Ottawa's new proposed light rail transit line will get $600 million from the Ontario government.

Premier Dalton McGuinty noted that the original estimated cost of the project was $1.8 billion. It has since increased to $2.1 billion. (CBC)City officials said they were pleased by Premier Dalton McGuinty's announcement Friday, billed as the province's biggest-ever single investment in Ottawa infrastructure.

"It is absolutely the best Christmas gift you could give the city this year," Mayor Larry O'Brien told provincial officials at a news conference.

To reporters afterward, he added, "On a day like today, 10 years from now, you won't be waiting up at curb level in the cold wind. You'll be down underneath the centre of the city with a hot coffee in your hand and the dry and the warmth, getting on your light rail train and that's what's important here."

The money would go toward the $2.1 billion first phase of the project, which includes 12.5 kilometres of light rail from the Tunney's Pasture transit station in the west to the Blair station in the east. A 3.2-kilometre tunnel will run between LeBreton Flats and the University of Ottawa, with four underground stations.

Mayor Larry O'Brien called the money 'absolutely the best Christmas gift you could give the city this year.' (CBC)Alex Cullen, chair of the city's transit committee, said the announcement makes the project a reality.

"This is a vote of confidence by the provincial government and we expect to hear the same from our federal counterparts," he said.

Typically, the three levels of government each cover one-third the cost of large infrastructure projects.

The $600 million provincial commitment is $400 million more than the province had committed toward the city's previous light rail plan. That $200 million was never spent because the project was cancelled following the municipal election in 2006.

$300M shortfall

However, the new commitment is still less than one-third the current $2.1 billion cost for the project. If the federal and municipal governments make equal commitments, the project will still have a $300 million shortfall.

In announcing the money, McGuinty noted that the original price tag for the project was $1.8 billion and said the economic times represent "a huge challenge"

"We need to, as they say, cut the suit to fit the cloth."

Coun. Rainer Bloess, who represents Innes ward, is concerned about the shortfall.

"When people go down a tunnel, they hope to come back up the other end," he said Friday. "And if we don't have enough money to build the entire tunnel, I think we need to pull back a bit."

When Cullen was asked what the city would do about the shortfall, he responded, "We'll cross that bridge when we get there. Today, we're just going to enjoy the gift that we've got."

The first phase of the transit plan was approved by the city's transit committee on Wednesday. City council was scheduled to vote on it in January.