February 26 News Bulletin

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2016 Ontario Budget – What It Means for the ICI Construction Industry

While much of the focus on the 2016 Ontario Budget has been on the new system for post-secondary tuition, yesterday’s Budget also contained positive news for the ICI construction sector.

The 2016 Budget showed a continuation of the government’s practice of presenting a 10-year plan for infrastructure investment, showing the planned expenditure of $137 billion in various sectors over that period.

The Budget reaffirms the Ontario government’s commitment to significant improvements to the province’s infrastructure, puts the government within reaching distance of a balanced budget by 2017-18, and signals refinements to the Apprenticeship Training Tax Credit that will encourage program completion.

 

Ontario’s Economy and Fiscal Outlook

The Ministry of Finance is forecasting real GDP growth of 2.2% over the 2016-19 period, and notes that Ontario’s GDP growth of 2.5% in 2015 was significantly stronger that the national growth rate of 1.2%. Ontario’s 2015 unemployment rate was 6.8%, down in all regions of the province and across the province as a whole, when compared to 2009 levels.

Of particular interest to the manufacturing sector, the Ministry expects strong economic growth in the United States (3.0%), and strong growth in Ontario’s exports (also 3.0%) between 2016 and 2019.

Ontario is reporting a deficit of $5.7 billion in 2015-16, $2.5 billion smaller than the deficit projected in the 2015 Budget. Next year’s deficit is projected to be $4.3 billion, with a balanced budget projected for 2017-18.

Ontario’s debt is projected to peak in 2016-17 at $308 billion, representing 39.6% of GDP, compared to the federal government, whose net debt currently sits at 31% of GDP.

 

Infrastructure Investments

In this Budget, the Ontario government remains committed to making significant, long-term investments in the province’s public infrastructure.

It should be noted that the Ministry of Finance’s Budget papers cited a report co-sponsored by OCS and RCCAO, and issued by CANCEA last year, that documented the contribution of infrastructure investments to Ontario’s long-term economic growth.

“An October 2015 report by the Canadian Centre for Economic Analysis (CANCEA) found that the Province’s 10-year infrastructure plan supports approximately 11 per cent of Ontario’s economic growth over the next 30 years.”
Source: page 59, 2016 Ontario Budget Papers

For 2016-17, infrastructure spending will be up to $16.2 billion, up from $12.9 billion spent in 2015-16, breaking down as follows:

  •     $8.3 billion for transportation (including transit, highways and other transportation, property and planning) – up from $6.3 billion in 2015-16
  •     $3.2 billion for health (up from $2.4 billion)
  •     $2.8 billion for education (up from $2.5 billion)
  •     $1.9 billion for social, justice and other sectors (up from $1.7 billion)

The 2015 Budget showed a 10-year-plan with $134 billion in infrastructure expenditures – the 2016 Budget’s $137 billion plan is slightly higher, mainly as a result of changes to two programs for smaller communities outside of the Greater Toronto and Hamilton Area (GTHA).

The Ontario Community Infrastructure Fund is currently a $100 million program to build and repair critical infrastructure across the province outside of the GTHA. This Budget increases OCIF’s annual funding to $300 million by 2018-19, and also makes increases the Connecting Links program to $30 million annually by 2018-19, to improve connections between municipalities at the end of provincial highways or at border crossings.

 

New and OnGoing Construction Projects

The Budget highlights a number of new and ongoing notable construction projects. Further construction announcements can be expected throughout the year, but the Budget highlights a number of projects, both new and ongoing, to underscore the significant number of transportation, education and health projects underway in Ontario.

Ongoing Transit Projects

  •     Investing $1.4 billion in the Hurontario LRT in Peel Region
  •     $1.0 billion in capital costs for Hamilton’s LRT
  •     Funding for planning and design work for GTHA Big Move projects: Dundas Street BRT in Toronto, Halton and Peel, Durham-Scarborough’s BRT project, Brampton’s Queen Street Rapid Transit project and TTC’s Relief Line and Yonge North extension

New education and health projects

  •     Two college projects: a new hub at Confederation College in Thunder Bay, and new learning space at La Cite collegiale in Ottawa.
  •     $50 million in new funding to help hospitals maintain facilities in good repair
  •     Call for Proposals in 2016 for one or more post-secondary facilities in Peel and Halton

New Road Construction Projects

  •     London – design work to upgrade the 401/Highbury Ave interchange
  •     Cambridge – Expansion of Highway 401 to 10 lanes in Cambridge, including new HOV lanes, starting in 2018
  •     Ottawa – Widening Highway 417 between Maitland and Island Park Drive, and from Highway 416 to Maitland Ave
  •     Four-laning Highway 11/17 between Thunderbay and Nipigon
  •     Capital improvements to Northern Ontario airports

 

Skills Training

Apprentices receiving training at community colleges will experience dramatic changes to Ontario’s student aid system, with the current complex array of tax credits being replaced by a grants-based system.

The Budget also announced a review of the Apprenticeship Training Tax Credit (AATC), looking for ways to improve completion rates and increase opportunities in underrepresented groups, with further details to be announced in 2016. The ATTC was intended to provide incentives for employers to hire apprentices, but the government found that the tax credit was not as effective as hoped, so changes were made in the 2015 Budget.

It was also noted that the Canada-Ontario Job Grant is currently providing up to 46,000 training opportunities for 35,000 employees in Ontario. This measure provides $10,000 in funding from both the provincial and federal government to cover training costs for newly hired apprentices.

In 2015-16, the government invested $176 million in a range of programs for apprentices, employers and training delivery agents.

 

Manufacturing and Innovation

The government’s efforts to boost manufacturing may be best described as targeted. While large funds like the $2.7 billion Jobs and Prosperity Fund, announced in previous Budgets, have matched funding investments made by employers, newer initiatives have been smaller, and more narrowly targeted.

This year’s Budget allocates $400 million over five years as part of the government’s Business Growth Initiative: a suite of programs to help companies invest in research and development, adapt to new technologies and access capital. The Budget also reinvests funding from R & D tax credit changes into investments in Advanced Manufacturing Consortium, college innovation projects and the Perimeter Institute.

 

Concluding Comments

A Budget is an opportunity for the government to communicate its priorities to a wide audience. It seems that the Wynne government, with this Budget, is trying to demonstrate that it is seized both long-term and short-term problems. It is looking to deal with issues like tuition affordability and infrastructure needs at the same time that it tackles an immediately pressing fiscal deficit.

On that deficit, the government can boast of progress made, despite volatile commodity and financial markets – with a political cost paid in difficult negotiations with public sector unions and other groups calling for greater spending in health and social services.

Hopefully, the government’s signal of changes in the apprenticeship tax credit system are a sign of a thoughtful approach that rewards employers or systems that generate higher apprenticeship completion rates, like the unionized ICI construction industry’s system of joint union-employer training centres.

With much of the province’s infrastructure investment being planned for transit projects like LRT or subway systems, and with health and education infrastructure investments remaining steady, the ICI construction sector should continue to see strong opportunities in the institutional sector. The Ministry of Finance’s expectations for growth in Ontario, the US, and in exports, may also be a sign that higher growth in industrial sector construction could emerge.

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FOR MORE INFORMATION, CONTACT:

Katherine Jacobs
Director of Research and Operations, or

Perry Chao
Senior Policy Analyst,

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

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