August 19, 2017


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Maybe we need an iBank

Entity would oversee, administer infrastructure spending

Hey there, time traveller!
This article was published 10/3/2014 (1257 days ago), so information in it may no longer be current.

Last week, while announcing a new five-year, $1.5-billion core infrastructure spending plan, two of the more articulate NDP cabinet ministers -- Infrastructure and Transportation Minister Steve Ashton and Jobs and the Economy Minister Theresa Oswald -- found themselves unable to answer a simple but essential question.

Ashton and Oswald had just confirmed the province failed to spend about $71 million that had been budgeted for core projects, funded in part by a one-point hike to the PST. When asked where that money had gone, neither could summon an answer.

Was it sitting around somewhere in a sock, ready to be spent next year? Would it be used to lower the deficit, or was this just a case of the province borrowing less money than expected?

Ashton and Oswald kept brushing aside the question, choosing instead to recite tiresome details of the five-year spending plan and how all budgeted expenditures would be rolled over into subsequent years. A later conversation with Finance Minister Jennifer Howard was just as fruitless. To this day, nobody from the NDP government has adequately explained the net impact of spending $71 million less than budgeted.

Before giving in to conspiracy theory, it deserves to be said infrastructure spending is difficult to track. Some projects are funded in cash, while others are amortized over many years. Most projects do not begin and end in one fiscal year, and thus it's hard to produce an accurate snapshot of actual spending.

When you consider the performance of a trio of cabinet ministers, and the inherent problems tracking infrastructure spending, isn't it about time we had a separate, arm's-length body administer infrastructure spending?

It's an idea that is gaining some traction. In a commentary in the Globe and Mail, Van Horne Institute fellow Brian Flemming makes the case for an "infrastructure bank" that would not only fund projects, but also raise money through bond issues and institutional investing. Government could capitalize the "iBank" through cash appropriations and the sale of surplus government land and other assets.

Although Flemming does not make note of this in his article, one of the other undeniable benefits of creating a separate entity to oversee infrastructure investments is it would provide a more comprehensive, transparent and accountable reporting mechanism.

As noted earlier, government uses different mechanisms to pay for infrastructure, from cash to borrowing. The problem is it's extremely difficult to track this spending in the budget documents or in the public accounts. Grants to municipalities are found on one page, while new hospitals, schools and buses for public transit are on other pages. There are summaries, but it's still difficult to nail down overall infrastructure spending.

Add to that the fact it is difficult for government to start every project budgeted in any given year. Weather, unforeseen design problems and tendering snags can derail many overall infrastructure plans.

An iBank, or a Crown infrastructure authority, would not solve all these problems. On the accounting side, not much would change. Any money transferred to a special operating agency would still be captured by the summary budget as an expenditure. However, overall management and -- perhaps most importantly -- transparency would improve in several essential ways.

This was essentially what the province did with the creation of the Red River Floodway Authority. Charged with managing the floodway expansion, the authority issues an annual report that contains all financial information related to the project.

A Crown agency could also ease some of the annual political tango that goes on between local government, the provinces and Ottawa.

Provinces and municipalities are often held hostage by the federal government, which usually keeps its infrastructure spending plans close to its vest. When funding is announced, it's not unusual for the eligibility parameters and application process to change. Confusion predictably ensues. Wouldn't it be preferable for provincial infrastructure agencies to work throughout the year to identify specific sums of money available and to work with standardized eligibility terms?

Right now, we're devoting billions of dollars to a problem that is conservatively estimated to require tens of billions of dollars to solve.

More money will always be needed. But a new way of managing and accounting for infrastructure spending is certainly part of the solution.

Read more by Dan Lett.


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