Meeting Mayor John Tory’s request for budget cuts next year would require the TTC to take “unpalatable” steps like eliminating all fare discounts, cutting service, and delaying the opening of the Spadina subway extension, according to the transit agency’s CEO.

TTC chief Andy Byford made that case in a letter this week responding to the mayor’s directive, approved by council last month, for 2.6-per-cent budget reductions at all city departments. According to a copy of the document obtained by the Star, measures the agency has identified to meet the goal include a 10-cent fare hike next year — the sixth increase in as many years — but those measures would still fall millions of dollars short of reaching Tory’s target.

In the letter, which is dated Aug. 2 and addressed to the city’s chief financial officer, Byford wrote that in its search for savings the TTC looked at “everything short of impacting service.”

“I instructed my chiefs to make the least damaging cuts first and then to progressively look at more difficult cuts,” he wrote. But he said the agency wouldn’t endorse cost reductions that would undermine the provision of public transit. “At no time would we recommend unpalatable reductions,” he said.

The TTC wouldn’t comment publicly on the letter, which agency spokesman Brad Ross stressed was a “work-in-progress” and not a final budget submission.

But Byford’s position could set him on a collision course with the mayor, who in an interview Wednesday raised the prospect of calling in a task force to cut costs at the TTC if the agency wasn’t able to. He said that approach had worked with the police department.

“If (the TTC) can’t do this themselves, and I’m confident they have enough good management there to find these ways of doing things better and differently, then I guess we could help them,” the mayor said.

Tory said he didn’t support reversing service improvements made under his term, but stated that the TTC could find more ways to reduce costs than Byford has already identified. “Perhaps the only people who would find them unpalatable would be those who want to preserve the status quo,” he said.

Trimming 2.6 per cent from the TTC wouldrepresent a clawback of roughly $16 million from the combined net operating budgets for the agency’s conventional service and WheelTrans. Byford’s letter suggests that amount would be manageable, but the bigger issue is that the agency is facing increased costs next year of $215 million in order to maintain current service levels.

That number includes a $184 million shortfall for the conventional service, which is higher than an earlier estimate of $178 million and includes increased costs associated with switching to the Presto fare card system, the opening of the Spadina subway extension in late 2017, vehicle maintenance, and decreased revenue as a result of lower than expected ridership this year. The WheelTrans funding gap is $31 million, and is driven primarily by what Byford called an “unprecedented” spike in expected demand next year.

The increased costs mean that in order to reach the 2.6-per-cent target, the TTC would have to find new revenue and savings totaling $231 million in 2017, out of anet budget of only $611 million.

Byford wrote that the TTC had already identified $17 million in unspecified “departmental expense reductions.” To further bridge the gap, the agency proposed raising $40 million by increasing fares by 10 cents, eliminating discounts on cash fares for seniors and students, and collecting more parking revenue. Controlling expenses related to Presto, diesel fuel, and employee benefits would save a further $7.5 million, and the TTC could make a one-time draw on a stabilization reserve fund for $15.4 million.

Taken together with a $1.8-million trim to the WheelTrans budget, the proposed measures amount to about $82 million in savings, a little more than one third of the $231 million needed.

According to a presentation attached to Byford’s letter, greater savings could be found by eliminating all discounts including for Metropass subscribers ($80 million), cutting service ($70 million), and deferring the opening of the Spadina subway extension to 2018 ($6 million). Byford deemed those options “unpalatable” and didn’t endorse them.

The CEO wrote that “none of the proposed cuts are easy and there is inherent risk in some of them.” He also warned that the cuts couldn’t be repeated in 2018 “without adversely impacting our ability to deliver a quality service.”

Councillor Joe Mihevc (Ward 21, St. Paul’s) said Byford’s letter is proof that the mayor’s office and council have no choice but to abandon the directive for a 2.6-per cent cut at the TTC.

“I do not see them demanding that this cut happen. That’s really the bottom line,” said Mihevc, who sits on the TTC board. “I cannot see a political universe in which that is possible.”

Mihevc also took issue with the proposed 10-cent fare increase, because he argued that the cost of transit is a major factor in why, after more than a decade of growth, the TTC’s ridership is flatlining. Fares have gone up every year since 2012 and since 2009 the price of a Metropass has increased by about 30 per cent, more than twice the rate of inflation.

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The commission is expecting to carry about 545 million people this year, down from its originally projected total of 553 million. A preliminary budget summary attached to Byford’s letter shows the TTC is currently projecting 545 million rides again in 2017, which would mark the first time in 14 years that ridership has not increased.

Mihevc argued that to fund the TTC and offset the need for a fare increase, the city needs to find new sources of revenue. Council is expected to debate revenue tools in the fall, but the city manager has said it’s unlikely that new taxes or levies could be in place in time to provide financial relief next year.

Council is expected to approve the 2017 budgets for all city agencies and departments in February.

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