Infrastructure bank projects could reach south of the border

OTTAWA—A new federal agency designed to fuse public and private dollars to help build infrastructure in Canada could end up building new roads and bridges reaching south of the border.

The legislation for the Liberals’ proposed infrastructure bank would allow the arm’s-length organization to use public money to help bankroll or financially backstop projects that are "in Canada or partly in Canada."

The key for the government is that there has to be a financial benefit and a physical connection to the country, meaning Canadian dollars won’t be building any infrastructure solely in the United States or anywhere overseas.

The Liberals are infusing the bank with $35 billion in government funding, hoping that the money can leverage three or four times that much in private dollars to build infrastructure in Canada.

Some observers and investors are concerned that the legislation as written gives politicians too much control.

Benjamin Dachis, associate director of research at the C.D. Howe Institute, says investors could be scared away from working with the bank if they don’t feel that there are strong firewalls to prevent political meddling in long-term projects.

Private pension funds have pushed for months for the Liberals to make the new bank independent from government intervention.

Government officials have been telling investors that the plan for the bank would be for the government to approve a project when it is submitted to the bank for review, meaning cabinet couldn’t cancel a project later on in the process.

More details about the bank’s operations will come from a corporate plan set to be released later this year.

Last year, Finance Minister Bill Morneau’s council of economic advisers envisioned a very specific decision-making process that would only allow government to step in if a project didn’t have a revenue stream attached to it, wasn’t in line with the government’s growth strategy, or didn’t have a private backer.

The overarching idea was to make the bank independent, so that it would be viewed as credible by capital markets and signal stability to private investors.