Budget Holes and Money Pits

The draft 2026 budget has finally been released, after Mayor Mark Sutcliffe bragged about it being the most transparent budget in the history of the city. It's true - hot air is transparent, and it creates mirages of fiscal responsibility and responsible governance. 

The mayor's press statements brag about fiscal responsibility and transparency, but the transit budget stands in opposition to his empty claims. Among the misleading or inaccurate statements are a third  "one-time" expectation for $47 million of "required" funding from upper levels of government which has never materialized ever; fare revenue increases bordering on magical; and the hiding of OC Transpo's subsidy behind the aforementioned false numbers and misleading budgeting. 

With this budget, the total operating cost reaches $939 million in 2026. Despite this, there is zero attempt to reorganize scheduling, a pathetic attempt at transit priority measures, and little attempt at financial transparency, which creates true image of fiscal indulgence and a lack of regard for long-term planning. 

OC Transpo will require even more money over the coming few years. Overprojecting revenue has become an annual ritual at City Hall - with a hostile mayoralty or province in charge, transit runs the risk of becoming a target. 

 

The City must right the fiscal ship, come clean about the looming danger, and City Council be resolute in demanding that this be done with the utmost transparency and accountability. 

Other Peoples' Money

It's very easy to spend somebody else's money. This applies to organizations as well as people, and transit agencies which receive cash without oversight often feel no need to constrain costs. This is why it's important to focus on transit governance at the level where it matters - in Ontario, that's the municipal level - rather than on governments to which transit agencies are not accountable to. 

This is an acute problem at the City of Ottawa. Having internalized the advocates' argument that OC Transpo is underfunded, or vice versa, and not willing to pass 10+% transit levy increases, the city goes cap in hand to upper levels of government every year asking for operations money, claiming that it's "required" funding that's already in the budget.  

This method has already failed twice, in 2023 and 2025, when we "one-time" asked for $39 million and $36 million. The City is calling it "one-time" "required" funding again, but clearly, the City does not think it is one-time, since they keep asking for it; and as for required funding, clearly that is not true, since nobody else seems to feel any obligation to fund our spending, and other cities manage to operate transit service without this so-called "required" funding. 

Like 2023, the $47 million of "one-time" funding is a request to the provincial government. Glen Gower claims that this related to the LRT upload to the province. But the deal is likely not being signed anytime soon - an early 2024 promise to upload Highway 174 to the province is stalled out over who-knows-what. I would be surprised to see the upload occur this year or even early next year, and meanwhile, the province is not likely to cover our costs; the City is still on the hook while the details are being negotiated. 

The province has not shown the slightest inclination to pay for OC Transpo beyond its share of gas tax revenue. The City missed its chance to collect transit funding with Mark Sutcliffe's historically bad deal on Ottawa, negotiated last year. Better luck next time, Mayor Sutcliffe. 

With this perpetual incompetence, we then proceed to be absolutely shocked that OC Transpo is running a deficit again, and the hole has to be filled by the City. In this way, political machinations hide the true subsidy for OC Transpo behind a veil of false promises and fake revenue projections. This is not fiscal responsibility and transparency, but lying to the public for political reasons. 

Singing the Fare Revenue Blues

Upper levels of governments aren't the only source of fake money in Transit Services' budget. A longstanding practice, which dates to the Watson era, has been to (unintentionally?) overestimate fare revenue to keep property tax increases low. This takes many forms: no accounting for ridership elasticity, improper accounting for fare increases such as last year's U-Pass debacle, or ignoring forecasted revenue from previous years - and the results are in: the transit operating reserve drained clean, continual deficits, and an inability to increase service for want of money. City Council is guilty for passing budgets year-after-year that do not reflect any version of reality when it comes to fare revenue projections. 

Next year, fare revenue is estimated to be $212 million, which the revenue change table says requires $6 million in extra revenue from increased ridership. That sounds like a reasonable explanation, but the $6 million figure comes from the budgeted revenue of $197 million in 2025. In reality, the projected revenue is $181 million this year. All of a sudden, the actual figure that needs to be raised from increased ridership is $23 million, which no longer sounds like an easy task. The dishonesty 

The dishonesty in the City's projected fare revenue estimates is another way that transit subsidies are hidden behind a veil of lies in the budgeting process. The headlines that scream "transit deficit" every year are a sign of continuing recklessness at City Hall, and a barrier to service improvements. If transit is just getting by, with a portion of its funding hidden behind false revenue projections, then the city will never be able to have a public discussion about the requirements for improved service. 

Transit as Political Football

The biggest risk to the City's financial tricks is not the lack of transparency or continual inability to improve service, but the eventual threat to existing service. 

With the completion of LRT Stage 2, the operating budget of OC Transpo is expected to grow to $1.15 billion, which would be by far the largest per-capita budget in the country. This requires $200 million more in operating funding in the next two years, of which $180 million will have to come out of the transit levy. 

We may see the rise of politicians, either in next year's election or in 2030, promising to reduce the burden on property tax payers by taking a big axe to OC Transpo. Given the consecutive 8% increases to the transit levy, and the fact that his current likely primary challenger, Jeff Leiper, would probably do the same, this leaves room for a hardliner to demand cuts to OC Transpo. 

There is yet another scenario for large scale cuts to happen. Given OC Transpo's consistent deficits and Mark Sutcliffe continuous begging other levels of government for help, the scenario may come to the attention of Doug Ford's provincial government. Given his propensity for playing fast and loose with municipal governance, he may order City Council to close the gap "or else." In that case, we will either have to increase the transit levy by a very large rate, or cut a lot of service out of the system. 

There will eventually come a day when we can no longer kick the decision down the road. If we continue on this path, the choice to hide big transit deficits behind financial contrivances will be a decision that we will eventually come to regret. 

Fiscal Responsibility: Wanted Alive

When it comes to the transit budget, the mayor's claims of fiscal responsibility are totally false. The budget hides the cost of transit behind tens of millions of money whose status is uncertain at best, preventing the City from having a true discussion about the future of transit. This practice is anti-transparent and antinomical to the mayor's claims of fiscal responsibility. As long as OC Transpo continues on the road of what is best described as self-inflicted financial crisis, it will preclude any productive discussion of improved service, the financial model, and the role of public transit in a growing city. 

At Transit Committee coming up on 24 November, councillors should ask one or more of the following questions: 

• Given the slowness of various upload promises throughout the province, including the Gardiner and Don Valley Parkway in Toronto or the 174 here in Ottawa, does the City have alternate funding plans in case the promised upload does not occur in 2026? Has the province committed $47 million for OC Transpo as an alternate scenario, given the lack of funding (note: the province contributed $73 million specifically for the acceleration of construction) for the Gardiner since then? 
• OC Transpo has failed to reach fare revenue estimates nine years out of the past ten years. $23 million in fare revenue growth is required to reach the 2026 target; why does OC Transpo believe that ridership will increase to cover the budgeted $212 million? 
• Why does the mayor insist on hiding OC Transpo's finances behind false money? What is gained by subsidizing transit through the back door, other than vague and blatantly false slogans about transparency and fiscal responsibility? 

Until next time.