OTTAWA — A new infrastructure bank could free up billions in new money for social services Canadians regularly use, internal government documents say — provided the experimental new institution meets its lofty financing goals.
The presentation, prepared for the economic growth council that’s advising Prime Minister Justin Trudeau and his cabinet, shows transit and water projects going through the bank could mean more federal dollars for social infrastructure like child care, recreational facilities and seniors’ centres.
Funding for social infrastructure projects, which tend to be less attractive to private investors, could increase by one-third if the bank meets its target of leveraging $4 in private investment for every $1 from the federal government, the documents indicate.
Those documents, obtained by The Canadian Press under the Access to Information Act, demonstrate the Liberal government’s thinking on how money from its long-term infrastructure program could help them meet their economic and political goals.
The program’s three streams — social, transit and so-called “green” infrastructure — are worth almost $69.1 billion in new funding over the next 10 years.
The green stream, which focuses on water and wastewater projects, could for example be used to fund energy retrofits for affordable housing projects, freeing up billions in the social infrastructure fund slated for low-income shelter work.
Wednesday’s budget will unveil more details of how the money will flow and where the funding for the bank will come from, say sources who spoke on condition of anonymity in order to discuss details not yet made public.
Concerns have persisted that the funding would be diverted away from money earmarked to cities and provinces. The government has argued the promised infrastructure money remains available even if it is delivered through the bank, which cities and provinces will have the option of using.
More details about the bank itself will come in the weeks and months to follow once cabinet has approved tabling the legislation that will create the institution, the sources said.
The Liberals plan to finance the bank with $35 billion — $15 billion of it in cash — to backstop projects and attract private investment for those that can generate revenue through transit fares, water rates or road tolls.
The hope is that the federal money will generate $140 billion in private investment, particularly from pension plans looking for steady, predictable returns that will also keep up with inflation.
The government has already unveiled the concept of the bank and the dollar figures attached to it, removing much of the political intrigue ahead of Finance Minister Bill Morneau’s second federal budget Wednesday.
But the concept has unleashed flurry of arguments.
A study released Monday from the Canadian Centre for Policy Alternatives suggests the bank will cost Canadians more over the long term. In it, economist Toby Sanger argues that much depends on interest rates: The federal government can borrow at rates below 2.5 per cent, while private investors want returns of seven to nine per cent.
Based on Sanger’s calculations, Canadians could end up footing the bill for an extra $150 billion in financing costs on the $140 billion in infrastructure investments the government hopes to see come out of the bank.
A second report from TD Economics says the bank meets a growing demand in Canada for new ways of merging private dollars into infrastructure projects, but warns that the government should ensure the bank doesn’t overlap with existing federal funding programs.
The note says the bank should focus on large scale, new projects that generate revenue.
Jordan Press, The Canadian Press