Mayor Olivia Chow delivers remarks during the Declaration of Office Ceremony at Toronto City Hall, on July 12.Tijana Martin/The Canadian Press
Renze Nauta is program director for work and economics at the non-partisan think tank Cardus. Andreae Sennyah is Cardus’s director of policy.
Toronto’s anticipated budget shortfall of $46.5-billion over the next decade paints a bleak picture for residents. The city’s long-term financial plan says services may be reduced, taxes increased and capital projects cancelled if no action is taken to address the fiscal pressure. Most notable among the measures recommended in the plan is the introduction of a municipal sales tax.
A focus on revenue generation is understandable, but revenue is only one part of the city’s balance sheet. Lowering the costs of projects and services is another.
Before the city considers increasing taxes or cutting services, it should implement one simple reform that a recent study by Cardus shows could save taxpayers hundreds of millions of dollars every year: open tendering.
Open tendering is an approach to infrastructure procurement that allows all qualified companies to bid on a government’s construction contracts, regardless of what kinds of trade unions their workers have chosen to join, or whether they have chosen to join them at all. For workers, open tendering means freedom of choice. For the taxpayer, open tendering means more companies can bid for government contracts. More bids mean more competition. More competition means better prices – and lower costs – on construction projects.
In 2019, the Ontario government gave municipalities the option of implementing open tendering. Toronto chose to opt out, and is now the only municipality in Ontario to use a restrictive (or closed) process for its construction projects, meaning only companies that employ certain building trade unions can bid.
Opponents of open tendering will claim that it could lower safety standards and wages for workers. That is simply not the case. In our highly regulated and highly competitive environment, worker safety would remain paramount, and wages would remain competitive for unionized and non-unionized workers. The fact that open tendering is already in place in other Ontario municipalities, without controversy, points to this reality.
When Hamilton moved to open tendering, the city found potential savings that ranged from 9 to 32 per cent per project, with an average savings of 21 per cent. That kind of result in Toronto could help the city’s fiscal situation. The Cardus study found that about $1.65-billion of Toronto’s 2023 construction budget was subject to closed tendering. This means the city might have saved about $347-million on those projects if it had opened the bids up to more competition – and with open tendering there would be further savings every single year.
The city’s long-term financial plan is brutally honest. Even if all its recommendations were adopted, Toronto would still have to do more if it hoped to fully address the $46.5-billion shortfall. Before raising taxes or cutting services, city council should look in its own backyard, and implement straightforward and cost-effective measures that would be good for workers and for taxpayers.