The provincial budget just cost Ottawa $1B in transit cash. So why is Jim Watson smiling?

When Premier Doug Ford came to town last month to personally commit $1.2 billion in provincial money for Ottawa'sLRTexpansion, city officials were relieved.

After all, time was runningout:the announcement came just a week before one of the bids was due to expire.

So when this major contribution was highlighted in the big blue budget book tabled Thursday at Queen's Park, no one was surprised whenMayor Jim Watson announced he was "delighted."

The mayor's statement on the budgethe was not available for comment went on to say how "pleased" he was by several measures brought in by the Progressive Conservatives.

• PC budget cancels $1B in transit cash for city

Glaringly absent from Watson's budget reaction? Any mention ofthe PCs' decision to cancelplanned gas tax increases, a changethatwill cost Ottawa hundreds of millions of dollars in coming years.

City counting on cash

The province collects tax on gasoline at the pumps, then gives some of it to municipalities to help fund transit. Right now, the city receives twocents per litre. For this calendar year, Ottawa is expected $36.5 million in gas tax payments from the province.

The previous Liberal government had promised to double the cities' share over several years. In the current fiscal year which runs from April 1, 2019, to March 31, 2020 municipalities were supposed to receive 2.5 cents per litre. Two years from now, it was supposed to nearly double to fourcents per litre. For Ottawa, that would have meant an extra $36 million annually.

Over a 30-year period the life span of the city's long-range financial transit plan that's more than $1 billion.

The affordability model assumes that the provincial portion will double over the next four years.- City report on funding for LRT Stage 2, February 2019

During the Ontario election campaign last spring, aspokesperson for the For campaigntold CBC Toronto the PC government would honour the planned increase put in place by the Liberals.

But in asingle paragraph in the 343-pagebudget, thePC government erased hundreds of millionsin future city revenue by stating simply: "The province will not move forward with the previous government's proposed changes to the municipal share of the gas tax funding."

That simple sentence creates a complicated problem for us, because we were counting on that money to fund Stage 2LRT.

According to the city report to council in February on the contracts for Stage 2, the moneyfor the increasingly expensive project it came in at $4.66 billion, more than $1 billion than expected is coming from a number of sources, includinggas tax revenues.

The report goes on to say that "the affordability model assumes that the provincial portion will double over the next four years per the commitment made by the previous government."

Where was Watson?

Given that we appear to be dependent on this money, why did the mayorremained silent about it inthe hours after the news became public?

It is, frankly, a broken commitment.- Toronto Mayor John Tory

Other city leaders spoke up. Toronto Mayor John Tory,who spoke with reporters Thursday evening after the budget was made public,called the cancellation of the gas-tax increases "very, very disappointing," then said this:

"It is, frankly, a broken commitment that was made and repeated and committed to during the election campaign," Tory said. "And we make our plans based on those commitments."

Did the city seekassurance?

At least one member of Ottawa city council was concerned about the possibility of this happening.

At a special meeting of council on Feb. 27where councillorsgrilled city staff on the risks of Stage 2LRT,Coun.Diane Deans wanted to know whether the city should worry about the PC government changing its policy on gas tax funding.

"Silence is golden,"city manager Steve Kanellakosanswered, pointing out that the government hadgiven no such sign, and notingsuch change would create major issuesfor municipalities across Ontario.

The PCs do appear to have broken a campaign promise by not increasing gas taxes. They also didn't decrease the corporate tax rate by one percentage point, or reduce hydro bills by 12 per cent, or fulfila number of other campaign promises. Newsflash:politicians sometimes break election promises.

So what assurances did the city ask for, or receive, from the province about the gas-tax increase? Surely we're not basing thefinancing for LRTStage 2 on a no-news-is-good-news philosophy? Was there a Plan B?

CBC asked about this early Friday, but hadn't received a response by the end of the day.

LRT2remains 'financially viable': city manager

The consequences ofthe PC government's decision not to move forward with the increased payments should have been immediately clear to the mayor's office andto senior officials.

It was Friday afternoon when thecity manager responded to questions on the subject through a memo addressed to council, and also sent to media.

The email assured elected officialsthat"the LRT Stage 2 project remains financially viable despite the revised provincial direction regarding the gas tax."

The impact of the cancelled money is "manageable" in the short term, althoughtransit projects "beyond Stage 2" could be affected, according to the Kanellakos memo.

It's not clear how the city will cover the more than $30 million a yearit was expecting, even in the short term.

And the city manager's memo appears to be at odds with the report to council that says that we've based our transit plans on the doubling of gas tax money.

Staff areworking on ananalysis on the implications of losing more than $1 billion in funding over three decades, and will bring options to council in "the months ahead."

Right now, though, we've got mostly silence. And it doesn't seem so golden.