It’s been a long, long time — some 15 years — since a budget process at Ottawa city hall has raised the spectre of huge cuts or a painful property tax hike.
Brace yourself, because Ottawa is on a financial roller-coaster not seen since the days of former mayor Larry O’Brien. Council relationships are not off track as they were back then, but this budget season is shaping up to be as unpredictable as those budgets were.
The next few months of deliberations about a 2025 spending plan could bring either a thrilling high or some tough lows that will be hard to stomach.
Could you handle a 9.9 per cent increase on your property tax bill after a decade in the two to three per cent range?
How about having to pay $6.65 for a single ride on OC Transpo?
Another worrisome option would see OC Transpo make $120 million in cuts, one-sixth of what it costs to run the system each year. Or, the deeply discounted passes for students and people on low incomes could be overhauled.
These worst cases won’t come to pass, but they’re down on paper in a budget directions document that goes before the finance and corporate services committee Monday. We haven’t usually seen such dire scenarios set out like that.
What city council could actually face is finding some combination of these “levers.” Local politicians hope it doesn’t come to that.
OC Transpo’s $120M problem
The whole problem lies at OC Transpo, which has a $120-million hole that must be filled. Municipalities can’t run budget deficits.
On the one side, revenue is not what it was counting on when it decided to build a train system pre-pandemic. It’s selling one-third of the adult transit passes it did in 2019. Most current riders are seniors, students and people on a lower income, all paying a discounted fare.
On the other hand, costs of running rail are about to climb to $176 million a year as the Trillium Line opens to the south, and the Confederation Line stretches east to Orléans.
Plus, debt payments for LRT construction kick in, including $137 million in 2025, according to city staff. That will push Ottawa’s total transit operations budget to $870 million, according to figures provided by the city.
There’s now a structural deficit that won’t go away, the mayor says.
It would grow bigger in the years to come, adding up to a whopping $8.9 billion over 30 years if staff’s projections prove correct. It won’t be solved with one-time fixes. Transit reserves are low.
Coun. Riley Brockington had been regularly asking questions about the sustainability of transit when ridership didn’t bounce back post-COVID. He didn’t think those budgets were sound, he said last week, and shortfalls in the past few years get harder with each budget cycle.
“This will probably be the most important year for the transit budget perhaps in the history of OC Transpo,” he said.
Even before the budget directions report was made public last week, Coun. Jeff Leiper was telling his residents to expect a “raucous budget season.”
Mayor’s messaging
Some critics would have preferred if Ottawa Mayor Mark Sutcliffe’s first two budgets had increased taxes by more than 2.5 per cent, which was below the rate of inflation and below what other cities did.
After searching for “efficiencies” and more or less staying the course, Sutcliffe has been signalling for a year that his third budget would be difficult.
In August, he stated into a microphone that the capital city is in a “financial crisis.” He wants to see if he can get what he believes Ottawa deserves from other governments before turning to tough local options.
The city is being shortchanged both by the federal government and the provincial one, he argues. Federal properties are getting away with paying less than they should in lieu of property taxes, he says.
Ontario, meanwhile, made this city foot the bill for far more LRT construction than its counterparts in Toronto and the Golden Horseshoe. Neither level gives decent support to run a modern-day transit system, Sutcliffe says.
He wants them to be “fair” to Ottawa and help the city balance its books. Full city council backed him up, and most believe he makes a strong case.
Meanwhile, he said he needs to be fully transparent with residents about just how bad things are.
Cities seek more revenue
But laying out broad, dire options for the budget’s direction was a “scare tactic” meant to get upper levels of government to pony up, said Coun. Shawn Menard. The city should instead show leadership by stating more clearly the tough decisions it intends to make, he said, and then adjust if good news arrives.
Sutcliffe isn’t the only one, however, to paint a stark picture of what lies ahead for a transit system without an influx of cash.
In B.C., TransitLink said in June that it’s facing a shortfall five times greater than Ottawa’s, and bus service would be cut in half without sustainable funding.
There is also a constant theme in cities across the country. They say they do too many things in the modern era that shouldn’t be borne by a property taxpayers. They’ve been calling for a “new deal.” Running a transit system is expensive, they say.
It’s unclear, though, if the mayor’s particular calls will be answered in time.
Federal public services and procurement officials “continue to work with the city” about those payments in lieu of taxes to make sure they’re “fair, and equitable, and consistent” with legislation, that minister’s office wrote in early September.
Meanwhile, the federal government isn’t in the business of subsidizing transit operations, wrote a spokesperson for Housing, Infrastructure and Communities Minister Sean Fraser. That falls to the province.
For its part, the Ontario finance minister’s spokesperson Colin Blachar wrote it’s “crucial that the federal government steps up as a full partner,” while also noting the half-billion-dollar deal it signed with Ottawa just a few months ago. That deal didn’t include transit money, although the mayor says the idea was negotiations would continue.
The mayor of Ottawa has 86 days to secure funding before council has to take a final vote on the budget. Between now and then are countless consultations, meetings and debates.
Let’s see how we all enjoy the ride.