting right now to build and support fantastic systems like the TTC. A central element is it is about making sure that we as a country do a better job at planning our transit systems, having regional... But the fund is meant to support transit capital investments, like new buses, new lines, that sort of thing,

but not to cover operating shortfalls. Is part of the challenge here the kind of funding that's available to cities from provincial and federal governments? Yes, totally. It is. So the province and federal government have been providing substantial capital funding. We've had a real deficit of building out our transit networks. If you draw the Toronto subway on a piece of paper, it's from 30 years ago versus today. The map's not that different. It's even a line across, right? So, and we're going to see some pretty substantial improvements to that in the near term. But the challenge is that we don't get the outcomes of these investments if you don't

actually provide the service. And we've had situations in a couple of cities where they would get funding for, let's say, a bus rapid transit service and then run service every like 27 minutes, every 35 minutes, because they actually can't afford to run it. We're very fortunate to get the funding for these projects, but you get no outcomes if we actually can't run them. There's a mismatch right now between the types of funding that we're getting and the types of funding that we need, and it's pretty severe when it comes to the operating funding conversation. Big transit projects are also often synonymous with delays and cost overruns. The Toronto-Zanglinton LRG is I don't know how many years behind schedule.

We're going to go live right now to Metrolink CEO Phil Verster speaking to reporters. Let's listen in. We are finding and fixing issues and defects. And when we feel the risks are contained enough and we can declare an opening date, we'll do so. If you don't want to declare an opening date, can you rule out certain dates? Can you rule out spring? Not going to be drawn into any guesses on dates. But some of the engineers downstairs are saying that they need some warmer climates, do some work that will take about three months. So, I mean, the earliest we're looking at is late 2024, I would say.

More questions? I mean, like, we're looking at is late 2024, I would say. More questions? I mean, like, can we answer that question, though? And people are also worried that there isn't enough publicly available information about the progress of these projects. Do these problems affect the public's appetite for increasing transit funding? What's interesting with transit is that it really runs a lot of support from the political spectrum. We don't have a lot of people saying we don't want to build transit. I think a lot of the conversation is usually about what are we building and what's the impact of it. And right now we're having challenges with some of the bigger ticket

projects from in terms of construction complexity or timelines or things like that. But we didn't build anything for a long time. And now we have several projects in the pipeline and we have labor shortages, we have supply shortages, we've had inflation issues occurring within our public infrastructure that you're also seeing in other types of infrastructure projects. And then also the complexity,

we're building transit in some of the most dense parts of our urban Canada. And these are things that will have impacts and these are things that will be difficult to construct. And that's unfortunately kind of one of the nuances with some of these projects. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem.

Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to,

50% of them do not know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. wait for these new projects to come online. The issues with the current transit system aren't getting solved. What has happened with the reliability of our transit systems? Well, I think one of the challenges we have politically is that it's not sexy to pay for operating. We've had a number of systems that are aging, that they're a state of good repair. I'll give an example. If you go on the Toronto subway, a lot of stations don't have a roof right now it seems because they're

trying to do you know basic maintenance work for you know keeping you know conduit running and and the station functioning and and adding sometimes you know accessibility improvements or or basic station maintenance and it's it's a challenge and and it's not as sexy for governments to fund we've had you know we have uh montreal has metro cars the the ones that are on the blue and the yellow line they're 48 years old uh they were built they were purchased for the 76 olympics um the ones with the three little hums, like when they take off, which is very iconic for Montreal. But we're running train cars that are with a 30-year design life that are 48 years old. Edmonton has LRT cars from 1977 for their system to open the next year are still running. These projects are not as exciting to a politician as a ribbon cutting would be on a new

line, but hundreds of thousands of people a day rely on those vehicles and in those stations and those infrastructures. Toronto is asking for new line 2 subway trains desperately, but they're not as sexy as these new lines. And there's a disconnect on that conversation at times too. I've heard the term transit death spiral used to describe what's happening. I touched on it a little bit in the intro, but can you flesh it out for me? Like what is the transit death spiral? So what the transit death spiral is, it's a very popular term in my sector recently, but what it is, is the big thing that attracts people to public transit is access to service and reliable service as well. And if you erode your service, you make it less attractive

for people to take. So then they end up taking it less or they just walk away. Former Paralympian Sally Thomas relies on OC Transpo to get around. We built a lemon. We cut corners. Too many secrets were held back from the public, and they rushed things. Thomas moved from Belleville, Ontario, to Ottawa specifically for a proper transit system. Would you still have moved to Ottawa knowing the transit troubles? I would definitely go somewhere else. And then you actually get less people to go on it, then you actually reduce your revenue even further.

And then they cut it again. And then you turn into this vicious cycle where you just keep losing the value proposition of taking public transit to the point where you make the service worse. Less people want to take it. They walk away. They reduce the revenue. And then they cut again. So and that's the issue we're in. And we're seeing that in Montreal.

We're seeing that in Ottawa. We're going to see that in Vancouver if we can't fix the broken funding model. We're going to see that in the prairie cities as well if we don't come up with a final solution on the structural issues of their operating budgets. You know, David, I think some people listening to our conversation about the problems with funding would say, well, look, the solution is obvious. Why not just increase fares?

Would that solve the problems that we've been talking about? I think the issue with increasing fares is that differing people get impacted differently. If increasing fares, you actually hit individuals in society that are more low income, individuals that are more transit dependent, and it doesn't really solve the actual particular issue you don't actually raise every time you raise fares you actually lose ridership which then contributes to that because again the value proposition you know you're raising fares for a service but you're not improving the service people don't see the value in it as well right so there's a bit of a

counterintuitive situation that occurs there i've've had people, you know, hearing about this story last couple of weeks, just messaging me and saying, well, why don't you increase your property tax? One of the challenges that we have with that conversation is that public transit is typically the second highest budget item in cities next to emergency services. And if you have a budget deficit, like cities can't run deficits legally, and you have a big budget hole from transit revenue challenges, it could also detrimentally impact other services. So you have these two constrained tools. And that's why we're saying maybe there's other ways that you may want to fund this as well. Because it's like when you retire, you want to have a diversified portfolio. So you have some ability to weather the storm. They don't have that and that's why we're trying to spur up this conversation today you know there are some cities and some provinces that are experimenting with different funding models like the the rem in montreal is

being built by quebec's uh pension fund um what are some of the other ways that transit agencies and local governments can try to address this issue of structural deficits? It's not politically popular, but it's getting new revenue tools and people don't like new taxes and fees. I don't like them either. But if myself or the public sees the line of sight where they put their dollars, you're more likely to agree to it. One of the challenges with these fees we have is that I'll give an example, off street parking tax, City of Toronto is looking at that it could actually bring in anywhere between two to $500 million worth of revenue to the city to pay for

things like TTC. But one of the challenges you have inside City Hall is that when new revenue tools come, if they are dedicated to a specific service or purpose, the public generally, when they see the benefit of that, there's a more public acceptance to it. If it goes to general revenue, there's very little public acceptance of it. Finance departments like things with general revenue because it provides them some ability to be flexible in terms of addressing some of the structural issues they have on the overall budget versus if people said, hey, you pay more parking tax, you're able to get more service. Seattle does this. Seattle's opening a significant amount of rapid transit right now. If you go on their website, they tell you what routes are actually funded by sales tax by jurisdiction. They said

you get more service because the voters of the city of Seattle paid for additional sales tax money to actually pay for additional service. When people see the alignment of their taxation dollars to a service that they can benefit from, you generally get more support. What is the political mindset that we would need to make day-to-day commute better for Canadians? I think on this one is that I think the challenge right now with this conversation is that governments don't want to do anything until there's a crisis. And I think there's a number of different crises unfolding at city halls right now from housing to public safety to transit to affordability. And what's happening is that transit riders are kind of stuck in the middle where it's like can i rely on this service will actually exist um and one of the challenges that we're going to have is we end up going into these periods of brinkmanship where it's like okay if we don't solve this these are the detrimental

impacts that's going to happen to your constituents and i think we need to have a little bit more of a less reactionary conversation on this. We're going to see more of this in the fall when municipal budget season comes, and they're going to make some hard decisions. If there isn't a solution by the end of this year, there will be some substantial impacts to Canadians and their commutes. David Cooper, thanks so much for joining us. Thanks for having me today. That's all for today. I'm Jonathan Mopetze, in for Jamie Possum. Thanks so much for listening. I'll talk to you tomorrow.