Infrastructure bank may avoid risky projects, minister says
The government’s new agency for financing major construction projects might take a pass on proposals that pose too great a risk for taxpayers when they’re asked to make a private sector idea a reality, the infrastructure minister says.
Amarjeet Sohi said the key test for the so-called infrastructure bank, which combines public and private funding for major projects, will be whether it is financially viable in the long run to provide the necessary returns to public and private investors.
The government will be taking on financial risk regardless of what projects go ahead, but only on its portion of the funding, not the entire cost of the project, Sohi said in an interview Wednesday with The Canadian Press.
The Liberal government has been parrying opposition questions about the agency and just how much public money will be on the line for transport, energy, and transit projects that could cross municipal, provincial and international borders.
“That is the review that the bank will do: is it too risky for the government to get involved? Maybe the government will not get involved,” Sohi said.
The Liberals see the bank as a way to use public dollars to leverage private funding for projects that are either too expensive or too risky for Ottawa or the private sector to go it alone.
The government plans to fund the bank with $15 billion in cash from its long-term infrastructure plan and a further $20 billion in financing, the costs of which would be defrayed through project user fees or other revenue streams.
The bank is not exactly what the Liberals promised during the 2015 election.
The party’s campaign platform proposed using the government’s “strong credit rating and lending authority” to provide low-interest loans and “small capital contributions” to help provinces and cities build projects that lacked the necessary capital.
Sohi said the Liberals changed the concept of the bank because provinces didn’t want Ottawa to compete with or duplicate their own lending agencies that provide financing to municipalities.
Instead, the Liberals looked to woo private investors for financing help, enlisting the help of investing giant BlackRock to bring together deeppocketed international investors last year. The government has refuted opposition charges that private investors have too much say in how the bank is being designed.
The opposition criticism about the bank has expanded since the legislation to create the bank was tabled last month, with questions about how much more Canadians would be forced to pay in user fees to provide a return to private investors — Sohi said those would be project-by-project decisions — and whether taxpayers could lose money if federal loans aren’t repaid.
The auditor general this week warned about the risk of outstanding federal loans, including $1.9 billion in loans, loan commitments and loan guarantees from Export Development Canada that taxpayers could be on the hook for if the loans are ultimately not repaid.