OTTAWA – Finance Minister Bill Morneau is suggesting that small municipalities won’t see much – if any – benefit from the federal government’s proposed new infrastructure bank.
The bank, to be launched next year, is intended to attract billions in private investment for public infrastructure projects.
But Morneau told the Federation of Canadian Municipalities on Tuesday that global institutional investors will be looking to invest only in “large transformational projects” that produce a revenue stream, from which they can earn a high rate of return on their investment.
He says it’s unlikely they’ll want to sink money into roads and bridges in small communities.
In a question-and-answer session hosted by the federation, Morneau made no mention of the notion that a number of small communities with similar projects could bundle them together in order to make them more appealing for international investors.
But FCM president Clark Somerville said the federation wants to ensure that all municipalities, big or small, are able to take advantage of the bank; he says rural Liberal MPs have assured him they’ll be pushing hard for the bundling concept.
“One thing that they talked about that they were really hoping to push for was exactly the bundling and was having it for the smaller communities,” said Somerville, who met earlier Tuesday with members of the Liberals’ rural caucus.
While Morneau didn’t mention bundling during his meeting with the FCM members, Somerville said he’s encouraged by the fact that the minister has promised to consult closely with municipal leaders as the government hammers out the details of the infrastructure bank, which is to be formally created in the 2017 budget in a few months.
Morneau has already announced that the bank will be launched with $15 billion in direct federal investments and another $20 billion in repayable contributions, loans and loan guarantees. The government hopes to leverage up to $5 in private investment for every $1 in government funding; to that end, Morneau and Prime Minister Justin Trudeau have been courting some of the world’s most powerful institutional investors.
Asked Tuesday what kind of projects he envisages being financed through the bank, Morneau said: “The notion behind the bank is that it’s going to provide projects that are going to be large because they’re going to large enough that institutional investors will be interested in them and these tend to be large investors that need to be able to write a large cheque.
“They’ll be projects that will have some way of having a revenue stream,” he added, like east-west transmission of electricity or public transit.
“The kinds of projects that are unlikely to fit the bill might be, you know, bridges or roads in smaller communities, for example.”
A spokeswoman for Morneau later did not respond directly when asked if bundling of small projects is still a possibility. Instead, Annie Donolo pointed to the fact that the government has promised to invest $186 billion over 12 years for infrastructure projects, including a targeted $2 billion for rural and northern communities.
The bank is “an added mechanism” aimed at helping provinces and municipalities attract additional investment for projects that otherwise wouldn’t get built, she said in an email.
While potential investors have told the government they’re interested in large, transformational projects, Donolo said, “It’s too early to tell what those might be, what form they might take, who the players will be, etc. An electricity grid, for example, would have many players. A transit line, fewer.
“But in all cases, this added investment will free-up taxpayer dollars for other projects – large and small.”
Toronto Liberal MP Adam Vaughan, parliamentary secretary to Trudeau and one of the architects of the infrastructure bank proposal promised in the Liberal election platform last year, has said that one of the primary objectives was to help small municipalities that don’t have the borrowing power to finance expensive projects or projects large enough to attract international investors.
“That’s actually one of the reasons it was conceived,” he said in an interview last week, adding that the notion of bundling small projects together is “one of the reasons” the FCM agreed to support creation of the bank.
“Small communities are a particular focus of how to bundle little projects that the big (investment) funds won’t touch into larger projects managed by the federal government … to access those pools of capital to deliver those projects.”