Ottawa mayor says city is in ‘financial crisis,’ due to federal, provincial underfunding

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Mayor Mark Sutcliffe unleashed a broadside at the federal and provincial governments Thursday, accusing them of shortchanging Ottawa by hundreds of millions of dollars in transit funding and property-tax equivalents.

“It is not an exaggeration to say Ottawa is facing a financial crisis,” Sutcliffe told reporters at a special briefing at city hall. “And I want to be clear that it’s a crisis that is not of our own making.”

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Speaking at a lectern sporting a “Fairness for Ottawa” sign, the normally restrained and diplomatic mayor urged residents to put pressure on federal and provincial politicians to pay their fair share of Ottawa’s spiralling costs.

It was a forceful presentation from a mayor who conceded he “doesn’t thrive on drama or conflict.” But Sutcliffe said months of patient negotiations with the federal and provincial governments, including meetings with Prime Minister Justin Trudeau and Premier Doug Ford, haven’t secured all the funding the city needs as its 2025 budget process nears.

“They send moderately positive signals, ‘Yes, we’re going to look into this,’ but time is of the essence,” Sutcliffe said. “If we don’t get some answers from the federal and provincial government in the next 60 to 90 days, we’re going to have to make some very tough decisions.

“The reason I’m going public with this today — still diplomatically and still respectfully, but perhaps a little louder and more forcefully — is because it’s urgent.”

Sutcliffe accused the federal government of low-balling the city on the money it pays instead of property taxes. Governments aren’t allowed to tax each other, so the federal government, Ottawa’s biggest landowner and biggest employer, gives the city something called payment in lieu of taxes — PILT — to compensate.

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But it’s the federal government that decides how much PILT it owes and Sutcliffe said it was paying the city $30 million less than it did eight years ago.

“People often ask me what has surprised me most since I became mayor. The situation with our PILTs is more than a surprise, it’s a shock,” Sutcliffe said.

“Imagine if I told you, as a property taxpayer, that you could decide how much you wanted to pay every year. Rather than have an independent valuation of your property, you could just choose your own valuation. Rather than have the tax rate set by the city, you could pick it yourself.

“Well, that’s exactly what the federal government gets to do. They decide how much their property is worth, what property class it belongs to, what tax rate they pay, all on their own. So, if they want to pay less, they pay less.

“And they do pay less … much less than they should.”

He also accused the federal government of letting its buildings deteriorate — he cited 24 Sussex as an example — or leaving them vacant for years and years, like the Jackson Building on Bank Street. As that building fell into disrepair, the federal government unilaterally reduced its value and the PILT accordingly.

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“No private-sector owner would abandon a building for that long. They couldn’t afford to let it sit without any income,” Sutcliffe said.

The federal government has said it plans to sell off much of its downtown property in the coming years, reducing its “footprint” in Ottawa by as much as 50 per cent, Sutcliffe said.

“It’s a historic change,” he said, likening Ottawa to a company town where the big employer shutters its factory. The federal property selloff could have a “devastating impact” on the national capital, he warned.

“We need the federal government to play a huge role. They can’t abandon us,” he said. “They’re the No. 1 employer in our city. They’re the No. 1 property owner in downtown Ottawa. They can’t just walk away and leave us with a hollowed-out downtown core. They’ve got to help us, like any employer would.”

‘Transit crisis’

Sutcliffe also unloaded on higher levels of government that he said had left the city holding the bag on transit costs.

While transit projects worth billions of dollars in other Ontario cities have been subsidized and cost local residents nothing, Ottawa taxpayers have been stuck with paying nearly 60 per cent of the cost for the LRT.

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The federal and provincial governments agreed to pay one-third each for the LRT, but Ottawa taxpayers have been left on their own to pay for cost overruns — largely caused by the COVID-19 pandemic. The federal and provincial shares of LRT costs had fallen to 22 per cent each, Sutcliffe said.

The city is in a “transit crisis,” he said — “crisis” appeared nine times in Sutcliffe’s 4,400 word, 30-minute speech — caused in part by the loss of ridership by work-from-home public servants. Ridership by downtown office workers is down 36 per cent, costing OC Transpo $36 million a year in lost fare revenue.

“I want to be clear: I have never asked the federal government to change the number of days public servants go to the office,” Sutcliffe said. “That’s between them and their employees. But I am asking the federal government to acknowledge the impact of their decisions on our city.”

OC Transpo is facing an annual operating shortfall of $140 million for the next three or four years, he said.

“We don’t even have the money we need to operate our existing 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. We’d be better off, from a financial perspective, not to open and run the system.”

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Without help, covering that $140-million shortfall will take a 37-per-cent hike in the transit levy, which translates to a seven-per-cent property tax hike just to pay for transit. The only other option, he warned, is to find the money elsewhere by cutting services.

Mayor’s five demands in his ‘Fairness for Ottawa’ speech:

• That the federal government pay up the nearly $100 million it owes the city in PILTs for the past five years
• That the federal government start to pay its fair share for local services rather than “cutting yourself a deal at every opportunity and asking local taxpayers to make up the shortfall”
• That the federal government maintain its PILTs payments at an appropriate level even as it sells off downtown real estate
• That the federal and provincial governments restore the 33 per cent funding they initially promised for LRT
• That the higher levels of government help cover OC Transpo’s $140-million operating shortfall to help recover from the loss or ridership

“These are not unreasonable requests,” Sutcliffe said. “It’s a very simple path forward that will allow the federal and provincial governments to help us when we need it most.”

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