Nov 23, 2011 - However, at no time will the rate that Metrolinx ... management systems that deliver excellent customer s
Memorandum To:
Metrolinx Board of Directors
From:
Steve Zucker PRESTO, Managing Director and Executive Vice President
Date:
November 23, 2011
Re:
PRESTO Agreement with Toronto Transit Commission
Executive Summary Metrolinx is seeking the Board’s approval to finalize and execute an agreement with Toronto Transit Commission (“TTC”). The proposed agreement sets out the terms under which Metrolinx will provide the electronic fare services known as PRESTO to the TTC. Concurrently, the TTC is seeking the Commission’s approval of this agreement at a Commission hearing also scheduled for November 23, 2011. The TTC’s participation in the PRESTO program is an important component of the regional transit system which includes the participation of all transit operators in the Greater Toronto and Hamilton region. Under the proposed agreement, Metrolinx funds the capital and operating expenses necessary to provide the services. The TTC has $47M of CSIF funding to cover its internal costs with contingency. To offset its capital investment, Metrolinx will retain a percentage of the gross e-fare receipts collected through PRESTO. The amount that Metrolinx retains will increase as PRESTO use increases, TTC ridership increases and TTC fares increase. However, at no time will the rate that Metrolinx retains exceed the agreed-upon percentage. The term of this arrangement is 10 years, with 2 five-year renewal options. Recommendation RESOLVED THAT: Metrolinx is authorized to finalize and enter into a Master Services Agreement with the Toronto Transit Commission ("TTC") relating to the provision of electronic fare services to the TTC, in accordance with the principles and terms further described in a report from the PRESTO Managing Director and Executive Vice President dated November 23, 2011. Background PRESTO is an operating division of Metrolinx, an agency of the government of Ontario. PRESTO fulfills one of the legislated responsibilities of Metrolinx, to “plan, design, develop, acquire…a unified fare system” applicable to GO Transit, the local transit systems in the GTHA, and any local transportation systems of municipalities outside the GTHA that agree to participate.
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This is reflected in one of the strategic objectives in Metrolinx’ 5-year strategy, guiding corporate activities in implementing The Big Move regional transportation plan: “Provide transit users across the GTHA with a seamless and integrated fare collection system.” PRESTO’s Vision and Mission were updated and presented in October 2011: Vision: PRESTO will, in 5 years, be the preferred service for efficient and reliable transit fare payment and related services throughout Ontario, meeting or exceeding the expectations of transit riders and our service provider partners. Mission: To provide transit electronic fare (e-fare) payment and related information management systems that deliver excellent customer service while enabling progressive fare policies, sound decision-making, and efficient operations for Ontario Transit Agencies. The principles below were negotiated as a precursor to moving forward on the financial and business negotiations: 1. PRESTO is committed to deliver a system that addresses TTC current and future business needs in a manner that is acceptable to TTC from a customer, operational, and financial perspective. 2. TTC will participate and sign-off on processes and decision points during key stages in the project, including system development and design, procurement, and implementation. 3. PRESTO will conduct an open and competitive procurement with full TTC participation for all required equipment and services. 4. Recognizing TTC’s customer, business and financial needs, a governance and decisionmaking structure will be established between TTC and Metrolinx that allows for the effective management of the Deployment Project; and the effective ongoing oversight of the PRESTO Program. 5. TTC and Metrolinx will establish mutually acceptable funding agreements for capital and operating for PRESTO implementation and operation on the TTC. 6. The City of Toronto, TTC and Metrolinx will take advantage of commercial opportunities (both transit and non-transit) that the PRESTO System provides. 7. PRESTO will take advantage of advances in fare payment approaches (e.g. open payments, mobile devices). 8. TTC and PRESTO will establish a mutually agreeable Operating Model for the ongoing PRESTO System that meets TTC customer, business and financial needs. Discussion Services Under the proposed master agreement and a series of ancillary agreements, the TTC will contract with Metrolinx to deliver: (a)
all fare/e-fare revenue collection (and related services) for it’s transit system excepting on board cash collection which remains a TTC responsibility; and
(b)
cash-based fare revenue collection from (and related services with respect to) TTC fare vending devices that are: (i) on board TTC vehicles; and (ii) on street – but excluding cash boxes on surface vehicles (collectively, the “Managed Services”).
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To meet the business requirements of the TTC and the future needs of the other transit service providers who use the current PRESTO services, Metrolinx is modifying and enhancing the PRESTO core system to provide e-Fare services. The new system will use industry standard tools and will accommodate open payments (credit/debit cards), mobile e-wallet applications and future technological innovations (as further described in the master agreement and ancillary agreements). PRESTO will provide a range of fare products and services to TTC riders that include e-purse and pass products on a PRESTO card. This new system is referred to in these agreements as “PRESTO NG” “or “P2”. TTC will remain responsible for all on board cash fares. PRESTO will provide devices on surface vehicles, subway stations, para-transit, parking and customer service locations. PRESTO will provide all services from devices, core and back office systems. PRESTO will be responsible for the infrastructure (civil works, networks, systems) and maintain them in a state of good repair. Agreement Structure The master agreement sets out the basic outsourcing arrangement by which Metrolinx will provide the Managed Services to the TTC. It provides mechanisms to permit the parties to deal with governance, ownership of all PRESTO intellectual property by Metrolinx, project management, change control and dispute resolution. Other details are dealt with in a series of ancillary agreements and related schedules, notably: (i)
Funding and financial reporting is dealt with in the funding and financial reporting agreement;
(ii)
The modification and enhancement of the PRESTO system to create PRESTO NG, and the implementation of PRESTO NG at the TTC, is dealt with in the project management agreement; and
(iii)
The operation of PRESTO NG and related issues (once that system is substantially deployed and implemented at the TTC) is dealt with in the operational services agreement.
Term This arrangement contemplates a three year development and implementation phase included in the initial operating term of 10 years. Provided that Metrolinx is meeting its obligations in all material respects, this initial term is to be automatically renewed for up to 2 subsequent 5 year terms. If either party wants to renegotiate the terms of the master agreement and certain ancillary agreements, it may do so as part of that automatic renewal, provided that notice is given to the other party: (a) no earlier than the end of the fourth year of the initial term; and (b) no later than 12 months prior to the expiration of the then current term (whether the initial 10 year term, or the first 5-year renewal term). TTC Legacy Fare Media A plan is to be developed by the TTC to cease all use of the legacy fare collection media including Metro-passes, tickets, and tokens. Based on deployment status, this date may be jointly renegotiated. To achieve this milestone, the TTC is to take all reasonable actions, including: (a) ceasing to promote the legacy fare collection media; and (b) implementing incentives for riders to use the PRESTO card or other e-fare media and the PRESTO equipment and services.
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Funding and Financial Reporting Agreement Metrolinx is responsible for funding the capital and operating expenditures necessary to provide the Managed Services in accordance with the master agreement and the ancillary agreements. Those agreements will contemplate macro TTC dependencies, upon which the delivery of the Managed Services is contingent, which may include specified costs that are to be borne by the TTC and not Metrolinx (ie power, facilities and infrastructure). In consideration for providing the Managed Services, Metrolinx will retain a negotiated percentage of the gross e-fare receipts collected by Metrolinx as part of the Managed Services (the “Metrolinx Fee”). Metrolinx is to remit the remainder of that e-fare revenue to TTC on a daily basis. As an exception to the Metrolinx Fee, Metrolinx must remit to TTC 100% of the e-fare revenue collected through any of the devices installed as part of the current PRESTO deployment in TTC subway stations. This exception will apply until such time as those devices are replaced with e-fare collection devices with agreed functionality that fulfills a mutually agreed portion of the TTC’s business requirements and in an agreed-upon implementation process and plan that is to be developed pursuant to the project management agreement. The funding and financial reporting agreement provides for mechanisms to adjust gross e-fare receipts where, as a direct result of a failure of the Managed Services or any part thereof, the gross e-fare receipts during a monthly reporting period were materially less than should reasonably have been collected during such period. The TTC must provide evidence in order to support any adjustment, and Metrolinx must agree to make that adjustment; provided that any failure to agree can be referred to arbitration in accordance with a process set out in the funding and financial reporting agreement. Metrolinx is to track both its expenditures and the Metrolinx Fees it receives, “Metrolinx Expenditure” means the total of all amounts expended by Metrolinx to: (a) enhance the PRESTO equipment and services to meet TTC business requirements (b) purchase equipment for use in connection with the Managed Services; (c) implement, operate, maintain and repair the PRESTO equipment and services forming part of the Managed Services (including all amounts expended in respect of administrative overhead, operating costs and expenses that are directly associated with the Managed Services); (d) the interest paid on funds borrowed to fund items (a) through (c) hereof or the cost of money (at the prevailing Ontario bond rate) to fund items (a) through (c) hereof (as applicable). If and when Metrolinx service revenue exceeds its cost and expenditures, Metrolinx will hold any surplus amounts in a segregated fund maintained for the benefit of the parties. Project Management Agreement Metrolinx must implement and deploy PRESTO NG (with functionality required by mutually accepted TTC business requirements), as set out in the project management agreement. This is to be done in accordance with an agreed upon project plan and subject to appropriate testing. As a part of such process, Metrolinx is to modify and enhance the current PRESTO system to create PRESTO NG. In connection with this, Metrolinx is to procure and provide any equipment and software necessary for the operation of PRESTO NG in the TTC transit system. TTC is to provide reasonable assistance to, and cooperation with, Metrolinx to develop, deploy and implement the Managed Services, and to do soon a timely basis in accordance with the master agreement and the project management agreement.
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Operational Services Agreement Metrolinx is to perform operational services consisting of the day-to-day operation of PRESTO NG and the other Managed Services (e.g., e-fare revenue collection services and the maintenance of the PRESTO equipment in a state of good repair). The operational services are to be performed in accordance with, and in a manner that meets, the operational services agreement, including certain agreed upon service levels. Notional Timetable – Preliminary Plan Key Milestones Operating agreements Financial agreements Procurement of devices for subway Business requirements finalized Deployment schedule & design finalized Civil works, power & construction Subway stations
Date March 2012 December 2011 April 2012 December 2011 March 2012 – March 2013 March 2012 – November 2013 November 2012 – August 2014
Legacy LRV Buses Withdraw legacy fare media
April 2012 – August 2014 March 2013 – December 2014 tbd
Metrolinx/Presto has a risk management program in place and will regularly report risk status to the TTC and mitigation strategies. Risks will be allocated to the agency best positioned to manage the risks. Appropriate joint risk mitigation strategies will be developed and regularly reviewed. Costs associated with Metrolinx risks will be the responsibility of Metrolinx. Costs associated with TTC risks will be the responsibility of the TTC. Proposed financing arrangement provides predictability for TTC on PRESTO fare system costs over 10 year period and subsequent two five year renewal periods. Capital costs associated with any future TTC-requested change orders are lease financed under the same arrangement during the project and only undertaken after TTC approval. Attachments N/A
Respectfully submitted,
Steve Zucker PRESTO, Managing Director and Executive Vice President
