Big Presto swipe

The TTC board’s decision last week to choose Presto over an open standards payment (OPS) system looks eerily familiar. Remember eHealth, another provincial IT project, which profited private firms, ran over budget and cost taxpayers an arm and a leg?

Well, watch out if the electronic Presto fare payment system, with its chip-enabled smartcard, makes it to our turnstiles.

The reason it’s on the table is that the system got bargained into a deal Rob Ford made with McGuinty when he moved to kill the Sheppard LRT and reallocate the provincial money to the Eglinton LRT for a few additional underground stations.

As part of negotiations, the city was forced to commit to Presto and its $250 million to $350 million price tag. There were no additional hard funding commitments for the payment system, so the city is likely on the hook – which explains why the TTC is keeping the OSP deal it made under the previous regime alive until November as a security measure.

Almost no one would deny that the TTC needs to modernize its fare collection. The question is how and at what cost. This is why the TTC began to consider open-standards payment two years ago, when New York City implemented a similar system and proved it worked.

Perhaps TTC board politicians were unaware of what they were rejecting, because the OSP Request For Proposal (RFP) seems just the kind of public-private partnership you’d expect Rob Ford types to embrace.

Open standards is not a specific proprietary system like Presto, with its one card, but allows payment by debit or credit card and any new mechanisms (like cellphones) that use standard financial protocols. This is why the financial community was likely willing to underwrite most of the costs of the system.

With OSP, the TTC would be like any other merchant. Instead of paying to set up its own complex – and costly – electronic “bank-like” back office to track fares and process payments, it would feed transactions through existing networks. Presto’s back-office requirement partly explains its nearly $250 million higher cost compared to an OSP system.

And instead of using expensive proprietary technology that would be sole-sourced, the TTC could use any of the multiple vendors that already sell OSP-enabled products to other vendors.

The OSP system uses the new credit/debit cards that have microchips enabled with RFID (radio-frequency ID) or short-range receivers that register a charge with a mere wave of the card, without requiring a PIN number. (It also provides a card option for those without credit or debit cards.)

Most important, it’s designed to allow for new payment tech through cellphones or other devices.

Sure, Presto could also be adapted to OSP, but because it’s a proprietary, custom-made system, it won’t change without the investment of tens of millions of dollars more. With OSP, financial services firms pay for upgrades, as they do with other merchants. With Presto, taxpayers pay. So with Presto, not only do future upgrades require additional money, but the province has already paid $250 million, much of it to private companies, for the central GTA system. On top of this is the approximately $300 mil (their numbers, not mine) needed to outfit the TTC system.

Compare all this to the cost of the rejected OSP system that would have been provided at no cost to the TTC except the $80 million needed to upgrade some turnstiles. In addition, with OSP, fare collection costs would be the same as today’s or lower (capped at the current cost of 7¢ per $1 of fare revenue collected), whereas Presto will cost more than 10¢ per $1, perhaps as much as 15¢, which means $20 million-plus more per year.

This, of course, comes from riders, the equivalent of a 10¢ fare hike, all of it going to the private companies that get revenue every time a Presto card is swiped.

We know all the numbers associated with an OSP system, because providing them was a requirement of the publicly tendered RFP. For Presto, we only know some of the numbers, since the full contract is not public. We must rely on costs from other cities for comparison.

At the end of the day, OSP would allow the TTC to keep up with technology, provide ultimate convenience and save $300 million outright and $20 million or more per year.

As we begin to implement one of the last smartcard-based transitsystems in the world, cities like NYC, Chicago, Washington, London, São Paulo and Paris are moving to OSP systems. Taxpayers will pay dearly if we miss this opportunity.

A TALE OF TWO FARE SYSTEMS

Set-up costs for the TTC

• Open Standards Payment: $80 million

• Presto: $250-$300 million

Fare collection costs

• Open Standards Payment: 7¢ per $1 of fare

• Presto: 10¢-plus per $1 of fare, amounting to $20 mil more per year

Adam Giambrone is former chair of the TTC.

news@nowtoronto.com

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