The Changing Landscape of Canadian Infrastructure

Reprinted with permission from The Hill Times – November 19, 2018

OTTAWA—Even with the billions of dollars spent on infrastructure by governments in Canada, Canada’s infrastructure deficit (estimated by the Federation of Canadian Municipalities to exceed $200-billion) continues to pose a significant challenge for all levels of government in Canada.

Governments are continually pressed to decide how limited resources should be spent. A transportation artery like Toronto’s Gardiner or Windsor’s EC Row Expressway cannot be ignored, so other spending priorities are placed on the back burner. As such, federal and provincial infrastructure dollars are often being used to catch up rather than invest in new or greenfield infrastructure projects.

To change Canada’s infrastructure landscape and attract investment to greenfield projects, the federal government has created the Canada Infrastructure Bank with a mandate to entice institutional investors to invest in Canadian infrastructure.

Within its mandate, the CIB assists governments and investors by helping to de-risk an asset and make it more viable as a long-term investment that will retain its value. An added bonus is the creation of the CIB may also serve to attract institutional investment for those projects that may not require CIB assistance to de-risk the project.

An asset sale to a private or institutional investor can benefit municipal and provincial levels of government by removing the asset from their accounts with the investor paying for ongoing upkeep and maintenance in return for future revenue. Governments can then use the proceeds from the sale of the asset to reinvest in other infrastructure assets without revenue potential. In this way the municipal or provincial government can break the cycle of only being able to play catch up with infrastructure dollars and begin investing in other priorities.

Canada is home to incredible expertise in the area of infrastructure investment. In fact, three of the top 10 global investors in infrastructure are Canada—CPP Investment Board, Ontario Teachers’ Pension Plan and OMERs. This experience will serve governments well as they embark on working with the CIB and governments across Canada to structure transactions Canadians can support with pride.

Even with expertise in Canada, few Canadians are familiar with essential infrastructure assets being owned by private or institutional investors. The CIB, government and investors must be mindful that this lack of immediate experience with private investors owning and managing Canadian infrastructure assets will make Canadians wary of allowing vital assets to be controlled by someone other than the government.

Success for government and investors will depend on the public and stakeholders being fully engaged in discussions around an asset sale to a private investor. They need to understand what assurances can be gained to ensure the asset is maintained in the public interest. Along with money, time and energy must be invested in educating the public about the benefits private infrastructure investment can bring to a community.

As the CIB proceeds to fulfill its mandate, legitimate questions and concerns will be raised by the public and stakeholders as the sale of any government assets take place. We will be well served if the CIB, governments, and investors take the time to ensure the public fully understands why these asset sales are in the public interest. If we want to change our infrastructure landscape, an investment in educating the public must be an essential part of the process.

Brian Klunder is Senior Counsel at Temple Scott Associates where he heads TSA’s Public Infrastructure Investment practice.