Ontario to open tap on flow of gas tax to cities — after next election

Ottawa will likely keep getting its usual $34 million in Ontario gas tax money to spend on public transit for the next few years, but the province is promising much more could flow the city's way later, a prospect that pleases Mayor Jim Watson.

"It was a pleasant surprise, and a great surprise," Watson said.

Ontario Premier Kathleen Wynne announced Friday morning her government's plan to increase municipalities' share of taxes collected at the pump from the current two cents per litre of fuel to four cents per litre.

There's a catch, however: the phase-in would only begin in 2019-20, after the next provincial election in 2018.

That first year, Ontario would give municipalities 2.5 cents of the 14.7 cents it collects on each litre of unleaded gasoline. That share would rise to 3 cents in 2020-21 and 4 cents in 2021-22.

For Ottawa, the province projects that would eventually translate to $66 million annually.

But politicians underline it doesn't mean drivers will spend more to fuel up; the province will simply hand more of the revenue over to municipalities.

Gas tax money goes toward public transit

Politicians gathered at Ottawa's Hurdman transit station Friday for the annual announcement of Ottawa's share of gas tax revenues. The city received $34.4 million for 2016-17, almost the same amount as the year before.

Ottawa was the second-largest recipient of the $334 million Ontario doled out to nearly 100 communities. Toronto received $171 million this year, about half of the total gas tax fund.

Watson said he's looking ahead to when the increases kick in, and said it will allow the city to take out fewer loans to pay for its portion of the second phase of light rail, which will mean paying less interest.

He thanked the province for its generosity, saying the city prefers reliable revenue streams such as gas taxes over one-time grants from upper levels of government.

The City of Ottawa currently spends $20 million of the $34 million it receives in Ontario gas tax money to subsidize the daily operations of OC Transpo.

The city also received $54 million this year in gas tax revenue from the federal government, which it must spend on capital projects.