September 26, 2005

Opening Remarks to the Standing Committee on Estimates
by David Caplan, Minister of Public Infrastructure Renewal

Check Against Delivery.

Good morning.

Thank you for the opportunity to appear before you today. I will try to keep my remarks within the deadlines you have set.

The function of this committee is oversight: You review spending by government ministries to ensure that we spend the public’s money in the public interest.

I fully support that endeavor. I believe in transparency and accountability in government. And my officials and I will do everything we can to answer your questions fully and frankly.

When the McGuinty government came to power two years ago, we saw ourselves and the people saw us as agents of change.

We came to office with the conviction that we needed to do government differently that we needed to change the way the public affairs of Ontario are managed.

One of the most important of those changes is a new way of looking at public spendingand especially public investments in infrastructure projects.

We view our infrastructure investments as ways to achieve the specific economic and social objectives people want: Better roads and transit; better schools and educational opportunities; better healthcare; and, a more successful and prosperous society.

They are a means, not an end. And the means need attention.

I have spoken before about the urgent need to renew our public infrastructure.

For many years governments at all levels have neglected this critical element of our society and that neglect is now apparent to all:

• Roads and bridges are crumbling;
• Universities and colleges are straining to accommodate the crush of new students;
• Water and sewer systems need to be modernized;
• Many of our hospitals and healthcare facilities are out-of-date and over-crowded.
• And we must also prepare now to accommodate millions of new people who will settle in Ontario in the next quarter century.

It is becoming clear that the traditional methods of financing public infrastructure are not enough to meet these needs.

This is our fundamental premise: That infrastructure investments are a means to advance social and economic goals, not an end in themselves; and, that we have to find better —more efficient and more cost-effective — ways to create and manage those investments.

We have spent the first two years of our mandate consulting and planning — carefully and thoroughly — how we will do that. Now we can begin to build on that foundation, and implement those changes.

We are at the beginning of a renaissance for public infrastructure in this province the point where our public facilities begin to be restored, and our infrastructure begins to be renewed and expanded.

It is an exciting time. We have many successes to celebrate and many more to come.

I want to spend my time this morning describing some of the initiatives we have begun in the Ministry of Public Infrastructure Renewaland some of the results we expect to see from those initiatives in the years ahead.

I want to begin by talking about three related issues:

• First, the growth we are expecting in Ontario and how we can properly accommodate it so that it serves us, and not the reverse;
• Second, the specific infrastructure strategy we have developed to accommodate growth and to repair past neglect of our public assets;
• And third, the mechanisms we are developing to manage our infrastructure investments for the greatest public benefit and how we will pay for them.

Growth

Let me start by directing your attention to the question of economic and population growth, and the steps we are taking to plan for it, accommodate it, and benefit from it.

Growth is important to us. It creates jobs, it fuels economic activity, and it offers the prospect of a better life for our children and grandchildren.

It does all of those things if it is properly managed.

If it is not managed it presents a threat to our quality of lifethe threat of urban sprawl and unbearable congestion in areas where unmanaged growth occurs and the threat of economic stagnation and de-population in areas where growth is needed.

The government is dealing with those issues through the Places to Grow Act, which municipalities initially called for and the Legislature adopted earlier this year.

The growth planning process embodied in the Act encourages broader, more comprehensive planningthat links land use decisions to future infrastructure needs.

It gives us new mechanisms to deal with broader planning issues that often transcend the interests and the boundaries of individual municipalities.

And it offers tremendous new economic advantages and business opportunities.

Between now and 2031, our population is expected to increase by more than four million people, and our economy will generate close to two million new jobs.

We welcome those newcomers. They are the key to our economic success.

But a very large proportion of them, more than 85 per cent, will settle in the Greater Golden Horseshoe, one of the fastest growing regions in North America.

Past governments treated this kind of rapid growth with a sort of laissez-faire neglect. 

As a result, unplanned growth and urban sprawl determined the development of the entire region. We are literally paving over paradise.

The problems with this ad hoc approach are now obvious: traffic is gridlocked, air quality is getting worse, farmland and green space are vanishing, and public infrastructure is worn out and inadequate.

That is the nature of our challenge in Southern Ontario. But in other parts of the province, many communities are experiencing the out-migration of their young people, and a declining property tax base that makes it difficult to maintain necessary services.

In these communities, the challenge is not to control growth but to stimulate more of it.

The Places To Grow Act is enabling legislation. It allows the province to create a growth plan for any specified region.

Because the Greater Golden Horseshoe is the area where the need for growth management is greatest, it is the area where the first — but not the last — growth plan is being developed.

We know — from a wide variety of studies — that low-density urban development and sprawl increase the cost of infrastructure, and reduce the effectiveness of our capital investments.

We don’t want that. And we can’t afford it.

Growth planning will enhance our competitiveness and prosperity by ensuring we have the right infrastructure, in the right places to encourage economic activity, and create more — and better — jobs.

The advantages of these measures are becoming increasingly apparent to all.

The Ontario Professional Planners Institute, the Urban Development Institute, the City of Toronto, the Ontario Smart Growth Network and even the Greater Toronto Homebuilders’ Association, all believe, as one group put it, that our draft growth plan for the greater Golden Horseshoe “is a landmark step toward ensuring the future prosperity of this region.”

So we are encouraged that our plans to accommodate growth, and benefit from it, are sound.

The next question is how we will implement those plans, and how we will manage the physical infrastructure projects that make it real.

And that is the subject I wish to address next.

ReNew Ontario

Earlier this spring the Ministry of Public Infrastructure Renewal published ReNew Ontario, the government’s plan for infrastructure investments over the next five years.

There has never been anything quite like this in Ontario before.

It is a strategic plan for investments in public infrastructure worth $30 billion by the year 2010.

And it shows how we will co-ordinate our infrastructure investments with the government’s — and the public’s — broader social and economic goals.

There was a time when the government of Ontariolike most governments made decisions about capital projects year-by-year and piece-by-piece.

We don’t do that any more.

When you consider public infrastructure projects to be a means to address social issues rather than as ends in themselves you have to plan much more carefully, and over a much longer time period.

Now we coordinate our investments across the whole governmentand the broader public sector.

And we plan our investments, not year-by-year, but far into the future.

That’s what the five-year infrastructure plan does. It provides the blueprint we will follow into the future.

It coordinates virtually all major public sector investments in infrastructure.

It directs the bulk of those investments to the areas Ontarians say are the most important: healthcare, education and economic prosperity.

And it encompasses both the need to restore the infrastructure we have now and build new facilities to accommodate future growth through a rational, coherent strategy — the first of its kind in our history.

For example, we know that demands for healthcare will increase as our population becomes older.

In 2000, 13 per cent of Ontario’s people were over 65; by 2025, 23 per cent will be seniors.

These people will need modern, effective care; and they will need modern facilities to provide it.

But our hospitals are also aging. They must be renovated, brought up to date, and expanded to accommodate growing caseloads. And new facilities must be built.

So ReNew Ontario identifies $5 billion of investments for health care; 105 healthcare projects will begin or be completed during the next five years.

Some of those projects have already been announced, and more will be announced in the weeks and months ahead.

We are now moving forward with projects that have been stalled for yearsand in some cases decades.

In Stratford, for example, we recently announced funding under ReNew Ontario for the Stratford General Hospital.

It will allow the community to complete a project that has been planned since 1989, in a hospital that is more than 50-years-old.

People in every part of the province are benefiting from these ReNew Ontario investments.

It’s not just hospitals.

We know that good infrastructure — and especially good transportation systems — is absolutely essential to sustain our economic prosperity. 

So ReNew Ontario provides for investments totaling $11.4 billion in transit, highways, and border crossing infrastructure.

Just three weeks ago my colleague, Transportation Minister Takhar, announced one important component of our transportation investments: $1.8 billion in funding for highway improvements in northern Ontario.

Our northern transportation infrastructure plan identifies construction and enhancements for nearly 200 bridges and more than 2,000 kilometres of highway as well as — at long last — a firm plan to complete expansion of highways 69 and 11 to four lanes.

One of our colleagues, the Member for Nipissing, Monique Smith, told her hometown newspaper that the expansion had been promised when her father held that riding, starting in 1965.

That’s 40 years ago.

Improving these two highways has been the northern dream for two generations.

Now, at last, it is happening. And ReNew Ontario is the vehicle that is making it happen.

We are seeing similar investments to get projects moving in education, where ReNew Ontario outlines investments of $10.2 billion over the five-year period and in the justice sector, where more than $1 billion will be invested.

And ReNew Ontario contains almost $1 billion for initiatives supporting clean water and the environment.

These are strategic, long-term investments, and they have a long-term pay-off. They translate into greater success for studentsstronger communitiesgreater opportunities for working familiesbetter jobsand economic growth for the province.

Members have been critical of the government for taking too long to plan our next steps, and have complained because they didn’t see shovels in the ground.

But the shovels are going in the ground now, and the planning has paid off in carefully chosen and well-thought-out projects that produce real assets and real results.

Framework

It is one thing to plan. It is something else entirely to implement those plans, and to manage the process in an effective, successful fashion.

In general the government all governments have an uneven record for commonsense management of large infrastructure projects.

We have good intentions. Always. But sometimes projects are late or over-budget or simply not appropriate. Or all three.

So we have developed an over-arching set of principles to guide our infrastructure decisions principles that protect the public interest, and guarantee value for money.

The result is a dramatic transformation of the process we use to planfinance procure and manage public infrastructure.

The details of this transformation have been published in a document called Building a Better Tomorrow. We usually refer to it as the Framework.

It is a set of policies and procedures that will govern every infrastructure project in which there is a substantial investment by the province.

The effect is to transform an ad hoc, seat-of-the-pants way of doing business into a standardized process that is predictablerational coherent and fair. 

Instead of evaluating every suggested development in isolationwe now have a tool that allows us to consider these proposals in comparison with other projects and in the context of the government’s broader social objectives to create a society that is healthier better educated and more prosperous.

The basis of the Framework is a set of five principles that govern all infrastructure projects where the province has a significant interest.

These are the principles.

1.   Protection of the Public Interest: Each project we invest in is intended to benefit the people of Ontario, and to contribute to the well being of people in the community. Everyone involved in the project must agree that the public interest comes first.

2.   Value for Money: Regardless of the method of financing it, the people of Ontario will ultimately pay for every project.

So all decisions affecting the facility – from its design and construction to its ongoing operation – must reflect the fundamental principle of value for money.

Investments must be cost-effective, optimize risk allocation, and be completed on time and within budget.

3.   Appropriate Public Control and Ownership: Appropriate public control and ownership of public assets must be preserved. In particular, public assets in the hospital, water and sewer, and public school sectors will be publicly owned.

4.   Accountability: Public infrastructure initiatives should have clear lines of responsibility and accountability, rigorous and transparent reporting, and clear, objective performance measures.

5.   Fair, Transparent and Efficient Processes: All public infrastructure initiatives must have efficient and fair bidding processes, and be subject to audit as required by the Auditor General of Ontario. All relevant project documents shall be available to the public.

AFP

Those principles ensure that the projects we undertake will serve the public interest.

They also guide the most important question we face: How will we pay for the infrastructure we need?

I want to talk now about how we are going to finance these infrastructure projects, and the process we have developed to protect the public interest. We call these alternative financing and procurement strategies.

Before I begin, I want to establish the context in which our investment decisions are being made.

Let me start with the massive infrastructure deficit we face here in Ontario.

First, let me outline some recent estimates of the need for investments in public infrastructure not just our estimates, but those of agencies directly involved in building infrastructure and providing public services.

At the municipal level, estimates of the municipal infrastructure deficit range from $1 to $4 billion per year over the next five to ten years, according to the Municipal Finance Officers Association of Ontario.

The Municipal Roads Coalition estimates that Ontario municipalities need to double their annual investment in roads to $3 billion a year, to address the backlog in municipal road repairs.

The Ontario Good Roads Association estimated in 2002 that the municipal road and bridge investment needs are $5.76 billion.

Provincial highways also require investment. The Federal-Provincial Task Force on Urban Transportation estimates that provincial highways need investment of approximately $18 billion over the next 10 years.

We must also invest in public transit, of course.

In February, 2004 The Canadian Urban Transit Association estimated Ontario needs to invest $10 billion in public transit for the period 2004-2008a third of that just to return existing assets to a state-of-good-repair or for infrastructure renewal needs.

We also have to invest in education. The Rae Review recommends that we need to invest half a billion dollars a year for the next 10 years — $5 billion in total — in post-secondary institutions.

The investment we need for elementary and secondary schools — to fix decaying facilities and build new schools — is also an urgent priority.

In 2004, the Good Places to Learn review estimated that between $5 and $9 billion will be required for repair and rehabilitation in Ontario's schools.

And of course we must repair our water and wastewater resources.

The Expert Panel we appointed to advise on that issue estimates that needed water and wastewater investments over the next 15 years will be from $30 to $40 billion.

Our best forecast of the need is $34 billion, including $11 billion in deferred maintenance, and $9 billion for growth.

And finally there is healthcare, the subject of most of the discussion about alternative financing methods.

In their 2003 technical study of Capital Planning and Investment in Ontario’s Hospitalsthe Ontario Hospital Association estimates that between $7 and $9 billion is required over  three yearsto meet the needs of an aging population, program growth, hospital renewal and investment in equipment.

I think you catch my drift. To paraphrase a departed federal politician: a billion here, a billion there pretty soon you’re talking real money.

We — and by we I mean the public sector at a variety of levels — need to invest massive amounts of money in public infrastructure and we need to begin those investments immediately.

Because what we are ultimately talking about is maintaining the quality of life that makes Ontario literally the best jurisdiction in the world to live in

Simply put: state-of-the-art healthcare can’t be delivered in antiquated hospitals, modern justice can’t be dispensed in dusty courthouses; a speeding economy is slowed by potholes and congestion; and the brightest minds can’t be illuminated in dingy classrooms.

Our best estimate of the need is more than $100 billion over the next 30 years. I have come to believe that estimate is low perhaps extremely low.

There are two points I want to make about this.

The first is that in the 723 days we have been in office, the present government did not create this enormous infrastructure deficit.

It took years — decades — of disinterest, neglect and dereliction before we got to this point.

Now the need for investment is not only larger than this government can manage alone it is greater than any government can manage alone.

Second, the solution to fixing this problem isn’t to use the very same methods that got us into this situation in the first place. 

That is why we are using alternative financing and procurement strategies, which we call AFP for short, to start clawing our way out of the massive infrastructure deficit we find ourselves in.

This deficit is as threatening to our economy and quality of life as any sizeable budget deficit. And for that reason alone, we as a government are committed to slaying both the budget and infrastructure deficit beasts that threaten in a real way our quality of life.

Our AFP strategies are based on a framework of principles that will above all else ensure the public interest is protected.

Working cooperatively and in partnership with municipal and federal governments and the private sector, AFP strategies leverage the strength of working collectively towards the same common good, such as:

• Negotiating cost-share agreements such as COMRIF – the Canada Ontario Municipal Rural Infrastructure Fund - with government partners to build critical infrastructure in rural areas and the North.
• Providing low-cost loans to municipalities through loan pools such as OSIFA  - the Ontario Strategic Infrastructure Financing Authority – to assist communities to get on with the job of rebuilding the province.
• Leveraging private sector financing and expertise in project management to deliver large-scale infrastructure projects on time and on budget.

A diversity of AFP strategies is being used to tackle a broad range of infrastructure challenges.

Let me give you a few concrete examples.

The province has partnered with the Federal and municipal governments to deliver the gas tax rebate to fund local transit infrastructure.

After years of being starved, public transit systems in Ottawa, York Region, Kitchener-Waterloo and Toronto, just to name a few, are being revitalized.

When people move efficiently, the economy moves.  And, when people move on public transit, the environment benefits.

The Toronto Waterfront, long a site of political turf wars and dulled by petty bickering, is finally being polished into the crown jewel that it aspires to be.

Based on a partnership with the City of Toronto, the federal government and the Toronto Waterfront Redevelopment Corporation - the waterfront is finally moving from years of planning to years of building.

We have been working hard to resolve the stubborn governance issues that have delayed progress for so long and I believe we can begin to talk about real progress.

A Memorandum of Understanding has now been signed that clearly define the roles and responsibilities of each organization in the West Don Lands Revitalization process

We will also be proposing amendments to the Toronto Waterfront Development Corporation Act in the Fall legislative session. If passed they will make it easier for the corporation to move forward with waterfront projects.

All three levels of government have now agreed to a 10-year business plan, which provides for a comprehensive, waterfront-wide, revitalization strategy.

We are making progress not as quickly as we would like, but not as slowly as in the past.

Bit-by-bit the Toronto Waterfront is beginning to become what it has always had the potential to be a source of pride for the city, and an engine of economic growth for us all.

We also established the Water Strategy Expert Panel to recommend the best ways to work with municipalities and the water sector to replace the pipes and sewers that provide us with clean water and sanitation.

The tragedy of Walkerton taught us an important lesson and the Expert Panel has done the homework.

The province’s water system needs at least $30 billion worth of investments over the next 15 years to ensure every Ontarian has access to safe, reliable, affordable and clean water.

We are currently reviewing the recommendations of the panel and are preparing to respond with a series of policy initiatives that will see the province’s water infrastructure – long out of sight and out of mind – renewed. 

As stewards of the public trust, we – the province, municipalities, the water sector - can do no less than this.

Water is the very essence of life and perhaps because of that fact we have long taken it for granted. Walkerton taught us that there is more to water than simply turning a faucet.  And we will ensure that the lessons of that tragedy are not forgotten.

And, of course, healthcare. Some of the most exciting advances in infrastructure are currently happening in our hospitals.

We have launched the single biggest expansion of public hospitals in well over a generation.

Over the next five years, $5 billion will be invested in hospital infrastructure, kick-starting a long overdue renewal of public health facilities in this province.

With the average age of hospitals in the province over 40-years-old, the need for investment exceed the capacity of any single order of government to build the facilities we need in a timely fashion, using traditional methods.

We were faced with the choice of delaying construction or changing the methods we use to finance, procure and oversee public infrastructure.

For us, there was no choice: healthcare is one of our most cherished public services and we will do the right thing and the responsible thing and invest in hospitals.

In short, we have launched a renaissance in health infrastructure that will ensure Ontarians have continued access to modern healthcare in publicly owned, publicly controlled and publicly accountable hospitals.

A few weeks ago I had the privilege of accompanying Premier McGuinty to Sault Ste. Marie, where we announced the approval of a 289-bed community hospital.

This hospital will be built using one of our AFP strategies. In this instance, we will work with a private sector consortium, the hospital board and the local community to turn a long-held dream of a new hospital in Sault Ste. Marie into reality.

A private sector consortium will raise the money, build the facility, and turn it over to the hospital boardwhich will then pay for it over a period of years, in exactly the same way as millions of Ontarians pay the mortgage on their home. 

The private sector consortium will also be responsible for ensuring that the hospital is well maintained over the long term.

This alternative financing arrangement will not affect public ownership of the hospital.

It will not result in the displacement of workers, because there is no change in the hospital’s labour agreements.

And the project will be completed on time and on budget. If it isn’t, the private sector consortium will pay, not the hospital or the government.

The people who will run the hospital, the people who will work in it, and the people it will serve, are delighted at the prospect of finally getting the care they need.

One of the physicians, Dr. David Walde, the head of oncology, told his local newspaper — he didn’t say this to us, he said it to his community — that my colleague, the Minister of Health, deserved a medal for finally pushing the project through.

Dr. Walde wished the Minister was there, so he could say that to his face.

But Minister Smitherman couldn’t be in Sault Ste. Marie that day because on that day he was at Sick Kids Hospital here in Toronto, announcing the successful approval of another project.

We can’t allow ourselves to be put in the position of choosing between providing adequate healthcare facilities for the sick children of Toronto or the people of Sault Ste. Marie.

We have to do both

It isn’t a choice between building with traditional financing or building with alternative financing. It is a choice between building now, or not building for many years.

I am convinced that building now is the right choice the right thing to do.

I began my remarks today by promising to honour your deadlines. But I am afraid I have allowed my enthusiasm to carry me away.

So I will stop now. I am eager to hear what the committee members have to say, and to respond to your questions.

Thank you very much.