At first glance, Bay Street and the federal Liberals seem miles apart when it comes to infrastructure.
The finance crowd sees investors lining up to put private money into public projects. BMO Nesbitt Burns, a market leader in the infrastructure bond market, confidently predicts the coming year will see private investors commit a record $8.7-billion of debt financing to Canadian projects, up from approximately $7-billion in both 2016 and 2015.
The projection reflects investments in everything from big-ticket items, such as the $4-billion Gordie Howe bridge between Windsor and Detroit, to small renewable power and transit schemes. Yet, Finance Minister Bill Morneau and Liberal economic guru Dominic Barton are out making the case for a government-based Canada Infrastructure Bank (CIB), an agency seemingly designed to throw money at projects.
When formally launched in October, the CIB was billed as a "once-in-a-generation opportunity" to blend $40-billion of taxpayer money with pension fund savings and create a new, $200-billion institution.
If Bay Street is awash in cash earmarked for bridges and the like, why is Ottawa intent on creating an infrastructure bank?
The issue here is one of semantics: The Liberals aren't proposing a bank in the traditional sense of the word. The CIB is more a dating service, meant to introduce revenue-generating projects to income-seeking investors.
As part of the match-making, the CIB serves as chaperone, setting the rules on the returns investors can expect and the protection consumers will get, with an eye toward building successful long-term relationships.
Keep in mind that the CIB, a federal agency, would typically be hooking up investors with assets owned by provincial or municipal governments. That role of CIB as an agency that oversees infrastructure investments is essential to the Liberals actually making something of their once-in-a-generation opportunity, according to bankers with international expertise in infrastructure.
Countries that successfully attract private capital to major projects – Australia and Britain – do so by creating independent regulatory authorities that set and enforce rules, with an eye to the interests of both investors and customers.
These agencies keep an eye on everything from airports, highways and train tracks to water and electricity. They ensure decisions are made for economic reasons, rather than political whim. With these regimes in place, Canada's biggest pension plans felt comfortable becoming significant investors in Australian and British infrastructure.
The Liberals know what's needed here in Canada. In setting out the agenda for infrastructure renewal this fall, Mr. Barton's Advisory Council on Economic Growth made it clear that a sound regulatory regime is a priority. The council's report in October said: "Institutional investors need assurances regarding efficient siting, permitting, approvals and compensation mechanisms – these should be transparent, time-bound and standardized wherever possible."
Canada doesn't need a government-backed "bank" to fund much-needed infrastructure. Money is not the issue when it comes to building new infrastructure in Canada: Past experience shows there is private-sector capital available for the right public projects. The challenge is creating a regulatory regime that gives investors confidence, keeps the provinces and municipalities onside and protects the interests of the public. If the Liberals want to brand that agency as a bank, so be it.