When it comes to building infrastructure, Ottawa has had its share of white elephants. But it is a signal achievement of the Trudeau government to have given us a bank meant to fund public works that is itself just another bridge to nowhere.
The Canada Infrastructure Bank, created in 2017, sounds reasonable enough on paper. Its mandate is to invest $35-billion in revenue-generating public infrastructure projects, with the goal of attracting even more investment from the private sector and pension funds.
The bank’s contribution can be in the form of equity, loans, loan guarantees or subordinate debt. Its only goal is to get its capital back, so it can reinvest it in other projects.
The Trudeau government sold the CIB as a jazzier alternative to the traditional way of paying for bridges, highways, transit and other public works. That traditional way of doing things goes something like this: Each level of government involved funds a portion of the total cost and the infrastructure gets built. The end.
The Liberals boasted that every taxpayer dollar invested by the CIB would pull in at least $4 from private investors. So Canadians would get four times the infrastructure at one-quarter the price. Or something like that.
It didn’t happen. From the start, critics raised red flags. One predictable hurdle was that pension funds and private investors will only put money into infrastructure projects that generate revenue through user fees – which politicians are allergic to. Canada’s highways may be worth tens of billions of dollars, but they’re almost all “free” (as in entirely supported by taxes), because politicians are terrified of asking users to pay a toll.
The other hurdle was the risk of government interference. The federal cabinet has final say over the CIB’s projects, which leaves investors vulnerable to four-year election cycles and partisan agendas.
The CIB was seen as possibly being useful for some federal infrastructure builds, but was considered a risk for projects involving provincial and municipal governments – which oversee most of Canada’s infrastructure – because of the added layer of political complexity and bureaucracy it would bring to the table.
Three years later, the CIB has committed just $4-billion to just four major projects and has only actually deployed its capital in one of them: $1.28-billion on Montreal’s new REM light-rail system. The bank has otherwise spent $55-million to help Via Rail develop a plan for high-frequency train service between Toronto, Ottawa and Montreal. It is also serving as a consultant on five projects seeking private investment.
The CIB did commit $20-million to a water and waste-water management project in Mapleton, Ont., in 2019, but the project collapsed last month after critics raised questions about the privatization of a public resource.
That’s not a stellar record and it certainly doesn’t prove the Liberal thesis that non-governmental investors will come rushing in if Ottawa puts up quarters to their dollars.
Yet Prime Minister Justin Trudeau is still talking up the CIB. He announced last week that it will invest $10-billion in yet-to-be-named projects focused on green retrofits, electric transit buses, broadband internet in remote regions and farm irrigation.
The announcement highlights the CIB’s two basic flaws: its complicated structure and its politicization.
It’s hard to pretend any more that the CIB is an arm’s-length Crown corporation or that it independently chose to target the types of projects that are close to the Prime Minister’s green heart and to his political agenda. Having the Prime Minister announce your investments tends to undermine the claims of independence or the notion that the CIB is a “bank.”
And the institution’s complicated financing strategy hardly seems more efficient than providing grants to municipalities that want to purchase electric buses or giving tax breaks to building owners that want to do a retrofit.
As a final nail in the coffin, it’s doubtful the CIB would survive a change of government. During last year’s election campaign, the Conservatives vowed to shut it down.
Barring an unexpected reversal of fortune, such as it becoming truly independent of its political masters, the CIB is going to be remembered as a Liberal boondoggle – which is an odd legacy for something that was supposed to improve the financing of public infrastructure.
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