CIB could help avoid ‘projects Canadians don’t need’

A report published by Toronto’s CD Howe Institute says transferring risk to the private sector could lead to stronger analysis of projects but expresses concerns over the bank’s independence.

The proposed Canada Infrastructure Bank can move taxpayer risk to the private sector, potentially leading to stronger cost-benefit analyses of projects, according to a Canadian think tank.

“Attracting private capital, done well, has the potential to improve the scrutiny of project proposals, accelerate the pace of project development and deliver projects more cost effectively through intelligent risk transfer,” the report from the Toronto-based CD Howe Institute said.

The study examined 10 Canadian infrastructure projects and found that usage often fell significantly short – 17 percent on average, in the cases examined – of the government’s expectations.

“Inaccurate usage forecasts lead to costly overinvestment in projects or expansions Canadians don’t need,” the report stated. “Working with the private sector can improve these forecasts – and avoid the cost for taxpayers of getting them wrong.”

But while the creation of the C$35 billion ($27.3 billion; €23.5 billion) bank, which Canada’s parliament is now considering, holds promise, its success depends in part on careful execution.

“[The bank] needs substantially greater independence than currently contemplated in its enabling legislation – most importantly, the ability to protect against government involvement in its analysis of projects and ability to publish results, and greater independence for board members,” the report concludes.

Prime Minister Justin Trudeau’s government announced plans for the CIB last fall, with the legislation formally proposed in April. The Toronto-based bank, which aims to bring private sector dollars to large infrastructure projects, is being considered as part of the government’s budget bill. Government officials hope to bring in five dollars of private capital for every public dollar.

Much criticism of the bank has centred on fears that requirements of government approvals for loans and appointments will undermine its independence. The bank’s transitional leadership, though, believes such oversight is appropriate and necessary, as the government serves as the bank’s shareholder.

“I do not like boards insulating themselves from the shareholders artificially,” Jim Leech, who is heading the bank’s transition team, told Infrastructure Investor in April, after the bank’s legislation was released.

Projects examined under the study included Vancouver Port Mann Bridge, Montreal Autoroute 30 and the Vancouver Evergreen Line.