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TTC Fare Price compares with OIL Prices


Sutharsan

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In these days, the oil prices were dropped by a couple of month ago so do you consider if the TTC would decrease fare price or not? It not fair for the TTC customers.

Please share with your thoughts

Gas prices may have dropped considerably, however, diesel has not. It is considered to be "heating oil", which at this time of year is in high demand.

Perhaps someone has a better idea of what goes on with fuel purchases, but would the TTC not hedge diesel?

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I know for a fact that the TTC hedges their fuel but i'm not sure how it works with them. But in any case there is a 0 percent chance the TTC would, or will ever reduce fare prices. Even if their operating costs magically fell by 200 million they would never consider reducing fares....they need every cent of the revenues they get.

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In these days, the oil prices were dropped by a couple of month ago so do you consider if the TTC would decrease fare price or not? It not fair for the TTC customers.

Please share with your thoughts

Any savings from a drop in fuel prices would count as a "surplus" and the city would claw it back.

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Fuel cost is such a small portion of the actual operating cost of the vehicle that even a 50% drop in diesel would only net an equivalent fare savings of perhaps 20 cents - and quite possibly less.

And yes, the TTC hedges its fuel contracts, usually in 3 or 5 year chunks. They usually have some ability to allow the price to float before they can lock it in for a time, but I suspect that even if the price of diesel does a nose-dive that they'll take a bit of a "hit" versus the price. Which is fine, considering that for several years they came out on top of the price fluctuations.

Dan

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Not as bad compared to certain surrounding municipalities which I wont name...

The thing that is overlooked with cost recovery ratio is the actually subsidized amount.

To make things simple, lets say to operate a trip is $1.

If there is 1000 riders for a TA with 70% recovery, that means the subsides required is $300.

And for the other TA. If they have a 50% recovery with 100 riders, only $50 is required to subsides the service.

The TTC has more than 10 times any 905 TA's ridership. Therefore the amount required to subsides the TTC is 6-8 times higher than those TAs but Toronto's population isn't 6-8 times more than the population in Mississauga, Brampton, York Region, etc. With lower property tax in Toronto, subsides is a huge issue. 70% for the TTC is simply not good enough if they don't raise taxes while 40% for that other TA is good enough for them.

Now, stop comparing cost recovery ratio cause it's very very pointless. Yes TTC's cost recovery ratio is bad. It should be close to 90% if they can't raise tax and higher if they want to expand services. It's also harder to raise the ratio with when the ridership is much higher.

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The thing that is overlooked with cost recovery ratio is the actually subsidized amount.

To make things simple, lets say to operate a trip is $1.

If there is 1000 riders for a TA with 70% recovery, that means the subsides required is $300.

And for the other TA. If they have a 50% recovery with 100 riders, only $50 is required to subsides the service.

The TTC has more than 10 times any 905 TA's ridership. Therefore the amount required to subsides the TTC is 6-8 times higher than those TAs but Toronto's population isn't 6-8 times more than the population in Mississauga, Brampton, York Region, etc. With lower property tax in Toronto, subsides is a huge issue. 70% for the TTC is simply not good enough if they don't raise taxes while 40% for that other TA is good enough for them.

Now, stop comparing cost recovery ratio cause it's very very pointless. Yes TTC's cost recovery ratio is bad. It should be close to 90% if they can't raise tax and higher if they want to expand services. It's also harder to raise the ratio with when the ridership is much higher.

Except that you completely missed the crucial parts of how subsidies are calculated, one being the fixed operation cost of a transit vehicle, which unlike your example do not fluctuate based on how many people are on board the vehicle. Second, most transit systems measure performance based on subsidy per rider and not the overall subsidy.

Let's say, as a example, that it costs $125 per hour to operate a bus. This factors in driver wages, benefits, fuel cost, maintenance, and perhaps other things such as insurance and the like.

If the bus runs for a hour and 20 people board during that time, with each paying $3, $60 in revenue has been generated. That means 48% of the cost has been recovered and 52% ($65) is subsidized. That means the subsidy per rider is $3.25 when factoring in the fixed hourly cost.

On the other hand, if the bus runs for a hour, but only 9 people board during that time, with the fare also $3, $27 has been generated. Therefore only 22% has been recovered and 78% ($98) is subsidized. The subsidy per rider is $10.88.

Finally, Toronto has a much larger tax base than the surrounding municipalities. Something that might be worth researching is what percentage of each municipalities operating budget goes to subsidize transit.

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Except that you completely missed the crucial parts of how subsidies are calculated, one being the fixed operation cost of a transit vehicle, which unlike your example do not fluctuate based on how many people are on board the vehicle. Second, most transit systems measure performance based on subsidy per rider and not the overall subsidy.

Let's say, as a example, that it costs $125 per hour to operate a bus. This factors in driver wages, benefits, fuel cost, maintenance, and perhaps other things such as insurance and the like.

If the bus runs for a hour and 20 people board during that time, with each paying $3, $60 in revenue has been generated. That means 48% of the cost has been recovered and 52% ($65) is subsidized. That means the subsidy per rider is $3.25 when factoring in the fixed hourly cost.

On the other hand, if the bus runs for a hour, but only 9 people board during that time, with the fare also $3, $27 has been generated. Therefore only 22% has been recovered and 78% ($98) is subsidized. The subsidy per rider is $10.88.

Finally, Toronto has a much larger tax base than the surrounding municipalities. Something that might be worth researching is what percentage of each municipalities operating budget goes to subsidize transit.

I was trying to keep it simple. :-)

It gets a lot more complicated for TTC's case with cash, tickets, metropasses and transfers. Is it subways, streetcars or buses they took. Every route is different along with time periods.

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I was trying to keep it simple. :-)

It gets a lot more complicated for TTC's case with cash, tickets, metropasses and transfers. Is it subways, streetcars or buses they took. Every route is different along with time periods.

Problem is, simple isn't always correct.

You're incorrectly taking the ratio and trying to work backwards, looking at just the actual ridership directly to determine subsidies, and not factoring the costs of the actual services offered. Looking at a level playing field scenario, if the fictional 197 Scrapyard Rocket runs one bus all day on a fixed schedule, and gets 10 or 1000 riders over that day, the cost to operate the route is nearly the same no matter how many riders are picked up (discounting any minor variances such as extra fuel used making more stops), but the revenue generated is more for the 1000 rider scenario, reducing subsidized costs on that route.

But of course that all works in a relevant range model. That bus may be able to handle that route with daily passenger ridership from 0-1000 fine, but if ridership hits a certain mark (say 1001+) another bus needs to be added to maintain the set schedule, thus doubling your costs and halving your ratio. Ridership is the cost driver, but the costs are stepped costs, with large fixed components (adding another bus to the route).

In some situations, over a certain point with enough riders where revenue generated exceeds costs, theoretically you could start making a profit (while in real life this is rarely the case, IIRC there are some of the more busy TTC subway and GO rail lines operating in the green, effectively helping to subsidize the others).

If you really want to improve the overall ratio, you can always slash or eliminate those routes performing under a certain per rider cost threshold (pull a YRT ;) ), but then you're beginning to stop offering transit as a service, and start running it like a business. Which, if you're a city, may not be in the best interests of all your residents.

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