STM 2006 Budget
Montreal, 12 December 2005 - The Chairman of the STM Board of Directors, Claude Dauphin, its Vice-chairman, Marvin Rotrand, and the Director General, Pierre Vandelac, today presented the highlights of the 2006 Budget. At $864.4 M, the budget shows a $32 M shortfall, despite an additional $10 M contribution by the City of Montréal, for a total of $278 M, and further efforts by the STM to reduce expenses by another $6.5 M through ongoing business process optimization and fare increases averaging 3.3%, or $2 for a monthly CAM pass, still below the Transportation Price Index (TPI).
The situation is cause for concern, but can be explained by increases in some unavoidable expenses and by insufficient sources of revenue earmarked for funding public transit.. “In the past four years, the STM has barely managed to balance its budget for lack of adequate sources of financing. The problem has been widely acknowledged and Québec’s Transport Minister had committed to introducing measures, as early as January 2006, to help public transit authorities meet their obligations. We have been informed that the $13.2 M we received in special aid for 2005 to mitigate the effects of postponed decisions would not be repeated, and that we had to wait for the next provincial budget to be adopted before we could have a new financial framework”, indicated Mr. Dauphin.
Three major factors explain the $33.3 M difference with the 2005 budget. First, a $16.8 M increase in wages, the result of collective agreement salary indexation (2.5%) and of the impact of legislative decisions about pay equity and the new parental leave programme. Second, energy costs, specifically diesel and natural gas, have jumped by more than 30%, or $10.6 M. And finally, the growing number of paratransit trips, combined with higher taximeter fares, have resulted in additional expenses of 5.4 million dollars for the STM.
In the absence of any firm commitment by the Québec government, the STM has no alternative but to raise passenger fares. Since 2003, passengers have seen their contribution increase by 23%. “We feel that transit users have already done more than their fair share and should not be alone in assuming the consequences of the government’s withdrawal from funding public transit’s operational costs,” admitted Mr. Dauphin.
The regular monthly CAM will go from $61 to $63, while the reduced fare CAM will cost $33.75 instead of $32.50. Regular cash fares will remain the same, but the reduced cash fare will rise to $1.50 for 2006. The regular weekly CAM Hebdo will increase by 50 ¢ to reach $18.50, while the reduced fare CAM Hebdo will cost $10.25, a 50 ¢ increase over 2005. Strips of six tickets will each go up by 25 ¢, costing $11.50 for regular fares and $6.00 for reduced ones.
Staying on course with the quality of service
Despite a difficult financial situation, the STM is staying on course with the goals set out in its Business Plan and foresees spending $5.6 M to improve the quality of service. “We have chosen to take action, within our means, to keep our current clients and try to gain new ones. Our efforts, combined with rising fuel costs that are beginning to have a positive impact on ridership levels, lead us to believe that we can increase the number of trips by 1% in 2006”, added Mr. Dauphin.
Resources to finance capital spending projects
Last November 28, the federal government reached an agreement with Québec to remit part of the excise gas tax to the Société de financement des infrastructures locales du Québec (SOFIL). For the Montréal area, this means $433 M (including Québec’s share) will be distributed among public transit corporations to cover some of their capital spending for the next five years. Although the terms and conditions have yet to be clearly defined, the STM could receive over $300 M. Welcome news, in light of the fact the STM estimates it will need to invest $3.5 billion in its network infrastructure over the next ten years.
Good credit ratings
Finally, Standard & Poor’s and Dominion Bond Rating Service (DBRS) have once again confirmed the STM’s sound financial management by upholding their respective credit ratings of A+ and A(high). “Nevertheless, the two agencies stipulated that if nothing was done to ensure more stable sources to finance operations, the quality of service and affordable fares, the STM’s credit rating could be adversely affected. This is one more argument in favour of a new financial framework that would ensure the development of public transit in Montréal”, concluded Mr. Dauphin.