Chairman and CEO of BlackRock, Larry Fink, helped set up how the Canada Infrastructure Bank would work. “Along with key figures from Canada’s business and financial community, Fink pushed for a bank that would open up lucrative opportunities for investors,” writes Linda McQuaig.
Trudeau’s new bank delivers for investors, not the public
The Trudeau government designed the Canada Infrastructure Bank in such as way that municipalities that want the bank’s financial support for an infrastructure project must “partner” with a private business, which drives up costs.
Chairman and CEO of BlackRock, Larry Fink, helped set up how the Canada Infrastructure Bank would work. “Along with key figures from Canada’s business and financial community, Fink pushed for a bank that would open up lucrative opportunities for investors,” writes Linda McQuaig.
Governments are generally secretive about giving handouts to business, but the Trudeau government has come up with a particularly sneaky way to deliver corporate welfare — through its Canada Infrastructure Bank (CIB).
This little-known business boondoggle is about to get much richer — billions of dollars richer — as Ottawa gears up for a binge of post-COVID spending to build infrastructure across the country, financed by its new bank.
Of course, municipalities badly need new infrastructure so the bank, endowed with $35 billion in public money to help finance infrastructure, should be a godsend.
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But it isn’t — except for business and investors.
That’s because of the business-friendly way the Trudeau government designed the bank. Municipalities that want the bank’s financial support for an infrastructure project must “partner” with a private business.
These public-private partnerships (P3s) ultimately drive up the cost of the projects and leave municipalities with less control over their own infrastructure.
But if municipalities don’t want to “partner” with business — if they want instead to handle the projects themselves, raising the money through municipal bonds as they’ve traditionally done — Canada’s new public bank won’t help them.
The township of Mapleton, Ont. recently got a taste of how tilted the bank is toward the interests of private business.
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Like many municipalities, Mapleton needed to upgrade its water and wastewater systems. The CIB offered a $20 million debt-financing package, and proudly promoted Mapleton as a “pilot project” for its new model of financing municipal water projects.
But the $20 million financing package was aimed at ensuring the private partner achieved its profit targets, and offered nothing directly to the municipality.
When Mapleton township studied the deal carefully, it realized that it would be cheaper for the township to do the water project itself. So it cancelled the deal — and received no help from the CIB.
All that Mapleton was left with was a $367,000 legal bill in connection with the CIB process.
But why didn’t the CIB offer the $20 million subsidy directly to the municipality to help finance the project? Why must a private partner be involved?
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What the CIB calls its “innovative financing model” is really a mechanism for directing taxpayer dollars to private companies so they can earn profits managing our infrastructure — even though we can build and operate these projects more cheaply on our own.
What’s the point of this bank — besides ensuring businesses profit from our public services?
Certainly it’s a far cry from the bank Justin Trudeau promised as a key plank in the 2015 Liberal election platform. During that campaign, Trudeau pitched the bank as a way to help struggling municipalities build needed infrastructure. He never mentioned municipalities would have to partner with businesses.
What Trudeau was describing back then sounded like European public banks, which clearly aim to advance the public interest.
Holland, for instance, has a public bank that helps finance local water projects by providing municipalities directly with extremely low-interest loans, as well as expertise in water management, according to David McDonald, a political economist at Queen’s University and co-author of “Public Banks and COVID-19.”
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But once in power, Trudeau designed his new bank with extensive input from Wall Street titan Larry Fink, head of the mega-investment firm BlackRock. Along with key figures from Canada’s business and financial community, Fink pushed for a bank that would open up lucrative opportunities for investors.
But those lucrative opportunities mean Canadians will pay more for infrastructure, either through higher taxes or user fees.
As the Ontario auditor general has shown, involving the private sector drives up the costs of infrastructure projects. In a 2014 investigation of 74 projects, the AG found that the province’s decision to partner with the private sector — rather than building the infrastructure itself — cost Ontarians an extra $8 billion.
The little township of Mapleton figured this out all on its own. So Mapleton (population 11,000) is now funding its water projects itself.
No longer hosting the CIB’s pet “pilot project,” the township has been abandoned by Trudeau’s new bank, which has plenty to offer rich investors but nothing for the people of Mapleton.
Linda
McQuaig is a Toronto-based freelance contributing columnist for
the Star. Follow her on Twitter: @LindaMcQuaig.
