The Toronto Transit Commission's 2026 Operating Budget: A Deep Dive
The Toronto Transit Commission (TTC) is set to present its Operating and Capital Budgets to the Board on January 7, 2026, with the latter then going to the City Council for final approval. This article delves into the Operating Budget, while the next one will explore the Capital Budget and plans for 2026-2040.
The TTC's 2026 Operating Budget is a testament to its commitment to providing reliable and affordable public transportation. Through a combination of strategic financial management and innovative accounting practices, the TTC has managed to freeze fares for a third year, introduce fare capping, maintain and enhance service levels, and stay close to the City's target of $91 million in added subsidy for the new year. This achievement is particularly notable, given the $90.8 million rise in Provincial subsidy for the operation of Lines 5 and 6.
The budget's pie charts reveal a significant shift in revenue sources. Passenger and ancillary revenues (fares, parking lots, shop rentals, advertising) account for only 39% of the total, with City subsidy making up the remaining 61%. This marks a substantial change from the past, when the City and Province each contributed one-sixth of the total, and fares covered the lion's share of the remainder.
Fare Changes:
- The fare freeze and capping measures, set to take effect in September 2026, will be further improved in September 2027. The Adult fare cap is close to the price of a monthly pass, benefiting riders without upfront pass purchases. Youth, Senior, and Fair Pass fares will be capped at 47 rides, an improvement over the current higher multiples.
- Post-Secondary students, who currently pay the full Adult fare if they don't have a pass, may see a reduction in their single fare or the elimination of the monthly pass, addressing a policy issue.
- If the fare cap is reduced to 40 in September 2027, it will result in a 15% reduction in the monthly pass cost.
The anticipated cost of fare capping in foregone revenue is $3.1 million in 2026, $18.5 million in 2027, and $36.6 million in 2028, assuming the 40 fare cap is implemented in September 2027.
Service Changes:
- The service budget increases by 2% in service hours, aiming to address congestion, adapt to changing travel patterns, and provide world-class service during the FIFA World Cup, with an expected ridership of 426.4 million in 2026.
- The budget focuses on restoring peak service on Lines 1 and 2, with current peak service levels and those in January 2020 for comparison. Line 2 is already operating at the 2020 level, while Line 1 would only improve by 6% in the AM peak.
Ridership:
- Conventional system ridership fell short of budget projections in 2025, attributed to optimism about return-to-work commuting and the loss of foreign students late in the year.
- Projections for 2026 are less aggressive, with the 'medium' increase used for budget and service planning.
- Wheel-Trans demand is strong, with further growth expected in 2026.
Capacity Enhancement Programs:
- The Line 1 Capacity Enhancement Program aims to achieve headways of up to 100 seconds by 2037, enabling up to 39,600 passengers per hour at peak hours. Updated ridership demand forecasts will require earlier achievement of these headways (by 2035).
- The Line 2 Capacity Enhancement Program has updated ridership demand forecasts, extending to 2051, with target headways to be achieved earlier than previously planned.
Metrics and Targets:
- The TTC tracks Customer Satisfaction and On-Time Performance, with internal work ongoing on new metrics.
- The concept of 'on time' is complex, as it has more internal significance than for riders on frequent but erratic service routes.
Year-Over-Year Changes:
- Changes in the budget are budget-to-budget, not actual-to-budget. For instance, in 2025, ridership and fare revenue were lower than expected, impacting the 2026 budget.
- Major changes in revenue and expenses include inflation, labor, and third-party provider increases, as well as one-time events like the reversal of a $15 million reserve draw in 2025.
TTC Reserves:
- The Long Term Liability Reserve funds accident claims payments, with expected contributions and payouts for 2026-2028.
- The Stabilization Reserve Fund is used for operating budget shortfalls and unexpected one-time costs, with contributions from one-time TTC income and City surpluses.
- A notable planned draw is $15 million for 'LRT Start-up Variation Costs' in 2026 and 2027, not funded by the Province.
Staffing:
- Staffing for the conventional system is planned to rise by 1.7% in 2026, with a 9.4% increase in Wheel-Trans.
Looking Ahead to 2027 and 2028:
- The budget pressures for 2027 and 2028 are significant, with the loss of the Stabilization Reserve as a revenue source adding to the shortfall.
- There's no provision for service improvements beyond demand growth in 2027 or annualization in 2028.
- The TTC has exhausted accounting changes for cost shifts, leaving limited savings from 'efficiencies'.
- The disappearance of Provincial 'New Deal' funding could add $231 million to funding needs in 2027 and $49 million in 2028.
