While Ottawa city councillors passed the 2026 municipal budget last week with relative ease, the process has laid bare significant, systemic financial challenges. The approved spending plan, which saw a notably smooth council debate, underscores a troubling tendency among elected officials to prioritize minor details while overlooking major, structural fiscal issues.
Transit: The Runaway Financial Train
The most pressing financial problem facing the city is the rapidly escalating cost of public transit. The transit budget surged by 11.4 per cent in 2025 and is projected to rise another 10.8 per cent in 2026. Expenditures are forecast to hit $938.7 million next year, before climbing to a staggering $1.074 billion in 2027.
This massive outlay constitutes a huge portion of the city's total $5.2 billion operating budget. Unlike other municipal services where annual increases are typically modest, the introduction of new LRT lines is fuelling cost growth at a pace the city did not fully foresee and now struggles to manage financially.
Budget Balancing Act Relies on Optimism
To cover these soaring costs, the 2026 budget employs a multi-pronged and precarious approach. It raises the transit levy paid through property taxes by eight per cent, increases rider fares by 2.5 per cent, and identifies $14 million in service cost cuts. Despite these measures, the budget still depends on $47 million in hoped-for provincial support to balance the transit books.
The disproportionate impact of transit is clear in the overall residential property tax increase of 3.75 per cent. Of that total, 1.25 per cent is directly attributable to transit, while a significant, overdue boost in police spending accounts for 0.5 per cent. The remaining two per cent covers higher costs across all other city operations.
Shifting Burden from Riders to Taxpayers
The combination of high operating costs and persistently mediocre ridership numbers has fundamentally broken the city's intended cost-sharing model. The official target is for 55 per cent of transit funding to come from property taxes and 45 per cent from fares. This year, however, the property tax share has ballooned to 69 per cent, with a projected 67 per cent share forecast for 2026.
The property tax burden would be even heavier if not for the city's decision to bank on $47 million in promised provincial transit support. During the recent provincial election, Premier Doug Ford pledged that his government would assume the capital and maintenance costs for Ottawa's LRT system, but this commitment has not yet been formalized or funded.
The city is hopeful for a long-term deal that could provide $4 billion in provincial support over 30 years, but this remains merely a concept. In the short term, Ottawa is counting on that $47 million in advance funding for 2026 while negotiations continue. If the money fails to materialize, the city will be forced to dip into its financial reserves.
Another concerning issue highlighted by the budget is the cumulative effect of property tax increases over the council's four-year term. Mayor Mark Sutcliffe has emphasized fiscal restraint, partly through identifying $253 million in "efficiencies" across four budgets. However, the relentless upward pressure from transit spending continues to challenge the city's long-term financial sustainability, casting a shadow over what appeared to be a smooth budgetary process.
