‘We can’t do it alone’: city council faces bleak financial future

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City council threw its support behind Mayor Mark Sutcliffe’s “Fairness for Ottawa” campaign Wednesday after hearing a long and detailed accounting of the city’s financial outlook, particularly the red-soaked books of OC Transpo.

Council voted unanimously in favour of a motion to support the campaign and to petition the federal and provincial governments to pay their fair share of the city’s costs.

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“This is about fairness. It’s simply about fairness,” Sutcliffe said. “As a council, it’s absolutely critical that we are united in our call to other levels of government.”

As she introduced the nearly two-hour staff presentation, City Manager Wendy Stephanson described the past several years as “amongst the most challenging the city has ever faced.”

Without a doubt, the most challenging part has been transit. In just a year since council’s last detailed briefing on OC Transpo’s financial future, its projected deficit over the next 25 years has grown by $2.3 billion. In a September 2023 briefing, OC Transpo’s deficit was forecast to be $6.6 billion by 2048. On Wednesday, Deputy Treasurer Isabelle Jasmin said that projection had grown to $8.9 billion.

The culprit? A single stroked-out line on OC Transpo’s balance sheet labelled “Federal Permanent Transit Funding” that a year ago the city thought would be worth $2.3 billion.

“The situation we’re in is the equivalent of buying a new house based on a salary that you were expecting to earn and a mortgage you can afford and then losing your job and living on a reduced income when at the same time interest rates are going up,” Jasmin told councillors.

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For the LRT to make economic sense, OC Transpo forecasted a ridership of 112 million in 2023. The actual ridership in 2023 was 64 million, just 57 per cent of what’s needed. While other cities have seen ridership rebound after the COVID-19 pandemic, OC Transpo use hasn’t recovered largely because of the continued work-from-home policies for federal public servants.

That’s a double hit since those commuters pay full fare while many of the riders who have come back are students and other groups that have discounted fares. Overall, the decline of ridership cost OC Transpo $100 million in revenue in 2023 alone.

Fare freezes in 2020 and 2023 added another $430 million hit on expected revenue. In addition, the city’s below-inflation rate tax increases of 2.5 per cent for the past two years were less than the 3.5 per cent increases OC Transpo predicted and was banking on.

Meanwhile, the city is hamstrung by deals it struck with the federal and provincial government in which each would pay one-third of LRT construction costs. But, when costs ballooned and revenues plummeted, Ottawa residents were left holding the bag. While other cities negotiated deals where senior levels of government would carry all or nearly all of the cost of transit, Ottawa residents were stuck paying for more than half of its LRT.

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Speaking to reporters after Wednesday’s meeting, Sutcliffe said the presentation underscored the need for his Fairness for Ottawa plea.

“Other levels of government support transit funding in other cities in ways that they do not support Ottawa,” he said.

“We have to address those challenges in our own internal work — which we are doing — but we can’t do it alone. We need the help from other levels of government and need to be treated fairly as a municipality and as Canada’s capital.”

City staff also laid out a list of euphemistically titled “Levers to Affordability”: short-term “levers” such as higher transit fares, a review of discounted fare policies, paid parking rates and “service alignment;” and long-term “levers” including development charges, sale of development rights and air rights on city land near transit stations, plus a new transit master plan.

But transit wasn’t the only bad news for councillors on Wednesday. Expanding on the mayor’s complaints earlier in the summer about how the federal government was stiffing the city on payments in lieu of taxes — PILTs — city staff staff did a deep dive on the issue. The city says that over the past five years it’s owed nearly $100 million on PILTs from federal properties, National Capital Commission lands, Crown corporations and some diplomatic properties. If the city has to make up that shortfall, it alone would mean a property tax increase of five per cent, city Chief Financial Officer Cyril Rogers told councillors.

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If nothing changes, the city projects it will be shortchanged between $252 million and $445 million over the next decade in payments from roughly 1,000 PILT properties.

On the positive side, the report showed the work that had been done to cut city expenses. Administrative costs in Ottawa have been reduced to 5.3 per cent of the total budget compared to seven per cent in 2016, Stephanson said. Cost-cutting this year resulted in more than $153 million in savings, the equivalent of about a 7.5-per-cent tax levy, she said.

But, even as city council was boosting its argument for more federal money, the federal political scene shifted Wednesday with news that the NDP was ending its supply-and-confidence agreement to support Prime Minister Justin Trudeau and the Liberal agenda.

Sutcliffe was asked how that might affect his Fairness for Ottawa campaign.

“I can’t make decisions based on what’s happening at the federal level,” he told reporters. “I can only appeal to whatever government is power to give Ottawa our fair share of support and funding.”

The federal government’s plans to shed many of its Ottawa properties “could be the biggest change to our downtown in a century or longer,” Sutcliffe said.

“Whoever is in government needs to partner with us on a transition plan. One of the reasons I felt there was an urgency to deliver this message in August was that we know that, some time in the next year or 14 months, there’s going to be a federal election. I didn’t want to wait around to be talking about this.”

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