Concerns raised about bank risks for taxpayers

Federal investments doled out through the government’s new infrastructure financing agency may be used to ensure a financial return to private investors if a project fails to generate enough revenues, documents show.

The revenues attached to projects financed through the soon-to-be-created infrastructure bank are key to the government’s plan to leverage private capital to pay for public roads, bridges and transit systems.

What investors have recently been told — and what the finance minister was told late last year — is that if revenues fall short of estimates, federal investments through the bank would act as a revenue floor to help make a project commercially viable.

That would be the case when the bank takes a subordinated equity position, where the government buys ownership shares in a project, and would only be reimbursed after those higher up the equity ladder receive their repayments.

Experts say the wording in the documents suggests taxpayers will be asked to take on a bigger slice of the financial risk in a project to help private investors, a charge the government rejects.

The opposition parties have taken the Liberals to task for days in the House of Commons over the plans to create the bank, enshrined in a budget bill the government wants passed before the summer recess. During the daily question period Wednesday, the Liberals were forced to defend how the bank would reduce risks for the private sector.

Infrastructure Minister Amarjeet Sohi said the bank wouldn’t invest in projects that are too risky, or that aren’t in the public interest. The experts that will run the agency “will make sure that taxpayer dollars are always protected.”

Conservative Leader Andrew Scheer questioned why private investors wouldn’t pick up the full tab for projects if the government was only going to pick those that never lose money. “Liberals will handpick projects and they’ll hand-pick the investors and they admit that the bank is all about de-risking private projects for private investors,” he said. “That means that investors get all the profit and taxpayers get all the risk. Can the prime minister explain to hardworking Canadians why he’s asking them to co-sign loans for the richest one per cent?”

Sohi said several public pension funds already invest in infrastructure projects, but overseas. “What is wrong, Mr. Speaker, if the same organizations … work with our government to build the infrastructure that our Canadian communities need?” Sohi said.

The Liberals see the bank as a way to build projects that are too expensive for government to handle and too risky for the private sector to tackle alone. The government plans to infuse the new institution with $35 billion, hoping to pry three or four times that amount from the private sector for large-scale projects.