March 28, 2006

The Bottom Line

‘Infrastructure budget’ good news

DON PROCTER

correspondent

The Ontario provincial budget announced Thursday reads like a pre-election run-up, with a number of major spending goodies earmarked for the construction industry.

David Frame, president of the Council of Ontario Construction Associations, called it the “strongest infrastructure budget in a generation.”

“(The budget) is the strongest infrastructure budget in a generation.”

David Frame - President, COCA

Frame was particularly pleased with the announcement of the $1.2 billion Move Ontario initiative to support public transit, roads and bridges. It includes $400 million for roads and bridges and another $670 million on Toronto’s subway extension to York University and the Vaughan Corporate Centre at Hwy 7.

The budget, announced by Finance Minister Dwight Duncan Thursday, results in “a very healthy increase in spending,” said John Clinkard, contributing economist for Reed Construction Data.

While revenues for the fiscal year just ending increased by nearly eight per cent, spending will skyrocket to almost nine per cent.

“This is a government that really hasn’t kept its hands in its pockets,” said Clinkard.

Also noteworthy in the budget is $1.9 billion funding for health care, more money for education and a reduction in capital tax, Clinkard said.

On the negative side, he said, the province’s deficit will rise to about $2.4 billion in 2006/07, up from $1.4 billion in 2005/06.

“I’m a bit concerned that they haven’t made a more concrete effort to eliminate the deficit and there is no personal or corporate tax relief. If you want to attract investment to the province, this isn’t the way to do it. We have a pretty high tax environment when compared to Alberta.”

However, the McGuinty government promised to eliminate the deficit by 2007/08 and possibly before that if they don’t dip into the contingency fund.

“I think they could have eliminated it this year had they been less redistributive,” said Clinkard.

Patrick Dillon, business manager of the Building & Construction Trades Council of Ontario, said even though the deficit is up, the government is “heading in the right direction” with a target elimination set for the next fiscal year.

Dillon said he’s pleased with McGuinty’s commitment to roads infrastructure.

“It will put lots of construction workers to work, which will have positive spin-off effects.”

However, he is disappointed that there was no mention in the budget of tackling the underground economy.

“I think it is inexcusable for any stripe of government not to tackle the underground economy.”

COCA’s Doug DeRabbie, vice-president of policy and government relations, said while COCA is also disappointed that the underground economy wasn’t addressed, government officials have indicated a commitment to work with industry to combat the problem.

The budget got a thumbs-up from the Toronto Construction Association.

“Overall, we’re very pleased with the budget,” said president John Mollenhauer. “The government appears to have a continuing commitment to badly needed funding for infrastructure, which we view as great news.”

He said “the most exciting piece” of news is creation of Move Ontario.

Like COCA, Mollenhauer was disappointed that no public commitment was made in the budget speech to address the underground economy, which he said is “a big issue” in the industry.