Item - 2025.TTC11.5

It is recommended that the TTC Board:

1. Approve the 2025 Capital Budget in-year budget adjustments to offset projects that have had accelerated spending by $204.0 million with projects that have experienced delays and lower spending by $204.0 million, with no debt impact, as outlined in Appendix 4 of this report.

2. Approve expenditure and funding adjustments to the TTC’s 2025-2034 Capital Budget and Plan for the Procurement of Electric Buses and Charging Systems projects by increasing the 2025 Budget by $16.7 million and the 2026-2034 Capital Plan estimates by $119.7 million for a total of $136.4 million to reflect the incremental matching Federal Funding through the Canada Public Transit Fund for the procurement of 50 electric buses and 155 charging systems.

3. Authorize the recommended budget adjustments noted in Recommendations 1 and 2 above, and in the TTC’s 2025-2034 Capital Budget and Plan, be included in the TTC’s Capital Variance Report submission for the nine months ended September 30, 2025, for City Council consideration and approval.

4. Approve the 2025 Operating Budget in-year budget adjustments of $12.2 million gross revenue and $12.2 million gross expense ($0 net) in accordance with the implementation of PS 3400 – Revenue Standard, to reflect costs that are recoverable through the billing of a third party, to be budgeted and recognized at the gross revenue and gross expense level.

This report sets out the operating and capital financial results for TTC Conventional and Wheel-Trans services and provides a status update of the TTC’s major capital projects for the period ended September 27, 2025. Financial projections to year-end 2025 are also provided. This is the third of four quarterly financial updates provided annually to the TTC Board for the fiscal year and subsequently submitted to the City of Toronto for consolidation with their financial variance reporting to City Council.

For the period ended September 27, 2025, the TTC reported a net year-to-date favourable operating variance of $5.8 million (0.5%), consisting of an unfavourable revenue variance of $57.5 million (6.3%), which was fully offset by $63.3 million (3.1%) in under-expenditures. The unfavourable revenue variance was driven by lower TTC Conventional passenger revenues due to lower-than-anticipated ridership growth, lower Provincial Funding due to the delayed timing of expenditures for Line 5 and Line 6 that are eligible for reimbursement under the New Deal Funding Agreement (“New Deal”), and lower ancillary revenue due to the timing of recoveries from third parties. The favourable expenditure variance was driven by delayed timing of planned expenditures to support the opening of Line 5 and Line 6, diesel cost savings due to the elimination of the Federal Carbon Tax effective April 1, 2025, delays in implementation of planned Information Technology (IT) software rollouts, delayed procurement for materials and services, and lower labour costs due to workforce vacancies.

For the full year, the TTC’s 2025 Operating Budget of $2.857 billion gross and $1.387 billion net, is projected to be $15.5 million net unfavourable to budget (1.1%), driven by an unfavourable revenue variance of $130.4 million (8.9%), partially offset by an under-expenditure of $114.9 million (4.0%).

The unfavourable full-year revenue variance of $130.4 million reflects the continued trend of lower-than-budgeted passenger revenue for the remainder of the year, a reduction in Provincial Funding due to delayed timing of expenditures to support the opening of Line 5 and Line 6, which are eligible for reimbursement under the New Deal, and delayed third-party recoveries. The favourable full-year expenditure variance of $114.9 million reflects delayed expenditures to support the opening of Line 5 and Line 6, diesel costs savings due to the elimination of the Federal Carbon Tax effective April 1, 2025 and the permanent reduction in the Provincial Fuel Tax effective July 1, 2025, labour cost savings due to workforce vacancies, and delays in implementation of IT software rollouts and lower materials and services costs, partially offset by higher Wheel-Trans operating costs due to higher-than-budgeted passenger ridership.

To address the projected $15.5 million net unfavourable variance, TTC senior management introduced a non-union hiring pause at the end of September and will review discretionary spending to identify additional opportunities for cost savings by year-end.

For the period ended September 27, 2025, the TTC’s capital expenditures totalled $930.8 million, representing a spending rate of 93% when compared to the year-to-date planned (calendarized) budget of $1,002.4 million. Of the total capital expenditures incurred to date, $923.7 million, or 96% of the base capital program’s planned budget of $965.4 million, was spent, and $7.1 million, or 19% of the $37.0 million planned budget for transit-expansion-related projects, was spent.

When comparing year-to-date spending to the total approved 2025 Capital Budget, 54% was spent to the end of Period 9 for the TTC base capital program and 29% for transit-expansion-related projects, resulting in an overall spending rate of 54% for the nine-month period.

By year-end, the TTC’s capital spending is projected to be in the order of $1.535 billion, representing an overall 88% spending rate, with the TTC’s base capital program projected to expend $1.514 billion or 88% and transit-expansion-related capital expenditures projected to reach $21.0 million or 86%. The year-to-date results and year-end projections reflect the recommended adjustments to the 2025 Capital Budget and future year cash flows in the 10-Year Capital Plan, as outlined in Appendix 4 of this report. This accounts for projects that have had accelerated spending and projects that have experienced some delays and, therefore, lower spending. These adjustments result from the ongoing monitoring of capital delivery and spending by TTC staff to ensure capital funding is maximized during the year.

2025 Operating Results

Based on Period 9 year-to-date results, the TTC incurred expenses of $1.986 billion gross and $1.130 billion net, compared to the planned budget of $2.049 billion gross and $1.136 billion net, resulting in a net favourable operating variance of $5.8 million (0.5%). The net unfavourable operating variance reflects an unfavourable revenue variance of $57.5 million (6.3%), partially offset by $63.3 million in under-expenditures (3.1%).

Operating results for the period ended September 27, 2025, and projected year-end results are summarized in Table 5 below:

Table 5 – 2025 Operating Year-to-Date Results and Forecast Summary

Note: Figures reflect 2025 Operating Budget in-year budget adjustments of $12.2 million gross and $0.0 net in accordance with the implementation of PS 3400 – Revenue Standard in 2025, to reflect costs that are recoverable through the billing of a third party, to be budgeted and recognized at the gross revenue and gross expense level. This amount is currently pending City approval and is included under Recommendations.

2025 Revenues

At the end of Period 9, total revenue was $57.5 million (6.3%) below budget, driven by lower passenger revenue due to lower-than-anticipated ridership growth; lower Provincial Funding due to delayed timing of expenditures for Line 5 and Line 6 eligible for reimbursement under the New Deal; and lower ancillary revenue associated with timing of cost recoveries for service disruption and third parties.

By year-end, revenue is forecasted to be $130.4 (8.9%) million below budget, driven by lower passenger revenue due to continued trend of lower-than-expected ridership growth; lower Provincial Funding resulting from delayed timing of expenditures for Line 5 and Line 6 eligible for reimbursement under the New Deal; lower ancillary revenue related to timing of third-party cost recoveries; and lower-than-expected TTC Stabilization Reserve draws due to delayed one-time variation costs for Line 5 and Line 6 to be funded from the Reserve.

During the 2025 Budget process, TTC staff advised on the risks associated with the level of 2025 passenger revenues, due to changing travel patterns.

2025 Expenditures

Operating expenses to the end of Period 9 were $63.3 million (3.1%) below planned spending, primarily driven by delayed timing of expenditures to support the planned opening of Line 5 and Line 6; lower-than-anticipated garage and equipment costs and delayed availability of vehicle maintenance parts, all expected to normalize by year-end; delayed timing of planned expenditures for implementation of Information Technology (IT) software rollouts; delayed procurement of materials and services; and diesel cost savings following the removal of the Federal Carbon Tax (effective April 1, 2025). This underspend is partially offset by higher Wheel-Trans expenditures due to increased Wheel-Trans ridership compared to budget.

Year-end projections indicate a favourable gross expenditure variance of $114.9 million (4.0%), primarily driven by delayed timing of expenditures to support the planned opening of Line 5 and Line 6; delayed timing of planned expenditures for implementation of Information Technology (IT) software projects, materials and services; lower employee benefits costs due to less WSIB claims than expected; and diesel cost savings following the removal of the Federal Carbon Tax (effective April 1, 2025) and the permanent reduction in the Provincial Fuel Tax (effective July 1, 2025). These savings are partially offset by increased Wheel-Trans service costs due to higher-than-budgeted ridership.

TTC senior management has implemented targeted cost containment measures to help mitigate the projected $15.5 million net unfavourable variance to budget. These measures include a non-union hiring pause introduced at the end of September, an organization-wide vacancy review and a focus on limiting discretionary expenditures.

2025 Capital Results

For the period ended September 27, 2025, $923.7 million, or 96% of TTC’s base capital program’s year-to-date planned (calendarized) budget of $965.4 million, was spent. A further $7.1 million, or 19% of the year-to-date planned budget for transit-expansion-related projects of $37.0 million, was also spent. In total, the TTC’s capital expenditures up to the end of Period 9 total $930.8 million and represent a spending rate of 93% when compared to the calendarized budget of $1,002.4 million. When compared to the total approved 2025 Capital Budget of $1.749 billion, the overall spending rate is 54%.

By year-end, the TTC’s total capital spending is projected to be in the order of $1.535 billion, representing an overall 88% spending rate, reflective of $1.514 billion or 88% projected spending in the TTC’s base capital program and $21.0 million or 86% spending for transit-expansion-related capital works, as summarized in Table 6 below:

Table 6 – 2025 Capital Year-to-Date Results and Forecast Summary

Year-to-date results and projected underspending at year-end in the capital program are impacted by various drivers, including but not limited to resourcing and supply chain constraints and third-party interdependences. The TTC’s capital program results to date and projections to year-end also indicate overspending in some projects due to cost escalation, as well as accelerated work plan schedules and procurement activities. As a result, in-year budget adjustments are before the Board for approval to offset projects that have had accelerated spending by $204.0 million with projects that have experienced delays and lower spending by $204.0 million, with no debt impact, as outlined in Appendix 4 of this report.

Adjustments to the 2025-2034 Capital Budget and Plan

Since the approval of the TTC’s 10-Year Capital Plan, the TTC Board and City Council have approved in-year budget adjustments to account for final 2024 capital spending. As a result, the TTC’s carry-forward funding of $66.6 million approved through the 2024 Budget process has been increased by $4.2 million.

The TTC Board also approved a funding reallocation within the Easier Access Phase III Program, transferring $8.5 million to the Old Mill Station project from permanent savings on the SRT Life Extension Project. This adjustment addresses increased project costs to ensure continued progress on accessibility upgrades. Furthermore, the TTC Board approved an acceleration of cash flows for the Bloor-Yonge Capacity Improvements Project, of $38.3 million in 2025 and $73.1 million in 2026, respectively, to be borrowed from future years to align with the project delivery schedule.

This report recommends the addition of $136.4 million Federal Funding through the Canada Public Transit Fund (CPTF) baseline stream, allocated to the procurement of 50 electric buses and 155 charging systems. Launched in 2024, the CPTF was established to provide $3 billion annually toward public transit across the country through three streams: Baseline Funding, Metro-Region Agreements, and Targeted Funding. On November 29, 2024, the Government of Canada announced Toronto’s allocation under the CPTF Baseline Funding Stream of $116,363,918 annually, for a total contribution of approximately $1.16 billion.

The TTC is using a portion of its CPTF allocation toward the required federal matching funding for the 55 Line 2 replacement trains, as well as Wheel-Trans buses. The TTC recently submitted and received approval for baseline stream funding allocations for the procurement of 50 electric buses and 155 charging systems, with total project cost estimates of $101.9 million and $239.0 million, respectively. With matching City/TTC funding already included in the Approved 2025-2034 Capital Budget and Plan, this report recommends the addition of the required CPTF funding for the projects to proceed.

Further in-year adjustments are being recommended in this report, as detailed in Appendix 4, to offset projects that have had accelerated spending with projects that have experienced delays and lower spending with no debt impact. These adjustments allow the TTC to maximize its capital project delivery by “borrowing” funds from those projects impacted by delays during the year and reallocating them to projects moving ahead of schedule. The “borrowed funds” are then reinstated to the delayed project in the following year.

With the approval of the budget adjustments noted above and detailed in Appendix 4, the TTC’s 10-Year Capital Budget and Plan’s annual cash flow estimates will be adjusted, as summarized in Table 7 below:

Table 7 – Adjusted 10-Year Capital Budget and Plan

The year-end projections based on the above amendments to the 2025 Capital Budget are accounted for in the Financial Update report presented here, and subject to the Board’s approval, will be included in the TTC’s submission for the City’s Period 9 2025 Capital Variance report to the Budget Committee and for City Council’s approval at its meeting on December 16, 2025.

Economic Impacts of TTC Spending

Using the economic model established in partnership with the University of Toronto, 2025 operating and capital spending is estimated to generate $5.003 billion in economic activity and almost 30,000 jobs across Canada. A total of 90% of benefits will accrue within Ontario. Both year-to-date and projected year-end benefits are summarized in Table 8 below:

Table 8 – Economic Impact of 2025 Projected Year-End Spending by the TTC