April 24 News Bulletin

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Ontario Budget 2015 – Focus on Transportation Infrastructure

In the 2015 provincial budget – entitled Building Ontario Up – Wynne’s Liberals still seek to balance budget by 2017-2018 by keeping a lid on program spending growth.  Despite this, the provincial government remains dedicated to rolling out their ambitious and robust long-term infrastructure investment plan, with even more funds being made available.

For this fiscal year, infrastructure spending breaks down as follows:

    • $6.5 billion for transit (+400 million from last year)
    • $2.9 billion for health (-$1 billion from last year)
    • $2.5 billion for education (about in-line with last year)
    • $1.9 billion for social, justice and “other sectors” (up $700 million from last year)

The Wynne government is projecting the 2015-2016 deficit at $8.5 billion, less than forecast in last year’s budget.

Building Together – The Province’s Infrastructure Plan:

In last year’s budget, the provincial government announced their 10-year, $130 billion infrastructure plan.  Part of this large-scale commitment to infrastructure included $29 billion over 10 years for projects within and outside of the Greater Toronto Hamilton Area (GTHA) through Moving Ontario Forward.  The 2015 budget reveals that this amount will be increased to $31.5 billion. About $16 billion will be funnelled to projects within the GTHA and roughly $15 billion is earmarked for investments in other parts of the province.

The government plans to pay for the Moving Ontario Forward plan in a variety of ways, including through repurposing funds from the HST, dedicating funds from the Provincial gasoline tax, “optimizing the value” of its government assets (i.e. offering Hydro One IPO, etc), working with the federal government through the Building Canada Plan, using revenue from toll-lanes and some borrowing measures. These revenue-generating measures will yield “dedicated funds” to put towards the plan.

Within the GTHA, the Moving Ontario Forward plan includes the following projects, which are supported by dedicated funds:

      • Go Transit Service Improvements
      • Lakeshore East and West Corridors Rapid Express Rail (RER)
      • Barrie Corridor RER
      • Hurontario-Main LRT

Meanwhile, the following Moving Ontario Forward GTHA projects are partly reliant on new partner funding

      • Stouffville Corridor RER
      • Kitchener Corridor RER
      • Central System Upgrades

Finally, these projects will only proceed if partner funding is secured

      • Eglinton West Extension
      • SmartTrack Stations

Outside of the GTHA, there is a broad-array of projects planned, all of which will be supported by dedicated funds, including:

      • The Ontario Community Infrastructure Fund – $100 million per year for small, rural and northern municipalities for their infrastructure needs
      • The Small Communities Fund – $272 million each from the provincial and federal governments for projects in municipalities with fewer than 100,000 residents
      • The Connecting Links Program – improving local roads that connect to provincial highways
      • Southern Highway Projects (i.e. Highway 417 in Ottawa, Highway 7 from Kitchener-to-Guelph)
      • Northern Highway Projects (i.e. Highway 11/17)
      • Infrastructure investments in the Ring of Fire
      • Projects to expand natural gas access
      • Additional investments to support the economy
      • Additional investments to support transportation

Also as part of Building Together, the province plans to spend more than $11 billion over 10 years in elementary and secondary schools including new schools in Collingwood, East Gwillimbury, Ottawa, Severn, Toronto, Vaughan, Fort Erie and Peterborough.  Meanwhile, $120 million over three years will be put towards early child-care spaces in schools. They plan on spending $900 million over 10 years on post-secondary schools, including investments in Humber College and McMaster University.

In the healthcare space, more than $11 billion over 10 years is pegged for hospital capital grants.  The Wynne government is also modernizing the province’s justice and energy infrastructure.  Notably, the province continues to endorse the Alternative Financing and Procurement (i.e. Public-Private-Partnerships) project delivery model, noting that almost all AFP projects have been delivered on budget.

Infrastructure Expenditures – This Fiscal Year:

For this fiscal year (i.e. 2015-2016), total infrastructure expenditures (which include contributions from the provincial and federal governments as well as third parties) are expected to equal $13.9 billion – a solid level though up only a modest $186 million from 2014-2015.

Breaking down this year’s projected infrastructure expenditures, the government plans on spending $6.5 billion on transportation infrastructure, accounting for 47% of total infrastructure expenditures and up 6.5% from 2014-2015.  They also expect to spend just under $3 billion on health infrastructure this year, about $1 billion shy of last year’s figure.  Education and post-secondary spending is projected be about $2.5 billion, roughly in-line with last year.  Meanwhile, social, justice and “other” infrastructure will be higher this year by $700 million.  From this information, it’s clear that the provincial government is prioritizing transit infrastructure investment this year.

For the full details behind planned infrastructure spending for 2015-2016, please see the Infrastructure Expenditures PDF here.

The Skilled Trades, Apprenticeship and Youth Employment

The Wynne government recognizes that while apprenticeship registrations have increased, completions have lagged.  They note that completing an apprenticeship is important as it leads to higher wages and future labour market success and pledge to help employers, apprentices and training institutions raise both completion rates and the profile of the skilled trades in the province.

The provincial government plans to further support the apprenticeship system by investing $13 million over two years for pre-apprenticeship programs and $19 million over three years to increase the “per diem” for apprenticeship classroom training.  The government provides funding for in-class training provided by colleges and training delivery agents on a “per diem” basis. Additionally, they will be spending $23 million over two years in the Apprenticeship Enhancement Fund to help colleges and other delivery agents train more people using better equipment.

Recall that the Apprenticeship Training Tax Credit (ATTC) was instituted as a way to provide an incentive to employers to hire more apprentices by providing a 35%-45% refundable tax credit to businesses.  However, the ATTC has not been as effective as the government hoped.  As a result, the following changes are being made:

      • The general tax credit rate will fall to 25% – 30% from 35-45%
      • The annual maximum per apprentice will be reduced to $5,000 from $10,000
      • The eligibility period will be reduced to the first 36 months of an apprenticeship program from the first 48 months.

This measure is expected to result in $195 million in higher government tax revenue over three years, and at least $95 million annually by 2017-18.

On the youth employment front, the government is investing an additional $250 million in the Youth Jobs Strategy in order to tackle the problem of high unemployment.  This money will be invested in a variety of programs.  Also notable is that to create a better match of worker skills to employer needs, the province has partnered with the federal government to deliver the Canada-Ontario Job Grant, which supports employer-driven training initiatives. The Grant provides up to $10,000 per person to cover eligible training costs.

Northern Ontario

Building Ontario Up makes note of several measures meant to boost Northern Ontario.  The Liberals plan to release their renewed Mineral Development Strategy this year. Additionally, the government is investing $60 million to create roads meant to improve access to forestry resources.  They will also invest up to $120 annually to help qualifying large industrial facilities in the North reduce their energy prices, in a continuation of the Northern Industrial Electricity Rate Program introduced in 2010.  Finally, the Northern Communities grant – which provides funds for infrastructure and other key priorities – will increase by $5 million in 2016, bringing its total to $84 million.

Other Notable Items:

Given the need to invest in infrastructure, not only in Ontario, but across Canada, the Wynne government is calling for a pan-Canadian infrastructure partnership to get the federal government further committed..  The province would also like increased federal support for the Ring of Fire, First Nation communities, the manufacturing sector, clean energy initiatives, and disaster response.  Additionally, the province would like the Labour Market Development Agreements to be reworked so that eligibility for the program is expanded and the federal funding commitment is increased.

Also worth mentioning is that $200 million more will be invested in the Jobs and Prosperity Fund, bringing its 10 year total to $2..7 billion.  The fund has supported investments made by Honda and auto-parts maker Linamar, thereby also boosting the construction industry.

Concluding Remarks:

The details of the budget reveal that spending is going to be skewed towards the transportation sector, both in the short and long-terms.  This fiscal year (i.e. 2015-2016), $6.5 billion is projected to be spent on transportation infrastructure with $3.2 billion going to transit, $2.5 billion going to provincial highways and the remainder being put in “other transportation”.

Although educational infrastructure spending will hold steady at $2.5 billion this fiscal year, spending on health infrastructure will fall. The government projects health infrastructure spending to come in a shade below $3 billion, compared to just under $4 billion in 2014-2015 and a three-year average of $3.6 billion. Meanwhile, spending on social, justice and “other sector” infrastructure will be higher this year.

Overall, it looks like the level of institutional spending will be similar to recent history as total institutional sector (taken to be health + education + social + justice + “other sectors”) spending will equal $7.3 billion – a similar level as in the past three years. Statistics Canada’s data indicates that institutional investment has been relatively subdued over the past few years as the market has unwound from stimulus related gains.  The government’s projections suggest that the level of institutional investment may be modest again this year.

It’s encouraging to see the government acknowledge that completing an apprenticeship can lead to better labour market outcomes. OCS research has shown that the unionized industry completes apprentices at a higher rate than their non-union counterparts.

FOR MORE INFORMATION, CONTACT:

Rishi Sondhi

Construction Information Coordinator
Ontario Construction Secretariat (OCS)
180 Attwell Drive, Suite 360, Toronto, ON M9W 6A9
P 416.620.5210 ext. 222
F 416.620.5310
EMAIL: kjacobs@iciconstruction.com
www.iciconstruction.com

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