My fantasy streetcar route change is the most modest of all: swap the western ends of the 514 and the 504. This is intended to reduce the track capacity issues at Dundas West and Broadview, improve passenger distribution between the 514 and the 504, and improve line management by equalizing headways.
Current King streetcar services
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Proposed King streetcar services
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Overnight service would continue to operate from Dundas West to Broadview as it does today.
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Dundas West / Broadview station capacity
Dundas West and Broadview stations both have capacity issues, with streetcars sometimes backing up down the street as the platforms are occupied. This is because of the recovery time that needs to be included within the schedule to account for variation in the travel time over the long and busy route. Meanwhile, Dufferin and Distillery loops have plenty of spare capacity, with less frequent service on a route which travels a shorter distance. By swapping the branches, the service operating out of Dundas West and Broadview now cover a smaller distance, which means there is less chance of delay and therefore less need for recovery time in those busy stations.
Passenger Distribution
In general, the 504 tends to be crammed through the combined section, while the 514 runs fairly empty. Besides the obvious difference that the 514 uses 30-metre low-floor streetcars while the 504 uses 15-metre CLRVs, this is also due to the fact there are many places on 504 that are not on the 514, but not many places on the 514 that are not also on the 504. Swapping the branches would help equalize the ridership between the 504 and the 514.
Allow for headway management
Currently during peak periods the 514 Cherry operates every 7.5 minutes, while the 504 runs every 4 minutes. This makes headway management pretty much impossible - if you equalized headways on the separate segments, they would be sporadic on the combined section, and if you evened the headways on the combined segment, they would be uneven on the separate segment. Once both routes are running 30-metre streetcars they could run the same headway (every 6 minutes?), allowing the combined segment to also run at an even headway (every 3 minutes?). Headways could then be managed in the combined section without screwing up the headways on the separate sections.
Conclusion
The drawback of this configuration is that it requires more streetcars than the current arrangement given that it provides slightly excessive capacity along the route of the current 514. So it wouldn't make any sense until the streetcar fleet is back up to full numbers. But once the streetcar fleet is restocked, this change could be a worthwhile investment to improve the practical capacity and reliability along the city's busiest streetcar corridor.