OPINION: The TTC and the Presto Smart Card

Courtesy TheMarkNews.com

The past 20 years have seen 14 fare hikes for the TTC, from $1.10 in 1990 to $3 for one adult token. But regardless of these increases, the TTC continues to require an ever-increasing subsidy to cover its budget shortfall.

A major reason for this lies in the TTC’s antiquated pricing and fare collection system. Despite the $3 cost of a token, each passenger accounts for only $1.78 worth of generated revenue for the TTC.

This can largely be attributed to the unlimited-ride monthly Metropass, meaning, rather paradoxically, the TTC’s most frequent and loyal riders are responsible for eroding the value of passenger revenue generated within the system.

While the first entry in this series advocated overhauling the TTC’s governance model and the second focused on exploring property development to generate future revenue streams, this article advocates a step the TTC can take to maximize returns from its current fare revenue.

Step 3. Adopt the Presto Smart Card

Modeled after similar cards used in cities around the world like London, New York, Hong Kong, and Tokyo, the Presto card is Ontario’s new, declining-cash-balance, contactless smart card to be used by all transit providers throughout Hamilton, the GTA, and Ottawa. However, the TTC is dragging its feet on adopting the Presto card, choosing instead to examine its own credit card-based open payment solution.

This is a poor choice.

Fare automation through the Presto card can reduce delays and confrontations between passengers and frontline staff while providing features such as electronic transfers, inter-regional transit connections, and the increased convenience of a standardized method of payment across the province. But more importantly, the Presto card can allow the TTC to return to the staggered fare system it successfully employed to expand service after 1954.

It used to be that suburban riders paid a premium for using the TTC to enter the city core, based on the higher costs to serve lower-density areas. This kept expenses at a manageable level and provided good value to inner-city customers. However, under pressure from Metro council, the TTC abolished its two-zone fare system in 1973 in favour of the system-wide flat fare that exists today.

It was a financial disaster. In every year since, the TTC has run a deficit, requiring almost $400 million in taxpayer subsidies last year alone. To counter this, the TTC has resorted to raising prices. But every time the TTC has raised prices, passenger numbers have slumped. For almost four decades, the TTC has been caught in a game of diminishing returns between attracting more riders and hiking fares to cover costs.

Adopting a pay-by-distance or graduated fare system made possible by the Presto smart card can reverse this trend to maximize the value of fare returns while allowing prices to vary according to distance. Imagine, no more tokens, tickets, or transfers. Using the TTC to travel one or two stops to the grocery store for $1, while cross-town journeys are charged realistic prices above the $3 threshold. With standardized prices, a $2 fare is $2 of revenue for the TTC and already gives a better rate of return than the $1.78 per rider it collects today.

Critics will point to issues of equity and the social role of subsidizing to get people out of their cars. But with token users paying more per ride than many Metropass holders and short-distance riders subsidizing long-distance riders, the current system is already inequitable. Having all users pay a standardized price based on distance travelled can actually increase equity and fairness for use of the service across the board. And while subsidizing suburban riders is a noble cause, how many more fare hikes, user fees, tax increases, or road tolls will Torontonians be willing to pay to cover the costs?

The TTC is 94 per cent reliant on fares to generate revenue, giving it little recourse to raise funds beyond cutting service, increasing prices, attracting more riders, or seeking further subsidies. But with transit suffocating the city budget and prices high already, action must be taken to increase the TTC’s revenue potential. A graduated fare structure and the Presto smart card remain the best options to update the TTC’s obsolete fare collection methods, alleviate its cost recovery problems, and standardize payment across the province.

Change rarely comes easy for the TTC, but there has never been a better time and opportunity to get moving and transform transit in Toronto.

The Mark News is Canada’s online forum for opinion and analsysis.

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