Canada’s Transit Crisis Intensifies as Operating Funds Run Short

Transit authorities across Canada are warning of dire service cuts and fare hikes for millions of daily commuters—unless higher levels of government step up with new models of funding.

Fare revenues plummeted as transit usage patterns shifted during the COVID-19 pandemic, and even as ridership rebounds to the point of overcrowding in some regions, reports show [pdf] that transit services lack the budget to grow in tandem.

With federal priorities uncertain ahead of the 2025 election, the focus has shifted to provincial governments to either reform transit funding models or force riders to face cancelled routes, reduced service, and higher fares.

COVID-Era Shortfalls Persist

Transit services in Montreal, Ottawa, Calgary, and Vancouver are grappling with multimillion-dollar revenue shortfalls this year. Dwindling ridership during the lockdown era sent revenues off a cliff; and transit services are buckling even as ridership rebounds. Before April 2020, fare revenue covered [pdf] roughly half of all transit operating costs in Canada. In 2023, fares covered as little as 23% of costs in Ottawa, and 43% in Toronto.

The pandemic also changed how and where people travel. Remote work increased and monthly pass purchases declined, wiping out a significant and steady revenue source.

For a time, federal and provincial governments chipped in, contributing around C$4.6 billion to public transit in 2021 through the Safe Restart Agreement. When the federal side of that agreement ended in 2023, only British Columbia, Manitoba, and Quebec continued to support transit.

In April 2024, the federal government allocated an additional $200 million to public transit via the newly-established Canadian Public Transit Fund (CPTF).

But the sum only covers capital costs—like new buses and trains—rather than essential operating funding, Nate Wallace, program manager for clean transportation at Environmental Defence Canada, told The Energy Mix. A gap remains in operating funding, which would cover driver salaries, maintenance, fuel, and everything else that keeps a bus line running, while also allowing the transit system to expand.

For transit authorities like Vancouver’s TransLink, which is struggling with record overcrowding, operating funding is the missing piece to running more buses.

“It’s not enough to just build more transit, you actually have to operate it,” said Mike Buda, director of the TransLink Mayors’ Council on Regional Transportation, a coalition of 23 regional transit leaders.

Facing a $6 million annual funding gap, TransLink will be forced to halve bus service and cut its local train service by one-third by 2026, the agency warned in a release last July.

“We’ve got a system that’s both financially strained but also just bursting at the seams in terms of demand, but we have no ability to grow,” said Buda.

Revenue Tied To Declining Gas Tax

TransLink is also losing revenue as fewer people drive gas-powered cars, Buda said. B.C.’s fuel tax made up about 16% of expected revenue for TransLink last year. But already by 2023, TransLink collected $34 million less revenue from the tax than the previous year, with more declines projected as EVs gain ground. Lower revenue reduces the authority’s ability to expand bus service in pace with demand, leading to overcrowding.

Ontario is on the same route: the Dedicated Public Transit Fund, fed by a 2¢-per-liter gas tax since 2007, has slipped by 30% due to inflation and the decline of gas-powered cars, says the Ontario Public Transit Association. Meanwhile, the province’s population, transit operating costs, and ridership are on the rise.

Ottawa Mayor Mark Sutcliffe has been in discussions with federal and provincial governments about transit funding, his office wrote in an email to The Mix.

“Should the $36 million expected in provincial and federal funding fail to materialize, Council will have to make some tough decisions in order to tackle the budget shortfall,” wrote Ottawa communications officer Rachel Bender Kerbel.

An Essential Service for All

Cutting transit service can hurt a city’s most marginalized residents, including newcomers to Canada, who may have limited alternatives and can least afford climbing fares.

“We couldn’t accept 120,000 or even 50,000 new immigrants a year in Metro Vancouver without a high functioning transit system, and many of those immigrants are very dependent on affordable transit to go to job and language training and go to work and visit friends and family,” said Buda.

TransLink is experiencing one of the highest rates of overcrowding of the decade.

At the Vancouver City Hall bus stop, the daily lineup for the Number 99 bus is so long that riders like suburban resident Melanie Watson sometimes wait for up to five full buses to pass before getting a ride on what she calls the “sardine can.” Once on the bus, Watson, who suffers from a disability that makes standing nauseating, rarely gets a seat.

“I don’t drive. It’s tied in to my diabetes—I have low blood sugars that come out of nowhere, so it’s just not safe for me to be driving,” she told The Mix.

For people like Watson, transit service cuts could be disastrous.

Some transit agencies look to raising fares and increasing fare enforcement as the answer, but this places responsibility for transit on the backs of the people who can least afford it, former TransLink planner Denis Agar, founder of the transit advocacy group Movement in Vancouver, told The Mix.

Fare reliance also lets the rest of the population off the hook. Beyond serving riders, a strong public transportation system benefits everyone: buses help reduce traffic for drivers, raise property values near transit routes, and improve air quality for all.

TransLink staff warned in a report last September that service cuts could lead to $1,000 in additional annual costs per household, considering the costs of alternative transportation, increased vehicle insurance premiums, and the increased costs of goods due to freight and truck congestion. “The staff report warns traffic congestion could increase by 20%, equivalent to an additional 200+ hours stuck in traffic for the average household annually,” reported City News.

To Buda, factors like these mean that transit must be funded as an essential public service. In one survey released last October, 97% of Canadians agreed.

Passing the Buck on Funding

Transit funding can come from the federal, provincial, or municipal governments. The high cost and wide reach of transit networks means none can do it alone.

“We have a problem right now of each level of government playing off of each other and saying, ‘it’s not my problem,’” said Environmental Defence’s Wallace. “They want to be at the ribbon cuttings when they’re unveiling new things, but when it comes to actually solving day-to-day operating problems, they try and point to each other.”

In a summit last September, governing Liberal Members of Parliament described transit as a provincial duty, while premiers like Ontario’s Doug Ford called on the federal government for more transit funding.

Cities are generally dependent on fares and property taxes, both of which are politically unpopular, to raise revenue. Other policy solutions—like taxes on vehicle kilometres travelled and street parking levies—often require legislative amendments at the provincial level, another roadblock.

Toronto successfully negotiated with Ontario for a transit deal in November, securing up to $1.2 billion for transit. Toronto’s transit operator approved a budget in January that freezes fares at 2023 levels while increasing service, reported CBC news. The deal includes $330 million over three years in operating funding, but Wallace said it is a temporary arrangement until 2026, rather than the kind of structural funding change the system needs.

In Alberta, Calgary and Edmonton transit advocates are hoping to maintain provincial funding to the city’s low-income transit pass program. Calgary Transit projects a $33-million revenue shortfall in 2025, with $19 million needed for the low-income program—one deemed indispensable for hundreds of thousands of riders, especially newcomers and refugees. Alberta has gone back and forth about it, pulling then reinstating funding for low-income transit passes in the two cities last April. Now, Calgary City Council is in talks about how to fill the hole in next year’s budget.

With transit authorities, municipalities, and provinces all coming up short, several collaborated with Environmental Defence in October to advocate with the federal government for a “new deal for transit.”

“If this historic challenge isn’t overcome, we risk a future that is costlier, more polluting, and where gridlock holds people and businesses back from their full potential,” the groups said in a joint statement.

Environmental Defence is pushing not just for federal transit funding, but for all levels of government to contribute through cost-share agreements. It prices transformative transit investment at an additional $3 billion per year to fix services, expand systems in step with population, and double transit ridership by 2035.

“If you compare it to how much we spent on buying a pipeline, right? It’s really chump change,” said Wallace.

An efficient transit system also serves Canada’s national climate goals—none of which will be attainable without “massively expanding” the system, Buda said.

An Incoming Conservative Leadership

With federal Conservative leader Pierre Poilievre leading in polls for the spring federal election, transit may not be able to count on the feds to come to the rescue. His party has not yet made a commitment to the CPTF, and Poilievre has promised to end a major source of municipal transit funding: the Canada Infrastructure Bank, which funds electric bus fleets.

The uncertainty leaves cities to negotiate with the provinces. Groups like the Vancouver Mayors Council, Ottawa Transit Riders, Toronto Transit Riders, and other rider advocacy associations have emerged to turn transit into a political movement. L’Alliance Transit in Montreal and Functional Transit Winnipeg are speaking up through protests and campaigns.

Movement founder Agar, who said he quit his TransLink job in 2023 in frustration over a lack of support for bus lanes, wants riders to feel heard and empowered at higher government levels.

“We want them to feel the pressure of a million riders at their back,” said Agar.