Council is eyeing $36 million in potential federal transit cash for an ambitious express bus expansion that requires a pricey new garage.

The catch: local taxpayers would have to cover the remainder of the estimated $150-million cost of the so-called bus barn.

The federal government announced a $1.49 billion funding agreement with the province Tuesday that is expected to result in transit grants to Ontario cities based on ridership. Hamilton should qualify for up to $36 million under that formula.

The "critical" bus transit priority for Hamilton is a storage and maintenance garage, acting transit director Gerry Davis told councillors Tuesday.

The city's 10-year transit plan calls for 100 new buses to extend express service up and across the Mountain and to growing communities like Waterdown. But Hamilton's existing 200-vehicle garage on the Mountain is already out of room, said Davis, with the fleet slated to grow to 260 buses next year.

Right now, extra buses are being stored outdoors in park-and-ride locations and paved areas normally used to pile snow after winter storms. "Just getting those buses out of there during a bad snowstorm is going to be problematic," he said.

Until that space crunch is resolved, the service expansion plan "is basically on hold."

Hamilton originally asked Metrolinx for bus barn cash along with a request to fund light rail transit through the lower city. The province announced $1 billion for LRT last year, but has not agreed to fund conventional bus projects.

Now, the city is exploring the idea of applying for the maximum $36 million federal transit grant to help offset the cost of the garage, which would also include maintenance equipment, a refuelling depot and paint shop.

Davis told councillors an early $200-million building estimate has been slashed based on design changes and because the city is eyeing its own nine-acre property near a Wentworth Street North operations building.

The city actually bought the land last year as an option for a LRT maintenance facility, but project lead Metrolinx rejected the site as too far from the King-Main corridor line.

Some councillors expressed unease about the high cost of accepting the federal cash.

"What if (the grant) is approved and we can't come up with the rest of the funding?" asked Coun. Lloyd Ferguson. "Look at the angst LRT is causing around the table (and) it's 100 per cent funded."

City finance head Mike Zegarac said he would come back to council this fall — when cities must make their applications — with potential financing plans that include development charge cash and debt-financing of $7 million a year.

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Coun. Tom Jackson noted the city's existing Wentworth Street operations centre started life as a bus facility and asked if the city could simply retrofit that building instead.

That is possible, Davis said — but the move would require relocating other public works departments and the city's disabled transit (DARTS) fleet.