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Former budget watchdog's think-tank questions Liberal infrastructure bank plan

Last Updated May 4, 2017 at 1:00 pm PST

OTTAWA – Researchers at a think tank headed by Canada’s former parliamentary budget watchdog are poking holes in the federal government’s plan to create a new infrastructure financing agency.

Kevin Page’s team at the University of Ottawa says the Trudeau government hasn’t shown a solid business case for its new infrastructure bank, which is designed to attract private dollars to finance public goods.

The Institute of Fiscal Studies and Democracy says the Liberals could build more infrastructure by simply borrowing cash at interest rates lower than those offered to the private sector and passing on the savings to cities and provinces.

Instead, the private sector may look for returns higher than those rates, the institute argues in a blog post Thursday. A 2015 analysis from J.P. Morgan Asset Management found the private sector would expect returns of up to 10 per cent for energy infrastructure and 12 per cent for toll roads.

“Why are we privatizing the returns for those (assets) when they would be going to the public sector?” said Randall Bartlett, the institute’s chief economist.

“There really isn’t a case that’s been made for the need for this bank overall, relative to existing tools that we have for infrastructure investment.”

A spokesman for Infrastructure Minister Amarjeet Sohi said cities and provinces can voluntarily use the bank, calling it just one tool in the Liberal infrastructure plan.

Brook Simpson said the bank will also work with Statistics Canada, cities and provinces to better track the country’s infrastructure needs — addressing another concern from Page’s team.

“This initiative will help the federal government and our partners better understand demand and usage, provide a national picture on the state of performance of public infrastructure, track impacts of infrastructure investments and deliver high-quality data analytics to inform policy and decision-making.”

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.

The legislation to create the bank is contained in a budget bill that’s currently at second reading stage in the House of Commons.

Government officials have looked to sell the bank to private pension funds as a way to ensure returns for their members.

At the same time, civil servants involved in the bank’s creation continue to talk about the new agency with stakeholders in meetings held under the condition that nothing they say be directly attributed to them — known as Chatham House rules.

At one such meeting in February, those in the audience were told that the timing and design of federal support would look to minimize the amount of government support needed to make a project financially viable.

The detail is contained in a presentation given at the meeting and obtained by The Canadian Press under the Access to Information Act.

— Follow @jpress on Twitter