Time to talk about iBanks in Canada: Brian Flemming
TIME TO TALK ABOUT iBANKS IN CANADA
Mark Twain famously said, “Everyone talks about the weather, but nobody
does anything about it.”
The same could be said about infrastructure in Canada today: “Everyone --on all points on the political spectrum --- talks about infrastructure but nobody suggests
serious, coherent policies on how to deal with Canada's vaunted 'infrastructure deficit.'”
Let's examine the policy terrain: last weekend's Liberal Party convention
passed a resolution that called for a “transformative Canadian infrastructure investment
plan” that would significantly expand the funds “invested or facilitated” by the federal
government up to a level of one per cent of GDP per year. Given that Canada's current
GDP is about $1.8 trillion, that would mean dedicating $18 billion per year to this plan.
Nothing was said about by whom this money would be administered.
The New Democrat's policy book says they would “[tackle] the
infrastructure deficit through a Canada-wide funding program that includes the
enhancement of the Gas Transfer Fund transfers to municipalities.” Its other policies
centre on more investment in public transit and VIA Rail. (see
xfr.ndp.ca/2013policybook, p. 3) Again, nothing is said about who would oversee these
For its part, the ruling Conservative government in Ottawa has pledged $70
billion in various “pots of capital” for public infrastructure in the coming years. (See
www.infrastructure.gc.ca/plan-eng), including $53 billion over ten years in a “New
Canada Building Plan.” Fourteen billion in this “pot” is made up of two funds --- “The
National Infrastructure Component” of $4 billion and $10 billion for a “ProvincialTerritorial Infrastructure Component.”
A paltry share of this “pot” --- $1.25 billion --- will go to the Crown
Corporation, P3Canada, for the “delivery of public infrastructure” under the direction of
a knowledgeable, arms-length board of directors and staff. But P3Canada's funding is
but a drop in the infrastructure “bucket.”
The bulk of the $70 billion in federal money --- $32 billion --- will be given
to municipalities “...for projects such as roads, public transit and recreational facilities,
and other community infrastructure.” (See www.infrastructure.gc.ca/plan) To date, more
than $660 million of this money has been granted to Toronto for Mayor Ford's pet
project, the Scarborough subway, a decision that appears to have been made in cabinet,
not through any transparent, publicly-accountable process.
While the federal funds are, admirably, the largest ever given by a federal
government for infrastructure, what is missing from its plan (and all the parties' plans) is
a coherent, transparent, accountable methodology for distributing the largesse.
What is needed today in Canada for infrastructure building and renewal is
an appropriate and trustworthy focal point for handling the infrastructure money in the
form of an “iBank” --- or a Canadian Infrastructure Bank, or CIB --- a federal Crown
Corporation would be arms-length from government and managed by the kind of expert
board that manages P3Canada.
And instead of using surplus budgetary monies from 2015-16 to capitalize
this iBank, the federal government should use a technique that is well-known in the
private sector --- it should divest itself of “surplus assets” such as airports; ports; the
Business Development Bank of Canada (which has long outlived the reasons for its
existence in its current form); and VIA Rail.
Those sales would bring in more than $15 billion in non-borrowed, non-tax
capital for the new CIB. If we had a truly conservative government in Ottawa, it would
allow the CIB to raise capital by issuing “paper” in form of bonds, notes or preference
shares that could be bought by the public. It would also empower the new CIB to join
with private sector or provincial infrastructure financing entities in making investments.
All around the world, countries and sub national entities have created, or are
talking about creating, iBanks. Yet, in Canada, where we have built up world-class
expertise in infrastructure investments, often abroad, through our large pension funds,
our insurance companies, our banks and companies like the Macquarie Group of
Canada, we do not use this expertise for our own benefit.
Indeed, while iBanks have been, or are being established, in the United
States, the European Union, Africa, Asia and South America, Canadians are not even
talking about the possibility of creating them here. The discussion is certainly timely as
traditional funding sources for infrastructure such as gas taxes, property taxes and
government grants appear to have gone as far as they can in dealing with the
infrastructure deficits across Canada.
If the federal government will not lead a serious debate about iBanks, then
the private pools of capital should take the lead in discussing the most rational and
focused way to pay for infrastructure in Canada. It's time.
Brian Flemming, CM, QC of Halifax is a Senior Fellow of the Van Horne Institute
(VHI) in Calgary and Counsel to the law firm of McInnes Cooper. He was the chair of
the Canada Transportation Act Review Panel in 2000-1. His paper, “Catching Up: The
Case for Infrastructure Banks in Canada” is to be issued this week by VHI.
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