The city of Ottawa staff presented an update on the transit long range financial plan. The update is aimed to ensure they have the latest information on the financial landscape of the city of Ottawa transit services to help inform decisions that will shape Ottawa’s future.
The impact of the COVID-19 pandemic on the economy and the hybrid workforce model is placing substantial financial pressures on the city’s transit services.
Contributing factors behind budget challenges
- Reduced ridership: Pandemic shutdowns and the shift to a hybrid workforce model has led to a lower number of people using public transit.
- Inflation pressures: Rising inflation affects both the city’s operations and capital costs, making everything more expensive.
- Increased interest rates: With higher interest rates, the city’s debt-related costs have risen, impacting budget.
- Rail operating costs: The cost to operate the city’s rail services has increased due to inflation, operating and oversight requirements.
Change in the budget pressures
The city of Ottawa’s financial landscape has evolved significantly since its last forecast in 2019. Its long- range financial plan forecasts to the end of 2048, which aligns with the LRT maintenance and operating agreement.
Budget pressures over the forecast period to 2048 now include:
- C$3.7 billion (US$2.7 billion) shortfall in ridership revenue, which is C$100 million (US$74 million) a year in 2023 dollars
- C$800 million (US$597 million) decrease in Gas Tax Funds due to the cancellation of the gas tax doubling
- C$500 million (US$373 million) increase cost for buses
- C$1.4 billion (US$1 billion) increase in Stage 1 and 2 of light-rail operating costs
- C$1.1 billion (US$821 million) increase in the net operating cost for Stage 3
- C$900 million (US$671 million) increase in the capital cost of all the bus rapid transit (BRT) projects identified in the Transportation Master Plan
Finding solutions to managing the budget pressures
The city of Ottawa is exploring several mitigation options to continue its commitment to fiscal responsibility and providing effective services, including:
- Increasing the transit tax
- Delaying, phasing-in or re-scoping Stage 3 of the LRT
- Increasing transit development charges to align with the city’s growth requirements
- Revisiting the planned BRT system and dedicated transit lanes
- Continuing to seek funding from senior levels of government
- Exploring other sources of revenue
Next steps
Over the coming months, city staff will examine any potential mitigation measures to offset the budget pressures.
