WATERLOO REGION — Bus passengers can expect fares to keep rising after a new business plan for Grand River Transit is crafted later this year.

The business plan will help guide transit expansion and improvements for five years.

Coun. Sean Strickland, a member of the business plan team, said cost recovery will be a key part of the new plan.

"We're going to be looking at cost recovery and cost ratios and we'll likely come up with some recommendations on that and how it might impact the fares going forward," he said.

The plan is expected to be ready in the fall.

The end of a four-year plan on July 1, 2014 hiked transit fares in an effort to recover 50 per cent of operating costs with fare revenue and provincial subsidy.

The region received an average of $1.22 in fares per rider in 2011, which increased to $1.26 in 2012 and $1.32 in 2013.

At that time highly discounted U-Passes offered to students of Wilfrid Laurier University and University of Waterloo students made up about 30 per cent of fares.

About 45 per cent of fares were other passes and tickets made up about 15 per cent.

Despite growing ridership and fare hikes, some politicians have said the discount passes have slowed cost-recovery.

Strickland said the business plan team will review how those passes work and investigate a similar pass for Conestoga College students.

"We've already got a contract in place with a formula already embedded so we do have numbers on the cost recovery on the U-Pass for transit use in the universities and we're going to put that into the mix determining what a potential U-Pass would be for Conestoga College," he said.

The university pass costs about $81 per term. Conestoga College students are paying $218 per term. Part of the Conestoga pass is subsidized by $1 million annually the region is spending to encourage transit ridership in Cambridge. It has been in place since 2013.

In the past, staff estimated it would cost $6.5 million annually to offer a $90 pass to Conestoga students, adding 12 new staff, 14 buses and 14,000 new service hours.

While the new business plan is not yet set, there is already work underway to prepare for future bus expansion.

In 2014, the region spent $7.4 million on a 17-acre parcel of land at 300-350 Northfield Drive in Waterloo.

It will become home to a new transit facility to accommodate the growing fleet. The total project costs are projected at about $73 million with construction expected to start in 2018.

A consultant contract to study the project was approved last week.

Thomas Schmidt, commissioner of transportation and environmental services, said the current facility at Strasburg Road has a max capacity of about 250 buses, which won't be enough.

"As the fleet grows we are going to need that additional space," he said.

The Waterloo location will also help the region get buses out more quickly in the morning because they won't have to travel to Waterloo from five sites in Kitchener and Cambridge.

"It's a bit of a logistical challenge in the morning to get all the buses to the far reaches," he said.

Regional officials just recently approved the $6.8-million purchase of 14 new Grand River Transit buses to add to the fleet, which totalled about 240 buses and 30 MobilityPlus vehicles in 2014.