Ottawa’s mayor is warning transit riders could see a fare increase of 2.5 per cent to 75 per cent in 2025, service cuts or a combination of levers to help offset a $120 million funding shortfall in the OC Transpo budget next year.
Mayor Mark Sutcliffe outlined the proposed budget directions for the 2025 City of Ottawa budget on Wednesday, saying homeowners are facing a 2.9 per cent property tax increase for “most areas of city operations” excluding the transit budget. The biggest budget pressure is the OC Transpo budget, which is projecting a $120 million shortfall in 2025.
“The challenges we are facing are significant,” Sutcliffe said.
The mayor has been calling on the federal and provincial governments to provide $140 million a year over the next three years to address a “structural deficit” in the transit service’s budget, as ridership remains below pre-pandemic levels.
Sutcliffe says, “if we don’t get help from other levels of government,” the city will have to introduce levers to mitigate the transit funding challenges.
“There’s a range of potential fare increases, a range of possible transit levy increases, a range of efficiencies and service reductions and a range of contributions from other levels of government,” Sutcliffe said.
“We don’t know hat the outcome will be with our negotiations with other levels of government. Depending on that outcome, we will need to apply different levers in order to close the transit gap. I remain optimistic, I remain hopeful that we will get the help we need.”
Possible options to cover the $120 million shortfall in 2025 include increasing the transit levy between 2.9 per cent and 37 per cent, depending on the level of funding received from the upper levels of government. Sutcliffe says another option is increasing transit fares between 2.5 per cent and 75 per cent.
“If we were to apply to some combination of all of the levers, the numbers would be lower in each area,” Sutcliffe said.
“Let’s be clear though, these are not things that we want to do but there aren’t a lot of solutions left. The result of this budget direction is we don’t know yet what the total tax increase will be for 2025.”
The 2025 budget directions outlines the following steps to address the $120 million funding deficit at OC Transpo, depending on funding from upper levels of government:
- A Transit Levy increase of between 2.9 and 37 per cent
- Fare increase between 2.5 per cent and 75 per cent
- Fare discount adjustments
- Operating efficiencies and service reductions between $0 and 120 million
- Capital investment deferrals
- “Identify any other levers for consideration” during budget talks.
A 2.9 per cent tax increase, including a transit levy increase at 2.9 per cent, would cost the average urban property tax owner an additional $125 in 2025.
The 2025 budget directions include a 2.9 per cent tax increase to fund the Ottawa Police Service, along with a 2.9 per cent increase for the Ottawa Public Library Board and Ottawa Public Health.
In the last two budgets, Sutcliffe kept tax increases capped at 2.5 per cent, which was an election promise. He did not, however, make a promise for the 2025 or 2026 budgets.
Sutcliffe says he wants to avoid a big tax hike for homeowners.
“We must respect the cost pressures that our residents are facing…and not add to their burden with big tax increases,” Sutcliffe said.
The 2025 budget directions are set to be brought before the Finance and Corporate Services Committee on Sept. 16 and full city council on Sept. 18. The directions will outline how the 2025 budget will be drafted, including possible caps on increases to property taxes and other tax-supported programs.
This announcement comes on the heels of a month-long campaign by Sutcliffe calling on the federal and provincial governments to provide more money to the City of Ottawa through payments in lieu of taxes (PILT) for government-owned buildings and additional funding to bolster the transit system.
Last week, a presentation to city council said there $99.2 million shortfall over the past five years related to federal and NCC properties in Ottawa. The city is estimating a funding shortfall of $252 million to $445 million over the next 10 years unless the federal government changes the PILT formula. Sutcliffe is also calling for $140 million a year over the next three years from the Ontario and federal governments to support transit.
The 2025 draft budget is scheduled to be brought before city council in November, with final approval in December.