May 27, 2004

Remarks to the Ontario Realty Corporation Infrastructure Symposium
by David Caplan, Minister of Public Infrastructure Renewal

Check Against Delivery

Good morning, ladies and gentlemen. Thank you for inviting me to join you today.

Let me begin by saying how pleased I am to have this opportunity to speak with you.

As you know, our first budget was released just last week.

It begins the long-overdue process of improving our healthcare and education systems and helping our municipal partners build strong communities.

The McGuinty government has presented a budget that accomplishes five important goals.

First, it presents a comprehensive four-year plan to deliver the real, positive change that Ontarians voted for.

Second, our budget offers a four-year plan that will deliver the results Ontarians want and need for healthcare.

Third, our budget delivers a four-year plan that will ensure success for our students in our publicly funded schools.

Fourth, the budget offers a four-year plan that will support and generate new economic growth and prosperity for Ontario.

And finally, our budget presents a prudent four-year plan to balance the budget and manage our finances in a more accountable and transparent manner.

But last week’s budget was not just about the choices we have made as a government, in the face of  $5.6 billion deficit left behind from the previous government.

It was also about how the McGuinty government intends to meet the challenge of an even larger infrastructure deficit.

Years of neglect, underinvestment and poor growth management have left us with a substantial infrastructure deficit in Ontario.

As you know, our government has now started the long-overdue process of developing a plan to tackle the infrastructure deficit – to help rebuild Ontario’s aging infrastructure.

This makes my talk with you this morning very timely.

It seems clear we have a common interest in public infrastructure: you want to build it, and we want to see it built.

Public infrastructure is key to building a strong economy and a better quality of life for all Ontarians.

So let me continue by offering a brief overview of Ontario’s first ever Ministry of Public Infrastructure Renewal, and the new way our government intends to manage the capital planning and investment process.

I also want to outline the dimensions of the infrastructure challenge we face, and the priorities we are setting to meet the most pressing needs.

Finally, I want to discuss some of the approaches that may help resolve these issues.

The purpose of this new ministry is to provide a broad framework for planning and coordinating the government’s investments in public infrastructure.

We make enormous investments in public infrastructure and still we put in less money than we would like.

We have to make sure we get absolutely the best result for every dollar of that money and that means we must plan wisely, and implement our plan carefully.

The Ministry of Public Infrastructure Renewal is expected to look at the government’s capital investments through a wide-angle lens, not a telescope.

Part of our task is to develop a coherent, long-term plan for infrastructure investments, so that our investments are mutually reinforcing.

They must maintain and renew the infrastructure that exists now, and provide for the new facilities we will need to accommodate future growth.

When Premier McGuinty created this ministry, he asked us to consider potential investments across different sectors of the economy, and across government ministries.

In general terms, the ministry will focus on five strategic areas of infrastructure planning, investment, and financing:

• First, we must restore and renew Ontario’s aging public infrastructure.
• Second, we will use these improvements to accommodate an expanding economy, and to bring positive change to the public services Ontarians depend on.
• Third, we intend to improve long-term infrastructure planning within government.
• Fourth, we intend to improve the delivery of public services through infrastructure investment in priority areas.
• Finally, we must develop creative financing solutions to meet our capital investment needs.

Each of those objectives will support the government’s overall priorities to build strong communities, and enhance our economic prosperity.

The very fact that there is a Ministry of Public Infrastructure Renewal signifies the importance the McGuinty government places on infrastructure investment and on managing the growth of our province.

We know that the public facilities people depend on – hospitals, highways, water and sewage treatment, schools and universities, and public transit systems – all demand high levels of public investment.

But you may not be aware of how much investment is required. So let me share with you some of the estimates.

A general rule is that a prudent manager needs to budget about two per cent of the total value of capital assets each year for routine maintenance.

This amount just keeps what we already have in a state of good repair. It does not build anything new.

Ontario’s public infrastructure is valued at about 240 billion dollars.

Not all of that is the direct responsibility of the province, so a conservative estimate of continuing maintenance costs might be based on half of that valuethat’s about two and a half billion dollars a year.

But the last two governments didn’t make those investments.

So Ontario is facing a significantly large and growing deferred maintenance bill.  Repairs are needed to hospitals, schools, water treatment facilities, and a host of other public amenities.

That is necessary, routine maintenance that can extend the useful life of our public infrastructurebut it has been put off, or simply ignored.

That isn’t smart planning. You wouldn’t do that with your own house, and we shouldn’t be doing it with our public assets.

We don’t have accurate measurements of the true burden of deferred maintenance across all economic sectors.

But we know the cost of repairs, and the cost of correcting past underinvestment, will reach into the tens of billions of dollars.

We must also plan to accommodate economic growth, especially in central Ontario.

By 2031, we expect about 3.5 million more people to move into the Greater Toronto Area alone.

And across the province, our population is expected to grow by 40 per cent, mainly in central Ontario. 

The triangle bounded by Oshawa, Barrie and Niagara Falls will be one of the most heavily urbanized regions in North America.

Those people will need schools, and hospitals and roads and water and sewer services.

That is one reason why integrating infrastructure needs and growth management will be an important component of our ministry’s work in the months ahead.

Some economists estimate that over the next two decades Ontario will need tens of billions of dollars for new capital investment in the Greater Toronto Area alone.

On the other side of the equation, we must use best practices. This means planning communities that are more compact and better connected to transit systems.

But by any measure, we need enormous amounts of money to repair what we already have and to build what we need for the future.

And we face this challenge in the context of severe financial constraints.

I won’t repeat the facts about the deficit we inherited from the previous government.

But as you know, we are looking at a four-year financial recovery plan – a plan to ease Ontario out of the red and into the black.

At this stage the question is less “what happened?” than “what are we going to do about it?”

We must regain the financial capacity to provide the public services the people of Ontario need and want.

Premier McGuinty has made it very clear that our priority has to be protecting and improving public services.

That will not be easy to do. We need to develop better ways of financing public infrastructure, of procuring infrastructure, and managing public assets.

And we do not have the luxury of relying on massive infusions of public money to solve our problems.

So we have to get smarter. We can’t afford a bigger hammer; so we have to have a sharper nail.

No single approach can successfully address all of our infrastructure issues.  We must consider the full range of infrastructure financing and procurement models.

That includes:

• More strategic, cost-effective approaches to planning and managing growth
• New operating models that link users or beneficiaries, to the cost of creating and maintaining the infrastructure
• Increased direct capital investments by governments and cooperative planning involving all levels of government and public agencies, so our investments provide the best return
• Innovation in the way we finance infrastructure investments, including participation by the private sector in some cases and
• Sound asset management practices, so that we get the maximum benefit from the public assets we create

While we intend to have an open mind about our financing options, we will not be indiscriminate.

We will have some fundamental principles to guide our financing and procurement strategies. I want to repeat these principles for you this morning.

Public interest is paramount.

Value for the investment of public money must be demonstrated.

Appropriate public control and ownership must be preserved.

Accountability must be maintained.

And finally, the process by which we finance and build in the future must be fair, transparent and efficient.

As you know, my ministry released a discussion document that outlines various alternative financing and procurement options.

We asked some important questions as well in this discussion paper.

Based on hundreds of stakeholders’ comments from communities, the business sector and infrastructure partners, we are developing a financing and procurement policy framework.

As announced in the budget, the Ministry will be releasing such a framework in the near future.

This framework will ensure that our investment initiatives, and ultimately our decisions, are grounded and evaluated by the guiding principles I have just mentioned.

Finally, the ministry will take a long-term, strategic approach to investments in infrastructure.

In fact we are in the process of developing the first-ever 10-year strategic infrastructure investment plan for Ontario. 

That plan is important, because it will show us where we need to go in the future.

Now some people say I get too excited about infrastructure. My wife says this.

And it’s true. I believe we are entering a new era of infrastructure renewal in Ontario. I call it the infrastructure renaissance.

And what’s even more exiting is that its coming of age coincides with the innovation renaissance. That’s a powerful combination.

But we are not building monuments.

The purpose of the government’s infrastructure strategy is to improve the public services available to the people of this province.

Our purpose is to build strong communities and help Ontarians improve the quality of their lives.

Our purpose is to make Ontario an attractive investment for industry and trade that will strengthen our economy and create jobs.

Ultimately, our plan will shape the kind of society we – and our children – live in.

Renewing and rebuilding Ontario’s infrastructure is a key part of these plans.

I welcome your contribution in this most important endeavour.