On a Footing for Recovery — Infrastructure Elements of the 2020 Ontario Budget

On November 5, 2020, Ontario’s Finance Minister, Rod Phillips, released Ontario’s 2020 budget entitled, “Ontario’s Action Plan: Protect, Support, Recover” (Budget). The Budget forms part of Ontario’s COVID-19 health and economic response plan, and accordingly it includes many measures targeted specifically at economic recovery from the effects of the pandemic. Of note to participants in the infrastructure sector, the Budget makes it clear that the follow-on economic effects of near-term spending on infrastructure by government are a core element of the province’s recovery plan. To that end, the Budget allocates significant funds to infrastructure spending. Specifically, the Budget provides for investments in transit, highways, schools, hospitals and broadband over the next 10 years, totaling C$142.9-billion, including C$13.6-billion in 2020–21 alone.

BROADBAND INFRASTRUCTURE

The Budget includes additional investments of over C$680-million over the next four years in broadband infrastructure as part of Ontario’s Up to Speed Plan, including an additional C$150-million for the Improving Connectivity for Ontario (ICON) program. This increase will bring Ontario’s investment in broadband to nearly C$1-billion over six years beginning in 2019–20.

The COVID-19 pandemic has highlighted deficiencies in access to, and reliability and affordability of, broadband and cellular services in Ontario, and these investments are intended to address such issues by expanding broadband and cellular infrastructure capabilities across the province. Notably, the Budget positions these initiatives as leveraging funding from other levels of government, including the Canada Infrastructure Bank, as well as the private sector (although further details of such funding are not provided).

TRANSIT INFRASTRUCTURE

Ontario has earmarked a significant portion of the Budget’s C$142.9-billion infrastructure allocation to transit, with a C$62.7-billion commitment over 10 years. Of this amount, C$28.5-billion has been set aside for the province’s subway plan, which includes projects such as Ontario Line (to be delivered by way of three separate public-private partnership procurements), the three-stop Scarborough Subway Extension, the Yonge North Subway Extension and the Eglinton Crosstown West Extension (priority subway projects). In respect of these priority subway projects, the Budget also calls on the federal government to fund at least 40 per cent of the C$28.5-million total cost.

The Budget also affirms Ontario’s commitment to projects currently under construction, such as the Hurontario Light Rail Transit Project and the GO Rail Expansion program, as well as the province’s prior commitment to provide C$1-billion in funding for transportation and transit projects in the City of Hamilton.

HIGHWAY, ROAD AND BRIDGE INFRASTRUCTURE

Also specifically highlighted in the Budget is the province’s highway, road and bridge infrastructure program, which include various expansion and rehabilitation projects across Ontario as a means of creating employment and ensuring efficient movement of goods and people. Per the Budget, C$22-billion in funding has already been allocated over 10 years to expand and repair Ontario’s highways and bridges (C$2.6-billion in 2020–21), including expansion projects on stretches of Highway 3, Highway 17 and Highway 401. Coupled with changes made earlier this year to the Public Transportation and Highway Improvement Act, the Building Transit Faster Act, 2020, the Transit-Oriented Communities Act, 2020 and the Public Service Works on Highways Act, the new funding is intended to accelerate not only key provincial highway construction projects, but also transit-oriented communities (including affordable housing). For more information about the changes to these acts, please see our July 2020 Blakes Bulletin: Building on Recovery: Ontario’s Infrastructure-Related Legislative Developments and February 2020 Blakes Bulletin: Fast Track for Transit: Ontario Introduces the Building Transit Faster Act.

Other road-related projects specifically discussed in the Budget include the Bradford Bypass to connect Highway 400 and Highway 404, as well as the GTA West corridor, which will include a new four-to-six lane 400-series highway and transit corridor across York, Peel and Halton regions with separate infrastructure dedicated for transit and passenger stations, as well as intelligent transportation features and truck parking.

TRANSIT-ORIENTED COMMUNITY INFRASTRUCTURE

The Budget reaffirms but does not specifically allocate any funding for specific projects in, the province’s Transit-Oriented Communities (TOC) program. The Budget describes the TOC program as part of the government’s plan to build new, sustainable transit while also connecting people to places by centering mixed-use communities around transit stations. The Budget discloses that the Ontario government is working with the City of Toronto and York Region to support the delivery of the TOC program across the priority subway projects, and that the province is exploring TOC opportunities for other provincial transit projects.

HEALTH INFRASTRUCTURE

In addition to measures targeted specifically at the COVID-19 pandemic, Ontario is proposing to invest more than C$18-billion in capital grants over 10 years to build new and expanded hospital infrastructure and to address urgent upgrades, including repairs and maintenance to help modernize hospitals across Ontario. Using its Health Infrastructure Renewal Fund, the government is proposing to invest C$175-million in 2020–21 for priority upgrades, repairs and maintenance projects in 129 hospitals across Ontario. In response to COVID-19, approximately C$50-million of this funding is designated to facility maintenance including upgrading HVAC systems, as well as infection prevention and control measures.

The Budget notes that there are almost 70 major hospital projects across the province that are currently under construction or progressing through various stages of planning, but these projects do not receive specific funding allocations in the Budget.

LONG-TERM CARE INFRASTRUCTURE

While a significant portion of the Budget’s spending on long-term care is operational in nature, the Budget also reaffirms the C$1.75-billion spending commitment announced by the province in July 2020 to increase long-term care capacity with a stated goal of building 30,000 long-term care beds.

In confirming these plans, the Budget references Ontario’s redesigned funding model for the long-term care sector (referred to as the Construction Funding Subsidy) which, as announced on July 15, 2020, is designed to help speed up construction by: (i) creating four new regional categories (large urban, urban, mid-size and rural) based on geographic location, with targeted home sizes for each; (ii) providing development grants to cover upfront costs (such as development charges, land and construction expenses) of between 10 and 17 per cent depending on the regional category; (iii) helping small operators in rural communities navigate the high cost of development while ensuring larger urban centres can secure the loans and real estate they need; and (iv) increasing funding to incentivize the construction of basic accommodation and continuing top-ups for small and medium-sized homes. The regional categories have the potential to alleviate regional real estate cost disparity issues experienced by both for-profit and not-for-profit owners and developers of long-term care infrastructure by recognizing and addressing the increased upfront costs associated with land and construction in large urban centres.

The Budget also confirms that a material portion of Ontario’s new long-term care bed capacity is intended to be provided through Ontario’s new Accelerated Build Pilot Program, which is being used to accelerate the development and construction of four new long-term care homes in Mississauga, Ajax and Toronto by the end of 2021.

EDUCATION INFRASTRUCTURE

In addition to funds allocated to the education sector related to COVID-19 safety, the Budget includes investments of C$13-billion in capital grants over 10 years to build new schools and renew existing schools across Ontario. As part of this investment, Ontario will provide C$1.4-billion in 2020–21 specifically for facility repair and renewal, in addition to C$50-million in one-time funding for improved ventilation, air quality and HVAC system works in schools.

The Budget also provides for C$466-million over three years in capital grants to support colleges and universities in making critical maintenance, repairs and upgrades, including modernization of classrooms, upgrading technology and improving environmental sustainability.

ELECTRICITY AND RENEWABLES

In a move intended to ease the burden of electricity rates on Ontario’s industrial and commercial sectors and make Ontario more competitive, the Budget shifts certain renewable power costs from the ratepayer to the taxpayer. Starting January 1, 2021, approximately 85 per cent of the cost associated with long-term renewable wind, solar and bioenergy contracts will be funded directly by the province. Ontario expects electricity rates for industrial and commercial employers to reduce by an estimated 8.05 and 14.31 cents per kilowatt-hour, on average, respectively. The fiscal impact on Ontario is expected to decline year-over-year as the majority of these long-term renewable contracts start to expire in the early 2030s. Going forward, these rate reductions will no doubt be an important factor influencing infrastructure-related investment decisions within the province.

FEDERAL GOVERNMENT’S ROLE

The Budget calls on the federal government to partner with Ontario in achieving many of the infrastructure-related goals set forth in the Budget, including most notably through federal–provincial programs like the Investing in Canada Infrastructure Program (ICIP). The province has nominated over 760 projects for the ICIP, including projects specifically related to COVID-19 resilience and recovery, rural and northern communities, green infrastructure, communities and culture, and public transportation and transit.

CONCLUSION

As a core part of the province’s COVID-19 recovery plan, the Budget demonstrates the government’s continued commitment to supporting both new and ongoing infrastructure projects. In fact, the Budget points to the province’s proposed infrastructure investments as a key driver of recovery, fuelling jobs and growth throughout the construction, maintenance and development sectors.

However, the Budget is also notable in contemplating a significant deficit of C$38.5-billion for 2020–21, which the province indicates reflects urgent spending necessary for post-COVID-19 recovery and renewal. While such deficits are forecast to decline over the medium term, the Budget’s clear calls for both ongoing and new federal and private-sector support for infrastructure spending are clear reminders that the ambitious plans for recovery from the COVID-19 pandemic will require long-term funding solutions from other levels of government and the private sector.

For further information, please contact:

Mark Johnson                           416-863-3318
Christine Ferguson                    416-863-3094

or any other member of our national Infrastructure group.