As cities across Ontario finalize their budgets and try to squeeze out savings to expand public transit, something doesn't add up. Too many cities, including Toronto, are missing out on hundreds of millions in savings. That's because Ontario has a labour law loophole that's putting cities, companies and taxpayers at a huge disadvantage.
The heated debate over road tolls in Toronto has distracted from a far simpler way of saving for public transit expansion. Here it is: Change the way construction projects are tendered. Right now, Toronto and too many other municipalities including Hamilton, Sault Ste. Marie and the Region of Waterloo are forced to award construction work to contractors affiliated with select unions only. No other contractors are allowed to compete, even if they're better qualified, can do the work more efficiently and at a lower cost.
A loophole in Ontario's Labour Relations Act forces these municipalities to pay a premium for construction work by restricting competition. Each year, up to a billion dollars worth of construction work is subject to labour monopolies. As a result, taxpayers are not getting good value, and infrastructure dollars aren't going as far as they should. Ontario is the only province in all of Canada where municipalities are treated as "construction employers" and automatically bound to pre-existing collective agreements with no ability to negotiate the terms.
If Toronto had an open bidding process, there would be no need to bring in road tolls.
There's a compelling and mounting body of evidence that demonstrates the costly consequences of limiting construction competition. Research by the Cardus think tank shows that in those municipalities where construction tendering is restricted, project costs are inflated by 20 to 30 per cent. Apply that to the $600 million worth of work Toronto performs annually (and isn't allowed to openly tender) and it translates into major savings that could go a long way in expanding transit or addressing the backlog of needed repairs at Toronto Community Housing.
Here's another way to look at it: If Toronto had an open bidding process, there would be no need to bring in road tolls. That's right. The city could save about the same amount of revenue it hoped to collect through tolls by tendering construction work in a fairer way.
This begs the question -- shouldn't open tendering be an obvious choice as Toronto looks for savings to fund transit and other infrastructure projects? After all, Mayor Tory vowed that "all options" would be considered and City Manager Peter Wallace has said, "We need to demonstrate that we're investing [Torontonians'] hard-earned tax dollars properly."
Toronto could prove that it's willing to do right by taxpayers by teaming up with the Association of Municipalities of Ontario, the Large Urban Mayors' Caucus, the Ontario Good Roads Association and the Ontario Chamber of Commerce. They've all urged the Ontario government to fix its antiquated labour laws.
"Restricted tendering increases project costs, harms local economic development and prevents the public from getting the best value for its tax dollars," said Gary McNamara, past president of AMO in a letter to Ontario's labour minister.
At every opportunity, the Ontario Chamber of Commerce has asked the province to amend Section 126 of Ontario's Labour Relations Act.
"The current system has created monopolies in some of the province's largest municipalities," said the OCC in a submission to the Ontario government back in 2015. It went on to say, "... this system stifles competition and often results in unnecessarily high infrastructure costs."
To help stimulate Canada's sluggish economy, the federal government is planning the biggest infrastructure spend in the country's history. It's committed to investing almost $125 billion over the next decade. "Every dollar we spend on public infrastructure grows our economy, creates jobs and strengthens our cities and towns," according to Prime Minister Justin Trudeau.
This should not sit well with taxpayers.
One issue is that when these infrastructure dollars start flowing, they won't go nearly as far in Toronto, Hamilton, Sault St. Marie or the Region of Waterloo. For every infrastructure dollar spent elsewhere in Canada, it translates into about 70 cents in these municipalities. This should not sit well with taxpayers.
There is a way for Canada's largest city to find the savings it needs and champion a worthy cause. Toronto has an opportunity to push for a small legislative change that could make a big difference to municipalities and taxpayers across Ontario.
This blog first appeared in this month's issue of Business Elite Canada magazine.
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