Menu

Services

Check it out

Urban Transit in Canada – Taking Stock

• Background
• Current Situation
• How Canada Compares
• Looking Ahead
• Comparison of Current and
  Future Transit Scenarios
• Pressure Points
• Demand Management
• Access to Capital for Infrastructure Investments
• Access to Operating Funding
• Fleet Availability and Durability
  

                    

Urban Transit in Canada Taking Stock

This document is published in Portable Document Format (PDF) Adobe© Acrobat. The file size is 1,772 KB.  In order to view it, you will need a copy of Adobe Acrobat Reader (version 3.0 or higher).  This reader is available free of charge from Adobe's web site.  Please visit the Adobe website where you can download the Acrobat Reader.

Background

McCormick Rankin Corporation was retained by Transport Canada in July 2001 to undertake the study, “Urban Transit in Canada – Taking Stock”.  This is one of three background studies commissioned by Transport Canada to provide the federal government with a better understanding of today’s transit industry, a vision of a robust and progressive transit future and the challenges of achieving it, and a framework to assess future transit investments.  The two complimentary studies are “National Vision for Transit in Canada to 2020” undertaken by IBI Group and Richard Soberman and “Economic Study to Establish a Cost-Benefit Framework for the Evaluation of Various Types of Transit Investments” undertaken by HLB Decision Economics.

The purpose of this study is to describe and assess the current state of the Canadian transit industry, compare it with other places internationally, project the current industry into the future based on targets outlined in the National Vision study and identify the pressure points and resource gaps related to achieving this future vision.

Much of the historical and current information in this report has been obtained from the Canadian Urban Transit Association (CUTA).  CUTA is a national organization whose membership represents all but a very few transit systems in Canada.  Member’s vehicles comprise 98% of the fleet in the country.  The Association surveys its members annually and collects a wide variety of statistics about ridership, revenues and costs.

Current Situation

Key findings about the current contribution that public transit makes to urban travel in Canada include: 

• Annual transit ridership in Canada has been increasing since 1998, reaching 1.5 billion in 2000, with service available to approximately 95% of urban residents and 61% of the 30 million residents of Canada.
• Transit usage (passenger trips per capita) has not kept pace with population growth over the years.
• On average, 10% of work trips in Canada are made on public transit.  In some larger Canadian cities, 50% of work trips to downtown are made on transit but the growing suburban market is more difficult to serve effectively.
• Some of the more important factors that influence ridership levels are population density, quality of transit service, demographics, land use, congestion levels, and the cost of car ownership.
• Canadian cities provide the full complement of public transit modes, ranging from subways, bus rapid transit, light rail transit, heavy rail transit, to a variety of buses (from low floor articulated to small community buses).
• There are 14,335 active transit vehicles in operation in Canada, averaging 10.7 years of age (roughly 3 years more than desirable).
• Transit agencies are increasing their stock of fully accessible low floor buses.
• New technologies such as automatic vehicle location, automatic passenger counting and transit priority are used in up to half the transit systems. 
• About $3.5 billion is expended annually to cover operating costs, about 63 percent of which is funded by fares. The remaining 37% is covered primarily by municipal funding.
• Direct operating costs per passenger have decreased from $1.31 in 1992 to $0.78 in 2000.  Service (revenue hours per capita) has also been in decline.
• Between 1992 and 2000, the Canadian average revenue to cost ratio (total passenger fare revenue to total operating costs), steadily increased from 53% to 63%. 
• Seventy percent of operating costs are labour-related.  Public transit employs almost 40,000 people across Canada.
• Productivity (defined as revenue vehicle km/employees) has remained relatively stable since 1992.
• In Canada, there is substantial experience and practice of alternate service delivery, although this has been limited to private sector operating and maintenance contracts.
• Expenditures for transit capital projects reached almost $1 billion annually in 2000, double that of 1992.
• Provincial government contributions to capital funding of transit are in decline.  To account for this, higher fares have covered a larger portion of expenses, and new funding sources such as regional gas taxes in British Columbia have very recently been introduced.

 How Canada Compares

Compared with other cities and countries in the world, Canadian transit service and results are similar to Australia, higher than the United States and lower than in Europe.  Some of the more interesting results of this review are: 

• Boardings per capita (a measure of transit use) in Canada is, in general, slightly higher than Australia, much higher than in the US, but significantly lower than in Europe.
• Transit’s mode share (percentage of travel by transit) in Canada, as with boardings per capita, are slightly higher than Australia, higher than the US and lower than Europe for the higher population cities.  Smaller Canadian cities are closer in mode share to US cities with similar population densities.
• Large Canadian cities have a higher revenue to cost ratio (or putting it another way, recover more of the operating cost from fares) than most other cities in the comparison groups, including the European cities.  As Canadian cities decrease in size, their revenue to cost performance decreases.

Looking Ahead

In order to examine the future of public transit in Canada, three scenarios were developed: 

1. Declining Modal Share Scenario

This scenario assumes that the transit industry will not grow or change as the population of Canada grows.  Ridership, fleet size, revenues and costs will remain at today’s levels, resulting in a continual decline in modal share.

2. Stable Modal Share Scenario

This scenario projects the Canadian transit industry into the future by assuming that the transit industry will grow in the same proportion as the population of Canada.  Overall ridership will grow at the same rate as the population, modal share will remain constant and average revenue and cost per passenger will not grow in real terms in this scenario.  It is also assumed that the nature of Canadian cities in terms of density, land use characteristics and population distribution will not change, even as the cities grow. 

3. Increasing Modal Share Scenario

This scenario examines the indicators and targets in the report “National Vision for Urban Transit in Canada to 2020” prepared by IBI Group and Richard Soberman.  This National Vision assumes that the transit industry will grow more quickly than the overall Canadian population, increasing the potential and benefits of an improved transit industry in Canada.

 The results of the analysis of the three scenarios and their comparison to the current (1999) indicators are summarized in Exhibit ES.1

Exhibit ES.1 

Comparison of Current and Future Transit Scenarios

Notes: all costs in constant 1999 dollars.

In July 2001, the Canadian Urban Transit Association (CUTA) surveyed its members in order to determine their capital infrastructure needs over the next five years.  Projects included in the survey may or may not have been subjected to an economic analysis. The overall results of the survey identify approximately $13.5 billion in equipment and infrastructure during the five-year period 2002-2006.  About half of this total amount is for projects that are currently planned and budgeted, while the other half is for projects that would require new funding from other sources.  Transit agencies anticipate having about 80% of the funding necessary for rehabilitation and replacement, but only 30% of the funding identified for expansion and ridership growth.

The transit capacity of the three future scenarios analysed in this report is generally consistent with the transit capacity that would result from the capital expenditures identified in the CUTA survey for 2002-2006.  The following summaries of transit investments are therefore based upon the infrastructure survey results, which provides the only comprehensive data readily available to explore the specific needs of Canadian cities. 

 The Three Large Urban Areas

 The three large urban areas in Canada, namely Montreal, Toronto and Vancouver, account for 73% (or $9.8 billion) of the $13.5 billion of transit infrastructure expenditures identified in the CUTA survey over the next five years.

These areas have already planned and budgeted for 87% of their overall system replacement and rehabilitation requirements.  The largest gap between planned projects and those that would require new funding is in the area of facility (transit-only corridor) rehabilitation, where one third of the identified funding is not currently available.

 For service expansion, the agencies in the three regions have already planned more than $2.2 billion worth of projects, about 65% of which are related to rolling stock and rapid transit rights-of-way.  This represents only about 35% of the cost of the projects these transit providers have identified as being necessary to accommodate current and future ridership growth.  This is a gap of almost $4 billion.  Approximately 90% of this gap is for rolling stock and rapid transit rights-of-way.

Overall, the biggest transit infrastructure issue for the Montreal, Toronto and Vancouver regions is the desire to supply rapid transit rights-of-way totalling about $3.55 billion in projects that are currently beyond the capacity of the transit agencies to fund.  Of the remaining $900 million funding gap, about $430 million is for rolling stock and almost $400 million is for advanced technology and fare system related projects.

The Mid to Large Sized Urban Areas

Of the approximately $13.5 billion in total transit infrastructure expenditures identified in the CUTA survey over the next five years, 24% or $3.3 billion were identified by the nine mid to large sized transit agencies in Canada, namely Calgary, Edmonton, Grand River (Kitchener/Waterloo/Cambridge area), Halifax, Ottawa, Gatineau (formerly Outaouais), Quebec City, Victoria and Winnipeg.

The situation for this group of urban areas is similar to that of the three large regions.  Approximately three-quarters of the projects identified that require new funding are for rapid transit rights-of-way.  Most of the remaining gap between planned projects and those that would require new funding is for rolling stock (more than $400 million).

A significant difference between this group and the three large urban regions is that only about one third of the projects identified have already been planned and budgeted, compared with more than half of the projects in the larger regions.  While there is no absolute data available to explain this difference it is likely a result of two factors: 

• Two of the three large urban regions (Montreal and Vancouver) have access to alternative funding sources providing them with a significantly more stable funding environment.
• Only three of the nine mid to large sized urban areas have extensive, high quality rapid transit facilities.  The remaining six areas view some form of rapid transit in the future as the only way of achieving their local visions.  However, they are not in a position to fund a major program.  This compares with the large urban areas where the projects are largely additions to the existing system rather than completely new endeavours. 

 The Small to Medium Sized Urban Areas

Only two percent of the $13.5 billion of transit infrastructure investments identified in the CUTA survey are for projects in small to medium sized urban areas.  This is because the needs of these systems are different than those of the larger urban areas.  This group of transit systems does not have or seek rapid transit rights-of-way. Their needs are primarily for vehicles.

Of the $330 million in investments identified in the survey for this group, $267 million is for bus purchases.  Approximately three-quarters of the bus expenditures identified have already been planned and budgeted.  The fact that this gap exists for replacement and rehabilitation expenditures indicates that these communities are having difficulty keeping up with their existing needs.  While some of them are able to accommodate expansion of service, the gap in this area indicates that the agencies have a desire to do more if new sources of funding become available.

 Pressure Points

 The information and analysis presented in this study illustrates a number of challenges that would be faced in achieving the National Vision for transit in Canada.

 Pressure Point #1 – Demand Management

 The National Vision calls for a 50% increase in transit over the next 20 years, with demand for transit growing faster than the Canadian population (forecast to increase by 16% over this period).  This would represent a tremendous challenge for all concerned.

To even make the attempt would require a systematic assessment of the factors that influence transit demand and a concerted effort to improve and adjust practices and policies related to these factors.  For example:

• Policies that recognize and support transit’s integral role in creating a sustainable transportation system would be needed at all levels of government;
• Transit priority measures (tools to improve the mobility and “on-time” performance of transit vehicles through congested urban streets) would need to be the standard rather than the exception;
• Policies that allow flexibility of zoning requirements with respect to parking and development intensity adjacent to transit facilities would need to be established by urban municipalities;
• Policies that facilitate increased urban density would need to be researched, developed and implemented;
• Policies to integrate transit efficiency and service considerations into land use decisions would be needed at the municipal level;
• Improvements would be needed to transit service availability and reliability to a level as yet not obtained in Canada;
• Rapid Transit infrastructure development would be needed to ensure that transit could be competitive, particularly in a congested traffic environment;
• Policies that provide for increased charges for car use such as road tolls, complementary congestion charges, license surcharges and parking surcharges would be needed.

 Pressure Point #2 – Access to Capital for Infrastructure Investments

Canadian transit agencies currently spend approximately $1 billion annually on capital projects, 25% of which relies on debt financing.  With their municipal partners, capital spending grows to more than $1.3 billion annually. Lack of access to capital funding would constrain the ability of transit properties to support the desired growth in demand.  Extrapolating from the list of projects that municipalities across Canada identified in the CUTA survey, new capital expenditures of almost $1.4 billion annually would be required.

Two basic types of programs to address the gap would be needed:

• Large-scale infrastructure programs geared to the needs of the large transit agencies and residents of the urban areas they serve.  Over 70% of capital funding would likely be for rapid transit projects in the three largest urban regions and the nine mid-to-large sized transit systems
• Programs to assist with vehicle purchase and small infrastructure projects for all transit agencies.

Pressure Point #3– Access to Operating Funding

If all of the projects put forward by municipalities in the CUTA survey were implemented (a rough proxy for the transit capacity which would be needed under the National Vision), annual operating expenditures by the transit industry would increase by 40% to $4.11 billion (from $2.92 billion today).  This amount assumes a decline in per hour operating costs of the industry, as it takes advantage of new technologies and economies of scale.  However, it is unlikely, under the present taxing powers, that revenues for municipalities (the main agencies that pay for net operating costs) will grow at this rate given the expected 16% increase in the Canadian population.  Thus, approximately half of the funding for the increase in operating costs would not likely be accounted for without a new source of funding being available.

Fare revenue from transit users in the National Vision scenario is assumed to grow from an annual amount of $1.8 billion today to $2.7 billion in the future.  The difference between this future revenue and the future total annual operating costs of $4.11 billion is $1.41 billion (compared with a gap of $1.1 billion today).  Thus, the potential gap in operating cost funding under the National Vision, would be approximately $300 million annually.  This operating funding gap essentially reflects the additional funds that would be required to pay for the extra peak period service necessary to allow transit to compete effectively with the automobile. It would apply mainly to the larger transit systems, as their peak hour services are operating at capacity now.

Pressure Point #4 – Fleet Availability and Durability

 When considering fleet expansion to support the substantial increase in transit demand envisioned, it is important to consider the capacity of the transit manufacturing industry.  The three Canadian transit bus manufacturers have all experienced significant change over the past several years and have products that can generally meet the requirements of the transit systems.  However, they are structured to serve the current Canadian market as well as compete in the U.S. market and they would face a challenge to quickly increase their manufacturing capacity to meet an ongoing expanded market.  To address this, they would have to invest and grow based on the future vision, and/or other manufacturers from the U.S. or elsewhere would have to become active in the Canadian market.

The U.S. transit bus market is much larger than Canada.  Because the Canadian bus manufacturers compete in both markets, they naturally design their products to meet the needs of the largest market.  Since U.S. transit systems typically replace their bus fleet after twelve years of life, the vehicles accommodate this and do not always meet the needs of Canadian agencies that traditionally keep their buses longer.  Ensuring that buses purchased in Canada can meet the unique requirements of the Canadian environment for the desired time frame is a key issue.

The availability of long-term sustained and guaranteed funding support for transit agencies would provide the agencies with the ability to plan and commit to vehicle purchases in a stable and predictable environment.  This would in turn, allow the equipment manufacturers to invest in their production capability to meet the needs of an expanded market.