GNCC 2020 Pre-Budget Submission to the Government of Ontario

Tuesday, February 11, 2020

Dear Minister Phillips,

On behalf of the Greater Niagara Chamber of Commerce (GNCC) and the 1,500 members of the business community we represent, I would like to offer my thanks for soliciting these pre-budget submissions. Your government has consistently recognized that it is the businesses, non-profit organizations, and the people of Ontario who are responsible for our prosperity, and we applaud your decision to involve them and to hear their needs and requests in the process of shaping the next budget for the province. It is in this spirit that I would like to offer our suggestions on behalf of Niagara’s business community.

Infrastructure investment

Responsible and forward-thinking government must not only tackle the problems of today but anticipate the challenges of the future. In broad terms, the two issues we see as the most pressing long-term concerns for this province are population growth and climate change. Planning for these issues will assure this government’s status not only as one which has delivered for the people of Ontario in the present but also established a legacy for decades to come.

Population growth is already placing pressure on, for example, transit infrastructure, real estate, and municipal services. Some projects that can help relieve this pressure, such as greater investment in light rail, the GO train network, or subways, and greater subsidies to municipal public transit, may not immediately pay off, but it is far harder to address these problems after they have occurred than to anticipate them before they occur. We encourage this government to transfer more funding to municipalities to fund transit projects and to invest in public works such as water, wastewater, and stormwater facilities, road and bridge repair, and the other infrastructure that supports a growing population.

The wave of public infrastructure investment undertaken in the 1950s and 1960s was not sustained, and at this point, many of those projects are nearing the end of their useful lives, meaning another wave of investment must take place merely to maintain what we have. The infrastructure gap is growing. A 2006 study by the Residential and Civil Construction Alliance of Ontario found that bringing the province’s public infrastructure up-to-spec would cost $19-billion; in 2008, the Provincial-Municipal Fiscal and Service Delivery Review found that gap had already grown to $22.4-billion.

Municipalities own half of all public infrastructure in Ontario – more than the provincial and federal governments combined. That infrastructure includes 15,000 bridges and large culverts and more than 140,000 kilometres of roads, which currently face an infrastructure funding gap of $28-billion – almost half of the total municipal infrastructure deficit of $60-billion. Ontario’s municipalities alone do not have the revenue options to close this gap, as staggering increases in levies – the only tool available to municipal governments – would be necessary, and would also have an extremely chilling effect on investment and growth, not to mention impoverishing countless households and businesses across the province.

We have repeatedly asked the Government of Canada to assist municipalities with the closure of this gap, and we are asking the same from the Government of Ontario. The Association of Municipalities of Ontario proposed a one-percentage-point increase in HST to close this gap the year before your government was elected, which was rejected by all provincial parties. We do not necessarily agree that this tax increase is the only way to close this gap, but it must be closed, and it will require drastic action. One way or another, this cost will be borne by the taxpayers. We hope that an option will be found that offers the greatest impact on the gap for the smallest impact on the taxpayer, but we urge you not to postpone tackling this issue as so many governments in the province before you have done.

Transit investment

Public transit investment is another issue facing the business community. Almost 80% of working Ontarians commute to work by automobile, and even in Toronto, with its network of multi-modal public transit systems, more than two out of three commuters still travel by car. In cities across the European Union, Eurostat found that 49% of people use transit to get to and from work. Fewer than 25% of Toronto commuters used public transit, and this rate is the highest in Ontario. At 28.8 minutes, Ontarians have the longest average commute in Canada.

This negatively impacts workforces and therefore businesses. Annual surveys by the Ontario Chamber of Commerce have consistently found that talent attraction and retention is the foremost challenge for businesses. European HR firm SD Worx found that employees who travel for 90 minutes or more each day were more likely to be actively looking for another employer, with 19% doing so on average, compared to just 9% of those whose commute is less than 30 minutes. Commute times and poor public transit actively contribute to a labile workforce and make talent retention harder for businesses. Better public transit reduces commute times not only by getting riders to work faster, but also by taking cars off the road, shortening trip duration for the remaining drivers. This does not work, however, while commute times in Ontario are increasing faster for transit users than for drivers.

In 2006, Metrolinx found that congestion in Toronto had an annual economic cost of $6 billion and would increase to $15.5 billion by 2030 without significant investment. In 2013, the C.D. Howe Institute discovered that this figure had likely been underreported by between $1.5 and $5 billion, since it had not taken into account the deterrent effect that congestion had on customers who would not patronize faraway businesses, co-workers and potential collaborators who could not share ideas face-to-face, and jobseekers who would not apply for better jobs that entailed longer commutes.

These statistics show a clear need for more investment in public transit in Ontario. This will necessitate provincial investment. We hope that the government will reconsider and allocate more funding to this and to other public transit projects across the province in order to reduce commute times and promote better stability and availability for Ontario’s workforce.

Affordable housing

We know you are acutely aware of the affordable housing shortages which affect not only the GTA, but have spread to other communities, including Niagara. An Auditor General’s report of December 2016 found that Ontario’s wait list of 185,000 households, representing about 481,000 people, was 3.4% of its total population, the highest rate in the country. The number of households on Ontario’s wait lists had increased by 36% in the last 13 years for which this information was available.

While municipalities can set their own priorities for housing, they must, of course, follow the direction of the Province. In order to deliver more housing for the people of Ontario, the Province must direct the municipalities to favour more intensive land use and the development of rental housing. Of course, this is a matter over which the Ministry of Municipal Affairs and Housing has jurisdiction, but there is still room for the Ministry of Finance to offer direction through the budget.

As mentioned, municipalities are facing substantial budgetary constraint. There is an opportunity for the Province to guide municipal governments in the right direction by offering funding for projects that favour the intensification of land use and the development of more affordable housing. Funds could also be made available for municipalities to process and approve more second-suite housing applications, for example, or the Province could offer to reimburse municipalities if development charges for new affordable housing builds are waived. Your predecessors in government also made the decision to transfer responsibility for the oversight and funding of social housing to the municipal level. Reversing this decision would be to the benefit of Ontario taxpayers and Ontarians in need of housing, for the Province can deliver these programs more effectively and efficiently than municipalities can.

Anticipating climate change

Since municipalities own so much of Ontario’s infrastructure, it follows that municipalities will bear the brunt of the impact of climate change on this infrastructure, which will intensify in future years. We have already seen pressure from flooding and from drought which our existing infrastructure is barely able, or even unable, to cope with, but greater extremes will follow. Southern Ontario currently receives 8 days per year where the temperature exceeds 30 degrees Celsius; by 2050, if current trends continue, those days will number 41. Not only do hot days mean greater demand for electricity, for example, but they also sap the ability of the grid to deliver power. According to a 2016 study published in Environmental Research Letters, by 2040-2060, rising air temperatures may reduce summertime transmission capacity by 1.9%-5.8%, on average, relative to a 1990-2010 reference period.

Municipalities are severely challenged even to maintain their infrastructure, however, let alone to retrofit or build new infrastructure that can meet this challenge. It is not in the power of our province alone to noticeably affect the pace of climate change. We must hope that the governments of the world can achieve this, but in Ontario, we must plan and budget for the impacts of change should they fail to do so.

These impacts will be increasingly felt by businesses. They are already being felt acutely in the financial services sector. The Insurance Bureau of Canada has reported many costly extreme weather events in Ontario, such as the two winter storms in February 2019 that collectively cost $118 million in insured damages. In 2018, insured losses from severe weather events across Canada totalled $1.9 billion, the fourth-highest amount of losses on record. Damage from extreme weather events is likely underreported as these figures do not include uninsured damages, damage from events totalling less than $25 million, or opportunity costs. The causal link between climate change and extreme weather is well-established in the scientific literature.

The single largest cause of damage is flooding, which obviously curtails or entirely stops business activity in affected areas. The same is true of power outages caused by summer brownouts or winter ice storms, of washed-out road and rail lines, and the other consequences of extreme weather. A lack of suitable infrastructure to mitigate the impact of these events exacerbates not only the impact of extreme weather on the insurance industry, but on all of Ontario’s businesses.

We therefore encourage the government to make more funding available for infrastructure projects that will mitigate the impact of climate change, and to assemble an inventory of such projects, along with their priority, in order to assign funding where it is most needed.

Youth unemployment

This government has made economic growth and job creation a priority, and rightfully so. The GNCC joins the Chamber of Commerce network across Ontario in applauding this focus on business growth and prosperity. However, we must remain mindful of the role of business in society: to create well-paid, stable, and meaningful work, to raise standards of living by offering more and better goods and services at lower prices, to facilitate trade, commerce, and interpersonal connections, and, overall, to make life richer, in every sense of the word, for Ontarians.

In this mosaic, there are a few spots where Ontario’s businesses could use the assistance of the Government of Ontario in delivering on this social vision. While unemployment has steadily fallen in Ontario for years, the outlook is not so rosy for Ontario’s youth, where unemployment rates in the double-digits persist. Twelve months ago, the unemployment rate for 15-24-year-olds was 12.3%, double the provincial average of 5.7%, and more than triple the rate for Ontarians aged 55 and older (3.9%). While young people have more difficulty finding work across Canada in general, it is worth noting that Ontario’s youth unemployment rate remains one of the highest in the country.

Employers face disincentives to hire young people. They are, by definition, less experienced and less workplace-proven than older workers. In order to balance this out, the government can offer positive incentives to hire young people. We have suggested, for example, that the Government of Canada offer a twelve-month Employment Insurance premium holiday for new, young employees hired permanently and full-time. The Government of Ontario could invest in similar programs that offer financial incentives for employers to hire young people. We suggest that such incentives be investigated and included in Budget 2020.

Public purchasing and procurement

The cost of inefficiency is something the private sector understands very well. We were pleased to hear this government’s commitment to finding and removing inefficiencies in the public sector, and we are continuously encouraged by the stream of announcements coming from this government regarding new efficiencies that have been found. One such announcement came from the Treasury Board and concerned greater bulk purchasing by the government to reduce costs.

Government purchasing represents a public-private sector partnership, and the private sector seeks assurances that Ontario’s firms, particularly small-to-medium-sized enterprises (SMEs), will be able to remain competitive in government purchasing and procurement. Ontario’s small businesses are fearful that they will not have the bandwidth to compete with large multi-nationals if provincial purchasing becomes predominantly or exclusively large-scale.

We suggest that Budget 2020 guarantee that a floor will be set for government purchases from small businesses in Ontario, and offer a commitment that the government will try to exceed this floor and offer strong opportunities to Ontario businesses, particularly SMEs, in government purchasing. We also recommend the implementation of regional procurement hubs which mandate public buyers to use a blended portfolio of national, provincial, and regional suppliers. The government must look upon public purchasing not only as an expenditure for the public sector, but as a driver of economic growth and social well-being.

Transfers of responsibility

Previous provincial governments have sometimes transferred some of their responsibilities to municipal governments, with either permanent or temporary funding streams attached, or no funding at all. However, this is not always to the advantage of the taxpayer or the citizen. This government is in the unfortunate position of having inherited a substantial public debt from predecessors that built it up over more than thirty years, but in seeking to pay down this debt, it should make every attempt to shield the taxpayer from its negative consequences.

It may be that some government programs and services currently offered by the provincial government would be better delivered by municipal governments, and vice-versa. We ask that transfers of responsibility only take place when that is clearly the case, and that Budget 2020 contain a commitment that transfers of responsibility shall only take place when the best evidence and research available suggests that such a transfer would result in a net savings to the taxpayer, in better service delivery, or both. There is only one taxpayer, and decreasing the financial burden on one level of government only to increase it even more on another does that taxpayer a disservice.

Ontario’s businesses do not want to feel the additional impact of cuts resulting in more challenges finding and retaining talent – already the foremost concern of Ontario’s businesses – or the sting of additional, heavy property tax levies to pay for them. We urge this government to take a holistic approach to transfers of responsibility and put the taxpayer first.

Supporting entrepreneurship

Entrepreneurship is tremendously important to Ontario. It is not only the businesses currently trading here that will drive our future growth, but businesses as-yet-unfounded, some of which will be in industries that do not even currently exist. Every business today, from the smallest solopreneur to the largest multinational corporation, was once a start-up. Every business stemmed from the idea of one person.

These ideas need to be nurtured before they can grow into the businesses that will power our economy and create jobs for Ontarians. They need advice, expertise, financial support, and more. Chambers of Commerce can provide some of these, but of greater importance are the Small Business Enterprise Centres. These centres provide tremendous assistance to new businesses from their conception onward.

The GNCC believes that the services offered by the Small Business Enterprise Centres are invaluable to small businesses and startups, and should not be discontinued. We therefore urge that the Government of Ontario continue to support the province’s small businesses by restoring funding in Budget 2020 to pre-2019 levels.

Public debt & red tape reduction

The GNCC realizes that the tremendous size of the public debt presents a significant constraint for government fiscal policy. The size of that debt, and the cost of servicing it, makes the delivery of existing government services more difficult, quite apart from the conception of new programs necessary to deal with population growth, climate change, and other pressures. As we have also said, we sympathize with this government’s difficult position in having to deal with a problem that was not of its making.

Nevertheless, that problem must be tackled, and this government has an opportunity to show more responsibility than its predecessors by actively confronting the debt problem. Debt that took decades to build up will take decades to pay down. While quick solutions are tempting, we urge the government to avoid any austerity measures or ‘shock therapy’ that will result in economic contraction and recession.

A response to the debt crisis must be long-term and measured, aiming at paying down our public debt with the least impact to citizens and businesses possible. It is our hope that this government will introduce a plan for a measured and sustainable return to balanced budgets, and then a longer-term plan to restore public indebtedness to more manageable levels.

Finally, I wish to congratulate your government for its efforts to reduce red tape and the regulatory burden facing Ontario’s businesses. We know that there is still much work to be done in this field. Our only request in this regard is that this work be continued.

 

Thank you for considering this submission. Please know that the GNCC is ready to assist in your mission to make Ontario more prosperous in whatever way we can.

Sincerely,

Mishka Balsom
President & CEO, GNCC