OC Transpo financials 'much worse' than expected

Updated financial projections for Ottawa's alreadytroubled transit system present a bleak picture that could forcethe city to take drastic action from increasing fares and adding a new tax to giving up on expanding light-rail to Kanata, Barrhaven and Stittsville.

It's long been clearthat OC Transpo is in bad financial shape.

Last year, the city was forced to dig into reserves to staunch the bleeding. But the situation became even worse, with the deficit for this fiscal year now pegged at$40.8 million.

Mayor Mark Sutcliffe introduced the financial update in stark terms, noting how the pandemic caused ridership numbers to crater and the federal government's decision to allow public servants to work from home slowed any potential progress.

"It won't be a shock to any of you that the result of that is a worsening financial picture for OC Transpo," he said.

Sutcliffe saidhe'd been bracing himself for bad news but found a picture "much worse" than he'd feared.

"People often say to me, as they may say to you, you inherited a mess," Sutcliffetold councillors. "And I'll be honest,I'm not thrilled about this financial picture, nor some of the decisions that led to it."

25-year fare projectionsdown $3.7B

Throughout the pandemic, OC Transpo has been comparing ridership numbers to 2019, the last time city staff mapped out itslong-term fiscal future.

It was enjoying steady growthat that time, spurred by the opening of the ConfederationLine and the promise of further expansion.

Staff had expected2023 would see 112 million rides,deputy treasurer Isabelle Jasmin told councillors. The reality is far from it, and is creating acascadeeffect on projected revenue forcoming decades.

Over the next 25 years, staff say the city can expect $3.7 billion less in fares or $100 million per year in net present value.

While the cost of bus service has increased, Jasmininstead emphasized the cumulative effect of fare freezes and the fact that light-rail operations are costlier than assumed and put a heftystrain on the city's ledgers.

And that's not the only challenge it's facing.

OC Transpois now expectingto bring in far less than was expected over the next 25 years, resulting ina $6.6-billion hole that must be filled.

"Ridership is forecast to return to pre-pandemic levels by 2030," said Jasmin, forcing councillors to consider how the city can dig itself out of the financial hole while continuing to provide the service ridersrely on.

Could put Stage 3 on the chopping block

The discussion comes at a time when many riders are still reeling from a weeks-long disruption in LRT service that brought to light the severity of technical problems on the line, and put the future of expanded rail in doubt.

• 2 years on, a fix to the LRT's derailment issue remains far off
• Premier wary of funding Stage 3 LRT amid system shutdown

Sutcliffe said he understands why there are concerns about the system, but suggested that frustrations will ease as serviceimproves.

"We are building a public transit system for the next 25 years," he said. "In a few years from nowwhen the city has grown even more it will be looked back upon as something that had some stumbles but was an important city-building project."

How to get there remains a burning and unanswered question.

The city must either find new funding sources by lobbying the provincial and federal governments, or decrease costs by reducing services or deferringcapital projects.Most likely, it will need to do both.

"Only using one lever will not solve transit's affordability issues. The solution will require a combination of changes," said Jasmin.

The options include raising fares, taxes and development charges, or "even Stage 3could be replaced by [bus rapid transit] or bus priority lanes."

Stage 3 was always completely reliant on provincial and federal funding, Sutcliffe noted, adding that he does not believe it will be necessary to pull the plug on the massive infrastructure project.

No decisions yet

Many councillors found the informationand realization of the scope of upcoming challengesdifficult to digest.

Some asked about specific plans for transit in their wards and expressed concerns about how the city would be able to properly accommodate growing neighbourhoods outside the downtown core.

Others wondered if residents with little access to transit would find themselves footing the growing bill.

"What I'm hearing is that we have an urban transit problem and we want other parts of Ottawa to pay for it," saidRideau-Jockward Coun. David Brown.

Transit general manager Rene Amilcaracknowledged that this will be tough, but Ottawa will get through it and end up with a stronger system.

The next step will be a direction to staff to come back with more developed options, saidSutcliffe, with an aim to receive them by the end of next June.