With the tabling of a second budget and two more years to go for his majority government, Justin Trudeau’s electoral promises on Canadian infrastructure are coming into focus.

Trudeau needs to deliver on the structural aspects of his economic program before the next federal election. He needs to ensure that the right tools are in place for his infrastructure stimulus by the time Canadians reach the ballot box.

After spending his first year signing bilateral agreements, the government’s infrastructure focus for 2017 has moved to setting up the Canada Infrastructure Bank (CIB).

After over two years of speculations around this new entity in the Canadian infrastructure landscape, there needs to be more clarity around the CIB.

Purpose of the CIB

Working in the interest of the Canadian public, the Bank’s purpose is to generate revenue through its investments and to attract investment from both the private sector and institutional investors. 

According to a report published by TD Bank in March 2017, the CIB is set to focus on “economic infrastructure” projects with revenue-raising potential, such as roads, rail, and other transportation projects. Other potential areas include broadband, water systems, and power generation.

Focus on the potential roles of the CIB

Some of the key roles of the CIB have generated significant speculation; however, these are the facts:

CIB acting as lender to multiple levels of government

In its 2015 electoral platform, the Trudeau team was quite keen on tasking the CIB with a lending role, leveraging the federal government’s AAA rating to help other levels of government access more competitive funding levels.

To do so, the CIB should have a strong funding capacity, including issuing covered bonds to fund equity contributions or loans for projects at various government levels.

Looking at the CIB Act, this key characteristic was somewhat watered down, as most provinces already have strong mechanisms in place to prevent municipalities and other public satellites from obtaining unfavourable financing conditions (MFABC, IO, Finances Québec, to name a few). While the CIB’s role as an investment bank may be limited, several sources indicate that one of its first commitments may be in the form of a participation in Montreal REM project.

CIB acting as sell-side advisor: asset recycling mandate

A paper published by Mark Romoff, President and CEO at the Canadian Council for Public-Private Partnerships (CCPPP), says that Amarjeet Sohi, our Federal Minister of Infrastructure and Communities, made it clear that the newly created CIB will not be selling off existing assets. Trudeau has further downplayed this asset recycling role within the CIB.

That being said, some news articles have indicated that sale rumours are intensifying for some major Canadian airports, specifically Toronto’s Pearson Airport. According to InfraAmericas, the federal government engaged Credit Suisse in 2016 to study the benefits and impact of privatizing Canada’s eight largest airports. The CIB Act does not provide much detail on this specific role, but most will agree that such divestiture decisions may not be very popular amongst some of its electoral base.

CIB acting as procurement advisor

In a recent publication, the Residential and Civil Construction Alliance of Ontario (RCCAO) showcased a different profile, presenting an infrastructure investment agency specialized in supporting all levels of government in the procurement of infrastructure projects in various project sizes and sectors. This role was clearly mentioned in the CIB Act as being a core function. It will be for the CIB to coordinate with existing entities at the provincial and federal levels (PWGSC, IO, PBC, P3 Canada, etc.).

Next steps

While Trudeau’s government has pushed hard to keep the CIB Act in the June 22, 2017 omnibus bill (against several of his own senators pushing to carve out the act), we remain far from its first closed deal, and even farther from any shovels in the ground.  Additional delays could push the establishment of the CIB to the end of 2017 or early 2018.

This may become more of an issue, as there will be limited time to reap any economic benefits and show tangible results before Canadians are called to vote again. It is therefore fair to expect Trudeau to be ready to take the gloves off and put up a fight, should any additional hurdles come in his way as he attempts to deliver results on one of his central electoral promises.