The federal government will seek additional funding from Canada’s pension funds as it looks to invest more than $120 billion in infrastructure over the next decade.
In its bid to shore up the country’s infrastructure, the government plans to “engage public pension plans and other innovative sources of funding,” the budget noted.
In its response to the federal budget, the Canadian Life and Health Insurance Association welcomed the infrastructure announcement. “We are particularly pleased with the focus on infrastructure and look forward to making an important contribution as the government moves to the next phase of the plan,” said Frank Swedlove, president and chief executive officer of the CLHIA.
Read: CLHIA calls for more infrastructure investments
The infrastructure announcement came on March 22 when the Liberals unveiled their first budget.
“These investments will accelerate our transition to a low-carbon, clean growth economy, make traffic flow more smoothly, bring high-speed Internet to more rural communities, and deliver so many other benefits for Canadians,” Finance Minister Bill Morneau said in his budget speech of the new funding for infrastructure.
“It means a father will make it to his daughter’s soccer game on time, a small business owner in rural Manitoba will get her website up and going, and our communities will be better places to live.”
Read: Canada’s infrastructure needs a facelift and pension funds want in
The government’s first step will be to invest $11.9 billion in infrastructure over five years.
This includes $3.4 billion for public transit across Canada. The projects could be subway improvements in Montreal and Toronto as well as new light rail transit lines in Greater Vancouver and Ottawa.
The $11.9 billion also includes $5 billion for water, wastewater and green infrastructure systems.
The remaining $3.4 billion will be used for social infrastructure, such as affordable housing, early learning and childcare and community health-care facilities. Social infrastructure investments will include $739 million for First Nations, Inuit and northern housing.
Read: Canada opens talks with pension funds on infrastructure investment
“It is evident throughout this budget that the Liberal government wants to boost the Canadian economy long-term by providing funding for infrastructure projects across Canada, specifically through transit and social infrastructure,” said Joe Cerullo, senior consultant with Segal Rogerscasey Canada.
“Upon prudent review of their strategies, plan sponsors may want to consider allocation to infrastructure funds or possibly invest alongside large infrastructure funds.”
Canada’s top defined benefit pension plans have said they’re interested in participating. “We’d like to participate. We’re significant players,” Michael Latimer, president and chief executive officer of the Ontario Municipal Employees Retirement System, said at a February panel discussion in Toronto about the Liberal government’s infrastructure plans.
The federal government estimates its infrastructure measures, along with other steps proposed in the 2016 budget, will increase Canada’s real gross domestic product by 0.5 per cent in the first year and by one per cent by the second year.
“Studies consistently show that when there is slack in the economy and interest rates are low, for every dollar a government spends on infrastructure, substantially more than $1 of economic activity is generated,” said Morneau.