The document discusses Canada's proposed Infrastructure Bank. It provides details on how the bank would work by leveraging government funding to attract private investment for revenue-generating infrastructure projects. It notes the bank has approved a $1.28 billion loan for Montreal's public transit system. However, critics argue this project offers a low rate of return. It also outlines operational costs for the bank and risks around ensuring projects provide sufficient returns to cover costs and debt repayment.

1. Infrastructure Bank and
Infrastructure Spending - Canada -
September 2018
By: Paul Young CPA, CGA
Date: September 4, 2018

2. Agenda
• What is infrastructure bank?
• How does an infrastructure bank work
• Bank Rules/Infrastructure Bank
• Issues/Risks facing infrastructure bank

3. Summary
• Investors will want investment protection built into their model including returns
• Government would have to back projects with government debt as well as support
through grants and subsidies
• Taxpayers would be paying tolls or higher transit fees
• Middle class is already tax to death as such an new tolls or fees will mean less money
for other goods and services

4. What is an Infrastructure Bank?
• https://www.liberal.ca/realchange/canada-infrastructure-bank%E2%80%A8%E2%80%A8/
• The federal government can use its strong credit rating and lending authority to
make it easier and more affordable for municipalities to build the projects their
communities need.
• Where a lack of capital represents a barrier to projects, the Canada Infrastructure
Bank will provide loan guarantees and small capital contributions to provinces and
municipalities to ensure that the projects are built.

5. How does an Infrastructure Bank work?
Source - http://smallbusiness.chron.com/infrastructure-bank-work-39194.html
Revenue for infrastructure -- such as roads, highway projects and bridges -- is typically
supplied by state and municipal bonds or federal monies. Unlike Europe, the United
States does not have a central source of financing for large-scale construction projects.
An infrastructure bank would provide a central source of funds for these necessary
construction projects.

6. Infrastructure funding
• It is very important to look at ways to leverage capital as
part of building infrastructure -
https://www.youtube.com/watch?v=ug-bQBtsnvE
• Here are the issues:
• Pensions funds do not take infrastructure projects on
unless they meet an investment criteria
• If projects do not make money then those projects will
likely be bail out with more tax dollars
• The last major toll road built in Canada was the 407.
New toll roads means more taxes to people. So, how is
more user fees actually helping the middle class.

7. Liberal Party of Canada
• https://www.youtube.com/watch?v=7pFjHC_wItg

8. Infrastructure Bank and Infrastructure Spending
Source - https://www.cbc.ca/news/politics/infrastructure-bank-funding-1.4830772
According to Finance Canada documents obtained through
the Access to Information Act, in March 2018 the bank
requested a draw-down from the federal Consolidated
Revenue Fund of $5,756,000 to cover operational expenses
until the end of June. That followed an earlier request in
August 2017 for $5,610,000 to cover initial expenses.
Operation Expenses
Projects Approved
• Montreal Transit System - Loan Value - $1.28B –
Project Value $6 billion
Issue – Low Rate of Return
• Critics also have lamented the low rate of return
for the bank under the REM deal. The bank's
investment is a 15-year secured loan at a rate
starting at 1 per cent, escalating to 3 per cent over
the 15 year duration.
• Meanwhile, institutional investor CDPQ Infra's 70
per cent equity stake in the REM will see an 8 to 9
per cent return, while the Government of Québec's
30 per cent stake will see a 3.7 return. "That's a
commercial decision for the bank. They operate on
an arms-length basis," said

9. Infrastructure Bank / Funding
• https://watershedsentinel.ca/articles/whose-canada-infrastructure-bank/ or http://www.ctvnews.ca/politics/federal-budget-to-show-how-infrastructure-bank-can-attract-free-up-investment-1.3332522
CTV News – March 20, 2017

10. Capital Markets – September 17, 2018
Source – BMO and TSX
Key Policy
• C69 – will make it difficult to get projects
of the ground
• Liberals are pushing carbon taxation
which will lead higher costs
• FDI has left Canada –
https://www.bnnbloomberg.ca/foreign-
investment-holds-steady-in-canada-
despite-u-s-tax-cuts-1.1130459

11. Liberal Party of Canada Infrastructure Banking
Backing
Source - http://www.cbc.ca/news/opinion/infrastructure-bank-1.4512240
• Ports
• Price for exports
and imports would
reflect cost recovery
of capital
• Bridges and Roads
• Tolls
• Transit Systems
received subsidies from
Government
• Supported by
property taxes
Middle class is under attack -
https://globalnews.ca/news/3769136/taxes-middle-class-
liberals/
Trudeau’s GDP and Job growth are also not accurate in terms of
health of the economy -
https://www.slideshare.net/paulyoungcga/real-truth-canada-
and-united-states-gdp-january-2018
Canada is less competitive today than it was when Harper left
office -
https://www.slideshare.net/paulyoungcga/competitiveness-
canada-vs-other-countries-january-2018
Harper had the best middle class in the world, right?
https://www.youtube.com/watch?v=yOl37VcG89c (Trudeau
has failed the middle class) -
https://www.slideshare.net/paulyoungcga/middle-class-
analysis-and-commentary-canada-january-2018

12. Toronto to HQ – Infrastructure Bank
• The Canada infrastructure bank will be located in Toronto, where its members
will have easy access to investors in the city’s financial district whose dollars the
Liberals need to make the agency a success.
• The proposed bank would take $35 billion in government funding to entice
private investment in projects like public transit systems, highways and
electrical grids that generate revenues through user fees or tolls.
• The Liberals predict they can leverage three or four times the federal
investment in private dollars for projects in three key areas: trade corridors,
green infrastructure and public transit.
Canadian Manufacturing – May 9, 2017

13. Loans / Infrastructure bank
• Montreal Transit - https://www.theglobeandmail.com/business/article-canada-
infrastructure-bank-loaning-128-billion-to-montreal-electric/
• Funding Starting - https://business.financialpost.com/news/economy/canada-
infrastructure-bank-announces-first-investment-as-gaps-persist-in-ottawas-186-7-
billion-spending-plans

14. Risk with Infrastructure Bank
• Cost of Capital vs- return on capital for projects
• Projects would then require tolls/users fees as part of supporting the requirement
• Pensions Funds have certain requirement in terms of investment
• How will the stress test be completed?
• Banks need to follow the Bank Act as well as Basel and Solvency Reporting
• Who sits on the board for the infrastructure bank
• Is the board independent?
• What happens when projects lose money?
• Are there guarantees? i.e. taxpayers flip the bill for the short-falls
• Municipalities asked for dedicated funding, not loans
• Interest expense would be cover through increase taxes and user fees