Don’t sell public assets to pay for infrastructure
The Canadian government is pursuing a policy that could leave us all tenants in our own house. It’s a risky direction that we will regret.
The government unveiled the new policy last year, moving to sell off two portfolios of critical national infrastructure — Canada’s eight largest airports and 18 major ports.
To be fair, Transportation Minister Marc Garneau has said this is not “a done deal.” The government has merely engaged two investment banks, Credit Suisse AG and Morgan Stanley, to “investigate options.” But the direction is clear. So, why would government want to sell assets that are instrumental in the delivery of national trade policy, and invaluable to every Canadian who flies within or beyond our borders?
In their 2016 budget, the Liberals said they were looking for sources of revenue to pay for new infrastructure. They dubbed it “asset recycling.”
But selling ports and airports wouldn’t recover value from facilities we no longer need. It would privatize assets that are still essential.
And that points to a motive more ideological than economic, as members of the government argue the assets might be better managed in private hands. A recent C.D. Howe Institute report suggested privatized airports would have greater incentive to expand retail options for their passengers — a position debunked by Vancouver International Airport Authority CEO Craig Richmond, who questioned the divestiture.
Richmond pointed out YVR already has the highest per-passenger retail space and the highest rates of airport concession sales in North America.
The C.D. Howe report author, Steven Robins, countered that YVR’s retail sales are higher than, say, Toronto Pearson because of YVR’s status as a travel hub to Asia.
The goal should be to identify the optimal way to create and maintain crucial infrastructure. Surely, that means protecting the things we need.
Consider the fate of once-bulletproof retail giants like Eaton’s or Woodward’s when they sold off their real estate. Obviously, there were other issues, but both companies woke up one day with balance sheets that showed all liabilities and no assets. And now they’re gone.
How do we pay for what we want without sacrificing what we need? One consideration is covered by historically low interest rates. There has never been a better time to borrow for sound public investments.
The other consideration is one I discovered as the CEO of SFU Community Trust, which is developing UniverCity, a new community beside Simon Fraser University’s Burnaby Mountain campus. The B.C. government wisely prohibits its public institutions from selling property that was endowed by the province. So, following the example of the University of British Columbia, we created development parcels and made them available through 99-year leases — with the lease amount payable up front.
You might assume that purchasers would demand a significant discount on a 99-year lease, compared to what they might pay if land was for sale outright. But universities are low-risk lease managers, so little discount is showing up on our bottom line.
A century from now, SFU will be enjoying a renewed income flow, and in the meantime, it is building community, creating endowment wealth and maintaining a proprietary interest that protects the rights of everyone involved.
The federal government deserves credit for seeking innovative ways to finance new infrastructure. But if other ports or airports aren’t hitting the mark, that deserves attention.
There are better options than selling off Canada’s strategic assets. We’re going to need them, forever.