The federal government’s proposed infrastructure bank is still shrouded in mystery, and a not-for-attribution briefing by government officials this week provided few answers to critics’ concerns.
Reporters filed into a downtown Ottawa office building for a technical briefing hoping to gain a better understanding of the infrastructure bank with help from officials from several departments, including the finance department and Infrastructure Canada.
The legislation to establish the bank is included in the government’s budget bill, which is inching towards approval in the House of Commons despite harsh criticism of the lack of details about the bank and the insufficient time for MPs’ review.
The government has said the bank would be funded with up to $35 billion “to attract private sector and institutional investment to new revenue-generating infrastructure projects that are in the public interest.”
The government says it hopes the public funds will attract up to $120 billion from private investors.
But Monday’s briefing didn’t provide any details on the bank’s operation. Reporters were asked not to directly quote or attribute information to the high-level bureaucrats at the briefing.
The officials insisted the bank is not setting up public-private partnerships
There’s a “considerable difference,” they said, between P3s and the infrastructure bank. The bank is a “partnership model around public assets” with the public remaining in control, they said.
But private partners will be involved in any projects funded by the bank, officials said. Funding will come through the finance department and the Bank of Canada and money will be released from the government as it’s needed, officials said. They cited water treatment facilities and bridges not likely to be built without the bank’s help as examples of projects that could be funded.
The briefing became muddy when it came to questions about the financial details or projects the bank will fund.
There were no answers to questions about risk mitigation for taxpayers, returns expected by private partners and whether the government will guarantee returns to private investors.
Officials said such details would be worked out on a project-by-project basis.
One government official insisted the bank would transfer a majority of project risk onto private partners.
But a Canadian Press story this week contradicted the briefing claims.
It cited documents showing that Jim Leech, a special advisor helping the government set up the bank, was told by Ottawa the bank could bear a significant amount of risk on projects. Leech is the former CEO of the $175-billion Ontario Teachers’ Pension Plan fund.
The articles also said the government may allow the infrastructure bank to take on debt to ensure private backers of projects get paid first and could give private investors exclusive rights on profits.
A report prepared by the Institute of Fiscal Studies and Democracy at the University of Ottawa released last month said there is not enough information on Canada’s infrastructure needs to determine if an infrastructure bank is warranted. The institute was founded by former parliamentary budget officer Kevin Page.
“One could make a strong case that the priority for the Canadian government should be to complete the analysis on its existing stock and future needs before shovelling money out the door,” said the report.
NDP leadership candidate and economist Guy Caron said the bank is a “boondoggle” waiting to happen.
“The government seems to be trying to convince us there won’t be any cost for the public in this, which is false because those private investors are not going to invest simply because they want to be generous,” Caron told The Tyee. “They will want their return.”
He said fees and tolls needed to ensure profits for the private partners would cost the public more than simply borrowing to build infrastructure.
Caron said the public needs to see clear criteria for the bank’s proposed project funding.
“It’s being very loosely created right now,” he said. “We’re going to see this as a major source of headaches for future governments.”
Caron also said he’s worried the bank’s plan to only fund projects worth more than $100 million will leave out smaller communities and their infrastructure needs.
The bank doesn’t serve the public’s needs, he said.
“It’s really to serve the companies that the prime minister has been enamoured with from the get go,” Caron said.
Conservative infrastructure critic and Surrey MP Dianne Watts said the public should be concerned about the lack of clear criteria for projects to be funded by the bank.
As well, the potential for political interference is “significant,” she said.
“The board’s picked by cabinet, the finance minister underwrites the loans, cabinet chooses the projects and they’re saying it’s arm's length,” she said. “Well, it’s not arm’s length.”
Watts said potential clients don't know if they’re pitching their projects to the bank or to cabinet.
The Liberals have allowed private investors, including BlackRock, the world’s largest asset management firm, to have a significant role in setting up the bank, she said, even allowing BlackRock managers to vet a presentation to potential investors.
“What could possibly go wrong?” Watts asked, sarcastically.