The City of Ottawa is threatening to confront the provincial government in court as the municipality tries to extend the current Presto agreement and fend off a massive cost increase to OC Transpo.
The city in February was shocked to learn Metrolinx, a provincial Crown agency, might not allow a three-year extension of the current Presto agreement beyond the Oct. 27, 2016 expiration of the current deal. Documents obtained by the Citizen through an access to information request reveal Metrolinx was only offering to extend the contract for another year, and only if they could reach an agreement in principle on a new contract by October.
City solicitor and clerk Rick O’Connor said Thursday the city took legal steps in March to preserve its right within the necessary timelines to challenge the province. The city has not yet sought a date for the divisional court to hear the court application, O’Connor said.
Metrolinx declined to comment on the city’s court application.
At the heart of the contract renewal talks is the province’s insistence that Presto becomes financially sustainable without the provincial government continuing to backstop the budget for the smart card system. However, the costs could be passed down to municipal taxpayers or transit riders through fares.
The Citizen previously reported that Metrolinx has wanted a 10-per-cent commission from Transpo on Presto taps in a new deal, a massive jump from the two-per-cent rate currently charged.
The new internal documents obtained by the Citizen include Metrolinx slide presentations. They suggest an agreement in principle with Presto-using municipalities outside Toronto would be sorted out by June 2016 and signed by October 2016, leaving another year to work out the finer details.
To this point, the City of Ottawa has not arrived at an agreement in principle with Metrolinx.
“Metrolinx and the transit agencies are on track to have key business terms agreed to before the current agreements expire in October 2016,” Metrolinx spokesperson Alex Burke said in an e-mail Thursday.
In the confidential presentations, Metrolinx stressed the marching orders given to the agency by the Ontario Transportation Ministry. Presto costs have increased and the revenue isn’t matching the expenses. The operating gap in funds could be as high as $78 million by 2025-2026 if the status quo continues, Metrolinx says in the slides.
Metrolinx points out other international transit agencies pay a much higher fee. The Oyster system in London, England carries a commission rate of just under 10 per cent, Metrolinx noted.
In the documents, Metrolinx tells municipal transit agencies it’s also trying to reduce Presto costs. The agency muses it could reduce call centre or help desk support, or try to convince more transit agencies to join the Presto club.
While Ottawa would prefer a Presto contract tailored for Transpo’s operations, Metrolinx has been considering Ottawa in the same group of other non-Toronto municipalities using Presto and whose agreements expire at the same time. Metrolinx hired a facilitator to guide the agency and municipalities through the contract renewal negotiations.
According to the documents, Metrolinx has wanted the city and those other agencies to pay a fixed “tap” charge plus a percentage cut of Presto revenue in the next deal. The so-called “hybrid” payment system was verified as the best option by a third-party accounting expert, who also recommended the agencies together assume the risk of providing a minimum amount of money for running Presto. Extra revenue collected by Metrolinx would be shared by the municipalities, and conversely, a shortage would require more money from them.
Metrolinx wouldn’t comment Thursday on the specifics of the negotiations.
The current Presto contract with Ottawa and the other non-Toronto cities allows the cities to renew the agreement under the same terms for three years with options for two additional three-year periods. When Metrolinx indicated verbally in February, and then formally in writing on March 1, that it’s only offering a one-year renewal, the City of Ottawa filed the court application.
In its court filing, the city argues that not extending the current terms would increase transit costs and reducing ridership, flying in the face of the province’s transportation goals.
At the same time, the province has the city against a wall. Under another legal agreement with the province, the city needs to use Presto if it wants to receive millions in gas tax funding.
The city initially paid about $34 million to implement the smart card system, which deployed on Transpo buses in 2013.
jwilling@postmedia.com
