2052.8 For Action Financial Update for the Period Ended December 31, 2020 and Major Projects Update Date: April 14, 2021 To: TTC Board From: Chief Financial Officer Summary This report sets out the preliminary operating and capital financial results for TTC Conventional and Wheel-Trans services for the year ended December 31, 2020. These results are subject to the year-end audit process and it is anticipated that the audited financial statements will be presented to Audit and Risk Management Committee on June 3, 2021 and the TTC Board on June 16, 2021. Recommendations It is recommended that the TTC Board: 1. Request City Council to approve the $18.0 million in proceeds from the sale of 70 Parliament Street, as a contribution to the TTC Land Acquisition Reserve Fund. Financial Summary COVID-19 Impact and Relief Funding The COVID-19 pandemic has had a major financial impact on the TTC, which totalled $751.9 million in 2020, before accounting for cost containment savings. After taking cost containment savings into account, the net impact net is $590.2 million prior to the application provincial relief funding. The 2020 shortfall will be fully offset by funding from the provincial and federal governments, primarily through the Safe Restart Agreement (SRA), which recognizes the financial burden of the pandemic and is designed to address financial pressures resulting from reduced revenue and new expenses resulting from COVID-19. Through the SRA, a total of $1.312 billion has been made available to the TTC to support operating budget shortfalls due to COVID-19 in 2020 and 2021. Financial Update for the Period Ended December 31, 2020 and Major Projects Update Page 1 of 41 2020 Operating Results by Service The TTC’s preliminary year-end financial results indicate that the TTC Conventional Service’s 2020 Operating Budget will be $635.9 million net over budget, offset by a $45.7 million net under-expenditure for the Wheel-Trans Service, culminating in a total unfavourable variance of $590.2 million, as summarized in the following table. Description Year-End Results ($Millions) Actual Budget Variance TTC Conventional Gross Expenditures 1,866.5 1,987.2 (120.7) Operating Revenue 588.0 1,344.6 (756.6) TTC Net (City Funding) 1,278.5 642.6 635.9 Wheel-Trans Gross Expenditures 105.4 156.4 (51.0) Revenue 3.9 9.2 (5.3) WT Net (City Funding) 101.5 147.2 (45.7) Total Net (City Funding) 1,380.0 789.8 590.2 Year-End Results Comparison to Third Quarter’s Year-end Projection As presented to the Board at its November meeting, the Financial Update for the Period Ended October 3, 2020 and Major Projects Update report reflected a projected net financial impact to year-end of $609.2 million. The actual financial impact at year-end is $590.2 million and reflects a reduced shortfall of $19.0 million. This change is mostly attributable to an increase in cost containment savings achieved from increased materials, services and contract savings, additional labour savings and lower energy usage, relative to the Q3 year-end projection. As a result of these favourable variances, the budgeted reserve fund draw of $9.3 million, which were primarily intended to fund accident claim payments were no longer required. Sale of 70 Parliament Street : Reserve Contribution On December 16, 2020, the TTC completed the sale of the property known as 70 Parliament Street, held in the registered name of the TTC. The sale was made to the leasehold tenant of the premises who had exercised their contractual right to acquire the property in accordance with the terms of the lease. The net proceeds from the sale of the property was $18.0 million and currently this amount is accounted for in the TTC’s 2020 revenues. To ensure that these one-time proceeds are available for future one- time emergent needs, it is recommended that the Board request City Council authority to contribute these funds to the TTC Land Acquisition Reserve Fund. The results reported in this report assume that this authority will be granted. Financial Update for the Period Ended December 31, 2020 and Major Projects Update Page 2 of 41 2020 Capital Year-End Results 2020 Year-to-Date Actuals ($ Millions) Budget $ % TTC Base Capital 1,016.1 825.4 81.2% TTC Transit Expansion 76.6 57.9 75.6% Total 1,092.7 883.3 80.8% Based on preliminary year-end results, the TTC’s base capital expenditures total $825.4 million, representing a year-end spending rate of 81.2% of the 2020 Approved Capital Budget. In addition to the base capital spending, the TTC also incurred $57.9 million or 75.6% of the 2020 Approved Capital Budget for continuing its capital work program for transit expansion initiatives. Taken together, the TTC’s preliminary year-end spending totals $883.3 million, or an overall spending rate of 80.8%.The spending rate for the base capital program reflects an improvement over the 2019 spending rate of 73.1% and the five-year average spending rate of 71.7%, after accounting for a $208.1 million reduction in the 2020 Capital Budget capital project delivery delays due to COVID-19. The unspent 2020 capital funding of $209.4 million will be carried forward into 2021 to complete the capital works underway in 2020, in accordance with the City’s Carry Forward policy. Equity/Accessibility Matters The TTC is strongly committed to making Toronto’s transit system barrier-free and accessible to all. We believe all customers should enjoy the freedom, independence and flexibility to travel anywhere on the public transit system. In addition to ongoing efforts to address access, diversity and inclusion, the 2020 TTC Operating Budget funded a new investment of $2.8 million to implement Ombudsman recommendations to implement the TTC’s anti-racism strategy and the establishment of an independent office to handle Special Constable and Fare Inspection complaints. At the end of 2020 the Embrace Diversity: 10-Point Action Plan was approved by the TTC Board. The 2020-2029 Capital Budget and Plan includes $76.8 million in 2020 and $526.2 million over the 10 years for the TTC’s Easier Access Program, which is underway to make all subway stations accessible by 2025 with elevators, wide fare gates and automatic sliding doors. With reduced ridership demands due to COVID-19, the TTC is accelerating Easier Access construction activities. Financial Update for the Period Ended December 31, 2020 and Major Projects Update Page 3 of 41 Decision History At its meeting on December 16, 2019, the TTC Board approved the 2020-2029 TTC Capital Budget and Plan of $7.696 billion over 10 years and a 2020 Capital Budget of $1.077 billion. http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Commission_ meetings/2019/December_16/Reports/Decisions/2_TTC_15_Year_Capital_Investment_ Plan_and_2020_2029_Capital_.pdf At its meeting on December 16, 2019, the TTC Board approved the 2020 Operating Budgets of $1,987.2 million gross and $642.6 million net for TTC Conventional Service and $156.5 million gross and $147.2 million net for Wheel-Trans Service and a 2020 total year-end workforce complement of 16,167 positions. http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Commission_ meetings/2019/December_16/Reports/1_2020_TTC_and_Wheel_Trans_Operating_Bu dgets.pdf At its meeting on January 27, 2020, the TTC Board approved the amended 2020-2029 Capital Budget and Plan of $11.924 billion, which included $4.23 billion in net new funding made available through the dedicated City Building Fund and one-time Federal Gas Tax. http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Commission_ meetings/2020/January_27/Reports/Decisions/10_TTCs_2020_2029_Key_Capital_Inve stment_Priorities_Subway_I.pdf At its meeting on February 19, 2020, City Council approved the 2020 Operating Budgets and 2020-2029 Capital Budget and Plan. http://app.toronto.ca/tmmis/viewAgendaItemHistory.do?item=2020.EX13.2 At its meeting on May 13, 2020, the TTC Board approved a net reduction of $208.1 million to the TTC’s 2020 Approved Capital Budget and a reduction of $117.5 million to the 2020-2029 Capital Budget & Plan to reflect delays in capital project delivery due to COVID-19. http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Commission_ meetings/2020/May_13/Reports/Decisions/5_Preliminary_COVID_19_Financial_Impact s_for_the_TTC_Decisio.pdf Comments 2020 Operating Budget: Key Indicators The TTC’s net operating results are primarily driven by six key indicators. These indicators impact year-to-date spending and revenues, as well as provide the basis for estimated year-end spending projections. Key revenue indicators include TTC and Wheel-Trans ridership and average fare, which impact the $1.246 billion TTC fare revenue budget. Key cost drivers for the TTC include the price of fuel and electric power that affect a combined fuel and utilities budget of Financial Update for the Period Ended December 31, 2020 and Major Projects Update Page 4 of 41 $175.8 million. The final, and most significant, driver of expenses relates to service hours, which impacts labour expenses ($1.105 billion), non-labour expenses ($240 million) such as parts and maintenance, as well as fuel and utility consumption. The following table details the year-end results of the TTC’s key operating indicators, as summarized in the following table and discussed below: Year-End Results Item Actuals Budget Variance Status TTC Ridership 225.0M 533.5M (308.5M) TTC Average Fare 2.27 2.34 (0.07) TTC Regular Scheduled Service Hours 9.029M 9.582M (0.553M) Price of Fuel ($/litre) 0.881 1.001 (0.120) Price of Electric Power ($/kwH) 0.156 0.153 0.003 WT Passengers 1.70M 4.21M (2.51M) Ridership At the peak of the COVID-19 pandemic impact, ridership levels fell to 14% of budgeted levels.