Mayor says Ottawa facing 'financial crisis,' blames feds for shortchanging city

Ottawa Mayor Mark Sutcliffe called a news conference Thursday to decry a financial crisis in the city he says could force tax hikes, fare increases or drastic service cuts — and he blamed it on the provincial and federal governments.

"This is a critical juncture for our city's finances … I can't overstate how important this is," he said.

The first-term leader said federal cuts to transfers meant to compensate for property tax revenue have cost the city almost $100 million, while the federal government's decision to allow public servants to work from home part-time has ravaged the transit system.

Sutcliffe said OC Transpo is facing an operating deficit of $140 million over the next three or four years.

"That puts us in an absolutely impossible situation," he said. 

"There are no easy answers to a problem like that. Without getting our fair share, without getting help from the other levels of government, it's going to be very painful. We'll have to raise taxes and transit fares enormously, or we'll have to cut service drastically."

Transfers over taxes

The federal government doesn't pay property taxes for its buildings, but instead compensates the city through payments that are meant to capture the value of its properties.

Sutcliffe said the federal government has been unilaterally deciding its properties — many of which are vacant or underused — are worth less, and transferring far less than it should.

"Imagine if I told you as a property taxpayer that you could decide how much you pay … Wouldn't that be a great deal? Well, that's exactly what the federal government gets to do."

He said the city "did the math" and determined that the federal government should be paying about $95 million more. He said the burden of that lost money is falling on residents.

"You have to pay more for everything, all because the federal government isn't paying enough," he said.

"We need this fixed or we're in big trouble."

Mayor calls payments 'unbelievable and unacceptable'

He said the problem will get worse as the federal government plans to shed even more of its buildings.

"The buildings they abandon typically sit empty for years," he said.

"We're going to lose millions in tax revenues. Even if they only reduce their footprint by five buildings a year, that will cost us about $70 to $90 million over the next 10 years and that cost, once again, will be paid by everyone."

Sutcliffe said he's pushed the prime minister to pay and that the city has actually taken the federal government to court over the issue.

"I'm extremely frustrated," he said. "The idea that we have to go to court on an issue of essential fairness is simply unbelievable and unacceptable. The prime minister or a member of his cabinet could do the right thing very quickly and fix this."

Sutcliffe called on the federal government to pay what he called its "back taxes" and guarantee it will keep payments in lieu at "the level they should be paying now," no matter how many properties the government vacates.

OC Transpo facing massive hole

Sutcliffe noted that Ottawa's long-term transit finances have "a $9-billion hole" due to lost fare revenues.

He said Ottawa has been shortchanged by both the federal and provincial governments on transit, but said the number one reason for the transit crisis is losing public servants as transit customers as they make fewer trips downtown.

Ottawa has not recovered ridership after the start of the COVID-19 pandemic to the same extent as other Canadian cities.

Sutcliffe said he's never asked the federal government to push them back to the office, but has asked the federal government to acknowledge the impact of its decisions.

"When you lose your number one customer, when passenger traffic drops enormously, there is no easy solution to that," he said.

Cover shortfall, Sutcliffe urges

Sutcliffe also blamed the provincial government for, in his view, supporting transit systems in the GTA to a far greater extent than Ottawa's light rail project. He said it too isn't paying its fair share.

"We simply don't get the same deal as Toronto or Hamilton or Mississauga or Brampton," he said.

Sutcliffe said it would require a 37 per cent hike to the transit levy on property tax bills to cover OC Transpo's operating deficit. That would amount to a seven per cent property tax increase overall, just for transit, on top of any other increases due to normal budgetary pressures.

He called on the other levels of government to cover that $140 million shortfall for the next three years.

CBC has asked Ontario's ministry of municipal affairs and Canada's minister of housing, infrastructure and communities, Sean Fraser, for comment.

The provincial government responded by pointing to its "new deal with Ottawa," signed earlier this year and worth potentially half a billion dollars.

• 'New deal' for Ottawa earmarks millions for housing, highways, public safety

Meanwhile, Micaal Ahmed, a spokesperson for Fraser's office, said in an email that they were working closely with the City of Ottawa and OC Transpo.

He highlighted the new $3-billion Canada Public Transit Fund and said the government looks forward to getting a submission from OC Transpo.

But that fund is meant to support transit capital investments, not cover the operating shortfalls Sutcliffe pointed to.

"The federal government isn't in the business of subsidizing transit operating funding," Ahmed said. "Our role is to fund the infrastructure upgrades, support the maintenance and repairs necessary for transit systems to maintain their fleets, while helping them grow."

As for payments in lieu of property taxes, Public Services and Procurement Canada (PSPC) says it's a committed partner to Ottawa and will remain one.

A statement from Guillaume Bertrand, a spokesperson for Minister of Public Services and Procurement Jean-Yves Duclos, said cities across the country are seeking new revenue sources — not just Ottawa.

"PSPC officials continue to work with the City of Ottawa to ensure that payments in lieu of taxes for Crown-owned properties are fair and equitable," said Bertrand.