TRAN Committee Report

SUPPLEMENTARY REPORT

OF THE

NEW DEMOCRATIC PARTY OF CANADA

The Canada Infrastructure Bank

The New Democratic Party supports the findings and recommendations of the majority report, which detail at length the failures of the Canada Infrastructure Bank (CIB). This includes problems with efficiently delivering projects, the issues arising from private sector involvement in delivering public infrastructure, the inadequate sensitivity to the needs of communities in funding decisions and issues with costs and transparency at the bank. It is for this reason that the NDP supports the recommendation to abolish the bank in its current form.

This supplementary opinion is intended to highlight further testimony from the study which demonstrates that these problems are rooted in the core mandate of the bank and will be impossible to overcome without fundamental reform. In particular, the selection of projects to attract private investment and the inherently profit-driven operation of completed projects are integral to the bank’s privatization agenda and severely limit its ability to serve the public interest. In addition, this supplementary opinion proposes that by supporting passage of Bill C-245, the Government could alternatively reform the bank’s mandate and activities to better suit the public’s interests and those of Indigenous and Northern communities.

The Canada Infrastructure Bank was first announced in the 2016 Fall Economic Statement. At the time, the federal government spoke of the bank as a tool to leverage public infrastructure funding to attract private financing for projects. Then Finance Minister Bill Morneau and the Prime Minister promised each federal dollar invested would leverage as much as $11 from the private sector.

The bank was indeed a chance to address Canada’s growing infrastructure deficit – a real and pressing concern in Canada that is leaving communities without the tools they need to build healthier and more sustainable communities in the face of the climate crisis, wealth inequality and the rising cost of living.

With an ample $35 billion in federal government funding, the CIB should have been able to narrow Canada’s infrastructure gap and deliver projects that created jobs and improved communities. But four years after its inception, in October 2020, when the House of Commons Standing Committee on Transport, Infrastructure and Communities adopted a motion from NDP MP Taylor Bachrach to study the Bank, it had largely failed to deliver on this promise. At the time, the bank had announced only a handful of projects and only one, the Réseau Express Métropolitain (REM) in Montreal, had received funding and begun construction. Co-financed by the Government of Québec and the Caisse de dépôt et placement du Québec, the project had attracted none of the private sector investment the federal government had promised.

Over the course of the committee’s study, numerous witnesses detailed the many ways in which the bank has failed to deliver on its mandate. Parliamentary Budget Officer (PBO) Yves Giroux presented his office’s recent analysis of the Bank’s funding commitments to date. It found that only three percent of the Bank’s $35 billion capital commitment had been disbursed and warned that the bank was not on track to meet its own goals. Subsequent PBO analysis has confirmed the bank is unlikely to meet its spending objectives, forecasting a spending shortfall of $19 billion[1].

Perhaps most frustrating was the PBO’s analysis of the Bank’s project selection process. At the time of Mr. Giroux’s appearance, the CIB had received 420 project proposals but had only publicly committed to 13. Alarmingly, he found the Bank had rejected or was no longer considering 82 percent of the submitted projects. Most were screened out because they were in the wrong sector or deemed not of sufficient size. As the large number of proposals showed, communities clearly have infrastructure needs that require federal support, however, the bank’s dogmatic fixation with massive projects and private sector investment means it rejects most proposals.

The PBO’s findings echo a concerning theme the Committee heard from witnesses: that the Canada Infrastructure Bank pursues a privatization agenda to the detriment of the public interest. New Democrats remain particularly concerned that such an approach is likely to result in rural, remote and Indigenous communities being overlooked in favour of parts of the country that offer the highest returns to private investors.

This was a consistent feature of testimony from witnesses including Canadians for Tax Fairness, the Canadian Union of Public Employees and the Council of Canadians, all of whom argued that public-private partnerships – particularly those that see private operators collect revenue through user fees – inherently raise questions about which projects are selected. They questioned whether Canadians can trust that infrastructure projects are being funded because they serve the greatest public interest and not because they offer the highest returns for private equity investors whose overriding interest is realizing a return on their investment.

Professor Heather Whiteside pointed to particularly concerning comments from the CEO of the Canada Infrastructure Bank, who said that he planned to address criticism of funding delays by being “more active in soliciting partnerships rather than waiting for offers.” He added that this approach would “start with the market and work backwards.” As Professor Whiteside testified, these comments reflect a reversal of the procurement relationship, placing the financial interests of potential private funders as the starting place for project selection rather than the needs of the Canadian public. Mr. Sanger from Canadians for Tax Fairness echoed this concern:

[The Canada Infrastructure Bank] should be focusing on its and Canadians' priorities in these ways, and not the priorities of whatever private financier, or whatever company, comes along. Otherwise you're just playing to the highest profit, and that's not what we need in our society right now. We have increasing inequality and a climate crisis as well.

Indeed, witnesses highlighted that some of the projects the Bank has funded so far have raised outstanding questions regarding the public interest. Perhaps the most frequently cited example was the Mapleton Water and Wastewater Project, a $20 million commitment from the bank which was subsequently cancelled by Mapleton Council. Despite Ontario’s troubled track record with water service privatization, Canada Infrastructure Bank officials hailed the Mapleton project as a pilot to model privatization of municipal water services in communities across Canada[2]. Mr. Ramsay from the Canadian Union of Public Employees testified on the lessons this project illustrates:

But the CIB model, as we saw play out in Mapleton, demonstrated an unsuitability for that context. The pace of the project start-up, legal consultation and negotiation of contracts was a significant cost to the town, which paid hundreds of thousands of dollars without getting a project in the end. [T]hey realized that it would be cheaper to do it themselves because they could finance the project at much cheaper rates themselves. That experience I think would be for small municipalities across the country

In addition to failing to reflect communities’ infrastructure needs, a number of witnesses highlighted the bank’s privatization mandate and its preference for public-private partnerships as an inherently inefficient approach to funding infrastructure. Not only has the promised multiplier factor proven wildly inaccurate, witnesses also argued private financing is largely unnecessary due to the availability of lower-cost financing available to government bodies.

The Bank’s use of public-private partnerships, especially those undertaken with private financing, is likely to cost Canadians more over the long term. This is because when the operation of public infrastructure is handed over to private corporations via long-term contracts, investors must recoup their investment and turn a profit through increased user fees such as tolls, fares or higher utility bills. Rather than using public revenue to build the infrastructure communities need, this government is pursuing a model that benefits wealthy investors and leaves everyday Canadians on the hook to cover the costs, regardless of their own ability to pay. As Mr. Sanger testified:

The only purpose that P3s fill is to engage in some off-book financing and provide private finance with lucrative low-risk investment opportunities that taxpayers will cover for decades to come. If these projects are really privatized, we will undoubtedly end up with some really inadequate infrastructure

During the Committee’s study, witnesses repeatedly referenced expert studies in Canada and around the world that have demonstrated the private investment model is a costly and inefficient approach to funding infrastructure. In particular, witnesses referenced a study from the Auditor General of Ontario, who found public-private financing of infrastructure projects resulted in a higher actual cost than traditionally delivered projects.

Overall, the committee’s study made it clear that beyond simple delays and inefficiencies at the Canada Infrastructure Bank, its core mandate to build large projects with private sector involvement is inherently problematic. It raises serious questions about whether projects are being delivered in the public interest, and saddles Canadians with higher long-term costs as they repay the investments of wealthy financiers. Given the seriousness of these failings, the government must either undertake serious reforms to the Bank or abolish it altogether.

Fortunately, New Democrats have proposed solutions to salvage the Canada Infrastructure Bank so that it lives up to its promise and serves the infrastructure needs of communities while supporting climate change mitigation and adaptation, rather than financing the interests of wealthy investors. In particular, MP Niki Ashton’s Bill C-245, An Act to Amend Canada’s Infrastructure Bank Act, addresses a number of issues facing the bank similar to the ones identified in the Committee’s study, including removing the privatization aspect of its mandate, prioritizing projects in Indigenous and Northern communities and altering the structure of the board at the Bank.

By altering the mandate of the Bank to remove references to the pursuit of private investment and the required profitability of infrastructure projects, Bill C-245 would allow the Bank to fund infrastructure projects in communities that have long been neglected by the federal government and truly work in the public interest for all Canadians. Similarly, by prioritizing Indigenous and Northern communities, this legislative initiative would ensure that the Bank would focus on communities with the greatest infrastructure needs. Changing the structure of the board of the bank to include First Nations, Metis and Inuit voices would also be a vital reform. The government must acknowledge that the greatest infrastructure gap in the country is in these communities and that it is inconceivable that in 2022 in an age of reconciliation that these communities don’t have a say in what’s happening on their land.

The committee also heard a lot about the lack of transparency from the Canada Infrastructure Bank, with witnesses pointing out the Bank’s refusal to share all documents requested by the PBO and the lack of briefings to Parliament. It is New Democrats belief that the Bank, through the relevant minister, should have to brief Parliament annually to ensure adequate transparency at the Bank.

New Democrats strongly urge all Parliamentarians to support Bill C-245 as a means to salvage the Bank. Without a fundamental reform of the Bank to address the concerns identified in this study, then the government would be left with no choice but to abolish the Bank.