Updated financial projections for Ottawa’s already troubled transit system present a bleak picture that could force the city to take drastic action — from increasing fares and adding a new tax to giving up on expanding light-rail to Kanata, Barrhaven and Stittsville.
It’s long been clear that OC Transpo is in bad financial shape.
Last year, the city was forced to dig into reserves to staunch the bleeding. But the situation became even worse, with the deficit for this fiscal year now pegged at $40.8 million.
Mayor Mark Sutcliffe introduced the financial update in stark terms, noting how the pandemic caused ridership numbers to crater and the federal government’s decision to allow public servants to work from home slowed any potential progress.
“It won’t be a shock to any of you that the result of that is a worsening financial picture for OC Transpo,” he said.
Sutcliffe said he’d been bracing himself for bad news but found a picture “much worse” than he’d feared.
“People often say to me, as they may say to you, you inherited a mess,” Sutcliffe told councillors. “And I’ll be honest. I’m not thrilled about this financial picture, nor some of the decisions that led to it.”
25-year fare projections down $3.7B
Throughout the pandemic, OC Transpo has been comparing ridership numbers to 2019, the last time city staff mapped out its long-term fiscal future.
It was enjoying steady growth at that time, spurred by the opening of the Confederation Line and the promise of further expansion.
Staff had expected 2023 would see 112 million rides, deputy treasurer Isabelle Jasmin told councillors. The reality is far from it, and is creating a cascade effect on projected revenue for coming decades.
Over the next 25 years, staff say the city can expect $3.7 billion less in fares — or $141 million per year.
While the cost of bus service has increased, Jasmin instead emphasized the cumulative effect of fare freezes and the fact that light-rail operations are costlier than assumed and put a hefty strain on the city’s ledgers.
And that’s not the only challenge it’s facing.
It’s now expected that OC Transpo will bring in $10.7-billion in revenue over the next 25 years, but spend $17.3 billion. The result is a $6.6-billion hole that must be filled.
“Ridership is forecast to return to pre-pandemic levels by 2030,” said Jasmin, forcing councillors to consider how the city can dig itself out of the financial hole while continuing to provide the service riders rely on.
Could put Stage 3 on the chopping block
The discussion comes at a time when many riders are still reeling from a weeks-long disruption in LRT service that brought to light the severity of technical problems on the line, and put the future of expanded rail in doubt.
Sutcliffe said he understands why there are concerns about the system, but suggested that frustrations will ease as the system improves.
“We are building a public transit system for the next 25 years,” he said. “In a few years from now when the city has grown even more … it will be looked back upon as something that had some stumbles but was an important city-building project.”
How to get there remains a burning — and unanswered — question.
The city must either find new funding sources by lobbying the provincial and federal governments, or decrease costs by reducing services or deferring capital projects. Most likely, it will need to do both.
“Only using one lever will not solve transit’s affordability issues. The solution will require a combination of changes,” said Jasmin.
The options include raising fares, taxes and development charges, or “even Stage 3 could be replaced by [bus rapid transit] or bus priority lanes.”
Stage 3 was always completely reliant on provincial and federal funding, Sutcliffe noted, adding that he does not believe it will be necessary to pull the plug on the massive infrastructure project.
No decisions yet
Many councillors found the information and realization of the scope of upcoming challenges difficult to digest.
Some asked about specific plans for transit in their wards and expressed concerns about how the city would be able to properly accommodate growing neighbourhoods outside the downtown core.
Others wondered if residents with little access to transit would find themselves footing the growing bill.
“What I’m hearing is that we have an urban transit problem and we want other parts of Ottawa to pay for it,” said Rideau-Jock ward Coun. David Brown.
Transit general manager Renée Amilcar acknowledged that this will be tough, but Ottawa will get through it and end up with a stronger system.
The next step will be a direction to staff to come back with more developed options, said Sutcliffe, with an aim to receive them by the end of next June.