The provincial government's decision to scrap previous plans to double the city's share of gas tax funding means Ottawa will lose $1 billion for its mass transit plans over the next 30 years.

The announcement that the Progressive Conservative government is cancelling plans to double the funds — which are expected to total more than $36 million for Ottawa in 2019 — appeared on page 75 of the PCs' first budget, tabled Thursday.

The cancellation appeared to have taken municipalities by surprise.

The city was counting on the additional money to help pay for its long-term transit plans, including the LRT Stage 2 expansion, approved by council last month.

However, city manager Steve Kanellakos told councillors in an email Friday afternoon that "the LRT Stage 2 project remains financially viable" despite the sudden disappearance of $36 million a year for the foreseeable future.

Liberal promise

Currently, municipalities receive two cents per litre of the gas tax collected by the province. The previous Liberal government had vowed to increase that to four cents per litre by 2021. Last spring, Premier Doug Ford's campaign told CBC that a PC government would honour that commitment.

However, Ontario's 2019 budget revealed the PC government had backtracked on that promise.

Nepean MPP Lisa MacLeod says she's a big proponent of Ottawa's light rail transit project. (Idil Mussa/CBC)

Nepean MPP Lisa MacLeod, who's the minister for children, community and social services, said her government had to make "tough decisions" when drafting the $163-billion budget.

"I think we made the right choice," she said, adding that Mayor Jim Watson is "pleased with our budget."

She also said she's a "big proponent" of Stage 3 LRT, which would extend rail transit to Kanata and MacLeod's own community of Barrhaven.

Earlier concerns

At a special council meeting February to discuss the $4.66-billion LRT Stage 2 project, Coun. Diane Deans raised concerns about the possibility of the PC government changing its policy on gas tax funding, which the city has been counting on to help pay for LRT Stage 2.

She was told by the city manager that "silence is golden." He said the government had given no sign of that sort of change, which would create major issues for municipalities across Ontario.

Coun. Diane Deans says this shortfall could push the city over its debt financing threshold.

"Well, how golden was that silence?" said Deans in an interview Friday.

"Thirty-six million dollars a year over 30 years is $1 billion, and that's money that the municipality really can't afford to take on," she said.

"Does it put the whole project into jeopardy? Probably not. But does it put our taxpayers in a very negative position? Yes, absolutely."

Short-term impact 'manageable'

In his memo to council, Kanellakos wrote that the impact of losing the additional gas tax funds is "manageable" over the short term, but projects beyond LRT Stage 2 "could be impacted."

That statement is at odds with the city report released in February on LRT Stage 2 financing, which said the "affordability model" was based on doubling of the city's share of provincial gas taxes.

Kanellakos said city staff are assessing the implications of the shortfall and will provide council with a report in the coming months.