The TTC’s Idiotic Approach to Fare Increases

by Mr. Cheap

It’s always interesting seeing unexpected consequences play out in government policies.  It’s almost like the old story about the monkey paw, where every time something is wished for, it goes horribly awry (including trying to fix previous wishes).  The TTC recently embarked on a series of foolish decisions when they wanted to raise the fare.

Prices go up, and I don’t have any problem with them raising the price.  The cash fare went from $2.75 to $3.00 and a token or ticket increased from $2.25 to $2.50.  While the fare increase was still under consideration, some enterprising commuters decided that it would be worthwhile to stockpile tokens (since they’d use them anyway and if the price went up, they’d have gotten them cheaper).

For some reason, the idea of this *REALLY* annoyed the transit commission.  People were only getting a 10% discount, the commission would get the payment upfront (for services that wouldn’t be provided until the future – possibly the far future if people bought a ton of tokens), and there’s a decent chance that a proportion of the stockpiled tokens would get lost over time.  Behind all this, the TTC was terrified of the possibility that the citizens of Toronto would get this discount, the very people the service was provided for and who pay for any shortfalls in funding (through municipal taxes).

I’m 100% in favour of fees where the people using the service pay for it, and I definitely agree that the TTC’s funding should come from its riders.  *BUT* since it already gets some funding from municipal taxes, I *REALLY* don’t see why it’s so horrible if some riders get a slightly better deal for a very short time.  The people getting the deal will be the same people bailing out the TTC in the future.  Besides, how many people are really going to invest their life savings into TTC tokens?

I understand that there was probably also a concern that some people might stockpile tokens then resell them.  Given that the absolute maximum profit margin they could make would be 10% (and many people would be leery of buying tokens from some black market source) and that it would probably be less (after costs to get tokens to buyers and offering a discount to entice people to buy from the vendor instead of directly from the TTC), I can’t for the life of me see why this was would be such a concern.

So, given that their objective was to prevent a) their customers and bosses from getting a small discount & b) from business people who are bad at math and business trying to arbitrage the fare increase, what did the TTC do?

First they stopped selling tokens entirely.  This at least makes more sense then in the past when they’ve “rationed” tokens before an increase, but either approach is pretty darn ridiculous.  They created an entirely new fare ticket (a temporary ticket that would only last until the end of January) and this is the only thing riders could buy.  I wonder how much retooling everything to sell these temporary tickets cost?  And, you could only buy them from the operators in the booths (they shut down the automated vending machines).

This, of course, led to MASSIVE line ups at the sales booths (every time I used the system over the holidays there was a line).  When I asked about the temporary ticket, and if it would expire, the vendor said “no, no, you just have to pay a quarter along with the temporary ticket after the fare increase”).  This turned out to be a lie:  the adult ticket is completely non-refundable and expires at the end of the month (at which point they’re useless pieces of paper that cost me $2.25 each).  Adding a quarter will only work for the month of January.  I bought 10 tickets (so I wouldn’t have to line up again), and only used 5 of them, so I’m out the cost of the remaining 5 tickets which I won’t be able to use (I’m not planning to go back to Toronto in January).

The thing that really drives me nuts about the whole situation is this is something that happens ALL the time over the ENTIRE WORLD!  Transit fare increases have happened numerous time IN TORONTO, BY THE TTC!!!  There is NO EXCUSE for them to make such a mess of it, cheat riders who have paid for tickets they won’t be able to use and waste everyone time by massive line-ups and congestion at the turn-stills (the only way to use a ticket is to squeeze past the people in line and drop it into a box in front of the operator).  One Toronto business professor suggested sidestepping all the silliness and just letting people buy as many tokens as they want or moving to a flexible pricing technology (which is pretty cutting edge – transit systems have only been using it for 25 years).

It sure must be nice having a government supported monopoly, as I can’t see this level of incompetence existing many other places.

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{ 19 comments… read them below or add one }

1 Four Pillars

Hilarious. I had thought of writing about this too.

Why couldn’t they have a shorter time period between the price increase announcement and the actual date of increase?

What did they do in the past? I don’t remember this fiasco happening before.

2 Mr. Cheap

I believe in the past that they rationed out tokens (people could just buy them one at a time or a maximum of 5).

You’re right, shortening the time between the announcement and increase would solve the problem too.

3 Alexandra

They did end up rationing them out this time as well – for a brief time before the hike went up, you could buy only ten tokens at a time.

TTC incompetance is just an integral part of living in Toronto – I’d list it on par with the sight of the CN Tower, the Toronto Maple Leafs, a long history of useless mayors, The Ballet, great restaurants, ROM, The Science Center and overpaid yet unappreciative garbage men. All part of parcel of this (great?) city.

4 Philip in North York

I think the massive line up happened because the raised price was steep for many people, and TTC just stop selling tokens.
I remember that I hoarded 200 tokens(!) when TTC jacked up fare from $2/token to $2.1. TTC rationed to 10 tokens per person until almost the end of the year at least, and the price increase was 5%. Last year, it was 10% increase, and the supply dried up very quickly. Still, I stockpiled 60 tokens from it.

FP, I agree on that there is no reason to not selling tokens before price change. When I hoarded 200 tokens, it took almost 5 months to spend them all, so I paid upfront fares for 5 months indeed.

Remember this; it burned 1 Billion dollars on Sheppard subway line that doesn’t replace bus route over it.

5 Jess V.

Government run system lives in a completely different world. Just take a look at the recent garbage strikes. They are out of touch!

6 Christopher Hylarides

Firstly, I want to say I agree that the people that run the TTC are bad at planning, which is disconcerting considering they have to run the largest transit system in the country. Their lack of foresight with everything from capacity planning to more modern ticketing systems is readily apparent when you travel to any other major city.

Of course, they say it’s (lack of) funding from upper levels of government. Adam Giambrone says it’ll cost $400 million to implement smart cards. That bullshit number (equal to half the cost of the sheppard subway), assuming that the TTC would put 2 readers in every bus/streetcar and 4 readers in every subway station, works out to $90K/reader. And with Presto all the back-end costs are eaten by the province. If anybody here knows if I can get that contract (i’m probably falsely assuming they’re not inefficiently doing this in house) I can undercut them by half. 😀 We also know how overpaid most of the employees are, so I won’t even bother get started with that.

Anyways, I know you’re mad, but I don’t think you were lied to or it’s entirely the TTC’s fault. The TTC collector was probably misinformed. They rushed that ticket idea and they it was another 2 weeks before most people could even get them. Half the problem here is at the political level. Adam Giambrone is a do-gooder that wanted to give everybody “heads up” of the fare increase, but never took econ 101 or he’d know what happens when you price things at below their true market value. You of course get shortages. Since he’s a big government guy, he thinks he can fix that by rationing. Now people buying tickets for groups (teachers, for example) are screwed.

And this guy wants to be mayor…

7 guinness416

I read that the time between announcement and introducing the new rate is to do with having hearings and board meetings and such over the raise but it still seemed like it could have been shorter. I’ve no problem with them suspending token sales (although with a metropass that’s easy for me to say!) – after all if everyone kept 200 tokens in a drawer for months at a time like Philip up there, would there be enough circulating? – but they should have moved to tickets right away. The lines were depressing looking. It sort of boggles the mind that nobody anticipated the extent of the hoarding.

Personally I’d settle for them just mopping up the inch-deep slushy water inside the entrance to Coxwell station on a regular basis.

8 stephanie

this happened to me too! i bought 10 tickets, was told they wouldn’t expire, i just had to use add a quarter when i used them. i sent an email to the TTC expressing my disappointment at being lied to and lured into buying these tickets which i wouldn’t be able to use in time. surprising i got a voice mail from Roger 416-393-3030 at the TTC who offered to discuss the situation in further detail. i’m not sure whether he was offering a refund or exchange (the website stated this was not an option) but i ended up re-selling my tickets to a frequent traveler and didn’t bother to call Roger back.

i agree that flexible pricing is the way to go. why should going from union to bloor cost the same as going from etobicoke to scarborough?

9 R I

I think you missed the point of the rationing and tickets, as well some of the commenters missed the point of the time between announcement and when the new rate started.

Yes, the TTC should have predicted that people would stockpile tokens, and they should have planned for it. I don’t think the reason is that they didn’t want people to get the discount – I think the reason is that there are only so many tokens to go around the system. When people pile them up under their mattress without returning them to the system, you end up with shortages. That was the point of the rationing. They ran short anyways, and switched over to tickets (which the TTC is capable of quickly producing). Machines have never been able to sell tickets – you have always needed to buy them from an agent.

As for the timing, it doesn’t have to do with bureaucracy. It has to do with the fact that for many people who are walking a tightrope with personal finances, a quick increase in the price of the tickets would have been devastating. Plenty of lead time allows them to adjust to the increase in transit fares.

Now, I’m not saying any of this to defend the TTC. They completely messed up the transition to the new fare. But thinking that this was about denying Torontonians a discount is rather narrow-minded.

10 Mr. Cheap

Guiness & R.I.: Yes, it’s POSSIBLE that the problem was a limited number of tokens in circulation (and that they just plain ran out). If that’s the situation, MAKE MORE TOKENS! As soon as they thought a fare increase might have been possible, they should have gotten more manufactured.

Oh, and R.I.: Thinking my entire post was about denying discounts is rather narrow-minded. 😉

11 jesse

Fear not. Transit authority bumblings are universal. Going to a paper/magnetic system would save much of the heartache. In a time when one’s deposits are earning less than 0.5%, it’s no wonder people are investing in tokens, that apparently increase in value faster than inflation!

12 Four Pillars

RI – Are there really that many people who find this price increase “devastating”? Will a month delay be enough time for them to cut that extra $10/month from other parts of the budget?

13 Philip in North York

stepahnie – In my opinion, the flexible pricing won’t be good as fixed pricing. If TTC switches to flexible pricing, people who commute from outside of Toronto will take their cars instead of riding the subway due to price hike. If the public transit is little cheaper than driving, why people take bus/subway?

jesse – Yes, the guaranteed 10% rate of return is great in this economy.

14 Potato

I’ve got to agree with Mr. Cheap: the token rationing was a disaster. They should have simply had more tokens ready to go or reduced the cash fare/single token price to $2.25. Part of the issue is people wanting to stockpile, but part of the issue is the fee structure: a single token/cash ride was $2.75, but as pointed out in the post, only $2.25 if you buy tokens 5 or more at a time. So you’ve got some people that want to massively stockpile them in advance of the fare increase, and a large number that want to legitimately buy 5-10 so they can make their trips through the week without having to overpay. Limiting sales to 5 or 10 at a time was reasonable because it makes stockpiling difficult (when there isn’t a fare hike in the works you can usually buy 50 or more at a time) but still lets people get the discount and have some tokens to use for the automatic entrances. As soon as they said they said they were thinking of limiting sales to one at a time everyone realized they had to stockpile or face an immediate 22% fare increase… it just made the demand wave worse.

The ridiculous paper tickets were to try to get around that, but still, it was stupid. They should have just had more tokens. That, or they could have tried more innovative solutions. For example, many people who take the TTC to work every day don’t have a metropass because you need to make more than just ~46 one-way trips to make a metropass worthwhile. Even those that do have metropasses tend not to get one in December because of all the extra days they don’t commute. If the fare increase came in the summer, it wouldn’t have been so bad. Even if it came at the beginning of December, it wouldn’t have been so bad, but they had to pick the one month that I hypothesize (I don’t have the actual data) has the highest demand for tokens to add in the hoarder demand. So if they had lowered the price of the Metropass to the point where even people that only had 3 weeks of work would get one, they could have drastically reduced the demand for tokens, and possibly sparked demand for passes once people got to see how convenient it is to not have a marginal cost of hopping on the TTC.

It could have been an opportunity rather than a fiasco.

15 Michael

The real reason we don’t have smart cards already is due to the union fighting it at every turn, as they are afraid (and probably rightfully so) that it will eliminate the need for all of the overpaid booth jobs.

The TTC as a business is horribly run. They clearly have no understanding of the most basic economic concepts. They made the decision to drop the free parking from the metropass while making no change to the price, thus offering less of a value at the same price. They assumed they would continue to sell the same number of metropasses but also make more off the paid parking. They never considered that demand would adjust to the new value of the pass and fewer people would buy the metropass.

Also, this decision was made at the height of the gas prices (I think it was around $1.30/L), so they figured they had a captive consumer (it was too expensive to drive in to work every day for most people as parking & metropass was still less than gas & parking). Gas prices came back down to more reasonable levels right in time for when the parking dropped off the metropass, and driving to work potentially became the less expensive option.

Great article! As you can see, I have no love for the TTC, so I appreciate knowing that others are fed up with their futility.

16 DuckConference

“Im 100% in favour of fees where the people using the service pay for it, and I definitely agree that the TTCs funding should come from its riders.”

Why? The government HEAVILY subsidizes travel by car (via hundreds of millions of dollars spent on roads that are almost all free to travel on), why shouldn’t they provide an equal subsidy to a form of transportation that’s much better for cities (in terms of urban planning/the environment).

17 guinness416

I’m not sure that’s what Mr C was proposing but don’t worry, everything I’ve seen says it ain’t possible anyway, DuckConference.

Supposedly the farebox recovery ratio for TTC is above 70% which is WAY higher than most systems with the exception of those in some Asian cities (and is twice NYC’s for example).

18 Mr. Cheap

Duck: In terms of why, it seems reasonable to me that people who want to use something should pay for it. Why do you think people who don’t benefit from something should have to pay for it for others?

I’d also be in favour of a change in policy where the government stopped subsidizing travel by car (and let those traveling by car pay more).

Guinness: I’m not sure why it isn’t possible (it sounds like you’ve looked into it more than I have, so I’ll trust you that it isn’t). If they privatized the TTC and made it clear that no level of government will be providing funds if the purchaser runs into problem that seems like one way to have the users entirely fund the system.

19 David

It annoys me when unions and government supported monopolies severely hold back innovation like this. B.C. has the same problem with Translink. Tokyo has tons of competing companies with a flexible pricing system with tickets which are transferable across the board!

Meanwhile, Translink’s busses don’t even give you change….

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