Date to Committee: July 7, 2015 Date to Council: July 15, 2015

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1 Page 1 of Report TR TO: FROM: Community and Corporate Services Committee Transit SUBJECT: PRESTO Contract Renewal Report Number: TR Wards Affected: All File Numbers: , Date to Committee: July 7, 2015 Date to Council: July 15, 2015 Recommendation: Renew the PRESTO Operating Agreement between the City of Burlington, the Greater Toronto and Hamilton Area transit service providers and Metrolinx for a further term of three years from October 27, 2016 to October 27, 2019; and Authorize the Mayor and Clerk to execute an amending agreement or other such documentation as may be required, subject to the satisfaction of the City Solicitor. Purpose: Obtain authorization for the extension of the current PRESTO Smart Card System Operating Agreement for an additional three years. The following are key points for consideration: On June 26, 2006, Council approved the City of Burlington entering into a ten-year operating agreement ( ) with the Ministry of Transportation for the operation of the PRESTO system; Through this agreement, the province funded 100% of the capital and operating costs of the Central System for the 10-year period and also funded 33% of the capital costs for the City of Burlington; The current PRESTO Operating Agreement (OA) with Metrolinx, which is set to expire October 27, 2016, includes a provision for three renewal terms of three years each subject to agreement by the ministry and a majority of the municipalities; In the summer of 2014, PRESTO began consultations with members of the PRESTO Executive Client Committee around potential future governance options; More time is required to allow PRESTO to achieve full functionality and fulfill its obligations under the current agreement; to assess the feasibility of various governance models and to negotiate terms of a new agreement; and As the PRESTO project has experienced delays totalling almost three years, the service providers need more time to understand the benefits and costs of a fully functional system prior to finalizing terms of a new agreement.

2 Page 2 of Report TR Background: The PRESTO Smart Card System was created to facilitate seamless inter-regional transit travel throughout the GTHA thereby also encouraging the use of public transit. It is intended to allow customers to ride on any participating Greater Toronto and Hamilton Area (GTHA) transit system without familiarity with the fare policies of each system. Increased use of public transit contributes to a reduction of vehicle congestion and associated environmental impacts. The PRESTO fare card is the size of a credit card with an embedded computer chip that can be programmed to store transit fare payment options and other information required for fare collection. Since 2004, Burlington Transit has been working with the province s PRESTO Project Office to develop and implement this electronic fare payment system. On June 26, 2006, Council approved the City of Burlington entering into a ten-year operating agreement ( ) between the City of Burlington and other participating municipalities, GO Transit and the Ministry of Transportation for the operation of the PRESTO system. At that time, the City of Burlington was required to demonstrate participation in the GTA Fare System in order to continue to receive their allocation of the provincial gas tax. The Greater Toronto Area Fare System (GTAFS) Operating Agreement outlined the roles and responsibilities of the municipal service providers and the province. It established a longer term governance structure that also outlined the framework detailing the decision-making regarding the operation of PRESTO. At that time, the total provincial funds for PRESTO were in excess of $250 million. The cost sharing arrangement saw the province fund 100% of the capital and operating costs of the Central System for 10 years ( ). The province also funded 33% of the capital costs of municipal service provider systems. This funding model applied to all participating municipalities. Burlington Transit was an early adopter and as such launched the PRESTO fare card on May 10, Since that time, Burlington Transit has not eliminated the existing paper fare media, but has encouraged customers to transition over to the new fare card system. Currently, 48 percent of our ridership uses the smart card technology to pay for their fare. In 2014, fares collected through PRESTO fare card payment accounted for slightly more than $2.2 million in revenue. Due to the delays in the initial implementation date of the program, rollout of full functionality for conventional transit has been delayed approximately three years from its original schedule.

3 Page 3 of Report TR Discussion: The current PRESTO Operating Agreement (OA) with Metrolinx is set to expire October 27, The current OA includes a provision for three renewal terms of three years each, subject to the agreement of all parties. The OA may be renewed by agreement of the province and a majority of the municipalities. Each renewing municipality must demonstrate agreement to renew by providing the province with a copy of a by-law or resolution properly authenticated by its respective council or board. The renewal period will be for an additional term of three years. The renewal will be on the same terms and conditions as provided in the original OA, unless the parties agree otherwise, in writing. Thereafter, the OA may be further renewed for two terms of three years each following the same renewal process. In preparation of the current OA expiration date of October 2016, a request to begin discussions around the new governance model was originally tabled and supported by the GTHA municipal service providers in late In the summer of 2014, PRESTO began consultations with members of the Executive Client Committee around potential future governance options. Several workshops have been held to date where several preliminary business models were discussed. Given the length of time required to allow PRESTO to achieve original scope functionality and fulfill its obligations under the current agreement; to assess the feasibility of various governance models; and to negotiate terms of a new agreement, a renewal of the current agreement is recommended. It should be noted that a three-year renewal period is consistent with the amount of time lost to project delays. In addition, the cost of PRESTO for all service providers has far exceeded original expectations. The three-year renewal period would allow municipalities to realize the benefits and understand the costs of a fully functional PRESTO system prior to finalizing terms of a new agreement. Burlington Transit, in cooperation with other GTHA municipal service providers, are requesting an additional three-year extension term, pursuant to Section 2.2, Article 2 of the operating agreement. Metrolinx has been advised of our intention to seek a threeyear renewal of the current agreement in a letter signed by the Director/General Manager of each transit service provider. This letter also conveyed our desire to continue to work cooperatively with Metrolinx to arrive at a future governance model that will be in the best interest of all parties.

4 Page 4 of Report TR Strategy/Process Under the current agreement, 240 days notice of a party s intent to renew the agreement is required. Accordingly, in order to ensure continuity of service, the City of Burlington, in conjunction with all other participating municipalities, is requesting the three-year extension. Staff will report to Council if a revised agreement is necessary to proceed. Options Considered In preparation for the expiry of the current operating agreement, Metrolinx has been researching possible governance options for a new operating agreement. Several possible governance options have been identified. The GTHA PRESTO Executive Committee, consisting of the heads of each municipal transit agency, evaluated the proposed models early in 2014 to identify the most favourable options, however, no agreement has yet been reached on the business model type to be used going forward. Financial Matters: Total Financial Impact The extension of the current operating agreement to October 27, 2019 would help to maximize investment in the current system in terms of devices/hardware, software and future short term enhancements. Source of Funding Sufficient funds are identified in the annual current budget to cover operating costs of the operation of PRESTO. The 2015 approved budget is $130,000 in Cost Centre Other Resource Impacts Staffing requirements for the delivery of the PRESTO Smart Card System are identified in the annual current budget. Public Engagement Matters: N/A

5 Page 5 of Report TR Conclusion: The GTHA municipalities and Ottawa are committed to continuing to work cooperatively with Metrolinx to arrive at a future governance model that is in the best interest of all parties and are committed to the success of the PRESTO Smart Card System. Pending successful negotiation of a future governance model by October 27, 2016, staff recommends the extension of the current operating agreement for a period of three years to October 27, The extension of the current operating agreement provides time to further assess the various governance models and to allow Metrolinx to fulfill obligations outlined in the current agreement. Respectfully submitted, Mike Spicer, Director of Transit ext Appendices: a. Notice of Intent to Renew Operating Agreement Notifications: (after Council decision) Name: Robert Hollis, Executive Vice President, PRESTO Mailing or Address: Robert.hollis@prestocard.ca Approved by: Joan Ford, Director of Finance Nancy Shea Nicol, Director of Legal Services & City Solicitor Scott Stewart, General Manager of Dev. and Infrastructure James Ridge, City Manager