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Commuters are photographed heading down to Union Station and transit home on June 14 2012.Fred Lum/The Globe and Mail

Toronto's cash-strapped transit system will have to find an extra $64.2-million next year to cover the cost of its new contract with unionized workers, as well as a plan to give the same deal to managers and non-union staff.

The increased bill for wages and benefits is in part the result of the first arbitrated settlement for the transit union since Mayor Rob Ford convinced the province to ban strikes at the TTC. That settlement gave members of the Amalgamated Transit Union a 6-per-cent increase over three years. The deal is retroactive to 2011 and will add close to $45-million in costs to next year's TTC budget.

During arbitration, TTC management asked for a four-year wage freeze, but having lost that battle, are now looking for the same increase as union members. A similar three-year deal for all non-union staff including senior managers would increase costs by more than $19-million for next year, a staff report says.

That report, to be considered at a TTC commission meeting Friday, notes that transit executives had their wages frozen in 2008 and 2009 and got a 1 per cent increase in 2010, at the same time that unionized employees got annual increases of 3 per cent. The increased pay packets, which would also be retroactive to 2011, are required to "avoid further wage compression," the report says.

TTC chair Karen Stintz defended the wage hike, saying it is in keeping with the city's policy to apply the same pay settlement to union and non-union workers.

A wage freeze across the organization would have been beneficial, she said, given that the city cut its operating subsidy to the TTC by 10 per cent last year. But since the arbitrator rejected that position, Ms. Stintz said it is only fair that non-unionize staff get the same wage increase. "It's more equitable to keep it consistent," she said.

Ms. Stintz said the commission is committed to limiting fare increases to the rate of inflation, and to preserving services after cuts were made earlier this year. "I don't think there is a public appetite for further reductions in service," she said.

The commission is looking for other ways to save money, she said, such as contracting out garbage collection. She would not speculate where it will find an extra $64-million to cover its higher wage bill. "We are still early in the budgeting process," she said.

The new wage deal for union and non-union workers will require the city to hand over close to $37-million more this year to support the transit system – including $11.4-million for the proposed raise for non-union staff.

The staff report notes the TTC has set aside enough money to cover the estimated $18-million needed for the higher wage bill for all employees in 2011.