As Ottawa prepares to draft budget, the elephant in the room is the transit deficit

Almost a year ago as council prepares to pass the 2024 city budgetMayor Mark Sutcliffe warned the next one will be much tougher.

As city staff prepares a draft 2025 budget on Wednesday, residents will soon have a clearer understanding of how tough it is and who will foot the bill.

Will the pain fall on transit passengers as well? What about taxpayers? Or will the city continue to hope that other levels of government will come to the rescue?

Wednesday’s draft will provide staff with the best guidance on how the council should consider these questions as it prepares for a final vote next month.

How did we get here?

The 2024 budget totals approximately $5.8 billion in operating and capital expenditures.

As always, inflationary pressures on wages, fuel and electricity will increase these costs. But the city also faces revenue challenges. Mayor Mark Sutcliffe has been complaining for months about reduced federal transfer payments, arguing that the federal government is not paying the city what it owes if it has to pay property taxes.

But the toughest challenge, and the biggest unknown in Wednesday’s draft budget, is how to fill the $120 million hole in the public transit budget.

Passenger numbers are still far below the level needed for the system to remain balanced, especially in the face of rising rail costs. To make matters worse, most of the missing drivers were commuters traveling to and from the city centre, who tended to purchase more expensive adult passes.

The remaining passengers are more likely to be lower-paying students or seniors.

What do property tax bills mean?

If this were a normal budget year without a large transit deficit, the broad outlines of the answer to this question would already be clear. Council members would set budget guidelines and signal exactly what kind of tax increase they were willing to stomach.

That’s exactly what they did this fallachieved a target of 2.9 percent, but only citywide and police levies.

What does this mean? When you take a look at your property tax bill, you’ll notice that it actually consists of separate charges. One funds most city services, the other funds the police. A 2.9 per cent increase on both would add about $100 to the property tax bill of the average home in the city of Ottawa.

But yet another tax led to a tax pass, and the council gave staff only a vague idea of ​​where they wanted it to be set.

Remember the $120 million hole? If the city covered this using only the transit tax on property tax bills, a 37 percent increase would be required.

This will add approximately $333 More to this average property tax bill.

But that won’t happen, right?

Almost certainly not. The city asked staff to play about a half-dozen “levers” to close the transit gap. Transit tax is just one of them.

Another is based on a wish: Mayor Mark Sutcliffe’s justice for ottawa The campaign will persuade the feds and the state to come up with money.

Other options are less pleasant. These include fee increases, service cuts, changes to fee reductions, and deferred capital projects.

Relying on wages alone would require a 75 percent increase. This would increase the cash fare for a single trip to over $6.70.

City council members described this possibility, like the all-tax option, as unrealistic and unpalatable; That makes it more likely that staff will come back with a mix that keeps all levers “at a reasonable level,” as the city treasurer said.

What else should we pay attention to?

The city budget covers much more than transportation, of course, and Wednesday’s draft will reveal how staff plans to meet the council’s other priorities with only the slightest financial leeway.

While a 2.9 percent tax increase would provide only $62 million for city services, expanding the tax base from new homes would bring in about $31 million more in revenue. The staff will also try to find efficiencies as they have had around $153 million over the last two years.

But with such a small margin and rising inflation costs, how much will be left over to fund new action on climate change or affordable housing (both priorities the council has repeatedly committed to) or to maintain the aging infrastructure that councilors have repeatedly complained about?

Although the council will have the final say next month, Wednesday’s draft will be the first move towards a response.