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OC Transpo is already running a deficit this year as the financially troubled transit agency is squeezed by low ridership, costly bus maintenance and more expensive fuel.
The deficit reached $7.2 million in just the first quarter, which ended on March 31, according to a budget status update going to council’s finance and corporate services committee next month.
Expenditures were actually lower than budgeted due to the delay in opening Line 1, which has been put on hold as OC Transpo faces a shortage of train cars that has hindered testing.
That was partly offset by higher costs elsewhere. OC Transpo has been facing higher maintenance costs as it keeps up with repairs on its aging bus fleet, and it is little surprise that diesel costs have gone up during a worldwide energy price spike fueled by the war in Iran.
Compensation and Para Transpo costs were also higher than expected.
But revenue loss is what’s really driving the deficit, mainly owing to lower fares amid disappointing ridership numbers. Overall, revenue came in $9.8 million below budget.
OC Transpo has run deficits year after year since the pandemic caused ridership to vanish. Ridership has recovered, but more slowly than management would like. Last year, OC Transpo’s full-year deficit came in at $52 million.
The deficit should not be viewed as akin to losses reported by a private company. OC Transpo is not expected to earn a profit and receives a substantial taxpayer subsidy.
Rather, the deficit is the difference between what was budgeted and the actual bottom line. Should the deficit continue or grow throughout the year, the city will have to make up the difference from reserves, including a transit reserve that is already near empty.
Snow surplus and salt shortage drive citywide deficit
The report heading to committee on June 2 puts the city’s overall first quarter deficit at $28.8 million.
That’s driven mainly by a winter operations deficit of $30 million, as the city dealt with 48 snow events, the highest number in 60 years.
That drove up overtime and contracting costs, and also salt usage. And that salt was more expensive. The report noted that the mineral was at a premium due to a province-wide salt shortage.
Those costs were offset in part by a spending freeze and a pause in non-essential hiring, as well as surpluses in several other departments, especially wastewater.