As Ottawa plows ahead with plans for the Canada Infrastructure Bank, Finance Minister Bill Morneau must surely be telling himself: "If you build it, he will come."
But like Kevin Costner's character in the 1989 fantasy baseball movie, Field of Dreams, Mr. Morneau is taking a leap of faith that it will all work out.
Here's the idea: Sink $35-billion into a newly created federal agency charged with building major public infrastructure projects. Identify projects that have potential to generate revenue, such as highways, water systems and high-speed rail lines. And then make the pot of cash multiply three or four times by persuading pension funds and other large private investors to pony up.
The point of it all is to get more and better infrastructure from limited federal dollars.
It's not uncharted territory. Australia has a similar national infrastructure agency mandated with the task of marrying public and private funds to build nationally important projects.
But it's a complicated model that requires a host of elements to come together – money, expertise, worthy projects and freedom from political interference.
It's not at all clear Mr. Morneau has all the details right as he rushes to get the bank up and running by the end of this year. The implementing legislation has been crammed into a 300-page budget bill and the government is giving scant opportunity to review the plan – just a couple of hours of review by a House of Commons committee.
The potential pitfalls are many. Ottawa has a poor track record of keeping its fingers out of these sorts of things, particularly when billions of dollars are on the line. The bank will be a federal Crown corporation, with a chairman and board of directors appointed by the government, as well as a chief executive, initially appointed by the government. Mr. Morneau has also said Ottawa will have a hand in approving individual projects.
The vast majority of worthy projects belong to provinces and municipalities. And they may balk at entrusting their pet projects to an agency that is mainly beholden to the federal government. The Quebec government has already served notice that it wants the legislation rewritten to make the bank subject to provincial law.
On the other hand, retain too little government control and investors could wind up with too much sway over public assets.
It's a fine balance. And in a report released this week, the Senate banking committee says it isn't convinced the legislation, as drafted, has it right.
Then there is the question of generating sufficient returns to attract private capital. The larger the return, the more interest there will be from investors. But revenue-generating projects are rare. And generating big returns could inflate overall project costs, or put a greater financial burden on users – rail passengers, motorists and taxpayers. It's not clear if the bank or investors will take the hit if revenues fall short of projections.
There is no point creating the bank if there is insufficient investor interest. Ottawa could continue funding infrastructure the way it always has – by giving the money to lower levels of government.
Mr. Morneau has strayed in some important ways from the plan laid out by his Advisory Council on Economic Growth, headed by public-policy guru and McKinsey & Co. managing partner Dominic Barton. As Mr. Barton put it, attracting institutional capital and project expertise hinges on creating a truly independent governance structure, where management and decision-making remain above the political fray. Among his recommendations: creating a long-term roster of worthy projects, looking out a decade or more. Governments could review the list every three years or so.
Another key element of Mr. Barton's vision for the bank would be to create a "flywheel of reinvestment" – so-called asset recycling. That would involve selling existing government assets, such as airports, and using the proceeds to pay for new infrastructure. That part of the federal plan has run into resistance from local airport authorities, and many Canadians, who are skeptical of privatizing government assets.
Unless Mr. Morneau gets the structure right, the Canada Infrastructure Bank could become another expensive and bureaucratic way to dole out scarce funds.