‘Budget direction’ goes with 2.9 per cent tax increase — and potentially hefty jump in transit fares

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The city’s finance and corporate services committee has approved “budget direction” that includes a 2.9 per cent municipal tax increase.

There are still weeks of public consultations left before a draft budget will be tabled in November. The direction includes a broad-strokes list of instructions for developing the city budget as Ottawa faces a number of tight squeezes, including $120 million transit deficit and declining ridership.

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Under the direction approved Monday, which will be before city council Wednesday, the draft budget will set a tax increase of no more than 2.9 per cent, including funding for libraries and public health. The Ottawa Police Services levy will also be limited to no more than 2.9 per cent.

However, the budget direction also shows wide ranges for other potential increases, including a transit levy increase of between 2.9 and 37 per cent, and a transit fare increase of between 2.5 and 75 per cent. City staff are also to look at transit operating efficiencies and service reductions generating anywhere between zero and $120 million, as well as creating a list of transit capital investment deferrals.

Stittsville Coun. Glen Gower, chair of the transit commission, said he was glad to see the numbers “being put transparently out there.”

“It’s unlikely we’re going to see a 75 per cent fare increase or a $120 million cut in service,” he said. “But I think it’s important to have those numbers out there so that councillors and residents are really clear on what the trade-offs are.”

A $120 million service cut is about 14 per cent of the entire transit operating budget for 2025, said Gower.

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“That would be like cutting service entirely for one day a week — which would be a ridiculous idea that would prevent people from getting to works, to jobs, to hospitals, nursing homes, retail. There’s no way we can solve this with a $120 million service cut.”

The increases are exactly what Mayor Mark Sutcliffe warned would be on the table last week when speaking to reporters about the $120 million transit deficit and the need for more funding from the provincial and federal governments. Early in August, Sutcliife said the federal and provincial governments were shortchanging Ottawa by hundreds of millions of dollars in transit funding and property-tax equivalents.

For some councillors, a 2.9 per cent tax increase is within the range of what residents expect.

“We’re not properly funded and other cities get a lot more than we do,” said Kanata North Coun. Cathy Curry. “So I think this is the right direction.”

For others, the 2.9 per cent limit would put far too much strain on city services already struggling after years of low tax increases.

According to City of Ottawa figures, cumulative municipal tax increases in Ottawa in the past decade have been significantly lower than in other major Canadian cities. In Ottawa, tax increases since 2014 have added up to 26.91 per cent compared to 36.47 per cent in Toronto, 39.86 per cent in Edmonton, 39.3 per cent in Calgary and 56.99 per cent in Vancouver.

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Low tax increases have resulted in underfunded core services, said Rideau-Rockcliffe Coun. Rawlson King. “I know that my residents acknowledge that we don’t live in Oz, we live in Ottawa. They don’t want the streets paved with gold, they’d just be happy with asphalt.”

Even if there is one-time funding from the province or the federal government, that will not solve the problem, said Kitchissippi Coun. Jeff Leiper

“We can try to plug holes here and there, but we need permanent ongoing funding,” he said. “The systemic and structural deficit in our budget is only going to continue to grow.”

A long-range financial plan working group has been looking at fare structures and discounts, such as the rate being offered to high school students through school boards, said Gower.

But he added that city council needs more than $120 million. OC Transpo is about to launch a new LRT line to the south, it’s building lines to the east and west, procuring e-buses and looking to improve Para Transpo, and $120 million is “the bare minimum that we need to meet the needs of our city to keep people moving,”  he said.

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Reducing service makes transit less appealing. Leiper said he was against service cuts, but open to fare increases. There is some “elasticity” in the system. The transit system has already lost the riders who have a choice, he said.

“The riders who are going to pay the higher fares are the riders who have no other choice.”

A study released last week by Ontario’s Financial Accountability Office said Ottawa will see the steepest decline in per-resident subsidies for transit of anywhere in the province next year. According to the accountability office’s figures, Ottawa will see a per-resident reduction from $59.61 in 2022-23 to $31.01 in 2024-25, while the per-resident subsidy will increase to $196.49 from $191 in Toronto.

Only 19 per cent of Ottawa’s operating revenue came from fares, with the remainder coming from federal and provincial subsidies, said the report. In Toronto, the TTC generated 35.9 per cent of its revenue from fares. The provincial average of revenue generated by fares is about a third of revenues.  

That underlines that taxpayers are contributing a greater proportion to transit in Ottawa than in other cities, Sutcliffe said Monday.

“Which is not necessarily a reason for us to dramatically increase transit fares. But just to know where we’re starting from as we go through this process.”

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