Corporations are renewing their push to get their hands on the vast pool of Canada Pension Plan money and invest it in P3s. The pot of gold is the CPPs reserve fund, pegged at $75.2 billion and growing.
The corporate one-two punch came through a poll of CEOs published in the Financial Post, followed by an editorial by the Canadian Council for Public-Private Partnerships Michael Wilson. The column, Partnership or perish, warned Post readers that the only way to bridge the municipal infrastructure gap is through P3s. Wilson neglected to mention that the CPP used to invest in public infrastructure until it was pulled off the job in 1998.
The poll, conducted by COMPAS, the National Posts polling company of choice, reported that Canadas business leaders are concerned about the future viability of the CPP and want the fund to focus on investing anywhere it expects a profit. That includes in Canadian P3s. The CEOs hackles were raised by recent news that the CPP would be investing in a European infrastructure fund.
The business leaders had clearly missed all the news coverage comparing Canadas stable and sustainable public pension plan favourably to the shaky future in store for American seniors if President George W. Bush succeeds in privatizing social security.
They also are missing the growing evidence that P3s are a risky investment. CUPEs backgrounder on urban infrastructure (http://www.cupe.ca/updir/Cities_Paper.pdf) makes the case for pension fund investment in public infrastructure projects. We argue that the investments provide a solid return while giving governments capital at a low interest rate.
CUPEs backgrounder has made the rounds with Canadas big-city mayors and other influential leaders. The paper states that governments are the most secure and efficient borrowers for major infrastructure investment. Municipalities can also borrow at lower rates than the private sector.
This recent flurry of pro-P3 activity highlights the need to rethink the mandate of the plans investment board. Until 1998, all CPP surplus funds were invested in provincial government bonds. Provinces were able to borrow at federal government rates cheaper than borrowing through the direct market. Much of the public infrastructure in Canada was built with the help of capital invested by the CPP. After 1998, the CPP investment board began investing in stocks and bonds. Today, the board has plans to invest up to 10 per cent of the reserve fund in infrastructure but with no ban on P3s.