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opinion

The street outside the chic glass headquarters of the Caisse de dépôt et placement du Québec is a dug-up construction site these days as workers move to replace a worn-out concrete overpass spanning the Autoroute Ville-Marie that runs below ground through downtown Montreal.

Not that Michael Sabia needed one, but the din of jackhammers is a noisy reminder for the Caisse chief executive officer of Quebec's immense infrastructure deficit, as the cash-strapped province strives to catch up on long-neglected repairs and make good on long-promised upgrades to public transit.

Mr. Sabia has leaped to the rescue under an agreement with Quebec that would see the Caisse take the lead on future infrastructure projects, leveraging its $226-billion in assets to finance, build, own and operate everything from light rapid-transit systems to commuter trains. The Caisse chief has put a sunny face on this "virtuous" plan, telling a recent parliamentary hearing that "each time you take the train, you'll be making a contribution to your pension fund."

Not everybody is as enthusiastic about the idea as Mr. Sabia and Finance Minister Carlos Leitao, however. The current hearings into Bill 38, which would authorize the Caisse's new role, have revealed plenty of skepticism among pensioners, opposition politicians and municipalities alike that the Caisse could generate an acceptable return on infrastructure projects without running up against the government's political imperatives or willingness of transit users to pay up.

Municipalities complain that one of the key sources of revenue the Caisse is counting on to finance future projects – so-called tax-increment financing, or the increase in property taxes raised on land above or near transit stations – will deprive them of money that should rightfully be theirs. Retirees worry that infrastructure is merely the flavour of the month at the Caisse, much like its disastrous foray into asset-backed commercial paper (ABCP), and could leave them to pay the price.

Since the Caisse's devastating $40-billion loss in 2008, on the heels of ABCP writedowns and the financial crisis, public-sector workers have seen their pension contributions increase significantly without any increase in benefits, Pierre-Paul Côté, the head of the association of retired teachers, told the National Assembly's public finance commission. "We're told that the new CEO has cleaned house …We hope so. Because certain observers are asking themselves whether the Caisse's recent successes won't lead it to commit [the same] sins of overconfidence."

The government has identified two initial projects, totalling $5-billion, for CDPQ Infra, the Caisse unit created to handle its infrastructure business: a light-rail transit project on the new Champlain Bridge linking Montreal's western downtown and the suburban South Shore of the St. Lawrence River, and a commuter train through Montreal's West Island linking downtown to Trudeau airport.

Mr. Sabia insisted, before the commission, that the Caisse would ensure the profitability of its projects through "a tight control of costs," notably by opening up public tenders to foreign bidders "to maximize competition." But how that will play politically, given the government's long preference for favouring local players on transit projects, remains to be seen.

Mr. Sabia also cited Caisse subsidiary Ivanhoé Cambridge's record of completing real estate projects "on time, on budget." But the Caisse faces long odds meeting the 2020 deadline set for the completion of CDPQ Infra's intital projects. The timing of the LRT depends on the construction of an entirely new bridge, by another level of government, that has not even started. And transferring responsibility for the so-called Train de l'Ouest from Montreal's regional transit authority to the Caisse means scrapping work already completed by the agency, since the Caisse favours a different route.

Mr. Sabia said the Caisse's "governing principle" for both projects will be to "minimize fares in order to maximize ridership." But Parti Québécois finance critic Nicolas Marceau countered that "what maximizes ridership is a fare of zero, not bigger than zero, but a fare of zero," suggesting the Caisse would face a trade-off between ridership levels and profitability.

Indeed, the mayor of the South Shore city of Longueuil, Caroline St-Hilaire, summoned the government to "put users at the heart" of the new law by including a "mechanism that would prevent significant fare increases in order to meet the Caisse's need for a return on investment."

Quebec, however, would face charges of political interference and violating a legal contract if it tried to stop the Caisse from raising fares. Envisioning this kind of future dilemma led Mr. Côté, the retired teachers' representative, to conclude: "The Caisse will be torn between different elements of its mission. Our members fear paying the price, be it as savers or as citizens."