Ensuring Ontario’s Economic Potential

8/2/2019 Ensuring Ontarios Economic Potential

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Ensuring Ontarios Economic Potential

prepared by

The Centre for Spatial Economics

prepared forThe Urban Development Institute/Ontario

February 2006

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Ensuring Ontarios Economic Potential: Recommendations

This report examines possible policy barriers to the achievement of Ontarios economic growth potential

over the next several decades. It was prepared at the request of theUrban Development Institute /Ontario

by the Centre for Spatial Economics. The report includes twenty recommendations aimed at keepingOntario on track to achieve its potential. The recommendations are listed below.

Recommendation 1

The federal government should earmark a fixed percentage of the personal income tax

revenues it collects from residents in the Golden Horseshoe for strategic transportation

infrastructure project investments in the Golden Horseshoe.

Recommendation 2

The federal and provincial governments should jointly pledge to eliminate Ontarios estimated

$100 billion infrastructure deficit within the next ten years and should implement the tax and

regulatory changes that are required in order to achieve this goal.

Recommendation 3

The federal and provincial governments should move quickly and deliberately to establish the

legal and regulatory framework required to make Alternative Financing Procurement a

feasible alternative to the conventional methods of financing, constructing and operating

public infrastructure.

Recommendation 4

The province should clearly articulate which transportation and other infrastructure projects

are covered in the 2005-2010 time frame and when and how those projects will be approved,

financed and constructed. The Mid-Peninsula Corridor, the eastward extension of the 407,the dedicated truck route through Windsor, the expanded border capacity in Niagara, the

proposed extensions to the GO system and the expansion of the TTC should be identified as

immediate priorities.

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Recommendation 5

The federal and provincial governments should move quickly and deliberately to reform the

environmental assessment process prior to the announcement of specific infrastructure

projects, to facilitate investor interest.

Recommendation 6

The province needs to make decisions quickly regarding Ontarios future electricity supply to

assure domestic and international investors of the long-term advantages of locating and

expanding their businesses in Ontario.

Recommendation 7

The province should redefine the Greater Golden Horseshoe to include only those cities,

regions and counties containing municipalities that form a part of the metropolitan areas of

Oshawa, Toronto, Hamilton, St. Catharines-Niagara, Brantford, Guelph, Kitchener and

Barrie.

Recommendation 8

The province should release, for review, the technical background papers that underlie their

population projections.

Recommendation 9

Upon the release of the 2006 Census data, prior to approving municipal Official Plans that

have been revised to conform to the growth plan, the province should update its population,

dwelling and employment projections to reflect the Census results.

Recommendation 10

The Agricultural and Rural Area south of the Greenbelt Area, and more precisely within the

GTAH, should, through municipal Official Plan conformity exercises, be identified as

Designated Greenfield Area to accommodate the projected population and employment

growth. As well, it should be recognized that some of the Agricultural and Rural Area north

and west of the Greenbelt will also likely be required for future urban growth before 2031.

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Recommendation 11

The province needs to reconsider its targeted shares for housing by structural type in the

Golden Horseshoe and bring them into line with the preferences of the people employers are

seeking to attract over the next several decades.

Recommendation 12

Considering the complexity and diversity of the employment sector within/across the Golden

Horseshoe, the 2:1 persons to jobs ratio may not be achievable in certain municipalities. A

further analysis informed by local market realities resulting in a more flexible target should be

undertaken.

Recommendation 13

The province needs to reconsider its forecasts for employment by land-use type and should

undertake further analysis of future employment by industry in the Golden Horseshoe based

on detailed information regarding the significant differences in land requirements across

industries and over time. This analysis should be carried out in conjunction with the sub-area

regional economic assessment to guide planning for employment.

Recommendation 14

A more thorough assessment of both residential and non-residential land requirements

throughout the Golden Horseshoe is needed. Future residential land requirements should

better reflect consumer preferences. Future employment land requirements should be based

on detailed projections of employment by industry and on an assessment of likely future

changes in land requirements per employee by industry. As part of this exercise the province

should release the technical background material underlying the proposed targets for review.

Recommendation 15

If the province decides to pursue immigration to fill current and expected skilled labour

shortages it will need to work closely and cooperatively with the federal government to develop

an appropriate immigration policy to fulfill its needs in the short and long-term.

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Recommendation 16

Where immigration is an option in meeting the skills Ontario will require in the future, the

province needs to facilitate the recognition of the qualifications of these new Canadians.

Recommendation 17

Where local development is an option in meeting the skills Ontario will require in the future,

the province needs to better counsel students regarding the opportunities and advantages of

the occupations expected to be required in the future.

Recommendation 18

The federal government needs to adjust the Kyoto targets and implement a realistic program

that reinforces the incentives being provided by the market place combined with incentives to

encourage energy conservation.

Recommendation 19

The provinces plans for transit infrastructure within the Golden Horseshoe should focus on

the provision of rapid transit links (including bus, light and heavy rail) among the urban

growth centres, providing adequate parking opportunities for commuters at strategic transit

nodes, rather than on the provision of door-to-door transit service in local neighbourhoods.

Recommendation 20

The province needs to take a proactive stance with respect to the Golden Horseshoes

requirements for additional airport facilities over the next quarter century. In collaboration

with the federal government, the province should develop an airport location strategy that

helps to direct people and businesses to the regions within the Golden Horseshoe designated

for future growth to ensure ready access and minimize traffic congestion.

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Table of Contents

Section Topic Page

Section 1 Introduction 1

Ontarios Growth Potential 1

Canadas Potential is Linked to Ontario 2

Ontarios Potential is Linked to the Golden Horseshoe 4

Major Challenges on the Horizon 6

Necessary Conditions for Growth in Ontario 8

Section 2 Current Policies Supporting Ontarios Economic Potential 8

Background 8

Monetary, Fiscal and Trade Policies 9

Transportation Panning 9

Immigration 10

Post-Secondary Education 11

Conclusion 11

Section 3 Current Policies Threatening Ontarios Economic Potential 11

Background 11

Federal-Provincial Revenue Sharing 12

Infrastructure Funding 14

Infrastructure Timing 16

Electricity Supply 17Defining the Greater Golden Horseshoe 18

The Population Projections 22

The Preservation of Agricultural Lands 25

Residential Requirements 30

Employment Lands 38

Land Supply 40

Skilled Labour 41

Environmental Policies 42

Transit 43

Airports 44

Section 4 A Final Word 47

Appendix A Growth Trends in the Golden Horseshoe

Appendix B Implications of the Aging of the Baby Boomers

Appendix C Growth Trends in the External Trading Environment

Appendix D The Macro-Economic Environment

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List of Figures

Figure Subject Page

1 The Federal Governments Net Fiscal Position With Respect to Ontario 3

2 Population of Ontario and the Golden Horseshoe 5

3 Ontarios Standard of Living 6

4 Ontarios Population by Single-Year Age Group 7

5 The Golden Horseshoe as Eight Metropolitan Areas 19

6 Population of the Golden Horseshoe by Census Division 21

7 Comparison of Greater Golden Horseshoe Population Projections 23

8 Population of the Greater Golden Horseshoe by Five-Year Age Group Comparison 24

9 Population and Farm Acreage Shares in Ontario 26

10 Change in Farm Acreage in Ontario by Area 27

11 Farm Acreage and Population in Ontario by Census Division 28

12 Dwelling Proportion for Single Homes by Age by CMA in the Golden Horseshoe 30

13 Dwelling Stock by Structural Type by CMA in the Golden Horseshoe 31

14 GTA and Hamilton Percent Share of Householders 65 and Over Preferring Single 33

15 Dwelling Requirements by Type in the Golden Horseshoe 34

16 Dwelling Type Preferences by Major Criteria 36

17 Net Migration from GTA to Outlying Areas 37

18 Number of Renter Households Who Can Afford to Buy 37

19 Employment by Industry in Ontario 39

20Province of Ontario Population Projections

45

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Ensuring Ontarios Economic Potential

Section 1: Introduction

This report examines possible policy barriers to the achievement of Ontarios economic growth

potential over the next several decades. It was prepared at the request of the Urban Development

Institute /Ontario by the Centre for Spatial Economics.

This report has 3 key goals:

1. To identify the conditions necessary for Ontario to reach its economic potential over the

next several decades and the policies that influence those conditions.

2. To identify the policies that threaten Ontarios achievement of these necessary

conditions.

3. To provide recommendations aimed at keeping Ontario on track to achieve its potential.

Ontarios Growth Potential

In recent reports1 we have noted that Ontarios economy has enormous growth potential:

Ontario accounts for a disproportionate share of the countrys most rapidly expanding

industries. Ontarios economy is the most diversified in the country.

Ontarios labour market is educated, mobile and flexible.

Ontarios share of persons 25 - 64 years of age holding a university degree is the highest

in the country.

Ontario has an above average post-secondary school enrolment rate resulting in high

productivity levels and high income levels.

These high incomes attract job seekers from other provinces and countries, boosting

Ontarios population and Gross Domestic Product (GDP) growth.

The Golden Horseshoes close proximity to the US has contributed to the heavy

concentration of the provinces people and productive capacity in the area.

1See C4SE Ontario Outlook Fall 2005, the Centre for Spatial Economics, and Key Forces Shaping the Economic Geography of

Ontario to 2025by Tom McCormack in Ontario Toward 2025: Assessing Ontarios Long Term Outlook, Ontario Ministry of Finance,September 2005.

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The Golden Horseshoe is well located to service this huge and rapidly expanding US

market, contributing enormously to Ontarios economic growth potential.

The Centre for Spatial Economics projects that, as a result of these and other attributes, Ontarios

economy will grow at an average annual rate of 3.2 percent in real terms over the next decade,

well ahead of the projected national average of 2.9 percent. Among the remaining nine

provinces only Alberta will manage to achieve a similar rate. Our longer-term projections

foresee Ontario sustaining an average growth rate above the national average through to the

middle of the century.

The positive future for Ontario suggested by our projections is by no means inevitable. If

Ontario is to reach its potential of higher than average growth and rising living standards, manypolicy-related concerns must first be addressed. The objective of this report is to identify the

conditions necessary for Ontario to reach its potential, to draw attention to those policies which

support and those policies that threaten these necessary conditions, and to recommend policy

changes that will improve Ontarios chances of realizing its promise.

Canadas Potential is Linked to Ontario

Economic growth in Ontario benefits the rest of Canada. In 2004, although Ontario accounted

for only 38.8 percent of Canadas population, it accounted for 39.6 percent of its jobs, 41.6

percent of its GDP and 43.7 percent of the federal governments revenues, yet it received only

33.2 percent of the federal governments expenditures.2 As a result, in 2004 the federal

government ran a considerable surplusin relation to Ontario, collecting $27 billion more in

revenues from Ontarios citizens and businesses than it spent on them, or an average of $2,166

per person. In sharp contrast, in the same year, the federal government ran a net deficit with the

rest of Canada, totaling $12 billion. Absent Ontarios contribution, the federal surplus of $15

billion would not have occurred.3

2Calculations by the Centre for Spatial Economics based on Provincial Economic Accounts data from Statistics Canada.

3Estimated Net Financial Flows Between the City of Toronto and the Federal and Provincial Governments, May 2005, Centre for

Spatial Economics. Statistics Canada Provincial Economic Accounts data, available only through to 2002, reveal that Alberta andBritish Columbia are also net contributors to the federal governments fiscal position. From 1998 - 2002 Albertas average annualnet contribution averaged $7.4 billion per year, British Columbias $2.7 billion and Ontarios $24.4 billion. The federal surplusaveraged $11.9 billion per year over the same period, leaving the federal net position with respect to the remaining 7 provinces and3 territories averaging $22.6 billion per year.

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Ontarios contribution to the rest of Canada in 2004 is nothing new, over the last quarter century

the federal government spent more on Ontario then it collected in revenue from Ontario citizens

and businesses on only two occasions; during the recession of the early 1980s (1982 -1985) and

the recession of the early 1990s (1993) (Figure 1). Over the last eight years Ontarios net

contribution to the federal treasury has averaged $24 billion per year.

In other words, the federal government has tapped into Ontarios prosperity in a significant way

over time to raise the living standards elsewhere in Canada, to levels that could otherwise not be

supported by the employment and productivity levels prevailing in the majority of those

provinces.

Figure 1

The Federal Governments Net Fiscal Position With Respect to OntarioBillions of Dollars from 1981 to 2004

urce: Statistics Canada and the Centre for Spatial Economics

-5

0

5

10

15

20

25

30

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Billions of Dollars

Years

So

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A key mandate of the Canadian government is to attempt to equalize the nations wealth among

its provinces and territories through the redistribution of tax revenues. We suggest that, in view

of the Canadian governments dependence on Ontario to fulfill that role, the federal government

needs to do more to ensure that Ontario reaches its economic potential in the decades ahead.

Ontarios Potential is Linked to the Golden Horseshoe

Economic growth occurs in two ways: through increasing the quantity of inputs used in the

production process4 and/or through increasing the quantity of output obtained per unit of input

(productivity growth5). Ontarios economy has grown in the past both because the inputs have

grown and productivity has grown. Productivity growth is important because it manifests itself

over time through rising real incomes per worker and per business owner. Productivity growth,

in other words, provides the wherewithal for society to increase its standard of living.

One of the many ways that societies achieve productivity growth is through agglomeration.

Metropolitan areas exist because of the enormous efficiencies they afford: businesses can access

suppliers and skill sets more easily, as well as market and distribute their products and services

in a more cost effective manner; consumers can more readily obtain the products and services

they want; and governments can provide public services in a more efficient and cost effective

manner.

When metropolitan areas reach a critical mass they are able to support even higher levels of

private and public offerings (regional shopping centres, performing arts venues, major league

sports teams, etc.). As a result, the standard of living provided in a metropolitan area is

significantly greater than that provided in smaller communities.

Metropolitan areas are the natural outcome of societies constantly striving for a better standard of

living. Urban areas attract people pursuing higher paying jobs, and businesses seeking bigger

markets and a larger pool of suppliers and employees.

To state the obvious, urban growth attracts more urban growth.

4Land, labour and capital.

5Through the use of more and better technology, educated workers, organizational structures and management practices, etc.

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This kind of self-reinforcing behavior has been at work in Ontarios Golden Horseshoe for some

time (Figure 2) and is fundamental to the continued achievement of Ontarios economic

potential. Three decades ago the Golden Horseshoe accounted for 57 percent of Ontarios

population; today it accounts for 64 percent; by 2031 it will account for 69 percent. These gains

reflect the fact that 80 to 90 percent of the growth occurring in Ontario now and into the future is

concentrated in the Golden Horseshoe.

Figure 2

Population of Ontario and the Golden Horseshoe 1976 to 2031

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031

55.0

57.0

59.0

61.0

63.0

65.0

67.0

69.0

71.0

73.0

Ontario Population (Left Scale)

Golden Horseshoe Population (Left Scale)

GH Population as % Share of Ontario Population (Right Scale)

Years

Population % Share

Source: Statistics Canada and the Centre for Spatial Economics

This relentless drive toward agglomeration along with the use of better skilled workers, moresophisticated equipment and advanced management practices have combined to raise the

standard of living in Ontario over the last quarter century by more than 40 percent. And,

provided we meet the various conditions described in this report, our projections suggest our

standard of living could grow by another 60 percent by 2031 (Figure 3).

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Figure 3

Ontarios Standard of Living

Gross Provincial Product per Person in Constant 2004 Dollars

ource: Statistics Canada and the Centre for Spatial Economics

ajor Challenges on the Horizon

entury Canada and Ontario face the many opportunities and

et the biggest test to be faced by Canada and Ontario in the coming decades, an aging

d social

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031

Constant 2004 dollars per person

Years

History

Projected by C4SE

S

M

Over the course of the next quarter c

threats posed by the continued expansion of global trade, and specifically by the industrialization

of the underdeveloped nations of the world. If Ontario is to continue to prosper it will need to

not only sustain, but also enhance, its competitive position in the global arena, no small test as

the spread of prosperity worldwide will result in an increase in the number of competitors.

Y

population, is homegrown. Between now and 2031 Canada must absorb the economic an

impacts of the retirement of the largest cohort, the aptly named Baby Boom Generation

(Boomers).

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Today, the Boomers (40-60 year olds) are for the most part fully engaged in economic and social

igure 4

Population by Single-Year Age Group in 2006 and 2031

The Centre for Spatial Economics

y 2025 the number of people 65 and over will exceed the number of persons under 20 for the

,

activities, and are in their peak earning power and spending years. In 2011, however, the oldest

of the Boomers will reach 65, by 2031 the entire cohort will be 65 and over. The demographic

shift projected to occur between 2006 and 2031 will result in an increase of 1.7 million persons

65 plus (Figure 4).

F

Ontarios

Age

0

50,000

100,000

150,000

200,000

250,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+

2006

2031

Number of people

300,000

Age

Source:

B

first time ever. Over the succeeding quarter century the generational gap will grow significantly

even if immigration levels are increased considerably (as we expect they will be). The aging of

the Baby Boom generation is a major policy concern as public spending per capita on persons

over 65 substantially exceeds such spending on persons under 20.6

6Appendix B contains background information with respect to the impacts of the aging of the Baby Boomers.

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Necessary Conditions for Growth in Ontario

for Ontario to reach its potential economic

arios achievement of its economic

2. vernment policies that threaten Ontarios achievement of its potential,

These c achievement are described in

ection 2: Current Policies Supporting Ontarios Economic Potential

ackground

omic growth over the last quarter century can for the most part be attributed to its

de. The

al

o long as Ontario retains its competitive edge, international trade can be expected to continue to

at

In this report the variety of conditions required

growth rate has been organized into two categories:

1. Current government policies that support Ont

potential.

Current go

including suggested remedies to get Ontario back on track.

onditions for economic success and policies related to their

separate sections of this report.

S

B

Ontarios econ

penetration of foreign markets, especially those of the United States. During the 1980s exports

accounted for 31.0 percent of Ontarios real GDP. That share skyrocketed to 41.2 percent during

the 1990s as a result of the Free Trade Agreement and the North American Free Trade

Agreement, and has increased even further to an average of 49.3 percent so far this deca

gains that Ontario made in penetrating these foreign markets propelled its growth over this

period. For example, between 1981 and 2004 the Ontario economy grew at an average annu

rate of 3.1 percent, in real terms, but exports grew at an annual rate of 7.0 percent.7

S

drive Ontarios prosperity in the future. The market for Ontarios exports is likely to remain

positive for the foreseeable future as the U.S. economy is forecast to continue to grow, though

a gradually decelerating rate, and China is expected to be a major economic force in the further

expansion of world trade in the coming decades.

7Calculations by the Centre for Spatial Economics based on Provincial Economic Accounts data from Statistics Canada.

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The emergence of China on the world scene contains both advantages and disadvantages for

Ontario. On the positive side, China is a fast growing market that the industrialized world,

including Ontario, can continue to export to. On the negative side, China is a major competitor

to all industrialized nations.8

The long-term continuation of growth in world trade bodes well for Ontario. However, a number

of conditions must be met if Ontario is to capture its share of these expanding world markets.

Monetary, Fiscal and Trade Policies

In our view no changes need to be made to Canadas macro-economic and trade policies to

ensure that Ontario reaches its economic potential. Canadas monetary, fiscal and trade policies

are positioned to sustain a low rate of inflation and balanced budgets over the long term, whilefurther improving on the establishment of competitive tax rates and liberalized trading

relationships.9

Transportation Planning

Ontarios transportation links to the rest of the world must be expanded, particularly to the US, if

Ontario is to reach its potential. To this end, the provinces growth management plan, Places to

Grow: Better Choices, Brighter Future: Proposed Growth Plan for the Greater Golden

Horseshoe,November 2005 (Places to Grow) represents an important sea change in policy

direction. In half a century, no other provincial government has exhibited the political will to:

1. Step forward and accord so much attention to one geographic area of the province, the

Greater Golden Horseshoe (GGH).

2. Recognize the critical importance of the GGH to the well being of the entire province.

3. Identify the critical link between the transportation system throughout the GGH and the

provinces future prosperity.

4. Assume the leadership position regarding transportation planning in concert with

population and employment growth and land use planning, throughout the GGH.

8Appendix C reviews growth trends in the external trading environment in greater detail.

9Appendix D reviews the macro-economic policy environment in greater detail.

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We commend the province for assuming this leadership role. Without the strong planning

commitment to the Golden Horseshoe made by the province through Places to Grow we believe

Ontarios future prosperity would be jeopardized. We support the provinces key goals as

expressed through Places to Grow and later in this report offer further input and

recommendations to assist the province in reaching those goals.

Immigration

If Ontario is to capture its share of expanding world markets and reach its economic potential it

will need to fill hundreds of thousands of new jobs over the next several decades. As the

Boomers retire and the age structure changes, Ontarios ability to attract immigrants will become

increasingly important as a source for skilled workers. Canadas current immigration policy

stance recognizes this need.

We do, however, question recent speculation by the federal government suggesting the current

immigration rate of 240,000 per year must increase in the next five years to 300,000. We believe

the current 240,000 per year pace is appropriate for at least the next decade, that a pace of

300,000 per year will not be required until the Baby Boom retirement is in full swing.10

Nevertheless, we applaud the federal government for recognizing that higher immigration in the

years ahead is a necessary condition for the achievement of Canadas and Ontarios economic

potential.

The assimilation of new Canadians into society poses major challenges in terms of skills

identification, language training, skills enhancement, the provision of new housing, etc., issues

that require attention from both the federal and provincial governments. We are encouraged by

the fact that both levels of government understand the critical role immigration must play in the

achievement of Ontarios economic potential. In later sections of this report we address specific

immigration policy implementation issues that need improvement, including cooperation

between the two levels of government and the recognition of foreign credentials.

10Indeed, we see the need for an immigration pace exceeding 300,000 per year by 2016, increasing to above 350,000 per year

during the 2020s. See Appendix B for more details.

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Post-Secondary Education

The jobs that will be created over the next decade will require ever more complex skill sets. The

Institute for Competitiveness and Prosperity recently drew attention to the fact that, compared to

a peer group of sixteen states and provinces, Ontario has fewer workers with university degrees

and produces fewer graduate degrees, and this deficit is especially pronounced among the

managerial levels of our businesses.11

The Ontario budget of May 2005 recognized the need to close this gap and included significant

new spending for capital and operational funding for post secondary education. We encourage

the province to maintain its focus on post secondary education and to increase funding further in

the future.

Conclusion

We conclude that the current stance being taken by the federal and provincial governments with

respect to monetary, fiscal, trade, immigration, and post-secondary education policies is

appropriate. In all of these areas the current position, if pursued into the future, will support

Ontarios achievement of its economic potential.

Section 3: Current Policies Threatening Ontarios Economic Potential

Background

The previous section of this report identified government policies that support the conditions

essential to the achievement of Ontarios economic potential. This section examines current

policies that threaten the conditions essential to Ontarios future success.

This section is organized around several themes, including discussion and recommendations

regarding: federal-provincial revenue sharing, infrastructure funding, the timing of infrastructure

delivery, land use, electric power generation and skills development.

11See Balancing Priorities for Prosperity, The Institute for Competitiveness and Prosperity, November 2005.

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Federal-Provincial Revenue Sharing

We noted previously that the federal government ran a huge surplus in 2004, thanks to Ontario,

collecting $27 billion more from its people and businesses than it spent on them. This is only part

of the story (Figure 1).

According to research we conducted in 2002 the federal governments surplus in the year 2000

totaled $19.4 billion. The federal governments net fiscal position with respect to the City of

Toronto alone, however, was a surplus of $8.0 billion12 and its net surplus with the four GTA

regions of Durham, York, Peel and Halton totaled $9.1 billion13. In other words, in 2000 the

federal government generated a surplus of $17.1 billion in 2000 with respect to the GTA and

$2.3 billion with respect to the rest of Canada.14

Our research at that time also shows that, over

the period from 1981 to 2000, the federal government never once generated a deficit with respectto either the City of Toronto or the four suburban GTA regions, not even during those years in

which it was running deficits on a country-wide basis in the $30 to $40 billion range.15

A review of the detailed calculations carried out in connection with that reveals that the

progressive nature of Canadas personal taxation system, coupled with the Employment

Insurance program, account for most of the GTAs unique net surplus with respect to the federal

government. The GTA has the highest average personal incomes in Canada and relatively low

unemployment rates, and accounts for 18 percent of Canadas population and jobs. In other

words, within Canada the GTA is relatively big and it very well off. Nevertheless, because the

federal government depends so heavily on the GTA for so much of its spending in the rest of

Canada, it seems reasonable to expect it might have done more over the decades to ensure the

GTAs long term survival.

12See the report we prepared for the Toronto Board of Trade entitled Estimated Net Financial Flows Between the City of Toronto

and the Federal and Provincial Governmentsin January 2002.13

Based on our research for the Toronto Board of Trade in January 2002 but not published.

14In a just completed update to that research for the Toronto Board of Trade we found that the federal government ran a surplus

with respect to the people and businesses of the City of Toronto equal to a revised $7.8 billion in 2000 (slightly lower than our earlier$8.0 billion estimate due to data revisions from Statistics Canada), $6.9 billion in 2001, $5.8 billion in 2002, $5.7 billion in 2003 and$6.7 billion in 2004. Estimates for the GTA suburban regions were not updated at this time but would no doubt show a similarpersistent positive net position over the same period.

15If interest payments on the federal debt paid to people and businesses in the GTA over that period are removed from the

estimates of the amount spent by the federal government on the GTA (since the GTA did not generate the debt in the first placeshould interest paid on it to the people of the GTA be considered a benefit to them?) the net federal fiscal surplus position with theGTA increases to significantly more than the figures cited here.

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In that connection, the federal budget of 2005 included measures to share 1.5 cents per litre of its

gasoline tax with Canadian municipalities for public transit and other infrastructure projects in

2005 (generating a total of approximately $600 million in 2005, growing to $2 billion by 2010).

We suggest that this program is flawed in two key ways:

1. The revenues are allocated to municipalities on a per capita basis (so the GTA, the engine

of growth for Ontario and Canada, will get the same amount of money per person as

those municipalities where jobs and population are stagnant or in decline).

2. The revenues are dependent on the volume of gasoline consumed, which will likely

decline in the future.

The federal government has a strong vested interest in the future success of the Golden

Horseshoe. To reach its potential the Golden Horseshoe needs investment in transportationinfrastructure that keeps pace with population and job growth. Rather than the proposed

approach (a per capita allocation based on overall gasoline consumption) we suggest a better

method would have the federal government earmark a fixed percentage of the personal income

taxes it collects from the residents of the Golden Horseshoe for investment in Golden Horseshoe

transportation infrastructure. The strength of this approach is that the infrastructure spending it

generates would directly reflect the growth occurring in that area.

In 2002, had the federal government taken 10 percent of the revenues it received from the

personal income taxes it collected from the residents of the Golden Horseshoe and earmarked

them for transportation infrastructure in the area, the amount of funding involved would have

totaled $2.6 billion. Despite that large amount the federal government would still have received

$17.5 billion more from the people and businesses of Ontario than they spent on them in 2002

(instead of the $22.1 billion net surplus position that was recorded for Ontario relative to the

federal government that year). If the federal government was to implement such a policy vis--

vis the Golden Horseshoe, if the province was to match that amount in infrastructure funding,

and if, in turn, the $5.2 billion of federal and provincial government infrastructure funding was to

be leveraged into an equal amount of private sector infrastructure funding, the estimated $100

billion infrastructure deficit in the province at this time16 could be eliminated within a decade.

16See ReNew Ontario 2005-2010, page 2.

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Recommendation 1

The federal government should earmark a fixed percentage of the personal income tax

revenues it collects from residents in the Golden Horseshoe for strategic transportation

infrastructure project investments in the Golden Horseshoe.

Recommendation 2

The federal and provincial governments should jointly pledge to eliminate Ontarios estimated

$100 billion infrastructure deficit within the next ten years and should implement the tax and

regulatory changes that are required in order to achieve this goal.

Infrastructure Funding

In the past, the federal and provincial governments have dealt with infrastructure funding in a

variety of ways. Our national railway system the Canadian Pacific Railway was built by the

private sector encouraged by governments to do so through a system of incentives that includes

land grants, monopoly rights and subsidies. In the case of the railway, the private sector

assumed the associated financial risks of front-end financing and building of the required

infrastructure in exchange for the expectation of future profits. In other cases, the government

itself or its agencies funded, built and operated needed infrastructure (for example, the highway

and road network). Other infrastructure (for example the cable television system) was built and

operated entirely by private companies under the umbrella of a legal/regulatory framework that

protects both the private sectors investment and the consumer.

More recently, alternate arrangements, tagged Public-Private Partnerships (PPPs) or

Alternative Financing Procurement (AFPs) have been developed as a means of leveraging

private sector money and expertise to fund, build and operate public sector infrastructure. AFPs

take many forms but they all employ a mix of public and private funding, with operation and

maintenance performed by private enterprise on behalf of the government. As recently pointed

out by Bank of Canada Governor, David Dodge, other countries such as the United Kingdom and

Australia boast numerous examples of successful PPPs whereas Canada has yet to establish the

well-developed legal and regulatory framework for PPP investment found in those other

countries:

Page 14 C4SE


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Pension and endowment funds are now allocating an increasing share of their portfolio

assets to infrastructure investments . . . These funds are increasingly looking for longer-

term assets that provide a better match to their liabilities. So far much of this

investment has gone to projects in other countries. This is partly because the domestic

markets for PPPs in these countries are more developed than ours. 17

We have previously noted that over the last decade the federal government has generated

considerable surpluses largely financed by the people and businesses of Ontario, and, in

particular, the people of the Golden Horseshoe. At the same time, the government of Ontario

repeatedly claims it cannot afford to pay for new infrastructure because it must first balance its

budget. Our long-term projections demonstrate that, despite the growing needs for increased

health care and other spending resulting from our aging population, the federal and Ontariogovernments combined have the financial capacity to pay for the necessary infrastructure in

Ontario.18 Furthermore, this financial capacity can be used to leverage private sector capital

through the AFP measures that were announced by the province last year.

Despite the fact that funds are clearly available for this purpose from public and private sources,

a logjam of inter-governmental wrangling over responsibilities and financing strategies,

combined with a complex regulatory approvals process, holds up infrastructure projects crucial

to the achievement of Ontarios economic potential. This situation is unacceptable, particularly

in light of the publics and business communitys desire to see concrete progress regarding such

issues as gridlock. To remedy this situation we offer the following recommendation.

Recommendation 3

The federal and provincial governments should move quickly and deliberately to establish the

legal and regulatory framework required to make Alternative Financing Procurement a

feasible alternative to the conventional methods of financing, constructing and operating

public infrastructure.

17This point and the discussion on infrastructure financing options and risks in the previous two paragraphs is based on remarks by

David Dodge, Governor of the Bank of Canada, to the Canadian Council for Public-Private Partnerships (Toronto, November 28,2005).

18See the presentation Government Balances in Ontario: How Tight?by Ernie Stokes of the Centre for Spatial Economics to the

Pragma Council of the University of Waterloo in April 2005.

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Infrastructure Timing

As the province is aware, the achievement of Ontarios economic potential is dependent on the

maintenance and expansion of the existing transportation network at a pace consistent with, and

preferably in advance of, the forecasted population and employment growth.

In May 2005 the province releasedReNew Ontario 2005-2010 in conjunction with the provincial

budget.19 The document describes itself as a five-year infrastructure investment plan to

strengthen our economy and our communities. It lists many major projects totaling more than

$30 billion that Ontario and its partners will invest in infrastructure over the next five years. As

best as we can determine some $11.4 billion of this total appears to be earmarked for public

transit, highways, borders and other transportation projects with the rest to be spent on health,

education and justice. Regrettably, the plan is short on details. It does not make clear theamount of money that will be spent on which projects, nor does it identify start and completion

dates for any projects. The section that references investing for growth leaves the unsettling

impression that the Golden Horseshoe will receive a disproportionately small share of the

promised $30 billion.

In November 2005 the province released Places to Grow: Better Choices, Brighter Future:

Proposed Growth Plan for the Greater Golden Horseshoe,November 2005 (Places to Grow)

which explicitly recognizes the importance to Ontarios prosperity of the free flow of goods

within, to and from the Golden Horseshoe.20

Places to Grow, in very broad terms, describes a

transportation plan designed to deal with both the movement of goods and the movement of

people throughout the area by addressing the need for refurbishing and expanding its system of

highways, roads, inter-modal facilities and transit systems.

Again, however, the province is silent about the timing of the rollout of fundamental segments of

the transportation plan.

19See ReNew Ontario 2005-2010 Strategic Highlights: A Five-Year Infrastructure Investment Plan to Strengthen Our Economy and

Communities, Ontario Ministry of Public Infrastructure Renewal (May 2005).

20See Places to Grow: Better Choices, Brighter Future: Proposed Growth Plan for the Greater Golden Horseshoe, Ontario Ministry

of Public Infrastructure Renewal (November 2005).

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Businesses within and outside of the Golden Horseshoe that are evaluating future moves to or

expansions in the area need to be reassured that they will be able to move their products and

deliver their services in the future. Construction of the infrastructure required to handle the

expected growth in goods movement between Ontario and the United States such as the Mid-

Peninsula Corridor, a dedicated truck route through Windsor, expanded border capacity in

Niagara is still years away due to the long and complex Environmental Assessment review

requirements. Regrettably, the evidence that is available including increasing congestion and a

set of plans lacking specifics is a deterrent to businesses to locate or expand in the Golden

Horseshoe. Businesses require clear timelines on these major transportation projects to make

informed choices. Substantial blocks of land throughout the Golden Horseshoe are not being

developed as a result of the uncertainties surrounding the timing of such projects as Highway

404 north, Highway 427 north, Highway 407 east and the Mid-Peninsula Corridor.

Recommendation 4

The province should clearly articulate which transportation and other infrastructure projects

are covered in the 2005-2010 time frame and when and how those projects will be approved,

financed and constructed. The Mid-Peninsula Corridor, the eastward extension of the 407,

the dedicated truck route through Windsor, the expanded border capacity in Niagara, the

proposed extensions to the GO system and the expansion of the TTC should be identified as

immediate priorities.

Recommendation 5

The federal and provincial governments should move quickly and deliberately to reform the

environmental assessment process prior to the announcement of specific infrastructure

projects, to facilitate investor interest.

Electricity Supply

Electric power is essential to households and remains a crucial source of energy for many of

Ontarios most important industries (newsprint, cement, chemicals, aluminum, iron and steel,

mining, etc.).

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In May 2005, the Ontario Power Authority (OPA) was charged with developing

recommendations regarding the future of Ontarios electricity supply taking into account

conservation targets and new sources of renewable energy out to 2025.

In December 2005, the OPA released its recommendations on options for the future development

of Ontarios electricity system to the Ontario Minister of Energy.21 Following the release of the

OPAs recommendations the Premier indicated that he would follow their advice only after an

appropriate consultation with stakeholders had taken place. Because of the lack of sufficient

attention to this issue in the past, the unavoidable retirement of existing nuclear capacity in the

near term, and ever-growing demands for electricity in the future, there is precious little time for

extensive consultations to inform needed decisions. An adequate supply of affordable electricity

is a crucial condition that must be met to ensure the future prosperity of Ontario. We suggestthat the OPAs recommendations are an important step in the right direction.

Recommendation 6

The province needs to make decisions quickly regarding Ontarios future electricity supply to

assure domestic and international investors of the long-term advantages of locating and

expanding their businesses in Ontario.

Defining the Greater Golden Horseshoe

A year ago the province released The Growth Outlook for the Greater Golden Horseshoe.22 This

document contains population, household and employment projections for each of the sixteen

Census Divisions (CDs) (cities, regions and counties) it considers to be part of what it refers to

as the Greater Golden Horseshoe. This document contains three projections for population

growth in the GGH called the Current Trends, Compact and More Compact scenarios.

The Compact scenario serves as the reference projection for the policies outlined in the Places to

Grow plan released in November 2005.23

21See Supply Mix Advice Report, Ontario Power Authority (December 2005).

22See The Growth Outlook for the Greater Golden Horseshoe, Hemson Consulting Ltd., January 2005.

23See Places to Grow, Section 7 Schedule3.

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We are concerned about the provinces definition of the Greater Golden Horseshoe and submit

that it is much larger than is appropriate. We note that the suburban municipalities of the four

original members of the Golden Horseshoe the Census Metropolitan Areas (CMAs) of

Oshawa, Toronto, Hamilton and St. Catharines-Niagara have grown outwards to such an extent

that they abut the also growing suburban municipalities of the Census Agglomerations (CAs) of

Barrie, Guelph and Brantford, with the suburbs of the latter two abutting the suburban

municipalities of the Kitchener CMA (Figure 5).

In other words, the municipalities included in these eight metropolitan areas have gradually knit

together to form one huge metropolitan area.

Figure 5

The Golden Horseshoe as Eight Metropolitan Areas

urce: The Centre for Spatial Economics

Brantford CA

Guelph CA

St. Catharines-Niagara CMA

Toronto CMA

Oshawa CMA

Barrie CA

Kitchener CMA

Hamilton CMA

So

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Statistics Canada defines a metropolitan area to be a group of contiguous municipalities with a

nding

area. Such

Brant

in

n

The provinces definition of the Golden Horseshoe what they call the Greater Golden

unties

the

s

city at its centre that has a population of at least 100,000 or more persons (a CMA) or a

population of at least 10,000 or more persons (a CA) where the central city and its surrou

municipalities are economically and socially interdependent. For the purposes of provincial-

municipal administration, and because of the availability of data , it is useful to define the

Golden Horseshoe on the basis of CDs by including any CD that contains any of the

municipalities that make up the eight CMAs and CAs that we feel properly define the

a redefinition leaves a list of twelve CDs that define the Golden Horseshoe:

Duffer

Durham

Halton

Hamilto

Niagara

Peel

Simcoe

Toronto

Waterloo

Wellington

York

Horseshoe expands on our definition to include the City of Kawartha Lakes and the Co

of Northumberland, Peterborough and Haldimand. In our view, these communities are not part

of the Golden Horseshoe and should not be included in the definition of the GGH. They do not

constitute major metropolitan areas like the eight we have included, and rapidly growing

suburban communities do not connect them to one another. The annual rates of growth in

population of these four areas over the last 25 years, in both absolute and percentage terms, doe

not match the accelerated pace witnessed across the twelve CDs we have included in our

definition (Figure 6).

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Figure 6

n of the Golden Horseshoe by Census Division 1981, 2006 and 2031

and includes Norfolk. In Schedule 3 ofPlaces to Grow Haldimand does not include Norfolk.

he slower pace of growth in these four areas means they are not prime choices among business

t can

e are also concerned that the provinces inclusion of these four areas could be used to justify

erage Average

Annual Annual Annual Annual

Absolute Absolute Percentage Percentage

Population Population Population Change Change Change Change

1981 2006 2031 81-06 06-31 81-06 06-31

Golden Horseshoe - C4SE 5,188 8,129 11,081 118 118 1.8 1.2

Golden Horseshoe - Province 5,494 8,535 11,540 122 120 1.8 1.2

Toronto 2,247 2,648 3,096 16 18 0.7 0.6

Peel 508 1,214 1,738 28 21 3.5 1.4

York 261 945 1,534 27 24 5.3 2.0

Durham 291 592 1,067 12 19 2.9 2.4

Halton 261 446 664 7 9 2.2 1.6

Hamilton 424 528 686 4 6 0.9 1.1

GTAH Total 3,993 6,373 8,785 95 96 1.9 1.3

Niagara 378 434 466 2 1 0.5 0.3

Brant 107 135 162 1 1 0.9 0.7

Waterloo 314 487 632 7 6 1.8 1.0Wellington 133 205 248 3 2 1.8 0.8

Dufferin 32 56 86 1 1 2.3 1.7

Simcoe 230 438 702 8 11 2.6 1.9

Other C4SE Golden Horseshoe 1,195 1,756 2,296 22 22 1.6 1.1

Norhumnberland 61 85 102 1 1 1.4 0.8

Peterborough 105 134 144 1 0 1.0 0.3

Kawartha Lakes 49 76 97 1 1 1.8 1.0

Haldimand 92 111 116 1 0 0.8 0.1

Other Province Golden Horseshoe 306 407 459 4 2 1.1 0.5

Populatio

Average Average Av

Note that in the above table Haldim


T

as site locations. This is supported by the provinces projections, as well as our own, that

indicate that these four will not capture much of the GGHs future population growth. Our

concern is that the inclusion of these four areas within the GGH planning area will drain

financial and planning resources away from the areas in greatest need (the twelve CDs tha

be readily justified for inclusion).

W

future growth in these communities that is difficult to support on economic grounds.

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As well, given the distances involved, we are concerned about the infrastructure costs that would

be required to connect these communities to the rest of the GGH. If the province is really

concerned about future infrastructure costs in the GGH, the planning area for the growth plan

should be restricted to the twelve suggested CDs and should not include the City of Kawartha

Lakes and the Counties of Northumberland, Peterborough and Haldimand.

Recommendation 7

The province should redefine the Greater Golden Horseshoe to include only those cities,

regions and counties containing municipalities that form a part of the metropolitan areas of

Oshawa, Toronto, Hamilton, St. Catharines-Niagara, Brantford, Guelph, Kitchener and

Barrie.

The Population Projections

The Centre for Spatial Economics produces and updates population projections for the 5,600

municipalities right across Canada on an annual basis. Using the provinces definition of the

GGH we find that our projections for the total population, households and employment for each

of the GGHs major components the GTA plus Hamilton and the Outer Ring differ only

marginally.

We agree that, between 2001 and 2031, the population of the GGH will grow by 3.7 million, that

the number of households will grow by 1.7 million, and that total employment will grow by 1.8

million. However, the calculations we used to reach those numbers are different enough from

the provinces calculations to cause us some concern.

The provinces projections forecast Canadas immigration rate to decline from approximately

218,000 annually between 2001-2006 to about 210,000 annually from 2007-2031. This

projection assumes a proportionate slowdown in the flow of immigrants to the GGH. As well,

the provinces projections call for the net natural change in population (births less deaths) to

decline only slightly over the projection horizon in the GGH, from an annual rate of 34,600

between 2001-2011 to 30,300 between 2021-2031. The provincial projections assume that

fertility rates will hold at current rates in the future and that mortality rates will decline slightly.

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In contrast, we foresee the net natural change in population of the Greater Golden Horseshoe

falling from 32,000 per year between 2001-2011 to just 7,000 per year between 2021-2031, a

much larger drop than suggested by the provincial projections. In conjunction with the drop in

net natural change we project an increase in net in-migration, thus arriving at the same total

population projections as the province. Our projection is predicated on an increase in overall

immigration to Canada from an annual rate of 225,000 in the 2001-2011 period to 275,000 per

year in the 2011- 2021 period and to 350,000 per year in the 2021-2031 period, in response to

growing labour market requirements as the Baby Boom generation retires.

In other words, the provinces projections for the GGH require less in-migration to achieve a

total of 11.5 million people in 2031 than our projections because the province projects a more

modest decline in net natural population growth. This is puzzling given that we agree with theprovinces assumptions regarding future fertility and mortality rates. We are unable to replicate

the results of the provinces projections. Figure 7 compares the two projections.

Figure 7

Comparison of Greater Golden Horseshoe Population Projections by Source of Growth

Province of Ontario and Centre for Spatial Economics Projections

Actual Projected Projected Projected

2001 2011 2021 2031

Provincial Projections

Population 7,790,000 9,090,000 10,340,000 11,500,000

Growth (10 year growth) 1,280,000 1,300,000 1,250,000 1,160,000

Net Natural Change (average annual) 45,300 34,600 38,600 30,300

Net Migration (average annual) 82,700 95,400 86,400 85,700

Centre for Spatial Economics Projections

Population 7,855,000 8,991,000 10,039,000 11,531,000

Growth (10 year growth) 1,221,000 1,135,000 1,048,000 1,492,000

Net Natural Change (average annual) 46,000 32,000 18,000 7,000

Net Migration (average annual) 76,000 82,000 87,000 142,000

Provincial less C4SE Projections

Population -65,000 99,000 301,000 -31,000

Growth (10 year growth) 59,000 165,000 202,000 -332,000

Net Natural Change (average annual) -700 2,600 20,600 23,300Net Migration (average annual) 6,700 13,400 -600 -56,300

Source: The Growth Outlook for the Greater Golden Horseshoe and the Centre for Spatial Economics

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Figure 8 compares the provinces age and sex distribution of the population of the GGH in the

year 2031 projections to our own projections. The provincial projections suggest that the

population aged 30 to 74 among both males and females will be less than we project, and that the

population aged 20 to 30 and 90 and over will be more than we project.

This result is puzzling in many ways, particularly given that the provinces projection is based on

a lower rate of net in-migration. Since migrants are typically relatively young (18 -35 yr olds

dominate) we would have expected to find that our projection, based on more in-migration,

would have resulted in a younger age profile in 2031, not the other way around.

Figure 8

Population of the Greater Golden Horseshoe by Five-Year Age Group in 2031

Province of Ontario and Centre for Spatial Economics Projections Comparison

-500,000 -400,000 -300,000 -200,000 -100,000 0 100,000 200,000 300,000 400,000 500,000

00-04

05-09

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90+

Province of Ontario ProjectionC4SE Projection

Males Females

Source: The Growth Outlook for the Greater Golden Horseshoe and the Centre for Spatial Economics

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On a cumulative basis our projections call for immigration into the GGH to exceed that projected

by the province by upwards of 400,000 to 500,000 over the entire 30-year forecast horizon.

Thus the immigrant share of the population implied by our projections is approximately 5

percent higher in 2031 than the share implied by the provinces projections.

These observations may have the appearance of professional quibbling. But the implications of

our observations in terms of the projected age and ethnic mix of the population are significant,

and these differences could have considerable policy impacts in relation to the type of housing

and public services that will be required.

Recommendation 8

The province should release, for review, the technical background papers that underlie their

population projections.

Recommendation 9

Upon the release of the 2006 Census data, prior to approving municipal Official Plans that

have been revised to conform to the growth plan, the province should update its population,

dwelling and employment projections to reflect the Census results.

The Preservation of Agricultural Lands

A key goal of the province as articulated in Places to Grow is the preservation of prime

agricultural land. We submit that such preservation is unnecessary for a number of reasons.

Research we carried out in 200124 and 200225 revealed a number of trends in the agricultural

industry suggesting that the depletion of agricultural land due to economic development in

Ontario need not be a concern. In brief, our research pointed out that farm production continues

to increase even though farm acreage is declining, as is farm employment. Farm productivity is

growing at a rapid rate, so less farmland, less farms and less farm workers are required each year.

24See Land Development and Agricultureprepared by the Centre for Spatial Economics on behalf of the Ontario Home Builders

Association in June 2001.

25See an until-this-point unpublished analysis of farm acreage trends in Ontario between 1986 and 2001 prepared by Tom

McCormack of the Centre for Spatial Economics when he served as a member of the Province of Ontarios sub-panel on SmartGrowth Strategy.

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Our research pointed out that the majority of Ontarios farm acreage is found in counties that are

not urbanizing in a major way, and that the majority of the decline in farm acreage in Ontario

between 1986 and 2001 occurred in counties that are not urbanizing. In fact, the decline in farm

acreage in the urbanizing regions and counties of the province was far less than the decline in

the non-urbanizing counties. Furthermore, we found that a select number of counties witnessed

large increases in farm acreage between 1986 and 2001, suggesting that specialization is

occurring. None of these counties are urbanizing rapidly and none are likely to in the future.

According to the 2001 Census of Agriculture, only 20 percent of Ontarios farm acreage is found

in the Golden Horseshoe. The lions share 80 percent is found among the 37 other CDs in

the province. Interestingly, these shares did not change between 1986 and 2001. As of 2001

some 63 percent of Ontarios population lived in the Golden Horseshoe. The other 37 CDsaccounted for the remaining 37 percent. In 1986 the shares were 59 percent and 41 percent

respectively. Figure 9 illustrates these significant differences.

Other Ontario37 %

GoldenHorseshoe

63%

Population Share

Other Ontario80 %

GoldenHorseshoe

20 %

Farm Acreage Share


Figure 9

Population and Farm Acreage Shares in Ontario

The Golden Horseshoe and Other Ontario

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Between 1986 and 2001 farm acreage in Ontario declined from 14.0 million acres to 13.5

million, or by 445,700 acres. Among the Golden Horseshoes twelve regions and counties farm

acreage fell from 2.8 million to 2.7 million, or by 160,500 acres. Across the rest of Ontario, farm

acreage fell from 11.1 million to 10.8 million, or by 285,200 acres. Within the group of thirty

seven CDs outside the Golden Horseshoe farm acreage increased within a group of 10 CDs by a

total of 147,500 acres and fell by 432,600 acres in the remaining twenty seven CDs. Three CDs

alone accounted for one-third of the decline within this latter group. None of these three CDs are

urbanizing.

Thus, the greatest decrease in farm acreage occurred in CDs where the population was not

growing by very much between 1986 and 2001. Figure 10 illustrates these different farm

acreage trends in Ontario. Figure 11 provides detailed information regarding population andfarm acreage trends for every CD in Ontario.

Figure 10

Change in Farm Acreage in Ontario Between 1986 and 2001

Golden Horseshoe vs. Farm Acreage Growth and Decline Areas Outside the GH

-500,000 -400,000 -300,000 -200,000 -100,000 0 100,000 200,000

Golden Horseshoe

Farming Growth AreasOutside the GH

Farming Decline AreasOutside the GH

Change in farm acreage


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Figure 11

Farm Acreage and Population in Ontario 1986 and 2001 by Census Division

ote: In the table above the CDs for Sudbury Region and Sudbury District have been combined.

RankRank Farm Farm Rank

Farm Farm Farm Acreage Acreage Rank Population PopulationAcreage Acreage Acreage Change Change Population Population Populatiion Change Change

Census Division 1986 2001 2001 1986-2001 1986-2001 1986 2001 2001 1986-2001 1986-2001

Ontario Total 13,953,009 13,507,357 --- -445,652 --- 9,424,089 11,897,647 --- 2,473,558

Golden Horseshoe 2,831,538 2,671,052 -160,486 5,581,139 7,462,797 1,881,658

Brant 158,945 158,693 34 -252 14 109,122 128,871 20 19,749 17Dufferin 213,403 193,162 30 -20,241 37 33,378 53,022 41 19,644 18

Durham 358,168 330,286 18 -27,882 44 334,863 526,987 5 192,124 4Halton 118,805 98,758 38 -20,047 36 279,271 390,235 12 110,964 8

Hamilton 145,083 138,879 36 -6,204 20 436,357 510,073 6 73,716 10Niagara 236,942 232,817 25 -4,125 19 380,256 426,532 8 46,276 13

Peel 129,476 104,433 37 -25,043 40 613,453 1,032,308 2 418,855 1Simcoe 550,073 540,870 7 -9,203 25 243,920 391,819 10 147,899 6

Toronto 0 0 48 0 13 2,305,302 2,592,460 1 287,158 3Waterloo 237,954 225,800 26 -12,154 28 339,054 456,349 7 117,295 7

Wellington 472,085 471,389 11 -696 15 143,315 194,821 13 51,506 12York 210,604 175,965 32 -34,639 45 362,848 759,320 4 396,472 2

Other Ontario 11,121,471 10,836,305 -285,166 3,842,950 4,434,850 591,900

Algoma 100,577 94,124 40 -6,453 21 135,678 123,927 21 -11,751 48Bruce 609,242 611,461 3 2,219 11 60,901 66,342 37 5,441 35Cochrane 101,984 76,872 43 -25,112 41 97,432 89,627 29 -7,805 47

Elgin 379,060 382,786 14 3,726 10 72,317 84,737 31 12,420 28Essex 335,494 334,122 17 -1,372 16 325,307 390,475 11 65,168 11

Frontenac 229,177 205,542 28 -23,635 39 118,571 144,094 16 25,523 14

Grey 632,609 593,121 5 -39,488 46 76,627 92,476 28 15,849 22Haldimand-Norfolk 522,205 515,099 8 -7,106 23 92,443 109,504 24 17,061 21

Haliburton 17,873 13,976 47 -3,897 18 12,235 15,655 47 3,420 38Hastings 333,604 306,068 19 -27,536 43 119,081 132,171 17 13,090 27

Huron 714,610 719,066 1 4,456 9 57,437 61,999 39 4,562 37Kawartha lakes 371,511 360,690 15 -10,821 27 53,825 71,818 35 17,993 19

Kenora 47,172 37,992 45 -9,180 24 60,552 66,513 36 5,961 33Kent 543,524 552,402 6 8,878 6 109,693 111,902 23 2,209 43

Lambton 567,210 604,555 4 37,345 1 128,773 131,835 18 3,062 39Lanark 291,076 241,972 24 -49,104 48 50,826 64,932 38 14,106 24

Leeds, Grenville 363,538 336,650 16 -26,888 42 86,595 100,339 26 13,744 26

Lennox and Addington 206,920 197,441 29 -9,479 26 35,177 40,963 43 5,786 34Manitoulin 180,021 173,523 33 -6,498 22 10,828 13,165 48 2,337 42

Middlesex 623,628 620,321 2 -3,307 17 343,034 421,969 9 78,935 9Muskoka 34,718 34,779 46 61 12 41,281 55,330 40 14,049 25Nipissing 100,256 83,170 42 -17,086 32 81,131 86,283 30 5,152 36

Northumberland 298,342 253,665 23 -44,677 47 63,131 80,458 32 17,327 20

Ottawa 317,365 297,644 20 -19,721 35 626,364 806,560 3 180,196 5Oxford 418,619 445,458 12 26,839 2 87,458 103,149 25 15,691 23

Parry Sound 112,612 95,810 39 -16,802 31 34,606 41,181 42 6,575 32Perth 485,212 502,926 9 17,714 4 68,259 76,543 34 8,284 30

Peterborough 272,634 258,642 22 -13,992 29 107,724 130,678 19 22,954 15Prescott, Russell 290,763 297,384 21 6,621 7 59,083 79,476 33 20,393 16

Prince Edward 157,882 143,223 35 -14,659 30 22,954 25,841 45 2,887 40Rainy River 182,091 188,080 31 5,989 8 23,566 22,959 46 -607 44

Renfrew 423,714 402,978 13 -20,736 38 91,272 98,833 27 7,561 31Stormont, Dundas, Glengarry 473,982 496,498 10 22,516 3 105,570 115,320 22 9,750 29Sudbury 101,151 84,047 41 -17,104 33 182,195 185,000 14 2,805 41

Thunder Bay 77,420 59,383 44 -18,037 34 159,705 157,043 15 -2,662 45Timiskaming 203,675 214,835 27 11,160 5 41,319 35,753 44 -5,566 46

N

Source: Statistics Canada

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On a nation-wide basis, agricultural production today is approximately double that of the early

1960s, and agriculture employment is less than half. Thus agricultural productivity output per

employee is almost four times greater today than it was four decades years ago. In other

words, agricultural production has been increasing even though the number of workers and the

amount of land used for farming has been in decline.

We have not highlighted the above information to undermine the provinces case for the

establishment of a large zone within the Golden Horseshoe to be protected from urban

development. Many people strongly support the preservation of the natural heritage areas and

the environmentally sensitive lands within the Greenbelt Plan Area. We believe, however, that

extensive protection of the agricultural and rural areas south of the Greenbelt but north of the

currently designated urban areas is not required because this area consists mostly of non-vitalnon-producing agricultural land.

Failure to designate these lands for future residential and employment use will have a major

impact on Ontarios ability to reach its potential. The protection of these lands will limit the

future range of housing choices available in the Golden Horseshoe, undermine its ability to

attract the highly skilled workers that will be required, limit the amount of land available for

future employment and residential use and increase the relative cost of non-protected land within

the Golden Horseshoe. In subsequent sections of this report we conclude, for a number of

reasons, that the amount of land required between now and 2031 for residential and employment

use in the Golden Horseshoe will exceed that identified in the Places to Grow document. In

view of these conclusions, and considering our assessment here of the future need for

agricultural lands in the Golden Horseshoe, we offer the following recommendation.

Recommendation 10

The Agricultural and Rural Area south of the Greenbelt Area, and more precisely within the

GTAH, should, through municipal Official Plan conformity exercises, be identified as

Designated Greenfield Area to accommodate the projected population and employment

growth. As well, it should be recognized that some of the Agricultural and Rural Area north

and west of the Greenbelt will also likely be required for future urban growth before 2031.

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Residential Requirements

We are concerned with the targets for dwelling units by structural type that are used in The

Growth Outlook for the Greater Golden Horseshoe and in Places to Grow. The targets translate

the projected population of the Greater Golden Horseshoe into the future need for residential

units by type and, in turn, into its future requirement for residential land.

Census data for 2001 reveal that in all five CMAs in the Golden Horseshoe the preference for

single detached dwelling units increases with age and remains high across the age spectrum until

the age of 75 when the share declines slightly (Figure 12).26 The single detached housing share

is lowest in the Toronto CMA across all age groups; it is significantly higher in all four of the

other Golden Horseshoe CMAs.

Figure 12

Dwelling Proportion for Single Homes by Age of Household Head

Five CMAs in the Golden Horseshoe in 2001

Age

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

15-24 25-34 35-44 45-54 55-64 65-74 75+

Toronto

Oshawa

Hamilton

St. Catharines Niagara

Kitchener

Proportion in single homes

Age of household head

Source: Statistics Canada

26We have not purchased the data for the CAs in the Golden Horseshoe from Statistics Canada but Barrie, Guelph and Brantford

likely show profiles close to those of the four CMAs outside of the Toronto CMA.

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The structural composition of the housing stock in 2001 differs across the five CMAs for a

number of reasons, primarily relating to differences in the age composition of the population,

income levels, relative housing costs and other local factors. The single detached share in the

Toronto CMA is approximately 45 percent whereas in the other four CMAs of the Golden

Horseshoe it ranges from 56 percent to 70 percent (Figure 13). In contrast, the share for

apartments (the other category in Figure 13) is 39 percent in the Toronto CMA but is much

lower, ranging between 18 percent 28 percent, in the other four.

Figure 13

Dwelling Stock by Structural Type by CMA in the Golden Horseshoe in 2001

urce: Statistics Canada

ata for the Greater Toronto Area by region indicate that the single detached share of the

In

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Single Semi Row Others

Toronto

Oshawa

Hamilton

St. Catharines Niagara

Kitchener

Proportion of existing dwelling stock

Dwelling stock type

So

Dhousing stock in the City of Toronto is approximately 30 percent but that the share is much

higher in the four suburban regions (ranging from 50 percent in Peel to 75 percent in York).

other words, the share of single detached housing in the outer regions of the GTA and in the

other four (4) CMAs in the Golden Horseshoe all exceed the share in the City of Toronto.

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As most of Ontarios population growth is occurring in the Golden Horseshoe in the

municipalities immediately surrounding the City of Toronto that is, in the four suburban

regions of the GTA and in the immediately adjacent other municipalities within the Golden

Horseshoe the Census data reveal that the newest residents of the area clearly prefer single

detached housing.

In preparing projections for housing requirements for the CMAs throughout Canada we use

detailed census data by age regarding dwelling preferences by structural type (such as the rates

shown in Figure 12 but including rates for the other structural types as well). Our projections are

based on the assumption that each age group will prefer housing in the future consistent with the

preferences prevailing in 2001. Our projections, therefore, account for the impact on housing

preferences over time of the changing age structure of each CMA.

Our approach is conservative as it likely under-projects the share of single detached houses that

will be required. This so because our projections assume that the share of people over 65 living

in single detached units in the future will remain at the level prevailing in 2001, even though the

evidence reveals that this share has been increasing in the past and is likely to continue

increasing (Figure 14). As each new generations standard of living has improved on that of the

previous generation, so has the share of middle-aged householders that achieved single detached

homeownership. Therefore, it is probable that the share of people 65 and over preferring single

detached units will be higher in the future than it is today. Since the rate of increase in this share

slowed in the GTA-Hamilton area between 1996 and 2001 (Figure 14) we feel it is prudent to

assume the share in the future will hold constant at the rates prevailing in 2001. Our only

concern is that our approach likely leads to a slight under-projection of the required share of

single detached housing in the future.

Our projections for the five CMAs included in our definition of the Golden Horseshoe27

indicate

that between 2001 and 2031 the single detached share of the units constructed during that period

should be 51.9 percent, the semi-detached share 7.9 percent, the row share 6.5 percent and the

apartment share 33.7 percent.

27We do not have dwelling unit data by age and dwelling type for 2001 for the three CAs in our definition of the Golden Horseshoe

(Guelph, Brantford and Barrie) but their inclusion would not change the projections significantly.

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Figure 14

GTA and Hamilton

Percent Share of Householders 65 and Over Preferring Single Detached Housing

35

40

45

50

55

1986 1991 1996 2001

Source: The Growth Outlook for the Greater Golden Horseshoe

In contrast, the provinces Reference Projection (the Compact Scenario in The Growth Outlookfor the Greater Golden Horseshoe) foresees a policy-induced single detached rate of only 44

percent this decade, falling to 33 percent during the decade encompassing 2021 to 2031; a semi-

detached rate of 10 percent increasing to 11 percent; a row house rate rising from 15 percent to 2

percent; and an apartments rate of 31 percent rising to 34 percent. By comparison, between 1991

and 2001 the single detached housing share in the Greater Golden Horseshoe was 50 percent, the

semis rate 9 percent, the rows rate 16 percent and the apartments rate 26 percent.

Our projections suggest that by 2031 the number of single detached dwellings in the Golden

Horseshoe should increase by 926,000 units. The provinces targets, however, would permit

single detached units to increase over that period by only 643,000 units. The difference would

be made up primarily by the building of 184,000 more row units, 51,000 more semi-detached

units and 49,000 more apartment units than our projections suggest consumers will prefer.

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Figure 15

Dwelling Requirements by Type in the Golden Horseshoe

Thousands of New Units Required 2001 to 2031

0

100

200

300

400

500

600

700

800

900

1,000

Singles Semis Rows Apartments and Other

Province C4SE

Single Detached Gap will be 285,000 units

Thousands of New Units Required

StructuralType

Source: The Centre for Spatial Economics and The Growth Outlook for the Greater Golden Horseshoe

The targeted shares that lie behind the provinces projections reflect what is primarily a ground-

related dwelling units strategy since the targeted share for apartments closely matches the share

preferred by householders on average across the area. To achieve the higher density targets

proposed in Places to Grow the province intends to provide the yet-to-arrive residents of the

Golden Horseshoe with 44 percent fewer single detached homes than they will want28. The

province expects these people who are coming to the Golden Horseshoe in pursuit of higher

paying jobs and a higher standard of living to come nevertheless even though many of them

will not be able to find the single detached accommodation they prefer and, therefore, will have

to be content to live, instead, mostly in row or semi-detached type units.

28Recall that this is a conservative estimate based on the assumption that the preferences for units by type by age in 2001 will hold

in the future. We know that the preferences for single-detached units could be higher in the future than it was in 2001 because theratio among those 65 and over could increase.

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It is our view that, because of the huge mismatch between what consumers clearly want and what

the province intends to permit, the provinces dwelling-type target shares which inform the

intensification targets in Places to Grow will not be met. Expenditures for housing account for

a significant portion of the average household budget, reflecting the relative importance people

attach to where and how they live. Housing is a key means by which people express themselves

and their achievements. As household incomes have climbed, Ontarios householders have

expressed these standard of living gains by choosing larger and better-appointed

accommodations. There is a strong correlation between increased overall preference for single

detached homes and rising average real incomes.

To successfully compete with other metropolitan areas the Golden Horseshoe needs to attract

highly motivated, highly educated, highly paid and highly mobile workers over the next threedecades. We are concerned that, if the province implements the structural-type shares proposed

in Places to Grow, the skilled people we are trying to attract in the future might locate elsewhere

because the lifestyle they expect at their income level will not be available.

Survey data obtained in 2002 by Clayton Research29 suggests that single detached units are

preferred by more than 60 percent of respondents, a higher rate than that underlying our

projections (Figure 16). Other evidence provided by Clayton Research notes that, historically,

whenever housing affordability in the GTA has worsened, people migrate from the GTA to the

outlying communities (Figure 17). Clayton Research also notes, not surprisingly, that the

number of renters in the City of Toronto who can afford to buy a house in Toronto declines

significantly as the average house price goes up (Figure 18).

Drawing on all of the above evidence we conclude that if the single detached targets in Places to

Grow are adhered to:

1. The average price of the existing stock of dwelling units will increase significantly with

the price of single-detached units relative to the price of other dwelling types increasing

the most because the demand for such units will clearly exceed the supply.

2. The housing affordability index in the Golden Horseshoe will deteriorate.

29See Ensuring Balance: Provincial Land Use Planning Initiatives and Economic Growth in Central Ontarioprepared by Clayton

Research for the Urban Development Institute (2002).

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3. These higher dwelling prices will encourage people to locate in the communities closest

to, but outside of, the sixteen regions and counties under strict development controls.

4. Many of the highly skilled workers Ontario needs to fill the jobs that will be created will

locate elsewhere, thus creating labour shortages and seriously undermining Ontarios

ability to achieve its potential.

5. Many businesses will locate either in the communities bordering on the Golden

Horseshoe instead of in the Golden Horseshoe itself, or outside of Ontario altogether,

again threatening Ontarios ability to reach its potential.

In view of these conclusions we submit the following recommendation.

Recommendation 11

The province needs to reconsider its targeted shares for housing by structural type in the

Golden Horseshoe and bring them into line with the preferences of the people employers are

seeking to attract over the next several decades.

Fi

Ensuring Ontario’s Economic Potential

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