There’s a better way to fix Toronto’s gaping budget deficit than by increasing property taxes, say economists, a city councillor and a labour leader.
Toronto could have saved an estimated $347 million in 2023 by opening up its bidding process for construction projects, according to a study by the think tank Cardus. Those savings would cover 87 per cent of the expected $399 million Toronto will raise this year through a 9.5 per cent property tax increase.
Toronto’s property tax hike has attracted considerable ire from city residents.
In 2019, Ontario passed Bill 66 which allowed municipalities to consider all qualified companies for public construction projects. Before this bill, firms in Ontario whose workers didn’t belong to certain trade unions were restricted from bidding on municipal infrastructure projects.
But there was a catch — Ontario municipalities could choose to maintain their exclusive arrangements with certain unions by opting out of a provision in the legislation.
“I think Doug Ford didn’t want to do anything that could lose him favour with those unions. But he was also feeling the pressure from free market advocates who wanted things opened up,” said Anthony Furey, a candidate in the 2023 mayoral race.
“The province could have written legislation such that it automatically came into effect in all municipalities. But they were playing their own form of politics by letting municipalities make the decision,” Furey said.
Some municipalities, such as Hamilton, Sault Ste. Marie and Waterloo, went forward with the open-bidding provisions of Bill 66, changing their status from construction employers to non-construction employers.
Those municipalities are now free to make deals with any construction company they deem qualified to fulfil a contract.
Toronto’s city manager, who oversees the city’s day-to-day operations, recommended to council in June 2019 that Toronto do the same. The manager’s report cited studies estimating there could be two to eight per cent in savings but declined to say for certain that savings would be found.
The city’s chief financial officer and treasurer reached the same conclusion as the city manager.
But council voted in favour of a motion to maintain the closed bidding framework.
“It’s rare that you see a wholesale departure from the city manager’s advice like that,” said Stephen Holyday, city councillor for Etobicoke Centre, who voted against the motion.
At the same meeting, council decided to further restrict bidding by granting the Laborers’ International Union of North America exclusive access to contracts in Toronto’s industrial, commercial and institutional construction sector.
“Very plainly, this [decision] was an example of city council supporting a special interest group [organized labour] instead of the citizens at large,” Holyday said.
The union could not be reached for comment.
Taxpayer funded projects
The Christian Labour Association of Canada — one of the unions restricted from accessing certain city contracts — has long advocated for an open bidding process.
In a report submitted to council, the Laborers’ International Union of North America claimed the Christian labour association and Cardus, a think tank based on Christian values, are “closely linked” but does not elaborate. Renze Nauta, a program director at Cardus, said in an emailed statement that the association and Cardus have no “institutional relationship” but they have worked on projects together.
“Toronto’s construction procurement policies punish the majority of construction workers for their choice of union and saddle taxpayers with significant and unnecessary costs,” said Ian DeWaard, the Christian labour association’s Ontario director.
“Equally competent workers and their employers are prevented from bidding on taxpayer funded projects,” said DeWaard.
But former city councillor Mike Layton, who voted in favour of opting out of Ontario’s Bill 66, didn’t believe alternative contractors would be suitable. Layton chose not to run in the 2022 municipal election.
“We don’t want to be skimping when it comes to making sure that the facilities we’re building for city use are anything but being done by the best,” Layton said at the executive committee hearing in June 2019.
In their report, the Laborers’ International Union said if Toronto walked away from its negotiated collective agreements it would be demonstrating an indifference to the unionized industry’s “superior health and safety performance.”
“I don’t want to be on council when we have to deal with a [safety] incident involving a non-unionized contractor,” Layton said.
But there are already many safety regulations in place for construction projects, both at the municipal and provincial level, says Nauta.
“I see this as a duplicate layer of regulation that is simply unnecessary,” he said.
Canadian Affairs sent multiple requests for comment to 10 city councillors who voted to maintain the closed bidding framework. None commented.
‘Antiquated system’
The Cardus report estimates Toronto awarded between $1.03 billion and $1.65 billion worth of construction contracts in 2023 to the industrial, commercial and institutional construction sector.
According to Nauta, the special access granted to certain unions is simply unfair.
“There exists an antiquated system whereby only a certain kind of company with a certain kind of unionized workforce is allowed to bid on these city construction projects,” he said.
“When you restrict competition and there are fewer companies bidding on something, the price, which is borne by the taxpayer, goes up.”
A City of Hamilton report in 2019 estimated the potential savings of an open bidding process for that municipality to be $7 million a year.
In the Region of Waterloo, 83 per cent of construction companies were unable to bid on municipal contracts before Ontario passed Bill 66, according to another Cardus study, published in 2021.
Two years after Waterloo opened its tendering process, the municipality received five times as many bids on construction projects as before, with the average bid 14 per cent lower, according to the study. This saved the region $24 million between 2019 and 2021.
But the amount of money Toronto would save is hard to estimate, the Cardus report says. The uncertainty stems from ambiguity surrounding which projects would be subject to closed bidding and a lack of access to the bids themselves.
In addition, “It would take time for the capacity of the local construction industry to bounce back after operating under a restricted tendering system for decades,” the study says.
“I have spoken with our [chief financial officer], who advised that, because of our fair wage policy, as well as the shortages of skilled labour, such a change would not produce any material savings. I suspect it would also trigger labour strife,” said Dianne Saxe, city councillor for University-Rosedale.
Toronto’s fair wage policy sets minimum wage standards for workers on city projects.
But Cardus isn’t arguing that savings would be found by cutting into workers’ paycheques, Nauta says.
“The savings would come from greater competition. More companies in the market competing for the same number of projects will lead companies to find more efficiencies.”
