Hamilton's troubled bus budget now has to contend with a looming multimillion-dollar hike in fees the city pays to use Presto transit cards.

The HSR is already feeling squeezed between a resident campaign to beef up bus service and calls from tax hike-wary politicians to cut a projected 4.1 per cent budget increase — and maybe pause a 10-year transit improvement plan.

Transit managers are supposed to report back next week on how service would be affected if the bus budget hike was whittled down by half and a planned fare hike axed.

Now, provincial transit agency Metrolinx is poised to increase by nine per cent the commission paid by Hamilton for the privilege of using Presto pay cards on local buses. Depending on how many bus riders adopt the card in future, that could drive up the city's annual Presto fee as high as $3 million.

Such a hike would be "just one more cost we are forced to juggle in an increasingly challenging budget," said Coun. Chad Collins. "We have a tonne of transit decisions to make upcoming... I wouldn't call any of them easy."

Hamiltonians have been able to use the regional GO Transit pay cards on local buses since 2011. But the city has little leverage in negotiations over the Presto fee because use of the cards is required if Hamilton wants to keep receiving provincial gas tax grants of $10.7 million a year.

HSR director Debbie Dalle Vedove wouldn't comment Wednesday on the issue ahead of a planned April update to council. But a report to Durham Region council shows all Presto-using cities outside of Toronto and Ottawa are on the hook for a nine per cent hike.

That report shows a phased-in hike would see Durham pay an extra $20.8 million over a 10-year agreement. The change would add $200,000 to that region's 2017 budget, but an extra $2.2 million yearly by 2021.

Metrolinx spokesperson Anne Marie Aikins said the new agreement is not yet finalized but said the numbers in the Durham report were accurate.

Calculating costs per city is tricky because the fees are based on Presto card usage. Hamilton has had relatively low Presto usage on local buses, around 21 per cent last year. Durham, by comparison, is closer to 30 per cent, while some near-Toronto cities boast usage above 60 per cent.

The HSR was supposed to increase transit spending by $4 million this year to improve service standards under the third year of a decade-long transit plan.

Environment Hamilton launched a "Fix the HSR" campaign this year in hopes of convincing council to invest more tax dollars — not fare hikes — into the service. It also argues the city should use more federal gas tax cash for buses instead of roads.

But with ridership falling for a second straight year, some councillors are questioning if the long-term transit plan needs to be tweaked.

Collins argued the city is already pouring more money into transit simply by matching new federal grants for projects like a proposed "bus barn" and bus signal priority technology on the A-line. Debt-financing the $40 million or so needed in matching cash for transit and water projects will add about $15 to the average tax bill.

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Coun. Sam Merulla said he's hopeful council can "scale back" the transit budget while simultaneously making targeted service improvements.

"But it can't always be on the backs of riders," said Merulla, who has called for a cancellation of this year's scheduled 10 cent fare hike. "It would be ridiculous to not acknowledge the correlation between two years of fare hikes and dropping ridership."