OTTAWA – A new federal agency designed to fuse public and private dollars to help build infrastructure in Canada could end up building new roads and bridges south of the border — so long as they connect to the Great White North.
The legislation for the Liberal government’s proposed infrastructure bank would allow the arm’s-length organization to use public money to help bankroll or financially backstop projects that are “in Canada or partly in Canada,” provided there’s a financial benefit and a physical connection to the country.
The wording means Ottawa could choose to fund projects with the potential to generate revenue for private investors or the government itself — toll roads or bridges, for instance, such as the Gordie Howe span between Windsor and Detroit, which is being financed with both private and public money.
“If in fact a vehicle like the bank can enable projects like that to go ahead more readily, then I think that’s positive,” said Mark Romoff, president and CEO of the Canadian Council for Public-Private Partnerships.
Romoff said it could also help advance Canadian interests south of the border, particularly at a time when U.S. President Donald Trump wants to leverage private money to help pay for a promised $1-trillion infrastructure program.
Late last year, U.S. Treasury Secretary Steven Mnuchin, then a member of Trump’s transition team, talked about the possibility of an American infrastructure bank that would use financing tools to lure private dollars for public assets like new transit and transportation networks.
Infrastructure Minister Amarjeet Sohi met high-level American officials on two separate visits to Washington, D.C., along with top officials at the International Monetary Fund and the World Bank, all of them interested in how the Canadian bank will operate.
Interested, too, are observers and investors in Canada, many of whom still have questions about the bank’s operations and whether the wording in the legislation could end up erecting roadblocks to its success.
Independence from political interference is at the heart of the issue.
Giving the government too much control could scare off investors who don’t want short-term political opportunism meddling in long-term infrastructure projects. On the other hand, too little political oversight could scare off cities and provinces.
Brook Simpson, a spokesman for Sohi, said the government believes the legislation strikes the right balance between making the Crown corporation arms-length from government to attract private capital, while also remaining accountable to Parliament in how it manages public funds.
To ease concerns from private pension funds about political meddling, government officials have told investors that the government would approve projects when submitted to the bank for review, preventing cabinet from cancelling projects later on.
Cities have been told they won’t be forced to use the bank and that financing won’t be conditional on any level of private-sector involvement. Nor would there be any restrictions on where private backing could come from, which would avoid any international retaliation against domestic funds that invest overseas.
Romoff said allowing more bidders on projects could drive down costs and fuel more innovative construction plans.
Benjamin Dachis, associate director of research at the C.D. Howe Institute, said investors could be scared away from working with the bank if they don’t feel there are strong firewalls to prevent political meddling in long-term projects.
“This legislation needs to strike that balance between democratic oversight, but institutional independence to make sure that projects that go ahead are the right ones and not just politically attractive ones in the short term,” Dachis said.
The Liberals are infusing the bank with $35 billion in government funding, hoping that the money can leverage three or four times that much in private dollars to build infrastructure in three key areas: trade corridors, green infrastructure and public transit.