The Ontario government says it intends to launch a provincial infrastructure bank with $3-billion in initial funding, one of few new initiatives outlined in a fall economic statement that warns of an unsteady economy and a worsening provincial deficit.
Few details about the proposed Ontario Infrastructure Bank were spelled out in Thursday’s annual fall fiscal update. The federal government launched a similar institution in 2017, and this kind of bank has been set up in several other jurisdictions, including Britain and California.
Typically, these institutions lend money for key infrastructure projects with more flexible terms or lower interest rates than a private-sector bank would offer. Ontario says the bank would focus initially on long-term care homes, power projects, affordable housing and transportation infrastructure. The aim is to use the bank’s support to attract the big pools of cash in the hands of public-sector pension plans and other large institutional investors.
Ontario Finance Minister Peter Bethlenfalvy says the bank is needed as Ontario’s population grows rapidly and the province struggles to keep up with the demand for new infrastructure after decades of underinvestment.
“You look around the world, and there’s many infrastructure banks in many parts of the world, which helps get things built that perhaps otherwise wouldn’t get built,” he told reporters after tabling his fall economic statement in the Ontario Legislature.
His annual fall fiscal update warns that with economic growth stalling, the windfall increases in tax revenues Ontario has seen in recent years are also drying up.
As a result, the deficit for 2023-24 is now expected to hit $5.6-billion – much larger than the $1.3-billion projected about seven months ago in Ontario’s March budget. The modest $200-million surplus projected for 2024-25 has also deteriorated into a projected $5.3-billion deficit. But the government is still projecting balanced books by 2025-26, in time for the next election, with a $500-million surplus.
The CEO of the Canada Infrastructure Bank (CIB), Ehren Cory, said Ontario’s new infrastructure bank will complement his own bank’s efforts at financing infrastructure in the province.
More than half the CIB’s existing projects are already in Ontario, including a nearly $1-billion low-interest loan to help build small modular reactors at Ontario Power Generation’s Darlington site, and the two organizations have overlapping mandates to invest in transportation and energy.
“We will absolutely be collaborating together. I suspect we will co-invest in things, we will share due diligence, we will look at deals together,” Mr. Cory said.
Mr. Bethlenfavly said Thursday that pension funds had told the government they were eager to invest more in Ontario infrastructure alongside a bank like the one he has proposed. But some of Ontario’s largest pension funds issued statements emphasizing the investments they have already made in the province.
Ontario Teachers’ Pension Plan, which manages $250-billion of assets including $25-billion in Ontario, said in a statement that it will engage with government “to learn more about new projects created by the Ontario Infrastructure Bank.” And Ontario Municipal Employees Retirement System (OMERS) said it is “always interested in pursuing new investments in our home province.”
The opposition at Queen’s Park was unimpressed with the government’s planned new bank.
While Mr. Bethlenfalvy said the bank would be “arms-length” and governed by a board of directors, NDP finance critic Catherine Fife said she was concerned about who would be chosen to run the institution, citing the scandal over the PC government’s now-rescinded move to allow developers to build on the province’s protected Greenbelt and previous patronage controversies.
“Cronyism, hacks – those are all good words to be using,” she said.
To help municipalities, Ontario says it will offer $200-million over three years for new water systems, to “unlock new housing opportunities.” But the new money comes amid a battle over the government’s recent changes to the fees municipalities can charge developers for new infrastructure – changes municipalities have said will cost them billions in revenue.
Ontario is proposing to expand an existing tax credit for critical mineral exploration, which would provide an additional $12-million in tax credits. And it is adding $100-million to its Invest Ontario Fund, which provides grants to companies to attract jobs. The province is also pledging to create a new regulatory framework for the “target benefit” pension plans offered by unions for workers in the skilled trades, aiming to keep these plans sustainable.
The fiscal update also contains a number of measures that were announced by the government earlier this week, including a pledge to extend an existing gas and fuel tax cut until June, slash the harmonized sales tax on new rental housing, and allow women as young as 40 to request breast-cancer screening.