Funding OC Transpo

Introduction

It is orthodoxy in Ottawa's transit advocacy circles that OC Transpo is underfunded. Advocacy groups from Ottawa Transit Riders and Strong Towns Ottawa to Free Transit Ottawa and Horizon Ottawa use phrases  like "underfund", "properly fund", and "neglected to fund" to describe OC Transpo. This extends to some politicians, including mayoral candidate and current MPP Catherine McKenney, who said that OC Transpo has suffered from "years of underfunding," as well as the media, who describe OC Transpo's various budget crises which these days seem to be the most regularly scheduled event at OC Transpo (these are not the same as "underfunding") - see this year's $56 million in "fake money" from bogus ridership projections and phantom spending by other levels of government. I have no doubt we will have another budget crisis sometime this year. 

Independent of these regularly occurring crises, which incidentally would make a great investigative journalism piece for someone with lots of connections to staff at City Hall, the mayor and City Council have so far resisted the urge make drastic increases to the budget, though many may disagree. (11.4% is a large increase, but the 4% increase that comes from real money is much smaller.) 

Nonetheless, the mayor continues to pledge "respect for the taxpayer," while advocates claim "underfunding." 

In this article, I wish to pose two questions: "is OC Transpo underfunded?", and "how does OC Transpo spend its money?"

Note that this piece only covers the operating budget. Big ticket purchases, such as the E-Bus program or Light Rail, are capital expenditures. These come and go in cycles, and it's hard to compare a mature system like the TTC to one in transition like Ottawa to a new system with little historical baggage like the 905 agencies. 

Comparisons

There are a few possible metrics to gauge OC Transpo's funding: subsidy, operating cost, or service operated, and then all of these metrics on a per-capita level. 

For the purposes of determining "underfunding," I have used the operating cost on a per capita basis. Here's why. 

In a transit budget, there are two components: the net, and gross. The gross refers to the total operating cost; the net refers to that cost, minus the fare revenue. Ottawa has a very high subsidy component compared to other cities. This year, a projected $203 million will be made through fares on a budget of $856 million (both of these include "fake" money), which is represents a cost recovery of 24%. More on this later. 

You do not fund transit network out of net funds. A transit agency uses both fares and subsidy to operate service, and ultimately, it is the service that is being measured with this metric. Fare revenue does not go into a magic pot and disappear from the agency's hands. While gross arguably represents a city's willingness to fund service, it also penalizes (for comparison's sake) the cities with an efficient and well-functioning transit system. Ottawa has a high net:gross ratio, so this effectively makes us look worse than other cities. 

Gross is also easier to find than net. 

I ran the numbers, and what I found shocked me. 

Across a dozen of the country's largest transit agencies, Ottawa has the highest operating budget per capita. 

With a population of around one million, and a 2024 budget of $767 million, OC Transpo receives about $790/capita. This compares to $780/capita in Toronto (excluding Metrolinx), $720 in Montreal, and $680 in Vancouver. All these cities see about much higher ridership than us, but more on that later. 

The underlying data was collected in this link. 

OC Transpo should provide the best service of all of these agencies, but that is not the case! While some may point to sprawl or urban planning, in theory, a less dense city should experience less congestion, allowing buses to increase their speed and thus the service operated by each bus. 

In practice, it doesn't always work like this, but compared to other sprawled cities such as Halifax, the 905, or Calgary, we have a very high budget. 

The Least Efficient Transit System

When City Council stands up and talks about efficiencies, such as reducing the phantom five minute bus to every ten minutes (I remember this scene from 2021, but could not find a source), they make themselves sound like idiots who do not know what they are talking about. But Council is right in one respect: OC Transpo is among the least efficient transit systems in the country. 

The below is a per-rider cost. The annual budget is divided by the ridership to produce the average cost of transporting one passenger. The data is in the same link provided above. 

In 2024, the average OC Transpo trip cost the agency $11.24. This compares to $14.64 in Gatineau, $8.44 in Edmonton, $7.87 in Vancouver, $6.16 in Montreal, $6.09 in Toronto, and as low as $4.33 in Halifax. 

We are paying more money for a service that is less efficient. 

The ridership per capita works to about 70 trips/capita over the entire year. This is higher than many other agencies, but it is not double of what, say, Calgary or Brampton sit at; the range is more like 30% at most. We are paying double for a service that receives maybe 20% more ridership; the other big city agencies see up to double our ridership. The TTC, for instance, saw about 130 trips/capita, which is commensurate with the higher rates they pay for the TTC. And this lower per-trip cost means a lower net budget, as more revenue is collected from fares, reducing the political impact of the mayor's whims or political promises to reduce the tax increase. 

While Toronto, or Montreal, or Vancouver pay nearly as much as us, their transit networks provide far more utility for residents. 

In short, while Ottawa pays more in gross and certainly more in net (our cost recovery is very low), we do not receive the ridership that one would expect from this extra transit cost. 

Line Items 

In order to see where the money is going, we need to look at the budget and its line items. 

A link to the 2025 budget can be found here. Note that this budget includes 2024 line items, which is what I will analyze. 

The Transit Services spending for 2023, 2024 forecast, and budget for 2025 looks like this: 

The budget breaks down spending in two ways: by the program, and by the 'type' of spending that money flows to. I will look at both, but let me look at program expenditure first. 

If you look at a nearly $100 million spending increase this year, there is no growth in bus operations. Instead, the funding has gone to rail operations (which is a service increase) or non-departmental costs - probably debt service - which is not useful for the rider waiting for their bus or train. 

Looking at past budgets, it becomes clear that the alarming increase in budget size comes from everything that is not operations and maintenance. Here is a look into the 2013-2015 budgets. The budget was still high in comparison with peer cities, but so was ridership. Notably, the program categories were more detailed then, and one can see that "bus operations" takes a much higher proportion of service cost; what's more, this area has barely increased since 2015, in comparison to every other cost which has added hundreds of millions to the budget. 

Transit Services are seeing a larger budget, but this isn't resulting in proportionally more money for service. 

Efficiencies and Savings

What is the solution? Tell OC Transpo to cut the budget? 

Absolutely not.  

This has not worked in the past. It didn't work in 2011, it didn't work in 2019, it didn't work in 2021, and it won't work now. The City's continual attempts to shave a few millions off the service at a time has resulted in service shrinkage, taking from both the scheduled service and reliability time. 

This hasn't resulted in a more efficient service in the past, and as the old saying goes, "the definition of insanity is doing the same thing over and over and expecting different results." 

I don't have the answers, but I do know that the past approach will not work. Ottawa needs new thinking to solve this riddle, and neither City Council nor OC Transpo seem to have it in them. Preferably thinking from outside the city. 

This challenge is not easy to solve for either City Council or management. After three years of service cuts, I do not think this Council has it in them to solve the riddle - they are stuck in the old ways, even though this Council may be relative political newbies. Similarly, much of management has sat at OC Transpo for decade and I also do not think they have the thinking necessary to approach their own service from a new angle. 

Are we doomed? 

We may be. The budget is quite large for a city of our size, yet we seem to produce mediocre results year after year. I have a growing conviction that a transit crisis will be what shakes the mindset of Council, who are ultimately responsible for oversight in our system (sigh). Until something forces a mindset change, Council and the mayor will try and fail to contain costs, and service will continue to deteriorate despite growing budgets. 

Sigh. 

Until next time.