Ottawa needs to reboot infrastructure bank, or shut it down

The federal Liberals are mulling a reboot of the Canada Infrastructure Bank over frustrations with what the government perceives as a failure to execute at the $35-billion investment fund.

Rather than swapping in new leadership – we’ll come back to that line of speculation shortly – the smarter move would be to put the Liberals’ considerable resources behind shifting the way governments of all stripes approach big-ticket projects.

That means embracing previously un-Canadian concepts such as user fees, which are central to the success of the CIB. Canadians would pay to use the infrastructure that’s built, generating revenue for the bank. Or the federal government could simply recognize that the CIB isn’t working, and shut down an organization that costs taxpayers $50-million annually.

The Liberals created the CIB in 2017, during the Camelot days of Prime Minister Justin Trudeau’s first mandate. The concept was to fund projects that wouldn’t otherwise get built by attracting private-sector investors to revenue-generating infrastructure, such as toll highways and public transit.

After last October’s election, a new politician took over the file – Infrastructure Minister Catherine McKenna – and new priorities were added to the bank’s mandate, including rolling out high-speed internet and funding clean energy projects.

Inside Ms. McKenna’s infrastructure department, sources say, civil servants are growing increasingly frustrated over what they perceive as the plodding pace of the CIB under the leadership of chair Janice Fukakusa, the former chief financial officer at Royal Bank of Canada, and chief executive officer Pierre Lavallée, recruited from Canada Pension Plan Investment Board in June, 2018.

There are also concerns the CIB has failed to create teams that offer cutting-edge advisory services and research on infrastructure, two important elements of the organization’s original mandate.

To date, the Toronto-based CIB has made just two significant investments – one in Montreal’s light-rail transit system, another in expanding Ontario’s GO train network – and smaller commitments to a grab bag of renewable power, transit, electric transmission and water treatment projects. A source, whom The Globe and Mail agreed not to name because they are not authorized to speak publicly, said the relationship between federal officials and CIB leadership has become increasingly dysfunctional.

The CIB has also seen turnover in its senior ranks. François Lecavalier, who ran the Crown corporation’s project development strategy, left in January after a year on the job. The CIB’s first head of investments, Nicholas Hann, stepped down last summer after less than a year.

Federal government officials take a view that money should be flying out the door, as Canada suffers from an infrastructure deficit estimated at $150-billion. CIB executives privately complain that politicians, particularly at the municipal and provincial level, are failing to create the sort of projects it can back, because they are loath to impose the user fees needed to generate revenue from infrastructure, fearing the wrath of voters who, for example, have rarely ever paid tolls to use highways, bridges or tunnels.

In Ottawa circles, there is talk of rejuvenating the CIB by recruiting a new chair, and offering Ms. Fukakusa a graceful exit after three years in the role. One potential candidate is former Caisse de dépôt et placement du Québec CEO Michael Sabia; another is Aecon Group Inc. founder John Beck, who left the construction company last month. As with any role at a federal agency, there are also potential female and Quebec candidates to consider.

Mr. Sabia was an early and enthusiastic backer of the CIB and has a proven ability to bridge the two solitudes of government and business. But he may be conflicted: The Caisse was the CIB’s first customer, as the two partnered on Montreal’s transit network. Mr. Beck built some of the world’s largest infrastructure projects over a five decade career in construction, and has experience working with government, including serving as chair of the Ontario Power Authority, a provincial agency responsible for the future of the electrical grid (and now known as the Independent Electricity System Operator).

The same management logic – that trading players builds successful teams – is fuelling speculation that a new chair would recruit departing Canada Mortgage and Housing Corp. CEO Evan Siddall as the next chief of the CIB, replacing Mr. Lavallée. A spokesperson for the CIB declined to comment on the bank’s leadership.

However, any new executive would face the same issues that bedevil the CIB’s current leadership: They need to convince city councillors and provincial bureaucrats there’s a new way to build critical infrastructure, and it involves charging fees to users, and accepting that anger will come before acceptance. Changing the way Canadians pay for infrastructure, and making the CIB successful, is going to take patience and courage on the part of politicians.

The second option for Ms. McKenna is simply shutting down the CIB, which would be a significant about-face for the Liberals, and sticking with the traditional approach of funding infrastructure with public money. That would mean continued deficit spending, and fewer projects getting built. But suburban voters would still be able to commute, for example, without paying the full cost of the roads they drive.