Similar to the current situation in many developed countries in the world, the magnitude of the current provincial deficit has required the government of Ontario to make major expenditure reductions. Consequently, the Ontario Ministry of Transportation is under continuing pressure to reduce its expenditures on the highway system and to maximize the value for every public tax dollar invested. At the same time, Ontario has a thriving economy that depends on highway transportation for continued growth and prosperity. The Provincial Auditor recently noted that over the past ten years the physical condition of the provincial highways has been steadily deteriorating. Highway investment needs can best be put into perspective by looking at the economic dimensions of highways within the Ontario economy. Highway transportation represents a major area of daily expenditure by residents and businesses alike and a key underpinning of the whole provincial economy. The highways already generate substantial revenues through fuel taxes alone. The Ministry of Transportation is beginning to use a number of techniques to identify the best investments to be made in roads and bridges: strategic network analysis, life cycle analysis, and benefit/cost analysis. Benefit/cost analysis is useful to demonstrate the marginal benefits (particularly the user benefits) of an investment, and to fine tune a solution to make it even more cost effective. It also generates a wide range of performance measures including the value per dollar invested (benefit/cost ratio), net present value, overall return on investment and return on investment specific to the investing agency cost and revenue streams. A combination of techniques is being used to identify different levels of investment in highways and bridges and the consequences of investing at those levels - for example, the expenditure required each year to counteract one year's worth of physical deterioration of highway infrastructure. The development of investment analysis is valuable for discussing annual capital budget requirements with the central government funding agencies. The techniques are also useful for exploring options for public/private partnerships regarding future investment in highways. (A)
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