Adapting the City’s transit long range financial plan/strategy to a new economic landscape

[guest]

Today, City staff presented an important update on the transit long range financial plan. This update, for members of Council, is aimed to ensure they have the latest information on the financial landscape of our transit services to help inform decisions that will shape Ottawa’s future.

After enduring two years of economic impacts due to pandemic shutdowns and restrictions, we now find ourselves in a changed economic environment. The environment is characterized by inflation rates nearing three percent, and higher interest rates, now sitting at five per cent. Furthermore, the pandemic has acted as a catalyst, accelerating the shift towards a hybrid workforce model.

In light of this new reality, numerous factors have converged, placing substantial financial pressures on our transit services.

Contributing factors behind budget challenges

• Reduced ridership: pandemic shutdowns and the shift to a hybrid workforce model has led to a lower number of people using public transit
• Inflation pressures: rising inflation affects both our operations and capital costs, making everything more expensive
• Increased interest rates: with higher interest rates, our debt-related costs have risen, impacting budget
• Rail operating costs: the cost to operate our rail services has increased due to inflation, operating and oversight requirements

Change in the budget pressures

Our financial landscape has evolved significantly since our last forecast in 2019. Our long range financial plan forecasts to the end of 2048 which aligns with the LRT maintenance and operating agreement.

Budget pressures over the forecast period to 2048 now include:

• $3.7 billion shortfall in ridership revenue, which is $100 million a year in 2023 dollars
• $800-million decrease in Gas Tax Funds due to the cancellation of the gas tax doubling
• $500-million increase cost for buses
• $1.4 billion increase in Stage 1 and 2 of light rail operating costs
• $1.1-billion increase in the net operating cost for Stage 3
• $900 million increase in the capital cost of including all the Bus Rapid Transit projects identified in the Transportation Master Plan

Finding solutions to managing the budget pressures

The City is exploring several mitigation options to continue our commitment to fiscal responsibility and providing effective services, including:

• Increasing the transit tax
• Delaying, phasing-in or re-scoping Stage 3 of the LRT
• Increasing transit development charges to align with the City’s growth requirements
• Revisiting the planned rapid bus transit system and dedicated transit lanes
• Continuing to seek funding from senior levels of government
• Exploring other sources of revenue

Next steps

The City has shared this information with members of Council and residents to be transparent and open about the most recent information and projections available for transit capital and the difficult financial realities facing our public transit system. Over the coming months, City staff will examine any potential mitigation measures to offset these budget pressures. Our goal remains to ensure the City continues to provide a safe and reliable transit system that meets the evolving needs of Ottawa residents now and in the future.

For more information on City programs and services, visit ottawa.ca, call 3-1-1 (TTY: 613-580-2401) or 613-580-2400 to contact the City using Canada Video Relay Service. You can also connect with us through Facebook, Twitter and Instagram.

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