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A comprehensive update on the City of Ottawa’s financial situation was presented to Council today, in which the City reaffirmed its commitment to strong financial management amid ongoing economic challenges.
The update offers a picture of the City’s finances and the external pressures unique to the City of Ottawa as we enter the 2025 Budget process.
In the update, staff detailed City Council’s fiscal leadership and sustained commitment to ensuring value for taxpayers’ money, continuously improving productivity, and delivering services as efficiently as possible – all while making critical investments in frontline services and priority areas such as transit, infrastructure and housing.
This commitment to strong financial management has resulted in more than $566 million in savings since 2001.
Highlights of this work include:
Despite these efforts, external financial pressures – particularly declining revenue from payments in lieu of taxes (PILTs), transit ridership levels, increasing construction costs of transit, and inequitable provincial and federal funding – are challenging the City’s established approach to financial management.
PILTs
Ottawa has approximately 1,000 properties exempt from regular property taxes that instead pay PILTs. These include properties owned by federal and provincial governments, the National Capital Commission, and diplomatic properties.
PILTs are intended to offset lost property tax revenue, but actual payments have fallen short. Over the past 10 years, the PILT budget has had to decrease by 4.6 per cent, while property taxes have increased by 30 per cent, placing a greater tax burden on residents instead of government properties.
The total shortfall in PILTs over the past five years amounts to $99.2 million in lost revenue. If current practices continue, this shortfall could grow to between $252 million and $445 million over the next 10 years.
Transit
The shift to remote and hybrid work since COVID-19 has led to a rapid decline in transit ridership, causing projected annual shortfalls of $120 million by 2025 and $150 million by 2028. At the same time, the estimated cost of the Stage 1 and 2 O-Train projects has increased from $5.2 billion to $7.1 billion due to market conditions, the pandemic, and other factors outside the City’s control.
Unlike light rail projects in the Greater Toronto and Hamilton areas – where construction costs are largely paid by the provincial and federal governments, and maintenance is entirely paid by the provincial government – the City of Ottawa bears all additional costs for the O-Train. As a result, the original funding model, where the City, provincial, and federal governments each covered one-third of costs, has shifted, with the City now covering more than half.
The need for additional funding
The City has participated in numerous discussions with the provincial and federal governments over recent years regarding the City’s unique financial challenges and the need for additional funding and support.
These discussions have led to some positive results, including more than $500 million through the Province’s New Deal for Ottawa, as well as potential future funding under the federal government’s Canada Public Transit Fund. However, none of these agreements address the PILT and transit funding disparity.
Moving forward, the City is committed to working closely with its government partners to address outstanding issues, including the need to restore revenue from PILTs, reinstating the one-third funding model for transit, and new support for emerging issues to ensure the sustained delivery of high-quality and reliable service for Ottawa residents.
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The update offers a picture of the City’s finances and the external pressures unique to the City of Ottawa as we enter the 2025 Budget process.
In the update, staff detailed City Council’s fiscal leadership and sustained commitment to ensuring value for taxpayers’ money, continuously improving productivity, and delivering services as efficiently as possible – all while making critical investments in frontline services and priority areas such as transit, infrastructure and housing.
This commitment to strong financial management has resulted in more than $566 million in savings since 2001.
Highlights of this work include:
$153.5 million in savings during the current Term of Council due to service reviews, the finding of efficiencies and other continuous improvements.
Reducing administrative costs to ensure a lean and efficient organization, while still prioritizing frontline services for residents.
Establishing a long-range financial planning process for various City services, ensuring sound financial discipline and transparency for priority issues.
Maintaining a healthy balance of reserves, including cash and investments.
Despite these efforts, external financial pressures – particularly declining revenue from payments in lieu of taxes (PILTs), transit ridership levels, increasing construction costs of transit, and inequitable provincial and federal funding – are challenging the City’s established approach to financial management.
PILTs
Ottawa has approximately 1,000 properties exempt from regular property taxes that instead pay PILTs. These include properties owned by federal and provincial governments, the National Capital Commission, and diplomatic properties.
PILTs are intended to offset lost property tax revenue, but actual payments have fallen short. Over the past 10 years, the PILT budget has had to decrease by 4.6 per cent, while property taxes have increased by 30 per cent, placing a greater tax burden on residents instead of government properties.
The total shortfall in PILTs over the past five years amounts to $99.2 million in lost revenue. If current practices continue, this shortfall could grow to between $252 million and $445 million over the next 10 years.
Transit
The shift to remote and hybrid work since COVID-19 has led to a rapid decline in transit ridership, causing projected annual shortfalls of $120 million by 2025 and $150 million by 2028. At the same time, the estimated cost of the Stage 1 and 2 O-Train projects has increased from $5.2 billion to $7.1 billion due to market conditions, the pandemic, and other factors outside the City’s control.
Unlike light rail projects in the Greater Toronto and Hamilton areas – where construction costs are largely paid by the provincial and federal governments, and maintenance is entirely paid by the provincial government – the City of Ottawa bears all additional costs for the O-Train. As a result, the original funding model, where the City, provincial, and federal governments each covered one-third of costs, has shifted, with the City now covering more than half.
The need for additional funding
The City has participated in numerous discussions with the provincial and federal governments over recent years regarding the City’s unique financial challenges and the need for additional funding and support.
These discussions have led to some positive results, including more than $500 million through the Province’s New Deal for Ottawa, as well as potential future funding under the federal government’s Canada Public Transit Fund. However, none of these agreements address the PILT and transit funding disparity.
Moving forward, the City is committed to working closely with its government partners to address outstanding issues, including the need to restore revenue from PILTs, reinstating the one-third funding model for transit, and new support for emerging issues to ensure the sustained delivery of high-quality and reliable service for Ottawa residents.
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