The council has committed to improving bus services, implementing new and more frequent services, better buses and integrated ticketing.
Patronage rose 14.9% in the past financial year.
Mr Martin said while much of the information presented in yesterday's policy and resource planning committee report on passenger transport services 2008-09 was positive, like the "stunning success" of the GoCard, he had to bring bad news.
"Passenger transport remains a hospital pass."
The cost of bus service contracts had more than doubled, from $1.9 million in 2005-06 to $4.8 million in 2008-09, as had the subsidy per passenger ($1.49 to $2.92), but patronage and fares had only increased a third (1.2 million to 1.6 million and $1.8 million to $2.5 million respectively), he said.
"It's quite scary. Those are the hard facts - we put more services in and the contract cost goes up and the subsidy per passenger goes up, but patronage only goes up a quarter."
Passenger transport, globally and in Dunedin, was a "fraught financial equation for public authorities".
Dunedin did not have the population density of the other centres with which it was commonly compared.
"There is a lot of good stuff, but the financial difficulties will continue and continue to look quite acute."
Cr Bryan Scott said the cost to the council of the improvements was "financially a bit of a wake-up".
Policy and resource planning director Fraser McRae said it had been understood the council would have to spend ahead of passenger numbers for "a while" to get more and better buses on the roads.
In May last year, council chairman Stephen Cairns suggested the running of the bus service being taken over by the Dunedin City Council be investigated.
Mr Martin said apart from the two councils agreeing a study into the viability of the suggestion was needed, no progress had been made on the proposal.
City councillor Syd Brown, co-chairman of the joint DCC and ORC public transport working party, said no timeline had been set for the investigation and both parties needed to agree on terms of reference for the study before a consultant could be hired to "evaluate the opportunity".
