Ottawa's mayor warns transit fare hikes, transit levy increases to address transit shortfall in 2025

Ottawa's mayor is warning of fare increases of 2.5 per cent to 75 per cent, service cuts, tax hikes, the elimination of free fares or a combination of levers to help offset a $120 million funding shortfall in the OC Transpo budget next year.

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." The proposed 2.9 per cent property tax increase does not cover the transit budget.

"The challenges we are facing are significant," Sutcliffe said.

"Big tax increase might help with our budget, but it won't help our residents and I was elected to protect the interest of our residents."

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.

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The mayor outlined several scenarios to fund the $120 million in transit funding, after spending weeks calling on the federal and provincial governments to provide $140 million a year over three years to address a "structural deficit" in the transit service's budget.

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 what 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 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

"I'm simply portraying the reality of the budget situation right now. The fact is we have a $120 million structural deficit in our transit budget that is driven by a number of factors that are beyond our control, including reduced ridership," the mayor said.

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.

A 2.9 per cent property tax increase and assessment growth would provide the city with $93.44 million for city services. The tax bill would allocate $56.65 million for city supported services, $15 million in funding for police and $17.3 million allocated to transit. 

Some homeowners, like Real Lavergne, say they understand the need to raise property taxes, but the prospect doesn't come without some frustration.

"It's basically just keeping up with inflation, so it seems reasonable enough to me to catch up. In fact, I do a little bit of renting myself and being capped at 2.5 per cent doesn't seem very reasonable so I can't hold it against the government if I find it unreasonable myself," he said.

"One reservation I have is that it's a pain to know the increase is largely due to the problems with OC Transpo because that file has just been so badly managed."

Meanwhile, many transit riders tell CTV News Ottawa they aren't getting their money's worth as it currently stands, so cuts to service while raising fares is unfair.

"Half the time the train's down, or the bus is late or it's not running. Out of service so, I don't like the transit system here," said Mohamed Hasan. "I don't agree with it. I don't think transit fares should go up."

"Throughout the years, the wait times have gotten longer. I was late for class. It took like 15 minutes for the train to show up so, it's not the best," said Anna Matte, a third-year student at the University of Ottawa. "Some people who are choosing public transit are not just doing it for the environment. They can't afford car payments or gas, which is already expensive, so if they increase the cost of transit, I think that would be even more difficult for the majority of population that's using public transit."

A fare increase of 75 per cent, while unlikely, would see the price of an adult monthly transit pass jump from $128.75 to $225.

"That would be a huge increase. It would be a huge hole in our pockets, and it would be difficult for someone who is working on an hourly basis and the salary has not yet increased compared to what our expenses are right now. It would be a huge impact," said Zeel Patel.

"It would cost me a few extra hours of salary just to commute. It would be a real hassle for us." 

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 was a $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.

--With files from CTV News Ottawa's Austin Lee