A new analysis warns that major Canadian cities are struggling to keep their transit systems running, saying public transit is headed for a “downward spiral” unless major new sources of operating revenue are opened up.
In a report released in late May, Leading Mobility Canada said the $120 billion expansions planned for those transit systems will not help cities struggling to keep buses and trains running at current levels.
David Cooper, director of Leading Mobility and co-author of the study, said most public transit is funded through passenger fares and property taxes, and cities have very limited options for other revenue sources.
The federal government is allocating billions to expand public transportation.
“It’s great that we’re getting these investments, but you can’t really realize the benefits of these investments if cities can’t afford to execute them,” he said.
The analysis examined the budgets, revenue sources and long-term plans of eight transit systems in Vancouver, Calgary, Edmonton, Winnipeg, Ottawa, Toronto, Montreal and Halifax.
Most of them are already reporting budget deficits.
Calgary’s deficit was $33 million in 2023, the same year Toronto reported a $366 million deficit. Montreal projects its budget deficit will top $560 million in 2025 and rise to $700 million in 2028.
Halifax expects to run a deficit of up to $22 million in 2026 (more than 15 per cent of its total transit budget), while Vancouver warns of a structural deficit of $600 million by the same year.
They all say planned expansions, such as new light rail lines in Ottawa, a bus rapid transit system in Halifax and subway extensions in Toronto, will entail operating costs far beyond what they can afford.
Vancouver estimates that the bus and light rail expansions will cost an additional $1.2 billion. Calgary said its operating budget will be $127 million higher over 10 years.
Edmonton says its budget deficit will grow to $174 million a year by 2033, while Winnipeg believes its expansion plans will add $37 million in annual costs.
The provinces and federal government are only offering limited operating funding to cope with growth, and even that funding is temporary. For example, Ontario has agreed to provide $1.2 billion to help Toronto operate two new light rail lines over a three-year period.
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In late July, Vancouver-based TransLink warned that it will have to make significant cuts to its services if its structural deficit is not addressed, including cancelling 145 of its 245 bus routes and reducing SkyTrain and SeaBus service. The result would leave more than half a million people unable to walk to a transit stop or station.
On August 8, Ottawa Mayor Mark Sutcliffe sounded the alarm about a “transit crisis” due to a $9 billion hole in OC Transpo’s long-term financial plan, including the opening of the nearly $5 billion second phase of light rail.
“It’s nice to dream about building more light rail, but we don’t even have the money we need to operate our current system,” Sutcliffe said. “If we don’t get the help we need, it won’t even make financial sense to open Phase 2 of light rail.”
“From a financial perspective it would be better for us not to open and operate the system.”
The report makes clear that COVID-19 accelerated some of the structural funding issues affecting transit systems, as work-from-home policies dramatically reduced ridership.
Leading Mobility said that before COVID-19, passenger fares covered an average of 59 per cent of transportation costs in Canada, much higher than the 38 per cent in the United States.
By 2023, fares would cover just 23 per cent of costs in Ottawa and up to 43 per cent in Toronto.
Most cities have seen ridership return, though not exactly to pre-pandemic levels, but people are using the system differently: Fewer people are buying monthly passes and, in some places, more people are using subsidized transit passes or tickets.
Property taxes are typically the second largest source of revenue for public transit, but inflation and affordability have put massive pressures on cities and there is limited ability for public transit to raise more money from property taxes.
Vancouver’s TransLink gets a portion of its funding from the gas tax, but with British Columbia drivers adopting electric vehicles more quickly than anywhere else, that funding source is rapidly shrinking. Gas tax revenues are down $34 million in 2023 from the previous year.
Halifax has a benefit area tax, an additional tax on properties located within a certain distance of transit, which in 2023 accounted for nearly half of its total revenue, or $58.6 million.
Montreal gets about five per cent of its operating revenue from a tax on vehicle registrations.
The Leading Mobility report proposes, among other things, taxes on vehicles and social benefits. It also suggests considering a tax on charging electric vehicles or adding a congestion charge system that taxes vehicles in the busiest areas of cities, similar to what is applied in London and New York.
The report estimates what might work best in each jurisdiction, but also notes that many cities need permission from their provincial governments to make such changes. It recommends that provinces make legislative changes to allow transit systems to raise new funds.
The report also calls for a national commission on operational transit funding, bringing together provinces and municipalities to determine how best to save their systems.
Cooper said cutting service is a death sentence because people will only use public transportation if it is reliable and affordable. If ridership declines, revenues fall and more cuts follow.
Marco D’Angelo, president of the Canadian Urban Transit Association, said he believes there is a will to solve this problem and that it is not insurmountable. He noted that when ridership plummeted during the pandemic, the federal and provincial governments stepped in to help.
“We have had the leadership when it was needed to keep Canada’s transportation systems running,” he said. “This is a different scenario, but it was handled before by the provinces and the federal government, which recognized the national importance of public transit.”
© 2024 The Canadian Press
