Any discussion of financing needs to start by understanding that public goods are not a cost. They are investments in social equity that save individuals money.

A city that neglects its transit system effectively requires people to travel by personal vehicles or ride hailing. Between gas prices, insurance, parking, maintenance, and the upfront cost of buying or renting a vehicle, this is an incredibly expensive way to get around.

So yes, taxes would likely increase to fund quality public transit. But this would be quickly offset by the savings offered by a free, fast, and frequent alternative to driving. The cost savings of being able to eliminate one vehicle would be $10,000/year. Health care costs would fall due to the resulting decline in car accidents and pollution.

As far as Free Transit Ottawa is concerned, transit should be funded by the federal and provincial governments largely through corporate and wealth taxes. But we don’t have to wait for a federal government prepared to act. If it had the political will, the City of Ottawa could find the money to eliminate fares and make the service more attractive to the people of Ottawa.

The $250 Million Challenge

OC Transpo’s pre-pandemic fare revenue was $200 million per year. Subtracting the $12 million OC Transpo spends on fare collection systems and enforcement and adding $50 million for our proposed service improvements — mainly additional vehicles to increase route frequency — the total financing requirement for our demands is $238 million.[1]

If the City chose to cover this entirely through a property tax increase, that would amount to a 12% property tax increase adding $520[2] on average on annual property tax bills. Small and medium assessed homes would pay much less. Already, this is far less than a year’s worth of bus passes while getting far more back in return.

However, it would not be difficult for the City to offset $119 million of such a property tax. By reallocating existing budget items and using other overlooked funding mechanisms, the actual average property tax increase required would only be 6.5% adding a modest $260/year on average. That’s about as much as filling up on gas for a month.

To reduce the revenue required from increasing property taxes, we propose:

  • Reallocating funds going to road expansion and widening – $35 million. The City budgets an annual average of $50 million annually to widen a slate of two lane roads to four, something that induces demand for driving. Any such road widening should be limited to one additional lane, dedicated to transit use, and only in areas where existing traffic levels significantly impede public transit service.
  • Planned increase in Federal Gas Tax Transfer – $30 million.[3]
  • Increasing development charges on single family dwellings – $21 million.[4] The City eliminated the greenbelt to provide low density single family housing and now has to provide services to these far away neighborhoods, often at a loss, while developers profit. The City should be charging development fees on par with the cost to provide high quality transit to these homes.
  • Increasingly Ottawa’s unusually low Uber/Lyft surcharge – $9 million. This is the fee ride hailing companies pay in lieu of providing accessible service for customers with mobility issues.[5] We would raise it from $.07 to $.70 per trip
  • Raising parking rates – $10 million. These were not raised for 10 years from 2008-2018, and even now stand at $1-3.50/hour vs the $5-9/hour rate in Toronto. We propose to increase it to $5.00/hr, extend paid parking to commercial areas that are currently exempt, and apply it on Sundays, with all the revenue applied to transit services.
  • Eliminate tax rebate on Brownfield developments and the Main streets program – $14 million. There is no evidence suggesting that these grants, which have been averaging $7 M per year, actually have an impact on the location of real estate development.

[1] Dividing OC Transpo’s annual operating cost by the number of vehicles yields a cost of $425,000 per vehicle or $22.5M for 50 additional buses. This estimate corresponds to other published figures. See https://www.liveabout.com/bus-cost-to-purchase-and-operate-2798845

[2] A 1 % property tax increase adds $40 to the tax bill of the average home and generates $18M in revenue.

[3]https://www.buildingcommunities.ca/sites/default/files/assets/Documents/Allocations/2019-2023%20Allocations.pdf

[4] Development charges on a Single Family Dwelling (SFD) were $34,000 [inside Greeenbelt] and $40,000 outside. SFDs were 26.4% of all new starts [9,200] or 2400. City Revenue from Development Charges on new SFDs is $35,000 x 2400 or $84M [out of a total of $170 M]. A 25% increase in Development Charges would generate $21M in additional revenue. This would add $8,500 to the cost of a SFD inside the Greenbelt and $10,000 to a SFD outside the Greenbelt

[5]https://www.cbc.ca/news/canada/ottawa/wheelchair-accessible-uber-ottawa-transportation-1.4180050#:~:text=Last%20October%2C%20councillors%20voted%20to,equal%20service%20has%20gone%20unanswered