Nobody envies Toronto Mayor John Tory's latest challenge: making Toronto's $23 billion capital budget shortfall disappear. Any moderately informed observer understands that this will inevitably involve increased taxpayer pain. Among proposed measures Tory has suggested, is a new tax to fund transit and housing projects. Topping out at 2.5 per cent after five years, the property tax is intended to pump millions into a dedicated City Building Fund for infrastructure projects.
But there are ways of funding badly needed projects that are already at hand and don't involve squeezing the long-suffering taxpayer harder. Although it would take some political will, Toronto could realize millions in savings that would go a long way in addressing its budget shortfall.
Here's how. Change the way construction projects are tendered. Currently Toronto is required to tender infrastructure projects only to companies with ties to select unions. This means many well-respected companies aren't allowed to compete on construction work -- even if they're more experienced and can do the job at a lower price. This lack of competition is costly to Toronto taxpayers. According to research by the Cardus think tank, Toronto is paying anywhere from 20 to 30 per cent more than it should for construction projects. Apply that to the billions of dollars in work the city performs, and it translates into major savings to carry out needed repairs at Toronto Community Housing, or to go towards other projects that are tens of billions of dollars short.
A study published in the Journal of Construction Engineering and Management by Cornell professor Paul G. Carr concludes that competition is good for taxpayers. Carr notes that there is no credible evidence suggesting that less competition has any benefit whatsoever -- not lower prices and not better quality, especially when contractors must adhere to strict standards and regulations. Carr is crystal clear.
"On taxpayer funded construction projects, government officials should be doing all they can to find savings and increase competition. It is in the public interest."
Isn't it in the public's best interest for a city that prides itself on being open and competitive for business, to walk the walk? There's no good reason why millions in taxpayer dollars should be squandered each year, not just in Toronto but also in other major construction markets, including Hamilton and Waterloo, where select construction unions are allowed to shut out competition (both union and non-union) and monopolize projects at taxpayers' expense. The Association of Municipalities of Ontario, the Ontario Chamber of Commerce and the Large Urban Mayors' Caucus have urged the Ontario government to fix out-dated labour laws that stymie construction competition and drive up costs. Toronto could protect its taxpayers, by joining them.
As Toronto councillors go through another painful round of number crunching, and the city and province make their case for a generous federal infrastructure handout, let's be sure that we're getting maximum value for taxpayers by making those precious infrastructure dollars go further.
Paul de Jong is President of the Progressive Contractors Association of Canada (PCA)
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