Why one Ontario town's Uber experiment shows that there’s no quick fix for public transit

OPINION: Innisfil town council opted for the plan because of its low upfront costs — but two years later, councillors are capping service and raising prices
By John Michael McGrath - Published on May 01, 2019
In 2017, the town of Innisfil signed a deal with Uber, the U.S.-based company, to deliver public transit. (Lars Hagberg/CP)



Two years ago, the town of Innisfil, south of Barrie, tried something new in the world of urban policy: rather than spend the cash upfront to buy and operate a traditional bus (much less numerous buses), its council opted to sign a deal with Uber, the U.S.-based company notable partly for losing money hand over fist. As part of the deal, users could get flat rates to a number of major destinations around Innisfil (the GO train station, the town hall, the rec centre), as well as discounted trips within the town.

How’s that working in 2019? At the end of March, Innisfil town council approved a number of changes to the deal’s fee structure, raising the flat rates, shrinking the discount, and capping the total number of discounted fares. The cap — 30 per month — may be the most significant change.

In effect, the city’s plan will now cover only 15 round trips every month. “I would never get on a bus in Toronto and hear the driver say, ‘Sorry, but you’ve hit your cap,’” resident Holley Hudson told the website CityLab. “Uber was supposed to be our bus.” The program may still be useful, but the new rules mean that it won’t be a viable alternative to car-based commuting for anyone who needs to work or attend school full-time.

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And Innisfil, population 37,000, was supposed to be the perfect candidate for this kind of experiment: a rapidly growing town that was still too small for a regular scheduled bus service but getting large enough that some kind of transit option was necessary.

So why the changes? Money. Staff estimate that the program will cost $1.2 million this year, well above the $900,000 that was budgeted. Transit isn’t cheap to run at the best of times — but the problem Innisfil faces is subtler and illustrates why services like Uber are inherently limited in terms of what they can provide.

Conventional transit — a bus running along a regularly scheduled route, say — has high upfront costs, but it costs more or less the same to run an empty bus as it does a full one: the driver, the bus, and the fuel costs change relatively little. The difference is that passengers pay fares, bringing the net costs down. In economics-speak, there’s a high fixed cost for the service and a low marginal cost for every additional passenger.

For an Uber-based service such as Innisfil Transit, the economics are reversed: it’s got a low-startup cost (which is what council found so appealing in the first place), but it gets more expensive to operate as demand grows.

At a certain point, the costs of operating the Uber alternative will exceed those of operating even a rudimentary bus system. But this is comparing apples and oranges: Innisfil voters may reasonably prefer the Uber alternative for reasons other than efficiency, and it will be up to them to decide what comes next. As I said two years ago: Innisfil council’s decisions aren’t going to have a broader impact on the policy of the province.

Which isn’t to say that some folks won’t keep trying. Every time a larger city proposes some major transit improvement, naysaying councillors (usually, but not exclusively, the low-tax kind) stand up and say something like, “Why are we spending this money when Uber/automated cars/flying taxis will be here soon and make buses/light rail/etc. obsolete?” Sometimes, they’re quoting newspaper op-eds.

But, as the case of Innisfil demonstrates, the alternative technologies and systems put forward by the opponents of basic transit service face fundamental constraints. They may be flexible but unable to scale to even modest passenger volumes. They may be cheap to start but get expensive quickly — and far sooner than boosters would like to admit. And all of this while relying on a business model that can’t really be called fair to workers.

It will be interesting to see how Innisfil Transit will be tweaked to serve the town — and interesting to see how (or whether) people will continue to use it despite the changes made on April 1. But the early results should humble anyone proclaiming the end of transit as we know it.

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