Toronto Transit Commission: Clearly not the “Best Deal On Wheels”
As the 3rd most heavily used North American transit system with an operating budget over $1.5B, it's shocking that an organization of this scale is able to get away with an ineffective operating model and continue to squander taxpayer money.
The Toronto Transit Commission (TTC) moves 540M people a year through a rapidly growing city[1]. As the 3rd most heavily used North American transit system with a budget over $1.5B[2], it’s shocking that an organization of this scale is able to get away with an ineffective operating model and continue to squander taxpayer money.
Business Strategy: The Age-Old Value Proposition
Like most public transit organizations, TTC hopes to provide a quick, cheap, and convenient ride to move people within the city. It’s an age-old proposition – pool collective funds, so all can enjoy a cheaper transportation method to their destination in a reasonable amount of time.
Operating Model:
To deliver on this proposition, TTC needs to excel on several fronts operationally. This includes investing in infrastructure, reducing downtime, keeping costs low, leveraging its workforce to provide good service and, more recently, integrating technology to enhance efficiency.
Poor infrastructure planning
Physical infrastructure is the backbone – the critical asset that will move people around effectively. Despite it’s heavy ridership, the limited permanent infrastructure (only 4 rapid transit lines) is an ongoing joke in the country.
It’s been clear that the TTC’s infrastructure must expand to meet the demands of a growing population and integrate with the transit systems in the broader Toronto area. However, TTC’s attempts to increase the scope of the physical infrastructure has been a disaster, partially due to the political pressures and capital investment required from the government. There have been talks about creating a light rail, leveraging railways or expanding the subway, but there is still no consensus on what the future should look like. TTC’s lack of vision, poor planning and inability to manage its stakeholders has resulted in a congested system that has become less relevant for its users as the city grows.
Frequent downtime on critical assets
Given the sparse infrastructure, TTC needs to limit the downtime on its critical assets to keep service moving. But, too many times, the city has been crippled by its subway delays. In 2012, the subway had ~5,000 delays for an average of 6.5 minutes each (~3 weeks!). 27% (or 109 hours of delay) were a result of emergency repairs required on trains and 12% were due to rail infrastructure[3]. TTC is doing a poor job in optimizing its constrained assets – especially since ~40% of these incidents appear preventable through better maintenance planning.
Trouble controlling costs
TTC’s business strategy only makes sense if it can keep the cost to its riders lower than alternative transportation. However, TTC has instead relied on fare hikes and government money to compensate for their spiralling costs. For example, the 5-mile extension of an existing line has been delayed by 2 years and grew to over $1.5 billon of it’s original cost[4]. Part of this run-up was due to an inability for TTC to manage the project and contractors effectively.
Unionized labour force = increased wages with minimal incentive for customer service
TTC employs over 13,000 employees, most of which are front line workers that are critical to creating a positive customer experience. In recent years, the workforce has garnered significant public scrutiny. In 2013, ~10% of workers made the Sunshine List ($100K+/year) of which 21 were fare collectors[5]. Even worse, there have been several complaints of employees caught sleeping on the job or disrespecting riders. A unionized workforce and lack of incentive structure could partially be to blame. To their credit, TTC is actively trying to turn around this image and work on customer service.
Leveraging technology
Other transit providers have effectively leveraged technology to improve efficiency. TTC continues to be behind the curve. For example, many large metropolitan cities (Hong Kong: 1997, London: 2003) have rolled out electronic payment fare-cards. PRESTO (Toronto’s version) took 6 years to approve, with a 10 year roll-out (estimated 2016) for $250M. The latest update is a 2019 roll-out for $700M – one of the most expensive fare-card systems in the world[6]. In the meantime, TTC will continue using manual labour to collect fares and force customers to wait in long line ups during rush hour.
So what?
Fortunately for TTC, even though the operating model is grossly misaligned with the business model, there currently are very few alternatives to get around (although Uber is definitely a start). By default, many just have to grit our teeth and deal with it. It definitely shows that misalignment of the business and operating models do not necessarily dictate the longevity of a firm.
Excellent description of how terrible Toronto’s public transportation system is. Since road traffic continues to increase and, as you mention, there are very few alternatives to get around in the city, do you think it’s possible to increase fares beyond the current $3/ride? This revenue increase could help the city raise funds to continue doing what it needs to do to succeed; invest in infrastructure. Also, do you think changing from a token based payment system to an electronic ticket/card will increase ridership (similar to comparable modern cities)?
Appreciate the response John, especially from a fellow Torontonian! I’m personally not convinced that increasing the fares will be the best move for the city – especially with the pricing pressures from UberX. I feel long-term this would further decrease the relevance and value that TTC can provide.
I do believe that changing to an electronic ticket / card system will increase ridership – especially from the younger generation. I’ve often forgone getting on a streetcar or subway and rather walked (or used Uber) because I no longer carry cash (and definitely don’t carry tokens).
Also, I can see it better promoting the integration with the other GTA transit systems. As someone who has used the PRESTO system extensively for the GO transit system (which is now entirely on PRESTO), I can see moving to an electronic system will encourage people to use both systems and provide a platform to provide potential incentives / discounts for those who already have a more expensive commute.
Very interesting blogpost, you did a wonderful job!
I saw many parallels between the TTC and Sydney’s railway system. Both experience significant delays arising from poor planning, poor scheduling, emergency repairs and signaling issues. Despite the constant attention from the public and ongoing public scrutiny, I am surprised at the rate of improvement and change overall.
I think the public nature of TTC plays a big role in slowing down the improvement progress as the $1.5B operating budget is a big component of the government’s overall budget, not to mention the additional investment required for technology and equipment upgrades. The vicious cycle of inadequate investment resulting in poor experience resulting in lack of reasons to lift fares to raise more funds for further investment is difficult to break. I wonder how the business model and operating model can be adjusted to break the vicious cycle that TTC is facing?
Great post Vicky! In a way I’m both glad and disappointed to realize that U.S. Government sponsored programs aren’t the only bureaucratic messes in the world. I do believe that it has cost far too much money, and has taken far too long of time to implement the electronic payment fare cards. Since they are already being utilized elsewhere, the cost should be lower and the implementation relatively easy. However, this may be a blessing in disguise for the TCC. I would imagine that the fare cards would increase overall ridership of an already stressed infrastructure. I think they need to get the ball rolling on increasing the number of lines, and the quality of trains before encouraging even more ridership. With everything you’ve written, I am very surprised that Toronto has the third most heavily used transit system in North America! I’m definitely staying away from it when I visit…
Haha – I really hope this doesn’t deter you from visiting Toronto! I’d love to host you and show you the joys that are Canada / Toronto.
I didn’t think about the added stress on the system by implementing electronic fare cards, but that’s a very valid point. But it’s a bit of a chicken and egg problem. You need the ridership to boost up your revenues (either from fares or making a case for an added cut of taxpayer money), but you also need the appropriate infrastructure to support / attract that volume. I’m not sure which they should tackle first, but I do think they first need to prove they can use their existing funds in a way that extracts the most value. Otherwise, it doesn’t matter whether they raise or spend money first because they are basically just throwing it away either way.
Super interesting post! As a fan of mass public transport systems, I was disappointed to hear that Toronto’s system is not properly addressing the needs of the city. In Mexico, many of the new investments for infrastructure, especially transport infrastructure, are being done through Public-Private Partnerships, with mixed results (some successful, some massive failures). Do you think that these types of partnerships might help to solve some of the issues faced by Toronto?
I think P3s are something that the private sector have been trying to advocate for years. It’s clear that TTC’s core competencies do not include managing large-scale infrastructure projects, and this is somewhere that a private partnership could help them. However, there’s been massive backlash on the use of P3s because of the massive failures you’ve mentioned. I personally believe that P3s would be beneficial if the right partner is selected and incentives are aligned. Unfortunately, I’m not sure that the Toronto population quite sees it the way I do!