OTTAWA—A multibillion-dollar proposal to connect Vancouver to the U.S. northwest by “ultra high-speed” rail appears to check off most, if not all, the boxes for funding consideration by Canada’s new infrastructure bank, argues a report commissioned by the Washington state government.
The analysis says the Trudeau government’s $35-billion infrastructure-financing tool could boost the likelihood of successful procurement for the project—and improve the chances of the link’s eventual delivery.
The Canada Infrastructure Bank, a key component of the Liberal government’s economic growth strategy, seeks to use public funds as leverage to attract billions more in private investment for major infrastructure projects, such as bridges, transit systems and rail lines.
It has also been designed to consider bankrolling cross-border projects as long as they’re partly located in Canada and will bring financial benefits to the country.
That feature of the bank has caught the attention of decision-makers south of the border, including Washington’s governor. Jay Inslee committed US$300,000 to study the “Ultra High-Speed Ground Transportation” proposal.
“The CIB, once fully operational, could provide a potential key source to finance major infrastructure projects such as the UHSGT project,” reads the Dec. 15 report for the state’s transportation department.
The study acknowledges that a complete description of the requirements necessary for a project to qualify for funding has yet to be released publicly.
The proposal, which would connect Portland, Seattle and Vancouver, appears to meet the bank’s high-level criteria because, among other features, the project would be in the public’s interest, have a public sponsor and be considered transformative, The authors write.
The report also said the project could satisfy the bank’s financial and commercial requirements, such as the need for any qualifying project to generate revenue.
“The UHSGT project meets the CIB’s strategic criteria, based on a preliminary assessment, and the project could satisfy financial and commercial requirements for investment. The CIB increases the financing options available.”
On both sides of the border, political leaders and the business community—including high-tech giant Microsoft—have expressed support for the transportation project.
They argue the region, which is experiencing strong population growth, has become increasingly important for the Canadian and American economies.
The latest cost estimate for the proposal, which aims to eventually see travellers whisked along a 550-kilometre stretch at speeds of up to 400 km/h, is between US$24 billion and $42 billion.
The goal is to dramatically reduce ground transportation times along the corridor, where a passenger trip by train between Portland and Vancouver currently takes about nine hours.
The study explores different transportation technologies that could fit the project, including high-speed rail, magnetic-levitation rail and, although still highly conceptual, a hyperloop.
But despite the potential for financial returns in the future, the high up-front costs for these types of projects could scare away private investors, the report said.
“However, contributions from government subsidies, a government-backed debt, or the involvement of the CIB could encourage private investments.”
The infrastructure bank, a Crown corporation, is intended to operate at arm’s length of the government and will decide whether a project is bankable and how any financing would be structured.
However, it would be accountable to Parliament through Infrastructure Minister Amarjeet Sohi, with cabinet having final approval over which projects get financing.
That governance structure is among several concerns related to the taxpayer-funded bank, which has generated controversy in Canada.
Critics fear it would put the priorities of wealthy investors ahead of ordinary Canadians, whom they say will be stuck carrying too much risk.
Political rivals have also warned the bank will likely force Canadians to pay twice for their infrastructure—first via the public treasury and then through user fees that will boost corporate profits. Last year, the government faced repeated calls to slow down the bank’s creation amid criticism it was pushing ahead without proper parliamentary scrutiny.
The Toronto-based bank will use $35 billion in public funding to generate three or four times that much in private dollars to help finance infrastructure projects across the country. Eligible projects will have to generate revenue through user fees, which could include road tolls, to make them financially attractive for investors.
The bank will also offer expertise that could include helping investors predict revenues before they make a commitment.