Mark Twain famously said, "Everyone talks about the weather, but nobody does anything about it."
The same could be said about infrastructure in Canada today: "Everyone – on all points on the political spectrum – talks about infrastructure but nobody suggests serious, coherent policies on how to deal with Canada's vaunted 'infrastructure deficit.'"
Let's examine the policy terrain: The recent Liberal Party convention passed a resolution that called for a "transformative Canadian infrastructure investment plan" that would significantly expand the funds "invested or facilitated" by the federal government up to a level of 1 per cent of GDP a year. Given that Canada's current GDP is about $1.8-trillion, that would mean dedicating $18-billion a year to this plan. Nothing was said about by whom this money would be administered.
The New Democrat's policy book says they would "[tackle] the infrastructure deficit through a Canada-wide funding program that includes the enhancement of the Gas Transfer Fund transfers to municipalities." Its other policies centre on more investment in public transit and VIA Rail. Again, nothing is said about who would oversee these investments.
For its part, the ruling Conservative government in Ottawa has pledged $70-billion in various "pots of capital" for public infrastructure in the coming years, including $53-billion over ten years in a "New Canada Building Plan." Fourteen billion in this "pot" is made up of two funds –– "The National Infrastructure Component" of $4-billion and $10-billion for a "Provincial-Territorial Infrastructure Component."
A paltry share of this "pot" – $1.25-billion – will go to the Crown Corporation, P3Canada, for the "delivery of public infrastructure" under the direction of a knowledgeable, arms-length board of directors and staff. But P3Canada's funding is but a drop in the infrastructure "bucket."
The bulk of the $70-billion in federal money – $32-billion – will be given to municipalities "...for projects such as roads, public transit and recreational facilities, and other community infrastructure." To date, more than $660-million of this money has been granted to Toronto for Mayor Rob Ford's pet project, the Scarborough subway, a decision that appears to have been made in cabinet, not through any transparent, publicly-accountable process.
While the federal funds are, admirably, the largest ever given by a federal government for infrastructure, what is missing from its plan (and all the parties' plans) is a coherent, transparent, accountable methodology for distributing the largesse.
What is needed today in Canada for infrastructure building and renewal is an appropriate and trustworthy focal point for handling the infrastructure money in the form of an "iBank" –– or a Canadian Infrastructure Bank, or CIB –– a federal Crown Corporation would be arms-length from government and managed by the kind of expert board that manages P3Canada.
And instead of using surplus budgetary monies from 2015-16 to capitalize this iBank, the federal government should use a technique that is well-known in the private sector – it should divest itself of "surplus assets" such as airports; ports; the Business Development Bank of Canada (which has long outlived the reasons for its existence in its current form); and VIA Rail.
Those sales would bring in more than $15-billion in non-borrowed, non-tax capital for the new CIB. If we had a truly conservative government in Ottawa, it would allow the CIB to raise capital by issuing "paper" in form of bonds, notes or preference shares that could be bought by the public. It would also empower the new CIB to join with private sector or provincial infrastructure financing entities in making investments.
All around the world, countries and sub national entities have created, or are talking about creating, iBanks. Yet, in Canada, where we have built up world-class expertise in infrastructure investments, often abroad, through our large pension funds, our insurance companies, our banks and companies like the Macquarie Group of Canada, we do not use this expertise for our own benefit.
Indeed, while iBanks have been, or are being established, in the United States, the European Union, Africa, Asia and South America, Canadians are not even talking about the possibility of creating them here. The discussion is certainly timely as traditional funding sources for infrastructure such as gas taxes, property taxes and government grants appear to have gone as far as they can in dealing with the infrastructure deficits across Canada.
If the federal government will not lead a serious debate about iBanks, then the private pools of capital should take the lead in discussing the most rational and focused way to pay for infrastructure in Canada. It's time.
Brian Flemming is a senior fellow of the Van Horne Institute (VHI) in Calgary and counsel to the law firm of McInnes Cooper. He was the chair of the Canada Transportation Act Review Panel in 2000-1. His paper, "Catching Up: The Case for iBanks in Canada" was recently relaseased by VHI.