News Releases and Op-Eds
Peacock Op-ed: Infrastructure - We need more and now is a good time to build (Vancouver Sun)
On several levels, it may seem that we have adequate infrastructure in place today. After all, British Columbia is blessed with a solid road network, excellent port facilities, modern airports (including the award winning YVR), leading telecommunications and wireless capacity, good water, sewer and solid waste systems, and generally high quality education and health care facilities. But the reality is greater global economic integration, population growth, demographics and the need to enhance BC’s competitive position means we cannot be complacent about infrastructure.
Infrastructure in BC is critical for the entire country. BC is Canada’s Gateway to the Asia Pacific and facilitates growth in two-way trade flows with that dynamic and rapidly growing region. Trade is on track to double over the next decade and could be three times its current level by 2030. Tourism and business travel will also rise steadily in line with the massive increase in the middle class in China and other emerging Asian economies.
Population and demographics warrant particular attention. Over the course of the current decade, the number of people residing in BC will climb by nearly 600,000, and in the following decade by another 620,000. Both of these anticipated gains are similar in absolute terms to the increases seen in recent decades.
An increasingly urbanized population is also shaping infrastructure requirements. The collective population living in BC’s four main Census Metropolitan Areas (Vancouver, Abbotsford, Victoria and Kelowna) has grown by an annual average of 1.3% in recent years – three times the pace in the rest of the province. As a result, the share of BC’s population residing in the province’s four principal cities has risen from 64% in 1990 to 69% today and is likely to reach 72% by 2031. As we have witnessed in some settings, without adequate investment in roadways, bridges and public transportation, urban areas will become heavily congested. Urbanization also puts additional pressure on sewer and water systems and the management of solid waste.
An aging population is also adding and reshaping infrastructure requirements. As the proportion of people over 65 rises from 16% today to nearly 25% by 2031 there is a clear need to expand capacity in health care and in the delivery of other services, such as specialized transportation.
Finally, there is the age of infrastructure. While much of BC’s infrastructure is comparatively new, more financial resources will need to flow into the maintenance, upgrading and rehabilitation of existing assets. In some instances, assets need to be replaced (Pattullo Bridge, Massey tunnel). As documented by many municipal governments, rehabilitation requirements may be most acute at the local level because of aging sewer and water systems. Municipalities are now responsible for the largest share of the stock of public infrastructure among the three levels of government and by some accounts face the greatest financing challenges.
How much governments decide to invest in infrastructure is a matter of choice. When deciding how to allocate scarce resources, policy makers need to recognize the fact that infrastructure brings widespread benefits. Studies consistently find it lifts economic growth, drives productivity, and improves overall prosperity. Modern and well-functioning economic infrastructure is central to enhancing BC’s competitiveness, which attracts business investment and creates jobs.
Beyond the connection to growth and living standards, public infrastructure is also linked to the well-being of citizens. Better roads reduce accidents, and thus enhance public safety; better water systems reduce disease; and, waste management services improve health and the ambient environment. Both economic and social infrastructure also influence the overall quality of life by increasing mobility, making job opportunities available to more people, and enhancing access to healthcare and education.
Now is an opportune time to step-up infrastructure investment. Borrowing costs are at historic lows, which reduces the cost of building large projects. The provincial economy is also operating below its potential. The construction of large assets would provide a welcome economic lift. Having some slack in the economy also reduces the risk of cost over runs.
Softer economic growth and escalating demand for health care and other social services are squeezing funds available for capital projects. For this reasons, government should continue to explore new and creative was to finance infrastructure development. P3s have delivered significant benefits to taxpayers. Large pension funds are increasingly looking to invest in infrastructure because these assets diversify portfolios and generally provide higher returns than many other investment alternatives. In Metro Vancouver, governments may be able to capture a portion of the increase in land value that results when new transit projects lead to rezoning and significantly higher real estate values. These funds could be used to help finance other capital projects. Green Bonds – which tie the proceeds of the bond issue to environmentally friendly projects – are also growing in popularity. Innovative technology solutions are also permitting the broader application and more efficient collection of user fees, which can help finance infrastructure and reduce capital costs for government.
Meeting BC’s future infrastructure requirements is increasingly important and increasingly complicated. BC needs to adopt a comprehensive and long-term strategy that incorporates growth projections, demographic changes, regional planning, prioritizing of projects, and innovative ways of financing projects to ensure the infrastructure that is required for BC to compete and to maintain a high quality of life for residents is put in place.
By Ken Peacock, Vice President and Chief Economist, Business Council of British Columbia
Published on-line at the VancouverSun.com