TransLink is facing a $4.7 billion funding deficit by 2033: forecast

Richmond-Brighouse Station on SkyTrain Canada Line. (Kenneth Chan/Daily Hive)

Metro Vancouver’s public transit authority states it is facing further financial headwinds through 2033, driven by falling fare and gas tax revenues, and increasing expenditures from inflation, service expansion, and traffic congestion.

Currently, it is forecasting a cumulative funding gap of over $4.7 billion between 2026 and 2033, which would necessitate substantial progressively growing annual revenues — starting with about $600 million in 2026.

And this funding gap does not even include any of the costs under the $21-billion, 10-year priorities for service expansion and improvements between 2025 and 2035, such as the introduction of new RapidBus and Bus Rapid Transit (BRT) routes, the overall doubling of bus service, the SFU Burnaby Mountain gondola, and UBC SkyTrain.

Moreover, for theoretical practices only, starting in 2026, it would have to cut services by 60% in order to balance the budget. TransLink is required to produce balanced budgets under the provincial legislation that governs the public transit authority.

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Currently, between 2023 and 2025, TransLink’s budget is balanced by the provincial government’s funding infusion of $479 million — announced in early 2023 — towards covering forecasted revenue shortfalls through 2025, and some bus service expansion and the further adoption of battery-electric buses. This measure by the provincial government avoided steep service cuts and fare hikes.

To date, since 2020, TransLink has received a combined total of $1.3 billion in pandemic-time financial relief from the provincial and federal governments.

Furthermore, TransLink also has an ambitious multi-billion strategy to gradually transition into a 100% zero-emission bus fleet by 2040, which requires major investments in acquiring battery-electric buses, and building charging infrastructure and expanding bus fleet maintenance and storage facilities.

After the latest round of provincial operating subsidies are fully depleted, TransLink’s funding gap is expected to start at $429 million in 2026 before progressively accumulating to $4.74 billion by 2033 over the entire eight-year period.

“The funding gap re-emerges in year 2026 once the provincial relief funding provided in 2023 is fully consumed, and grows progressively as expenditures outpace the existing revenue sources,” reads a TransLink staff report that will be reviewed by the Mayors’ Council later this week.

The continued forecast of a shortfall in transportation demand-driven revenues beyond 2026 is leading factor for the deficit.

By 2033, TransLink expects to see a cumulative funding gap of $1.88 billion from fare revenue, and $958 million from the accelerating decline in gas tax revenue.

While overall public transit ridership has recovered to about 90% of pre-pandemic levels as of early Fall 2023, there are sustained pandemic impacts to ridership, with not only lower ridership but more importantly fewer long-distance weekday commuters due to semi-remote work, and a greater proportion of weekend trips and discounted program riders such as the U-Pass. As passengers are taking less frequent trips, they are buying cheaper fare products, such as single-trip tickets, instead of the more expensive monthly passes.

The lower-than-anticipated fare increases since 2020 — below the 2018-created, multi-year schedule for increasing fares on annual basis — also had a compounding effect, which is responsible for $318 million of the forecasted funding gap.

With gas tax revenue, the growing fuel efficiency of vehicles combined with the provincial government’s legislated target of reaching 100% light-duty, zero-emission vehicle sales and leases by 2035 is depleting this major source of TransLink revenue.

TransLink ridership gap between 2026 and 2033. (TransLink)

TransLink funding gap between 2026 and 2033. (TransLink)

TransLink funding gap between 2026 and 2033. (TransLink)

On the expense side, inflation is the largest growing cost, accounting for $839 million of the funding gap, with $551 million coming from increased labour rates due to 2023 negotiated contracts with the two main unions — Unifor, representing bus and SeaBus workers, and CUPE 7000, representing SkyTrain Expo/Millennium workers. These new contracts with Unifor and CUPE expire in 2026 and 2028, respectively.

“As the economy began emerging from the pandemic, higher inflation and increased cost of living resulted in higher than before negotiated settlement of labour contracts,” reads the report.

Another $288 million associated with inflation is due to general inflation increases, including fuel, maintenance costs, and other contractual increases.

The next highest expense driver is service expansion, with associated projects to support the Millennium Line Broadway Extension and Expo Line Surrey-Langley Extension, and other Expo/Millennium upgrades adding $408 million in costs.

Debt service costs to support the capital costs of new and improved services and infrastructure account for $459 million of the funding gap over eight years.

There are also growing expenses to bus operations as a direct result of worsening traffic congestion and delays. This means TransLink needs to deploy more bus vehicles and drivers to maintain scheduled frequencies and route capacities. Over eight years, this will account for $411 million of the funding gap. The public transit authority states this partly explains their push for more bus-priority measures, such as bus-only lanes, queue jumpers, and traffic signal priority.

Furthermore, another $118 million in the eight-year funding gap is from TransLink’s commitment to increase services reaching the region’s First Nations reserves.

TransLink appears to be making a case that it needs the provincial and federal governments to continue providing more direct senior government funding towards public transit to sustain services and proceed with service expansion, and create brand new sources of revenue that are not dependent on transportation demand.

Forthcoming capital projects under the 10-year priorities are almost certainly largely dependent on the will of senior governments.

The Mayors’ Council is already calling on the federal government to to start its previously announced annual permanent federal transit fund in 2024, a few years earlier than planned.

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