The federal finance minister came to the defence Tuesday of the Liberals’ promised, $35-billion infrastructure bank, insisting it would create less risk for taxpayers than if the government shouldered the financial burden for projects alone.
The infrastructure bank is a key component in the Liberals’ economic growth strategy. It’s designed to use public funds as leverage to attract billions more in private investment for large projects, such as rail lines, bridges and transit systems.
By looking beyond government funds to finance a project, Finance Minister Bill Morneau argued Ottawa would shift more of the risk to private investors and put them on the hook for the majority of cost overruns. Government would take on a smaller role, he added.
Taxpayers would feel some pain as well if a project were to generate added costs, but it would be minimal compared to the bill taxpayers would have to foot if the project was funded entirely from public coffers, he said.
“The essence of the infrastructure bank is it will allow us to complete infrastructure in this country with less risk — it’s actually de-risking infrastructure projects,” Morneau told The Canadian Press.
“We’ve off-loaded some of the risk to those (private) investors, which can only be positive for Canadians. … We’ve made sure that we do more projects, we find outsiders to take on that financial risk and we assure that over the long term there’s a contract that provides certainty for Canadians.
“We see it as a win-win-win.”
Morneau’s remarks come amid constant criticism from political rivals over the soon-to-be-launched infrastructure bank. Opponents on the left and the right have accused the government of putting taxpayer dollars at risk in order to lure private investment, details of which have been outlined in internal government documents obtained by The Canadian Press.
The Trudeau government has faced repeated calls to slow down its plans amid concerns the government is rushing through the legislation to create the bank without proper parliamentary scrutiny.
Morneau said the government has discussed the proposal at length: through the economic advisory council, the fall economic statement and in the March budget. He also said he has talked about the bank at parliamentary committees and in the House of Commons.
“There’s been a significant amount of time spent discussing this and that the approach that we’ve taken will allow us to get on with project by project to build confidence in this institution over time,” said Morneau, who also believes the government has provided enough clarity on how the bank will work.
“My sense is that people understand that there’s a demand from Canadians to have infrastructure that has the ability to meet their needs — whether it’s public transit infrastructure, or affordable housing across our country, or wastewater systems that deal with climate change impacts — and that we should get on with it.”
The bank would look to fund projects that are too costly for governments, too risky for the private sector to cover alone, and which generate revenue to provide a return on investment for all involved.
All proposals would require government approval before the agency could strike a financing deal and funding would flow on a project-by-project basis. The rate of return to private investors will be tied to their share of the risk — the bigger the risk, the bigger the payoff.
Once a project is completed, the ownership of whatever is built would be split between the different levels of government involved and the private investors based on their financial stakes in the project, Morneau said.
Even if the government takes a hit to its financial stake in a project, there may be benefits through construction, engineering and planning jobs, as well as productivity gains that provide economic gains over and above the government’s investment, Morneau said.
“Since we don’t have the projects yet to consider, we can’t very well argue that this is going to have this specific advantage,” Morneau said.
“We’re not going to over-promise and under-deliver. Instead we’re going to take a project on based on the merits of the project and then show people that it’s going to make sense.”