Where to begin with breaking down the 2025 Draft Budget for OC Transpo? Our Transit Commission spent over eight hours on Monday hearing delegations, asking questions, and discussing the numbers.
Some of the budget recommendations stem from the Transit Long Range Financial Plan Working Group. I’m a member of that group along with Mayor Sutcliffe, Councillors Tierney and Leiper, and subject matter experts from City staff. We’ve been meeting regularly since early 2024 to review transit operations and revenue.
We spent a lot of time in this group reviewing fares: Fare categories and discounts; and what other Canadian transit agencies offer. That’s informed some of the proposed changes in the draft budget. One thing that was important to our working group was to avoid any increases to the deeply discounted Equipass for low-income customers, and to the Community Pass, available to Ontario Disability Support Program (ODSP) recipients. Those are proposed to be frozen for 2025.
Let’s start from the top down.
$856-million
The draft 2025 operating budget is for $856-million, up 11.4% from 2024. There is also $500-million in capital investments planned. Of the $856-million:
- $606-million goes to transit operations
- $152-million to pay down debt
- $66-million towards reserves
Operational costs are rising from year to year due to factors like inflation, wages, new train service on LRT Lines 2 and 4 to the south, and the launch of Line 1 service to Trim in 2025.
There are new investments for rail operators and bus maintenance personnel to improve reliability; increases in Para Transpo service including replacement of mini-buses; purchasing new electric buses; and additional funding from the provincial government for more special constables to ensure safety.
There are no service cuts proposed in this year’s budget.
Revenue
That $856-million is funded from four main sources:
- Tax revenue ($447-million)
- Fare revenue ($197-million)
- Other revenue and adjustments ($144-million), including development charge revenue, advertising revenue, leases and rentals, etc.
- Contributions from the provincial and federal government ($36-million)
A number that we track closely from year to year is the revenue ratio between fares and taxes. This year property taxes make up 66% of revenues compared to 34% for fares.* Pre-pandemic, that number was closer to 55% property taxes and 45% fares.
(*NOTE: I’ve updated this number from a previous version of this post since I calculated it wrong. To make the calculation, staff take fare revenue and divide by operating cost (excluding contribution to capital and debt servicing). Clear as mud? In 2025 fares are projected to fund 34.4% of operating costs, compared to 32.5% in 2024.)
we only look at operating costs, and exclude contribution to capital and debt servicing.
The tax revenue of $447-million translates into an 8% increase in the transit levy, or 1% increase on the overall property tax bill.
Fares
- Most fares will increase by 5 per cent.
- That brings a single-ride adult fare to $4, with an adult pass to $135.
- EquiPass, Community Pass, and Access Pass fares will remain frozen. These are all deeply-discounted programs for low-income customers and people with disabilities.
- The Youth (13-19) monthly pass will be discontinued and replaced by the Adult monthly pass. Just about all of the youth passes are purchased by local school boards for school transportation.
- Kids ages 11 and 12 will no longer ride for free and will be eligible for a new Pre-Teen single-ride discounted fare of $2. Kids aged 10 and under will continue to ride free.
- The post-secondary U-Pass is proposed to rise by 5%, or $3 per month, pending discussions with universities and colleges.
On Monday, Transit Commission approved a motion to maintain free transit for seniors on Wednesdays, and adjust the Senior monthly pass to $78.50, a 42 per cent discount of the Adult monthly pass price. There will likely be additional motions on this at City Council when the final budget is decided on December 11.
I put together this chart to show the proposed cost of fares and passes in a few different categories.
(Note the U-Pass is sold by semester, so the cost reflects the per-semester cost of $240.52 divided by 4 months.)
Risk in this year’s budget
I see five areas of risk in this year’s budget:
- Funding from other levels of government: The budget is counting on $36-million from the federal and provincial governments in 2025. Mayor Sutcliffe continues to have positive and constructive conversations with both levels on finding a solution to ensure a sustainable transit system in Ottawa. If that money doesn’t come through, OC Transpo would have to find savings in-year through deferral of capital projects, or borrowing from the transit reserve or other city reserves. More to come.
- Ridership: The budget assumes a 2025 ridership at 80% of pre-pandemic levels, up from around 75% in 2024. This goal is realistic when you take into account natural population/development growth, continuing increase of return-to-office, and especially new riders from the launch of Line 2/4 LRT to the south, and Line 1 east to Trim. (In real numbers, 80% of pre-pandemic ridership equals 77.9 million trips per year.)
- U-Pass: The 2025 budget calls for a 5% ($2.86/month) increase to the U-Pass. The current contract allows for a 2.5% ($1.43/month) budget increase, so OC Transpo staff need to negotiate to achieve the higher increase. There’s about $1-million at risk here.
- Impact of fare increases: Any increase to fares could lead to a net loss of customers, or slow down passenger growth, but the magnitude of that impact is unclear. The fare increases are relatively modest (20 cents per adult ride) and research suggests quality of service is the primary driver of customer retention and growth, not fares.
- Impact of discounts: The average fare paid on OC Transpo in 2024 is around $2.15, a far cry from the full adult fare of $3.80. That’s due to an increasing proportion of riders using discounted fares: 67% had discounted or free trips, compared to 33% full Adult fare trips. Ideally we’d like to see that average fare increase, by attracting more non-discounted Adult passengers.
What’s next
The 2025 Draft Budget will be considered by City Council on December 11. It’s very likely we’ll see additional motions to adjust the transit budget.
We’re also looking ahead to the update of the Transit Long Range Financial Plan in 2025, which will give us a strategic funding framework for transit. We’re still exploring new revenue streams, beyond fares and property taxes. Not to mention changing ridership patterns, new technology, and more. The transit budget has been and will continue to be very challenging.
Finally, the Mayor continues to have regular and constructive discussions with the other levels of government about the funding gap for transit. The funding gap is too large to address on our own. Their support is going to be crucial in 2025 and in future years to ensure not only that we can deliver a sustainable transit service, but that we can keep expanding and improving service to serve our Ottawa’s growing population.
More resources
- Staff slides: Draft 2025 Budget
- Staff slides: Draft 2025 Budget (French)
- YouTube: Staff presentation, motions, and delegations
- YouTube: Committee discussion and questions for staff
