September 27, 2005

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

Check Against Delivery.

We’ve covered a lot of ground today.

I want to begin my closing remarks by thanking the committee for the opportunity to appear before you to explain the issues Ontario faces in creating the public infrastructure we need and to describe the actions the government is taking to deal with those issues.

I particularly want to acknowledge the importance of the opposition members to these proceedings.

The purpose of this committee is to scrutinize the way we spend the public’s money and therefore uphold the public trust — to make sure we do it wisely and carefully.

And the loyal opposition makes an important contribution to that process.

We have a common purpose and a common responsibility: To serve the public.

And that takes precedence over any political disagreements about the way that purpose is accomplished.

I also wish to acknowledge my colleagues on the government side, and thank them for their participation.

You know, a lot of the work we do in government is not very glamorous. It takes place out of the public view. It does not attract public notice or public comment. But it is important nonetheless.

This government prides itself on doing the right thing — even when we don’t get much public recognition for it.

And you are doing the right thing, by maintaining our commitment to the democratic processeven if no one notices.

It is simply part of the service to the public that we all promised to perform. 

I also wish to mention the honourable chairman of this committee, who has handled the proceedings with even-handed fairness and grace.

For my part, I wish to reiterate our commitment to respond promptly and fully to the questions the committee has raised.

We believe in transparency and openness in government, and we will follow through on that commitment.

We are giving expression to that belief in transparency and openness in the way we are proceeding to build the infrastructure the people of Ontario needa topic I will return to in a moment.

In my opening remarks I described some of the challenges we face.

There have been decades of neglect and underinvestment stretching back to the 1980s.

And because of that neglect, and the failure to maintain a decent state of repair in public facilities we now face massive repair bills.

We didn’t maintain our assets when we could have done it cheaply; now we have to fix them when it is expensive.

It is part of the price we must pay now for the shortsightedness of our predecessors.

Parts of our infrastructure are simply wearing out.

Some of the water pipes in cities like Ottawa and Toronto went into the ground before the turn of the century ... and that’s the nineteenth century. At least one city is still using wooden pipes.

One of our most important highways was named to commemorate Queen Elizabeth not the current Queenher mother.

Some of our schools were built in the 1920s. And so were some of our hospitals.

Once they were modern new facilities where our grandparents got treatment. Now they treat our children and grandchildren and they are no longer new or modern.

We need to repair what can still be fixed and replace what can’t.

Then we must build new infrastructure to accommodate the demographic changes coming to Ontario.

Over the next 25 years, an estimated four million new people will come to live in Ontario about 85 per cent of them in the Golden Horseshoe centred around Toronto.

This is good news. It will help sustain our economy – there will be almost two million new jobs created – and it will cement our position as a strong competitor in the global economy.

The bad news is that we have to build the public infrastructure those people need roads, bridges, schools, highways, hospitals, universities, water and wastewater treatment plants and we have to start building now.

It takes a decade or more for a major infrastructure project to go from conception to construction.

Within two and half decades we will add the equivalent of Vancouver, Edmonton and Calgary to southern Ontario.

We are falling behind and every day we wait makes it more difficult and ultimately more expensive to catch up.

We need to repair and modernize the facilities we have. We need to build new facilities for the future.

And we need to take steps to accommodate our growing and aging society.

None of this will be cheap.

The most common estimate of the investment required is $100 billion dollars. And I think that estimate is low.

So one of the crucial issues this government — any government — faces is simply: Where can we get the money.

Developing mechanisms to provide predictable, sustainable funding for the infrastructure we need is a major challenge.

We need the infrastructure. It is absolutely essential to our economic success. And we can’t put it off any longer.

But the investment required is beyond the capacity of this government — of any government — if we rely on traditional methods of finance.

That is the challenge the Ministry of Public Infrastructure Renewal has been given. In the balance of my remarks I will describe how we are planning to meet it.

There are two elements to our plan to renewal the Public Infrastructure of this province. They are equally important, in the sense that we must do both, more or less simultaneously.

The first is reforming the methods we use to procure, finance and manage public assets.

The second is a rational, coherent and comprehensive plan to co-ordinate virtually all public capital investments so we build the right things in the right places to restore what we have, and create  what we need for future growth.

Let me take them in order, although they are going forward at the same time.

Framework

We were chosen by the people of Ontario to bring real, positive change to government.

One of the most important of those changes is in the process we have developed to procure, finance and manage public infrastructure.

There is a new way of doing business in Ontario. It is characterized by openness and transparency in building public projects :

by careful management of the procurement process to get a fair deal every time…

by careful management of the construction process, so projects come in on time and on budget …

and finally, by careful management of the resulting public asset, so it lasts longer and performs better.

We will also broaden our strategy to encompass partnerships with other governments, and with other public agencies like hospital boards and universitiesso that we work with a common set of priorities and toward a common set of outcomes.

Over the next five years the government and its partners will invest more than $30 billion in public infrastructure.

That is the first step in a long-term plan to restore our public facilities. And that investment is accompanied by major improvements in the processes we use.

All projects in which there is a substantial provincial interest – which means all projects of any size – will be subject to the province’s infrastructure planning, procurement and management framework a set of policies and procedures that dramatically improves the infrastructure process.

And because the challenge of infrastructure deficit is so formidable, we have also developed more flexible — and better — ways to manage public investments in infrastructure.

We will look for innovative ways of financing and paying for the infrastructure we need.

Make no mistake: the government will continue to play the leading role in funding public infrastructure.

Of the more than $30 billion the government and its partners  plan to invest during the next five years, more than 90 per cent will be direct public investment.

But we will also look to pools of private capital like public pension funds and to long-term financing arrangements that will allow us to build the facilities we need, when we need them.

We call this Alternative Financing and Procurement.

AFP

There have been a number of questions on alternative financing, especially as it applies to hospital projects.

I want to deal with those questions as directly and as carefully as I can. I want to make sure there is no confusion about what we intend to do, and how it affects public infrastructure…

Or about what this form of financing would mean for the people of Ontario.

Let me summarize the most frequently asked questions

• Will alternative financing will cost more, because the government can borrow money for less than any private sector consortium?
• Will alternative finance projects mean that the government will be making secret deals with the private sector?
• Will people will lose their jobs because alternative financing means re-writing collective agreements?
• Will alternative financing mean that the government will be allowing private sector companies to earn excess profits?
• And is alternative financing just another name for privatization and P3s?

First, it is only superficially true that the government can borrow at a lower rate than the private sectoralthough that would not be true much longer if we borrowed at the pace set by previous governments.

Standard and Poors estimates that Ontario’s total indebtedness, as a percentage of GDP, is now around 27 percent, which is very high in comparison with other jurisdictions. British Columbia, for example, is 19 per cent of GDP.

The deficits your governments accumulated don’t disappear when you do; they hang around the necks of our children and grandchildren.

For now, the government can borrow at a marginally lower rate than the private sector, and that is only one of the factors that affect the total cost of infrastructure.

But it isn’t the only factor. And it isn’t the most important.

Keeping the lid on cost over-runs and poorly estimated projects is much more significant.

The government does that poorly; and the private sector does it very well.

For example, the previous government started a hospital project in one Ontario city that was initially estimated at less than $120 million; it has now been completed — a year behind schedule — and the cost has ballooned to more than $230 million.

The public is on the hook for every dime of that cost over-run…

and the fact that the government could borrow at lower rates than the private contractors is interesting, but irrelevant.

Private contractors have always built public infrastructure.

They will continue to build public infrastructure.

The only difference is that we are now getting better deals and if the cost of the project goes over budget, we — we the people — don’t pay for it. They do.

The other objections that are raised about alternative financing are equally nebulous.

Will it lead to secret deals? No. Part of the process is a requirement binding on all parties that makes contract details public documents. These deals will also be open to Ontario’s Auditor General to ensure the public gets the best value-for-money.

The entire process will be fair, open and transparent and mechanisms are in place to make sure it is.

For example, we are building a hospital in North Bay. All of our requests for proposals related to that project are available on-line through the public procurement website, and we have provided this information to the Canadian Union of Public Employees, which represents workers at the existing hospital.

We haven’t signed any final contracts yet using alternative financing. When we do, we will make them public.

Will alternative financing cost people their jobs?

No. Existing union contracts will be honoured in every case. In fact it will lead to more jobs, because more projects will be built sooner. There will be more jobs after the projects are completed, and there will be more jobs during the construction phase.

One of the issues with alternative finance is that we can’t move forward as quickly as we want because there are not enough skilled trades people to do the work There are more jobs than people to fill them, which is one of the reasons the construction unions are strong supporters of this approach.

Finally, some of the more radical critics say that alternative financing is just another name for privatization and P3s.

Let me be unequivocal about this: Core public assets such as hospitals, schools and water systems will always be publicly owned, publicly controlled and publicly accountable.

There is no transfer of public ownership in alternative financing and procurement. To suggest otherwise would be fearmongering.

The most direct comparison is to taking a mortgage on your house to renovate the kitchen. The contractor who installs new cabinets doesn’t end up owning the houseand neither does the consortium that renovates your hospital.

Ontarians are coming to realize — that we do not face a choice between building the projects we need now using alternative finance, or building them now, using traditional financing methods.

Our choice is between building now with alternative financing and procurement, or delaying until some day in the indeterminate future when traditional methods will allow us to go forward.

And given the financial conditions past governments have caused, that day is not near.

ReNew Ontario

Our economy – and our way of life – depend on infrastructure that is modern, reliable, efficient and affordable.

But we can no longer afford to plan and build infrastructure using the slap-dash and improvised methods of the past.

We need to plan – carefully and thoroughly – what we are going to build, so that we create real assets, not white elephants.

We need to coordinate infrastructure investments across the broader public sector, so that we are all rowing in the same direction.

And we need to change the planning horizon from the year-by-year and ministry-by-ministry approach the government has traditionally taken to one that more closely matches the time required to build infrastructure, and the time during which we will be using it.

That time is measured in decades, not years.

We have begun that process, with the ReNew Ontario strategy my ministry released earlier this year. But we have only begun. To paraphrase Churchill, this is not the end, or the beginning of the end; it may be the end of the beginning.

We are now beginning to build not just for our needs today, but for the needs of our children and grandchildren, far into the future.

ReNew Ontario, the government’s five-year, $30 billion infrastructure investment plan includes both long-overdue projects and urgent new initiatives.

It focuses on key priorities – health care, education and economic prosperity. It includes:

• More than $11 billion for public transit, highways and other transportation projects;
• More than $10 billion for schools, colleges and universities;
• And $5 billion for hospitals and other health care facilities.

All of the infrastructure investment will be paid for with public dollarsbut the financing for some large projects will come from the private sector.

All of that financing will be repaid from public funds over time.

All major projects delivered through alternative financing and procurement models will be subject to the principles of our infrastructure policy framework, Building a Better Tomorrow, to ensure all of our infrastructure investments serve the public interest.

The funding for these projects includes:

• $18 billion of the Province’s own gross capital investment over the next five years, including federal flow-throughs. This includes the $3.7 billion in gross capital investment in 2005-06 announced in the 2005 Provincial Budget;
• $5 billion in capital funding provided through operating grants to long-term care homes for per-diem payments and to school boards. That does not include funding for the Good Places to Learn initiative, and for university expansion, which may be as much as $4.8 billion more;
• And approximately $2.3 billion for projects using alternative financing and procurement methods, a small but vital part of the overall picture.

ReNew Ontario, is a  strategic five-year infrastructure investment plan, the first in the province’s history.

It concentrates on investments in areas Ontarians have said are their priorities: health care, education and economic prosperity. 

Investing in Health

By 2010, Ontario and its partners will invest approximately $5 billion in health care facilities to reduce waiting times, provide better service in high-growth areas, and modernize older hospitals.

Some highlights of the plan include these projects:

• Funding to start or complete 105 hospital projects that will expand and/or  upgrade existing hospitals and build new ones;
• More than $150 million over five years to improve cancer treatment and expand diagnostic facilities;
• Nine new and seven upgraded MRI machines will be operating by the end of this fiscal year. Together, they will increase the number of MRIs by 15 per cent;
• The number of doctors graduating each year will increase by 15 per cent, starting in 2011-12.

Investing in Education

We are also investing in educationand these investments are absolutely essential for our continued economic success.

Our economic success is based on the knowledge and skills of our people. And it is the very nature of knowledge that it changes fast. 

Manual skills change very slowly.  Socrates was a stone mason. That is how he earned his living. And Socrates the stonemason would still feel comfortable in any modern stone mason’s yard.

But Socrates the philosopher would be totally baffled by both the concerns and the tools of such key disciplines of modern philosophy as symbolic logic or linguistics.

Our task is to prepare our young people for the knowledge-based jobs of tomorrow, and by investing in education we equip ourselves with the skills we need to compete in a global economy.

By 2010, Ontario and its partners will invest more than $10 billion in elementary and secondary schools, and in post-secondary facilities.

Some highlights:

• Over the next five years, the Good Places to Learn initiative will provide annual funding to school boards to enable them to undertake approximately $4 billion worth of projects, to address the backlog of repairs and new school construction needed in the system.
• Approximately $1.4 billion will be invested over the next five years for planned school construction and to accommodate projected new enrolment growth.
• In addition, another $1.5 billion will be provided to boards over the next five years for ongoing renewal of school facilities.
• Approximately $1.8 billion will be provided over the next five years to support school construction already completed.
• $540 million is being invested to renew university and college facilities and buy new equipment, including $250 million in one-time investments in 2004-05.
• Over the next five years, $600 million will be invested in a major expansion of medical and graduate school space. Graduate education will increase by 14,000 students by 2009-10, and 15 per cent more doctors will be graduating in 2011-12. This is in addition to the first freshman class of future doctors who enrolled in the Northern Ontario School of Medicine this fall.

Investing in the Economy

The students who benefit from those investments will enrich our society both in individual and collective terms.

They will contribute to an enlighted society and a prosperous one.

But there are other investments we must also make to ensure economic success.

Public infrastructure — including efficient transportation and transit systems — is essential to a robust economy. 

In addition to investments in healthcare and education which improve our economy, Ontario and its partners are making strategic infrastructure investments that will have a substantial impact on our economic prosperity and our quality of life.

By 2010, Ontario and its partners will invest $6.9 billion for highways, border infrastructure and other transportation projects.

These projects include:

• Accelerating the four-laning of highway 69 between Parry Sound and Sudbury and on Highway 11 between Huntsville and North Bay;
• In the south, 22 new highway projects will focus on areas with high traffic volumes and significant safety issues;
• $638 million to relieve congestion at border crossings.  This includes $300 million to support improvements at the Windsor gateway and $323 million for improvements at the Niagara and Sarnia border crossings.

Another $4.5 billion will be invested in public transit, including:

• $3.1 billion invested to improve and expand public transit, including major investments in GO Transit, the TTC and the Ottawa O-Train;
• $1.4 billion to improve 83 transit systems in 110 municipalities through the provincial gas tax.

The province is also investing in affordable housing through a new $600 million Ontario-federal affordable housing agreement.

The government is meeting its 2004 commitment to invest $300 million over four years for research infrastructure in universities, hospitals and research institutes.

And through the Canada-Ontario Municipal Rural Infrastructure Fund, investments of almost $900 million will be made in smaller communities to improve local roads and bridges, water and wastewater systems and solid waste management facilities.

It is imperative that our planning for the future also plan for ways to accommodate future growth.

This is a major priority for the government. We understand the need to control unplanned and destructive urban growthby providing better alternatives.

Our proposed draft Growth Plan for the Greater Golden Horseshoe is the first initiative that takes this innovative approach.

It is the first growth plan being developed under the Places to Grow Act passed by the Legislature earlier this year.

When the first growth plan is adopted it will prove a blueprint for better ways to manage  urban growth a blueprint that will help us deal with these issues in every part of the province.

Until now, the record of the Ministry of Public Infrastructure Renewal has been largely devoted to planning and process.

We have developed an important framework to reform the process of infrastructure creation, and the way we pay for it.

We have developed a plan to guide our investments — and those of our partners — over the near term.

And we have passed legislation and developed a draft plan to manage urban growth in the greater Golden Horseshoe.

Those are all important achievements, and I am happy to acknowledge the hard work and dedication of the staff in the ministry who made them possible.

They are an important foundation for the work we will do in the next two years.

But now we must turn from planning to implementation from laying the foundation to building the house.

That is the task that will occupy us next. And I assure you, that when I return to this committee next year, or the year after, I will have much progress to report.

We are beginning a renaissance of public infrastructure in Ontario. It is an exciting timeand there is a lot to do.

And in the coming months, I look forward to working with you to get those things done.

Thank you.