Yedlin: Infrastructure bank announcement appears to throw cold water on Calgary's chances
Deborah Yedlin, Calgary Herald
More from Deborah Yedlin, Calgary Herald
Published on: March 29, 2017 | Last Updated: March 29, 2017 5:00 AM MDT
One day after federal Finance Minister Bill Morneau’s visit to Calgary that included meetings with Mayor Naheed Nenshi and Calgary Economic Development officials, Bruce McCaig was named executive adviser to the federal government regarding its plans to establish the Canada Infrastructure Bank.
Since 2010, McCaig had been at the helm of Toronto-based Metrolinx, the Ontario government agency that oversees the transportation infrastructure of that province’s Golden Horseshoe, which includes the Toronto and Hamilton regions. During his tenure, more than $21 billion in transit infrastructure upgrades were made to subway and transit services.
In other words, he knows infrastructure.
The announcement that someone from Toronto is taking the role as senior adviser doesn’t necessarily throw Calgary out of the running to become home to the infrastructure bank, but it does feel a bit like the city has just been doused with a bucket of ice water.
That, and the fact another person from Toronto is advising the federal government rather than looking west for input, isn’t exactly encouraging.
There are some with the view that Toronto — as Canada’s financial centre and home to three of the country’s largest pension funds — the Canada Pension Plan and Investment Board, Ontario Teachers and the Ontario Municipal Employees Retirement System (OMERS) — should be the bank’s headquarters. They also point out it’s also where successful public-private partnerships have been structured and where the country’s largest insurance companies are based, in addition to private-sector entities such as Brookfield, which also actively invests in infrastructure.
That may be true, but when it comes to the design, engineering, construction and financing of large infrastructure projects, Alberta — and Calgary — is where the action has been for the better part of two decades.
As Senator Doug Black said when he rose in the Senate earlier this month to make the case for Calgary as the infrastructure bank’s headquarters, this city has been the centre for financial innovation since the 1950s.
In other words, there is room for more than one financial centre in this country, and Calgary is the logical choice.
Were it not for the financial structures such as the sophisticated project finance, junior capital pools, special warrant private placements and the royalty trust structure that were developed in Calgary, capital formation for the energy sector would have looked much different.
And the oilsands growth took it to a much higher level.
According to Alberta government figures, investment in the infrastructure-heavy oilsands totalled $201 billion between 1999 and 2013, a time when production grew from 600,000 barrels a day to almost two million barrels a day. Current production is 2.4 million barrels a day.
No other province in the country has seen infrastructure investments of that magnitude — and that is in only one segment of the Alberta economy.
The federal government has said it wants to leverage the $35 billion that will be provided to the infrastructure bank on a 5:1 basis, using capital provided from the private sector and pension funds. That would put it at $175 billion — much less than what has been invested in the oilsands since 1999.
Not only are these projects complex, requiring a wide array of skills, they are designed to operate in a less than friendly climate.
And it’s not just oil and gas. [...I can't bear to read any more of this...]