Fix Transit 2: A New Approach to Funding Transit Operations

All three levels of government need to be part of the solution.

This is the second in a series of common sense solutions for fixing public transit.

Everybody should want better transit

Transit helps all road users — including those who never set foot on a bus. Better transit means more people taking buses or trains, which means less people driving, which means less traffic congestion.

Transit is key in reducing the emissions for a city — even as personal cars transition to electric. About half of a car’s carbon footprint comes from tailpipe emissions with the rest from manufacture and maintenance. (See Mike Berners-Lee’s The Carbon Footprint of Everything.) Fewer cars, not just fewer trips, requires transit to be a viable option for getting around.

Transit also allows for more efficient land use, with less space required for parking, which has a lower cost of public services. Transit-oriented development reduces everyone’s municipal tax burden.

Public authorities have a choice

Transit that is a viable option boils down to a service that is frequent, reliable and affordable. This means:

• Larger operating budgets, so that transit can run more frequently

• Priority bus lanes, so that buses don’t get stuck in traffic and can reliably stick to their schedule

• Fares that users consider reasonable for the service, or even free for certain groups.

Virtuous circle

Some transit authorities make this choice, and end up with a transit system that is self-reinforcing. Faster, reliable and affordable attracts more riders which leads to more revenues which leads to better service which leads to more riders which leads to …

Viscous cycle

Unfortunately, many transit systems in Canada have taken the opposite path. Poor service leads to fewer riders which leads to a revenue shortfall which leads to an increase in fares which leads to fewer riders which leads to … a transit death spiral.

If people in your city see transit as the “last choice” in how to get around town, then the transit system is already in a death spiral.

Shock to the system

To break out of the death spiral, we need the equivalent of a defibrillator to shock transit systems back to life. That defibrillator is new money for transit operations.

A recent report, Putting Wheels on the Bus, from Environmental Defense and Équiterre, points to how much is required and how we could fund those new operations.

They propose to double transit ridership by 2035, to reduce car trips by 35% and cumulatively reduce carbon emissions by 65 million tonnes.

Doubling transit ridership would require increasing operational budgets by 14% for each of the next four years, 3.5% for each of the subsequent four years, followed by more modest 1% increases. This is a major increase, to be sure, but reflects the “catch up” required from many years of underinvestment.

Funding operating budgets

So where could the money come from?

Federal government

The Environmental Defense report is calling on the federal government to start funding transit operations. The feds have a Permanent Public Transit Fund coming on stream in 2026-27, which will provide $3 billion annually to cities for transit capital projects. The feds pick up typically 40% of the capital costs of new buses and trains, but do not contribute to operations.

The report is calling for the federal government to effectively double the fund, and provide an additional $3 billion to cover a 40% share of increased operations.

Provincial governments

Provincial governments mostly do not fund transit operations, with the exceptions of Quebec, and Ontario through its modest gas tax transfers to municipalities.

Provinces also control the revenue powers of cities, and should be making more tools available to municipalities to fund transit and other priorities. Quebec, for example, is now allowing municipalities to charge vehicle registration taxes based on fuel consumption, to be used for public transit.

South of the border, New York State has authorized New York City to levy a congestion tax on vehicles entering lower Manhattan (which is currently in litigation) with proceeds going largely to transit. Canadian provinces should be allowing cities to consider a similar measure to fund public transit.

Municipal resources

Municipalities in Canada already cover 75% of transit operating costs (including through fare collection). Municipalities could increase property taxes for transit, or they could increase fares. But putting more of a burden on local taxpayers and riders would be a tough sell, when higher levels of government do so little for operations.

If municipalities were to significantly increase funding for transit, it would most likely need to come through the province green lighting a new revenue source, such as a congestion, income or sales tax.

Time for the feds and provinces to step up

Outside of our large cities where transit ridership is high, the status quo is generally not working well.

Transit is a significant cost to a city budget, but not sufficiently funded to be frequent, reliable and affordable.

Both the federal and the provincial governments need to seriously reconsider providing transit operational funding.

And the provinces need to give cities the powers to raise new sources of revenue.

Public transit addresses a number of challenges facing Canadians, including climate action, gridlock on our streets and better land use. It’s time that all three levels of government started working together to make transit a “first choice” rather than the “last choice” for getting around our cities.