Fed pro­gram to free up bil­lions?

Fed­eral bud­get to show how in­fra­struc­ture bank can at­tract, free up in­vest­ment

The Intelligencer (Belleville) - - NATIONAL -

OT­TAWA — A new in­fra­struc­ture bank could free up bil­lions in new money for social ser­vices Cana­di­ans reg­u­larly use, in­ter­nal gov­ern­ment doc­u­ments say — pro­vided the ex­per­i­men­tal new in­sti­tu­tion meets its lofty fi­nanc­ing goals.

The pre­sen­ta­tion, pre­pared for the eco­nomic growth coun­cil that’s ad­vis­ing Prime Min­is­ter Justin Trudeau and his cabi­net, shows tran­sit and wa­ter pro­jects go­ing through the bank could mean more fed­eral dol­lars for social in­fra­struc­ture like child care, recre­ational fa­cil­i­ties and se­niors’ cen­tres.

Fund­ing for social in­fra­struc­ture pro­jects, which tend to be less at­trac­tive to pri­vate in­vestors, could in­crease by one-third if the bank meets its tar­get of lever­ag­ing $4 in pri­vate in­vest­ment for every $1 from the fed­eral gov­ern­ment, the doc­u­ments in­di­cate.

Those doc­u­ments, ob­tained by The Cana­dian Press un­der the Ac­cess to In­for­ma­tion Act, demon­strate the Lib­eral gov­ern­ment’s think­ing on how money from its long-term in­fra­struc­ture pro­gram could help them meet their eco­nomic and po­lit­i­cal goals.

The pro­gram’s three streams — social, tran­sit and so-called “green” in­fra­struc­ture — are worth al­most $69.1 bil­lion in new fund­ing over the next 10 years.

The green stream, which fo­cuses on wa­ter and waste­water pro­jects, could for ex­am­ple be used to fund en­ergy retrofits for af­ford­able hous­ing pro­jects, free­ing up bil­lions in the social in­fra­struc­ture fund slated for low-in­come shel­ter work.

Wed­nes­day’s bud­get will un­veil more de­tails of how the money will flow and where the fund­ing for the bank will come from, say sources who spoke on con­di­tion of anonymity in or­der to dis­cuss de­tails not yet made pub­lic.

Con­cerns have per­sisted that the fund­ing would be di­verted away from money ear­marked to cities and provinces. The gov­ern­ment has ar­gued the promised in­fra­struc­ture money re­mains avail­able even if it is de­liv­ered through the bank, which cities and provinces will have the op­tion of us­ing.

More de­tails about the bank it­self will come in the weeks and months to fol­low once cabi­net has ap­proved tabling the leg­is­la­tion that will cre­ate the in­sti­tu­tion, the sources said.

The Lib­er­als plan to fi­nance the bank with $35 bil­lion — $15 bil­lion of it in cash — to back­stop pro­jects and at­tract pri­vate in­vest­ment for those that can gen­er­ate rev­enue through tran­sit fares, wa­ter rates or road tolls.

The hope is that the fed­eral money will gen­er­ate $140 bil­lion in pri­vate in­vest­ment, par­tic­u­larly from pen­sion plans look­ing for steady, pre­dictable re­turns that will also keep up with in­fla­tion.

The gov­ern­ment has al­ready un­veiled the con­cept of the bank and the dol­lar fig­ures at­tached to it, re­mov­ing much of the po­lit­i­cal in­trigue ahead of Fi­nance Min­is­ter Bill Morneau’s sec­ond fed­eral bud­get Wed­nes­day.

But the con­cept has un­leashed flurry of ar­gu­ments.

A study re­leased Mon­day from the Cana­dian Cen­tre for Pol­icy Al­ter­na­tives sug­gests the bank will cost Cana­di­ans more over the long term. In it, econ­o­mist Toby Sanger ar­gues that much de­pends on in­ter­est rates: The fed­eral gov­ern­ment can bor­row at rates be­low 2.5 per cent, while pri­vate in­vestors want re­turns of seven to nine per cent.

Based on Sanger’s cal­cu­la­tions, Cana­di­ans could end up foot­ing the bill for an ex­tra $150 bil­lion in fi­nanc­ing costs on the $140 bil­lion in in­fra­struc­ture in­vest­ments the gov­ern­ment hopes to see come out of the bank.

A sec­ond re­port from TD Eco­nom­ics says the bank meets a grow­ing de­mand in Canada for new ways of merg­ing pri­vate dol­lars into in­fra­struc­ture pro­jects, but warns that the gov­ern­ment should en­sure the bank doesn’t over­lap with ex­ist­ing fed­eral fund­ing pro­grams.

The note says the bank should fo­cus on large scale, new pro­jects that gen­er­ate rev­enue.


Work­ers pre­pare to re­place a wa­ter main in this file photo. Wed­nes­day’s fed­eral bud­get will un­veil de­tails of the gov­ern­ment’s planned in­fra­struc­ture bank.

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