Ottawa city councillors are being asked to approve the contract for the $4.66-billion Phase 2 LRT project by March 6.
Notwithstanding ongoing efforts to secure the provincial $1.2-billion share of the project, it was revealed in a technical briefing last week that the cost of the project is more than $1 billion over the original target – owing in part to a longer than anticipated construction schedule and higher than expected construction costs.
The city has reported that it plans to cover the higher than expected cost of the project using an additional $700 million in debt, to be paid back over the next 30 years.
That debt and the related interest will have to be repaid through tax or other revenues. But let’s be clear: Ottawa taxpayers will largely be on the hook. And beyond bridging a funding gap, this financing approach will do little to draw more users to the eventual LRT or promote its wider benefits.
There is a smarter way. A 2017 study commissioned by four city councillors points to potential options to simultaneously promote transit use and reduce road congestion, while raising funding for important infrastructure projects such as the Phase 2 LRT project.
The study, The Potential for Congestion Pricing Tools in the City of Ottawa, by CPCS, a global management consulting firm, identified a downtown parking tax or levy as likely the most appropriate congestion pricing tool for Ottawa to encourage mode shift from auto to transit.
A $2 daily parking levy on existing downtown paid parking spots during peak periods would generate close to $50 million in gross annual revenues. Capitalized at five per cent, this could generate about $1 billion, which is about the size of the higher expected cost of LRT Phase 2. Such a levy is relatively easy to put in place, has low administrative costs compared to other congestion pricing tools, and is entirely within the city’s powers to implement.
This approach is not novel and is used in other jurisdictions, including most large U.S. cities. The impact of a parking levy could be muted where commuters benefit from subsidized parking, but there are fewer and fewer such instances. The federal government has largely phased out its subsidies for parking in Ottawa, for example. More recently, the Treasury Board Secretariat has completely eliminated parking benefits for management category employees in several bargaining unit groups. This trend will continue.
Sure, those who would be stuck paying the levy – those who drive into the city’s urban core during peak times and who currently pay for parking, may be unhappy about the levy. Some would presumably shift to using transit, including the LRT. The same 2017 study found that a parking levy could lead to a seven-per-cent increase in transit use in Ottawa. This would remove cars from the roads. Those who choose to continue to drive and pay the parking levy would face less congestion, and at the same time contribute to reducing the city’s debt load from the LRT Phase 2 project, to the benefit of all city of Ottawa taxpayers.
To be clear, the use of a parking levy is as much a policy tool – to promote a mode shift from cars to transit – as it is a revenue generating tool.
A parking levy is a better solution to pay for the higher than expected cost of Phase 2 of the LRT project. Implementing a parking levy takes political courage. But it is a smart approach that can go a long way in helping realize the full benefit of the LRT project – to improve mobility in Ottawa.
Marc-André Roy is a Managing Partner with CPCS and was involved in the congestion-pricing study. He is based in Ottawa.