Thursday, July 14, 2011

Fare hikes don't pay for capital projects

I was rather perturbed when I came across an article on the 580 CFRA website, entitled "Fare Bumps Down the Road," which included the following lede:
A long road of transit fare hikes is facing OC Transpo riders to help pay for the $2.1 billion Light Rail Transit system.
It then went on to discuss the long-range financial plan for Ottawa until 2048, which states that transit fares and taxes can be expected to increase at the rate of inflation.

It's a strange story for two reasons:

1. Transit fares will not be used to "help pay" for Ottawa's $2.1B light-rail system; the construction of it has long been budgeted out using $600M from each of the federal and provincial governments, and another $900M from the city's treasury. Transit fares are, in fact, never used to fund capital projects; they're put towards the operating costs of OC Transpo.

2. Even if a decision were made to use transit hikes to fund the project (which, I will state once again, is not the case), rises in fares which follow the inflation rate will do nothing but compensate for inflation. There's no net gain when fares rise with inflation, because expenses also rise with inflation.

I'm not sure if this misconception is a common one, but I figured I'd point out that it's misleading.

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