OC Transpo posted a deficit of nearly $7.2 million in the first three months of 2026, largely due to lower-than-budgeted fare revenue as ridership numbers continue to decline. The transit agency's financial struggles are part of a broader city deficit of $28.7 million, according to a quarterly financial report prepared for the finance and corporate services committee.
Ridership Declines Sharply
Bus and rail service combined for 14.4 million customer trips from January to March, down from 19 million passengers during the same period last year. In March alone, 5.9 million passenger trips were recorded, representing a 10 percent drop from March 2025 levels. Fare revenues for the first quarter were $9.8 million below budget, attributed to lower-than-expected ridership.
Operational Challenges
The deficit was partially offset by $2.7 million in expenditure savings, primarily from the delayed opening of the O-Train's Line 1 east extension and performance deductions for the existing rail line. However, OC Transpo faced significant operational hurdles, including bus shortages that led to thousands of cancelled trips and rail service disruptions since January due to a mechanical issue that forced dozens of Line 1 trains out of service for repairs.
OC Transpo ran a $52 million deficit in 2025 as ridership dropped amid missed reliability targets, a maintenance backlog with an aging diesel fleet, and delays in the delivery of new e-buses. The current deficit is larger than the $47 million projected in fall 2025, when city staff forecast a similar budget shortfall for 2026, including the expectation of $46 million in provincial funds.
Rising Costs and Diesel Volatility
Para Transpo saw higher costs due to bus fleet maintenance, compensation, and rising diesel fuel prices. Global diesel prices spiked because of geopolitical disruptions related to the war in Iran, and staff noted that the volatile diesel market remains an ongoing financial risk. The city's diesel hedging program played a critical role in mitigating budget impacts, reducing diesel expenses by $1.9 million despite higher fuel costs and consumption during the first quarter.
The hedging strategy involves purchasing diesel at a lower market price and locking in prices for a portion of the city's forecast fuel needs, limiting the financial impact of short-term market price spikes. Staff will closely monitor market conditions and fuel costs, the report states.
Federal Tax Suspension
The temporary suspension of the federal fuel excise tax is expected to generate about $580,000 in one-time savings, but the measure does not materially reduce long-term exposure to diesel markets, according to the report.
The city's public works department also posted a $29 million deficit during the first three months of 2026 due to a significant number of winter snow-clearing operations.
