Financial safeguards to be part of new infrastructure bank: Sohi
Measures planned to protect taxpayers, vet projects to ensure they are sound
The federal infrastructure minister and his top officials tried Thursday to ease a Commons committee’s fears that taxpayers could be left holding the bag if projects funded through a proposed infrastructure bank go bankrupt.
Top officials from Infrastructure Canada told MPs that bank deals, which include some level of financial risk to the federal treasury, will be worded to protect taxpayers in cases where one or more parties go into default.
Infrastructure Minister Amarjeet Sohi told the committee that the bank, once it is created, will also conduct extensive analyses on proposals before approving them for funding, to ensure the projects are financially sound and deliver an economic boost.
“There is a lot of money in the private sector that can be mobilized to build infrastructure that our communities need to grow our economy,” Sohi said during his committee appearance.
“The private sector creates jobs. They create jobs in many other ways and if we can mobilize that capital to build the necessary infrastructure, as well as grow our economy, we don’t see a downside to that.”
Sohi could not say, however, who would make the final decision about what projects the bank would finance. Most of those details won’t be worked out until after this year’s federal budget, but officials were quick to point out that the bank would be accountable to Parliament.
Among the details still under review are the size and location of the bank’s offices, a point Sohi made when a fellow Liberal MP pushed for it to be in Montreal.
The new, experimental infrastructure bank will take $35 billion in public funding to attract private investors to fund infrastructure projects that may not otherwise be built for years, or projects that public or private organizations can’t afford on their own.
The Liberals have promised that cities and provinces won’t be forced to use the bank, but officials said it will fund projects that can generate a return for private-sector investors.
The bank will be able to spend $15 billion in cash with the remaining $20 billion to be used in loan guarantees or equity stakes to spur private investment.
Officials said the financial risk to the federal government will be recorded in the year-end federal accounting books.
The practice is one the parliamentary budget office flagged in its most recent report on the federal infrastructure program. The budget watchdog said it is difficult to determine the actual financial risk to federal finances for existing loan guarantees and recommended parliamentarians may want more details from the bank once it is up and running.
If we can mobilize that capital to build the necessary infrastructure ...we don’t see a downside to that.