Introduction

The Canada Infrastructure Bank (CIB) was announced in the 2016 Fall Economic Statement as a way to attract private sector investment in Canadian infrastructure. It was established as a Crown corporation the following year by the Canada Infrastructure Bank Act (CIBA).

According to section 6 of the CIBA, the CIB’s purpose is to

invest, and seek to attract investment from private sector investors and institutional investors, in infrastructure projects in Canada or partly in Canada that will generate revenue and that will be in the public interest by, for example, supporting conditions that foster economic growth or by contributing to the sustainability of infrastructure in Canada.

The CIB’s Corporate Plan Summary, 2020–21 to 2024–25 lists the corporation’s three responsibilities as advising on, investing in, and developing knowledge and research about new infrastructure investment in Canada. The CIBA authorizes the CIB to contribute to infrastructure projects through equity investments, loans and loan guarantees. It also provides a budget of up to $35 billion.

On 29 October 2020, the House of Commons Standing Committee on Transport, Infrastructure and Communities (the Committee) adopted the following motion:

That, pursuant to Standing Order 108(2), the Committee undertake a study on the mandate and activities of the Canada Infrastructure Bank, including a review of the projects that the Bank has supported and possible alternate mechanisms for funding for comparable projects and that no fewer than five meetings be set aside for this study.

Between 23 February 2021 and 23 March 2021, the Committee held five meetings on this subject. It heard from twenty-four witnesses.

Efficiency

Much of the discussion throughout this study turned on the question of the CIB’s efficiency, with several witnesses expressing concern that projects were not flowing as quickly as expected. For example, Mary Van Buren, President of the Canadian Construction Association, considered the state of progress to be “pretty dismal right now,” while Heather Whiteside, Associate Professor, Political Science at the University of Waterloo (appearing as an individual), opined that the CIB “hasn’t done much” considering that, of the 13 projects announced, “over half are in the MOU stage, a couple are basically providing low-cost financing, some are advisory services.”

Dylan Penner, Climate and Social Justice Campaigner with the Council of Canadians, told the Committee that the CIB’s delays, which he considered inherent to projects with private sector involvement, are particularly concerning considering the urgent need for infrastructure to address the climate crisis.

Meanwhile, Brendan Haley, Policy Director for Efficiency Canada, argued that the CIB has the potential to take on a “market-creating” mission to help promote building retrofits as a new area for productive private investment. Martin Luymes, Vice-President of Government and Stakeholder Relations with the Heating, Refrigeration and Air Conditioning Institute of Canada, added that investing in decarbonized electricity grids would further support building retrofits in addressing the climate crisis.

Sandra Skivsky, Chair of the National Trade Contractors Coalition of Canada, told the Committee that, for her members, an announcement does not mean that shovels are in the ground, and that her members have not been contacted about any CIB projects. In order to speed up infrastructure projects, Robert Ramsay, Senior Research Officer, Research with the Canadian Union of Public Employees, recommended that the government fund projects directly, much as it does with the Federal Gas Tax Fund.

As Ms. Skivsky explained to the Committee, delays can have a significant impact on the construction industry, which relies on a steady flow of projects to ensure short-term capacity. Despite the long-term societal benefits of large-scale projects, these do not address the immediate issues facing construction workers in want of a project. She added that the status of CIB projects is unclear, with information difficult to obtain, and that although her members have heard of new project announcements, these have yet to translate into actual work: “somewhere something is holding them up because they are not started.”

In response to these concerns, the Honourable Catherine McKenna, Minister of Infrastructure and Communities, told the Committee that the government has updated the approval process for CIB projects to ensure the CIB has independence to make project-specific investment decisions, thereby accelerating the process. Ehren Cory, Chief Executive Officer of the Canada Infrastructure Bank, also pointed out that, despite an initial slow start, the pace of investment commitments by the CIB has been accelerating and building momentum.

Private Sector Involvement

The purpose of the CIB, as set out in its enabling legislation, is to “invest, and seek to attract investment from private sector investors and institutional investors, in infrastructure projects in Canada or partly in Canada that will generate revenue and that will be in the public interest”[1]. Mr. Cory told the Committee that the CIB is “on the right track” as one part of a broader infrastructure plan. Yves Giroux, the Parliamentary Budget Officer (PBO), disagreed, indicating that, based on information reviewed by his office, the CIB is not meeting its own goals. He referred to a blog post, released by his office, concluding that, despite the CIB’s goal of leveraging private investment, projects to date have been exclusively funded by federal, provincial and municipal levels of government.

A point of significant contention regarding this conclusion was what constitutes a non-governmental source of funding. Mr. Cory and John Casola, Chief Investment Officer with the Canada Infrastructure Bank, indicated that pension plans, as well as the Alberta Irrigation Districts, represent pensioners and farmers, and are therefore private sources. Mr. Giroux responded that his office, based on the definition established by Statistics Canada, considers all sources of funding for current CIB projects, including public pension funds and the Alberta Irrigation Districts Association, to be “government entities”.

Many witnesses were also polarized on the issue of public-private partnerships (P3s) in principle. Some claimed that P3s, and particularly the Canadian P3 model, have a strong track record of delivering projects on time and on budget.[2]

Among the proponents of P3s, Derron Bain, Managing Director of Concert Infrastructure, was of the view that the CIB is crowding out opportunity for private sector equity and debt investment in infrastructure projects. As such, he noted “an abundance of private capital available for infrastructure investment in Canada but an undersupply of project opportunities.”

Other witnesses took the opposing view that not only is the CIB a solid example of the P3 model, but this model is fundamentally flawed.[3] To support that conclusion, several references were made to a report by the Auditor General of Ontario which, in reviewing 74 P3 projects in that province, found that public financing of those projects would have resulted in a lower cost.[4]

Mr. Penner told the Committee that, “in an attempt to cut corners and maximize profits, private companies operating P3s often try to reduce their workforce and avoid ‘unnecessary’ investments in the public interest, delivering poorer quality.” Prof. Whiteside, while not disputing that the P3 model can deliver projects on time and on budget, simply argued that the same can be said of the traditional contracting model.

Dr. Ryan Riordan, Associate Professor with the Institute for Sustainable Finance at Queen’s University, agreed that the CIB does follow a P3 model, to its advantage. He argued that “combining different sources of funding, accepting the fact that public funds are not inexhaustible and allowing the private sector to help guide the capital to the most productive uses of that capital lead to public-private partnerships that could increase economic growth.”

Finally, Mr. Cory disagreed with the premise that the CIB falls under any model, presenting it instead as a unique “made-in-Canada” approach to infrastructure funding. He presented the CIB’s goal in engaging private capital as twofold: “to grow the pie of money we have to pay for these projects—because we all have to admit that there’s a limit to what we can do from purely tax-based, traditional grant funding” and “to grow that pie in ways that create a good alignment of incentives, so that if you have a private sector partner, they have every incentive in the world to build it well and run it well over the long term.” Both Mr. Cory and Minister McKenna clearly underscored that the CIB has no mandate to privatize public assets.[5]

Despite these reassurances, several witnesses expressed concerns with what they considered to be an inherent draw towards privatization within the current CIB model.[6]

Reflecting the Needs of Communities

Among the projects that have progressed is the Réseau Express Métropolitain (REM), a light rail network in the city of Montreal. Toby Sanger, Executive Director of Canadians for Tax Fairness, considers this to be “the only project with a realization somewhat consistent with its original vision,” despite environmental controversies and potential delays and high costs. Mathieu Vick, Union Advisor—Research, SCFP-Québec with the Canadian Union of Public Employees, did not view this project as a success story. According to him, the project aims to replace a high-functioning and electrified commuter train with another, at the cost of $1.2 billion.

The preferable alternative, Mr. Vick proposed, would have been for a new infrastructure project to complement the existing transit network, rather than “bringing in a new player, changing all the rules and creating havoc within the system.”

Mr. Penner and Mr. Ramsay both expressed concern that private sector involvement results in projects responding more to investors, rather than being tailored to the actual needs of municipalities.

Some witnesses also raised the example of the Mapleton Water and Wastewater project.[7] After being announced and beginning to move forward, the project was cancelled by the Mapleton Council. According to witnesses, the council determined that funding the project itself would be more cost-effective than to proceed with the rates offered by the CIB. Mr. Ramsay suggested that this conclusion would be applicable to other small communities across Canada, while Mr. Penner spoke specifically of “remunicipalization” in regards of water-related infrastructure, “because people, communities and councils are recognizing just how bad water P3s are for their communities.”

Various proposals were put forward to address the perceived shortcomings in the CIB’s current approach. Mr. Ramsay recommended that the CIB’s governance model be amended “so that provinces and municipalities have a seat at the table.” For her part, Ms. Van Buren suggested that more flexibility is needed to ensure more rapid movement on projects, particularly with the goal of post-pandemic recovery: “the barrier seems to be more in moving it from the federal government to the provincial governments and then to the municipalities.”

Mr. Sanger pointed out that several provinces, through a municipal financing corporation, are able to provide much lower cost financing for municipalities, in much the same way the federal government could, “pooling capital and getting lower cost loans for public infrastructure.”

Tabatha Bull, President and Chief Executive Officer of the Canadian Council for Aboriginal Business, noted favourably that the CIB’s investment team and board of directors include Indigenous representation. In particular, she pointed to the Kivalliq Hydro-Fibre Link project as “crucial to advancing the economy” of Nunavut and Manitoba. She added that Indigenous infrastructure development requires “patient capital, private sector investment and development expertise in partnership with indigenous peoples and businesses.” Niilo Edwards, Executive Director of the First Nations Major Projects Coalition, pointed to the benefits of involvement in major projects for Indigenous communities, as these can then “leverage their economic participation in these major projects to secure those revenue streams and to then deliver community infrastructure using the proceeds from their involvement as equity owners.”

Chief Sharleen Gale, Chair of the First Nations Major Projects Coalition, told the Committee that the First Nations Major Projects Coalition sees “a role for the Canada Infrastructure Bank to play in filling a critical gap concerning capital access to First Nations and all indigenous people,” and that they believe “the bottleneck right now is for our nations to access that capital. There is a natural role for the Infrastructure Bank to play that will remove that bottleneck and unleash economic growth.”

Chief Gale also said that “including indigenous nations as equity owners is a very effective way to get our informed consent while ensuring that we benefit from resource development and have control over environmental and social impacts.”

Cost

Regardless of the model it follows, several witnesses were critical of the cost of CIB-funded projects, particularly with regard to borrowing rates. These witnesses told the Committee that, in relying on private financing, the CIB is missing an opportunity to offer municipalities the significantly lower interest rates that could be obtained through the federal government.[8]

As previously mentioned, however, Mr. Giroux maintained that the CIB has yet to leverage any private sector funding and that it, since its creation, has behaved “like a traditional government entity in providing grants or loans or whatever type of financing that is typical of government institutions without leveraging private sector involvement.” He referred again to a blog post published by his office that concluded that, despite having received hundreds of project proposals, the CIB has committed to only 13 projects and finalized investments on only two. As a result, he indicated that roughly 3% of the CIB’s $35 billion in capital has been disbursed, with proposals largely screened out “because they don’t fit within the government’s targeted sectors: transit, green, clean power, broadband, and trade and transportation.”

Mr. Giroux declined to offer an opinion on whether the CIB generally provides good value for money to Canadians, responding that this was “all in the eye of the beholder.” He did, however, compare the CIB’s annual office expenditures of $41–42 million for a staff of 74 to the $7 million budget for his own office of slightly more than half that number of employees.

Transparency

Some witnesses indicated that a full assessment of the CIB was difficult due to a lack of transparency, particularly in terms of the CIB’s projects but also regarding its own budget.

Mr. Vick spoke of difficulty in obtaining information on “where this money is going and who is getting the contracts” and receiving nearly completely redacted documents in response to access to information requests. Mr. Penner told the Committee that, in his view, a lack of transparency is widespread in P3s as a whole.

Mr. Giroux also reported difficulty in obtaining detailed information from the CIB. According to him, his office received information that was largely already public. The CIB claimed confidentiality issues prevented it from providing anything more, although Mr Giroux told the Committee that the PBO is entitled to receive confidential information of a commercial nature. He added that “four years into the federal government’s infrastructure expansion, we’re unable to provide parliamentarians with a full status update because the government has not kept track of information on all funded projects.”