June 14, 2005

Ontario Hospital Association Conference on Capital Planning in the New
Era of LHINs - Hilton Toronto Airport Hotel
by David Caplan, Minister of Public Infrastructure Renewal

Check Against Delivery.

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

I’m delighted to have this opportunity to talk about renewing and financing public infrastructure in general – and hospitals in particular.

Infrastructure is crucially important for the economic development of our provinceand for maintaining the quality of life that makes Ontario so attractive that millions of new people will come here to live in the next two decades. 

Ontario has been remarkably successfulboth in terms of economic prosperity and in terms of the outstanding quality of life we enjoy. We have done well.

But there are also clear signs of neglect and deterioration.

Some of you saw the evidence as you drove here this morning over highways that are now operating close to capacity almost all of the time.

Some of you manage institutions that face many of the same pressures overcrowding, underinvestment, deferred maintenance and a steadily increasing demand for services that shows no sign of slowing and that strains your resources to the breaking point.

You are not alone. That is exactly the challenge the government and our society is facing, in almost every area of public infrastructure.

There are water pipes in cities like Ottawa and Toronto that were installed in the 1800s. There’s a town where some of the water pipes are still made of wood.

One of our busiest highways was named in honour of Queen Elizabeth. Not the current queen. Her mother.

We have to rebuild our schools and classrooms. There are more than 4,800 elementary and high schools in Ontario and many of them were built in the 1920s. The cost of renewing them is many billions of dollars.

And you know, better than anyone, the strains on our hospitals.

On average, Ontario’s hospitals are more than 40 years old. Many are approaching the end of their useful lives.

Some can be modernized some need to be replacedand some totally new facilities must be built.

Over the next quarter of a century, our population will increase by about 4 million people…

The portion of our population that is over 65 will increase from about 13 per cent to more than 22 percent.

We will have substantially more people, and more of them will be entering the period of their lives when they need more medical attention.

You all know the impact this will have on the demand for service, and on the ability of your institutions to meet those demands.

None of this happened by accident. We dug this hole for ourselvesthrough chronic under-investment in our most important institutions through decades of neglect of our public infrastructureand through careless inattention to the facilities and services that are the foundation of our success.

And now it is time to apply what I call Caplan’s First Law of Holes: when you are in one, stop digging. 

We need to correct the deficiencies and mistakes that are limiting our success and impairing our future. And we need to do it now.

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In fact, we have already started.

The McGuinty government was chosen by the people of Ontario to bring real positive change to the way our public affairs are managed.

Perhaps the most important change is that we are prepared to tackle the big issues that have been neglected for so long, and at such great cost.

We understand the need for a long-term vision, and the need to repair the mechanisms that affect the delivery of public services.

We understand the importance of the public facilities that support our growth and our prosperity.

And for the first time in Ontario’s history, we have developed a strategy to deal with these crucial issues in a coherent, comprehensive fashion something that has never happened in this province before.

Three elements of this strategy will be of particular interest to the people here:

• First, the way we are planning to accommodate growth in the most heavily populated part of the provincean initiative that involves both limiting growth in some areasand encouraging it in others through new investments in infrastructure;
• Second, the dramatic, almost revolutionary changes we are instituting in the way we plan, procure, finance and manage public infrastructure, mainly through the new Framework we introduced last summer;
• And third, the five-year infrastructure investment plan I presented to the Legislature last month. Among other investments envisioned in that plan, we are anticipating an investment of approximately $5.3 billion in healthcare projects by 2010.

Taken together those three elements have the potential to start the rescue of Ontario from decades of decline and to launch an unprecedented renaissance in our public facilities and our public services including healthcare.

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About 70 per cent of Ontario’s people live in the region we call the Greater Golden Horseshoe. In the course of the next 25 years, about 3.7 million more people will come here to join them.

That is about the same as putting the population of Vancouver, Winnipeg and Edmonton into the area between Peterborough and Niagara Falls.

So we are focusing first on this area, where most of our people live today, and where most of our future growth is expected to take place.

We are taking steps to manage this growth to harness its benefits while avoiding the harmful effects of urban sprawl.

We are doing this by clearly defining the areas where we do not want growth to occur areas where the natural environment will be protected.

The Greenbelt we created will protect 1.8 million acres of valuable farmland and sensitive environmental areas in the Greater Golden Horseshoe.

At the same time we are clearly defining the areas where we believe growth should occurthrough the Places To Grow legislation.

We are encouraging growth in those areas by investing in the public infrastructure schools, water systems, roads, public transit that supports compact, sustainable communities.

This isn’t rocket science. Many previous governments could see what we see. But none were willing to make the commitment of time and money to fix the problem.

That’s the kind of real positive change I was talking about earlier.

What is rocket science, or something close to it, is the revolutionary transformation of our systems for planning, financing, procuring and managing public infrastructure.

I am referring to the Framework for Public Infrastructure I released last summer.

I’m not going to say very much about the Framework this morning. I believe you are already familiar with it although I would be happy to answer any questions you might have a bit later.

But don’t mistake brevity for disinterest. The Framework is a crucial step for the restoration of public infrastructure in Ontario.

It gives us the tools we need to rebuild this province better, more efficiently, with the best value for our investment and then manage the resulting public assets to get the maximum benefit for the people who paid for it.

One of the tools the Framework gives us is a better way of managing private sector investments in public infrastructure, using alternative finance arrangements.

Because we can now manage alternatively financed projects more effectively, with better guarantees for the public welfare, we are able to generate much larger investments in public infrastructure and especially hospitals.

You can see the details of this in Renew Ontario, a document I released last month.

It contains the strategic highlights of our five-year infrastructure investment plan which will generate more than $30 billion for investment in public infrastructure over the next five years.

Approximately $5 billion of that will be for investment in healthcare facilities, including new hospitals and substantial renovation and restoration of existing hospitals.

The ministry of Health and Long-term Care played a major part in identifying those investments, in light of the continuing development of Local Health Integration Networks, and the priorities for patient care associated with them.

Our government recognizes that Ontario’s well-being depends in part on the health of its citizens…

…And we’re committed to ensuring that people have the health care facilities and services they need.

We intend to modernize the infrastructure that supports our healthcare system by updating equipment and expanding capacity.

Our five-year infrastructure plan includes funding that will allow us to:

• Complete 39 major projects with a value of at least $25 million;
• And begin 66 new projects to upgrade and expand hospitals, to provide better services in high-growth areas, modernize hospitals and reduce waiting times.

At least 33 of these projects will begin over the next two years. Another 33 projects will start between 2007 and 2010.

We will also invest more than $150 million to improve cancer treatment, through equipment upgrades.  And we are expanding diagnostic imaging facilities.

We are purchasing nine new MRIs and seven upgraded machines over the next five years. That represents a 15 per cent increase in the number of devices available.

To get so much done so quickly, the government has also announced its intention to pursue a number of alternative financing and procurement projects with the private sector.

Unfortunately, as soon as you mention “hospitals” and “private sector” in the same sentence, people think you’re talking about  “privatizing” health care.

Newspapers love to print outraged letters to the editor on this subject. But frankly, we need to lay this kind of nonsense to rest once and for all.

Alternative financing projects are not privatization. They are simply an extension of the collaboration between the government and the private sector that we’ve always used to build Ontario’s infrastructure and major public services.

What is different is that the way we build will be governed by five principles:  protection of the public interest, value for money must be demonstrable, accountability, processes must be fair transparent and efficient and finally, appropriate public control and ownership must be maintained.

Alternate financing and procurement will allow us to undertake a lot more projects, and deliver them much more quickly.

They will allow us to manage the construction phase of projects more effectively, and reduce the risk of delays and cost overruns to taxpayers.

And they will allow us to pay for the new facilities over a longer period – over the useful life of the asset, in the same way a mortgage allows you to pay for your house over time.

The point is you can live in the house while you pay for it, just as alternative financing allows us to use the hospitals while we are paying for them.

This is hardly a new idea. Governments in many other jurisdictions – British Columbia, Great Britain, Australia, and New Zealand – have been doing the same thing for years.

In the U.K. alone, more than 600 public infrastructure projects have been delivered using alternative financing.

Ontario has been slow to recognize the strategic value of looking beyond government, to partners in the private sector – including pension funds – to help finance and deliver the long-term infrastructure we need.

We need to start tapping into our own sources of capital, and harness some of the wealth generated here in Ontario to build the infrastructure our people need.

We need public investment strategies that are more innovative and more flexible.  And we need new investment partners – people and organizations that want to join us by investing in Ontario’s future.

In Canada, private pensions funds have an estimated $700 billion invested. Ontario’s two major public sector pension funds have at least $120 billion in assets.

This money represents the savings of Ontarians, and it is invested  – some of it in public infrastructure -- all around the world.

But not in public infrastructure here.

The Ontario Teachers’ Pension Plan recently paid $651 million to buy a 25 per cent interest in a company that provides water and sewer services in the UK.

They also invested $1.75 billion to buy a part interest in a power generation company in the United States.

These investments could have been made here in Ontario, to benefit all Ontarians. But they were not because we have not created suitable opportunities.

We need to turn this around. We need to bring more capital to the table, to supplement the government’s investments.

Finance Minister Greg Sorbara and I have explored these ideas with representatives of some of our major public sector pension funds.  And their response was very encouraging.

If we create the right circumstances, we can expect more investment in Ontario’s public infrastructure from private sources including more investment in hospitals.

Regardless of how we decide to finance our investments in hospitals, they will continue to be public institutions – owned in trust for the people of Ontario, and controlled and operated by public hospital boards.

The government has also announced its intention to create a new public agency that can apply expertise and best business practices to infrastructure financing, planning and construction management.

The Ontario Infrastructure Projects Corporation will directly oversee new, large, alternatively financed infrastructure projects. It will report to the Minister of Public Infrastructure Renewal, and work at the direction of the Ontario government.

And I predict you will find it a helpful partner in planning and managing your alternative financing projects.

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The McGuinty government is committed to strengthening Ontario’s economy and to improving our quality of life.

We’re investing in the province and its people, by investing in public infrastructure.

In the coming months, we will be actively seeking private sector partners to help us finance and deliver the public infrastructure our society needs.

Without these partners, we simply would not be able to build all the projects we need to by the time we need them.

I want to be clear about this. The choice is not between building new infrastructure using traditional methods, and building it using Alternative Financing and Procurement methods.

The choice is between building it now, using AFP, or not building it at all, until some far-off point in the future.

There is no question about the right choice.

We are determined to create the circumstances that will encourage new capital investments from new partners so that our hospital boards and the communities they serve get the health care they need.

But I want to be clear with you about our 5-year plan:  We can’t do everything in one year.

And we can’t start all projects in year one – we need to plan our projects and we need to plan our cash flow.  Some projects will start earlier.  Some will start in the middle of the plan and some will start toward the end.

We won’t do that alone. Many of the people in this room today will be active participants in that process.

And I especially want to acknowledge the continuing support of the Ontario Hospital Association, which is making a substantial contribution to improving health care in this province.

We have a common interest in achieving these goals and I welcome your participation and your support.

The issue we must face now is finding the best way to translate that mutual interest and those shared goals into better treatment and better care for the people we have the honour to serve.

Thank you for your attention to this issue. I look forward to working even more closely with you in the future.