If infrastructure funding announcements in the 2016 Federal Budget and 2016 Fall Economic Statement — totalling $180 billion — seemed like a New Year’s party to many in the building industries, 2017’s budget unveiled on March 22nd was more like a buzz kill, merely repeating previous edicts and taking a more cautious, targeted approach to new infrastructure investment. What concerns me is how no new funding was committed to our cities’ desperately needed public transit systems and how little was offered in new details on the much-anticipated Canada Infrastructure Bank (CIB), simply reiterating its $35-billion commitment to the CIB which was made in 2016. It also revealed that less than 10 per cent of this funding (only $2.8 billion) will be spent over the next five years.
For those who are still a little hazy on the CIB, here’s why it is so important. Roads, bridges and water-treatment facilities are among the desperately needed infrastructure that regions across the country require. “The purpose of an infrastructure bank is to provide low interest loans and credit enhancement services to provincial and municipal governments investing in priority infrastructure projects,” says University of Toronto associate professor Matti Siemiatycki, who authored a report on the topic last year. “The cost of financing is reduced by taking advantage of the federal government’s top credit rating.”
Because of the relatively small difference between the interest rates at which the federal and most provincial and municipal governments borrow money, the lending services of an infrastructure bank would provide significant benefits but only for the largest infrastructure projects, focusing primarily on lending services to projects with capital values of at least $10 million. “Despite this restriction, if a CIB can shave 100 basis points off the cost of borrowing $500 million, it would save the borrower $100 million in interest payments over a 35-year loan term,” Siemiatycki stresses.
Legislation to establish the Canada Infrastructure Bank is said to be coming soon, and the Government plans to identify a CEO and Chairperson to expedite a goal for the Bank to be operational in late 2017. But many professional groups are nervous about the length of time this is taking. The Association of Consulting Engineering Companies of Canada (ACEC), for example, is urging Parliament to finalize the passage of the government’s budget bill, as passed by the House of Commons, in order to establish the CIB.
“Every day we delay implementation of the Infrastructure Bank represents a missed opportunity for Canadians. Infrastructure connects people and communities; it enables trade and commerce; it improves our quality of life; and it protects the environment. Tools like the Canada Infrastructure Bank can help us address deficiencies in our infrastructure,” said John Gamble, ACEC president, in a press release. “We understand that there will always be debate over the details of how the Infrastructure Bank will operate, and that debate is healthy and will continue after its establishment. But we need the legislation that’s currently before Parliament to enable the establishment of the Bank to pass before Parliament breaks for the summer recess.”
“Infrastructure will always be a core role of government, but if we can combine public resources with private ones in an appropriate and transparent manner for projects that lend themselves to this kind of financing, then Canadians and the Canadian economy will be better off for it,” concludes Gamble. But before any of this happens, the legislation creating the Bank has to pass Parliament, and the sound of that ticking clock is maddening.
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