Raising funds for port infrastructure projects in Canada is sometimes rather like crowdsourcing: generate interest, put out a call for money and hope for contributions. Multiple sources for funding infrastructure development is not uncommon for the country’s 18 Canada Port Authorities (CPA) in the National Port System.
“Port authorities have become very adept at putting together a patchwork quilt of funding; for example, saved earnings, provincial and federal grants, loans and private money,” says Wendy Zatylny, president, Association of Canadian Port Authorities (ACPA).
This is, for example, how the Saguenay Port Authority raised $37 million to build a new 12 kilometre rail link and intermodal yard, which officially opened this May. It tapped the federal and provincial governments, the City of Saguenay and its own bank account for funds.
Trolling for capital expansion project money is one thing. Finding maintenance money is a quite different kettle of fish. Take Port Alberni, which needs $15 million to revitalize its facilities. “Our structures, built in 1964, are very much dilapidated and at the end of their useful life,” says Zoran Knezevic, President & CEO, Port Alberni Port Authority.
The federal government owns the CPAs, which, according to the ACPA, “… were created by an Act of Parliament in 1998 under the Canada Marine Act, providing an overall governance structure for the management of Port Authorities with important local governance and control.”
In plain language, the federal government divested its responsibility for the operation of its major ports to the Port Authorities and their boards of directors.
Under the terms of this Port Divestiture Program, however, the CPAs are caught between the devil and the deep blue sea with a rather backhanded autonomy. They have strict borrowing limits and may not use their assets as collateral for borrowing. They are self-sufficient, with no federal funding, including no maintenance funding. Yet they must hand over gross revenue charges to the federal government.
For Port Alberni, with annual revenues of only $5 -$6 million a year, finding rehabilitation money is tough. “It is hard to justify investing $15 million to revitalize those berths, because we don’t have a business case. I’m concerned that we will have to condemn two berths. Closing them down will have an impact on industry and the communities,” Knezevic says.
The Port Alberni Port Authority is not alone in this leaky boat. A 2012 White Paper, Strengthening the Canada Port Authorities – Key Enablers of Canadian Trade, written by the ACPA, notes that the CPAs need $5.3 billion to rehabilitate and expand their facilities to meet growing trade. “This is simply the identified pool of money. This is the magnitude of the funding needs,” Zatylny says.
“The government has passed on the responsibility for maintenance to the CPAs. The government expects the CPAs to pay most of the $6 billion in projects identified in an ACPA survey of the CPAs,” says Serge Auclair, Vice President, Strategic Planning, Montreal Port Authority (MPA).
CPAs are certainly welcome to tap their own revenues for maintenance projects, or borrow money. “We can raise money through banks or bonds. We have a $130 million borrowing limit. If we borrow money, we borrow it in our own name,” Auclair says. The Port Alberni Port Authority can borrow up to $1 million.
There are exceptions to the federal government’s stated hands-off role in funding ports; it has created some special, big-ticket capital funding programs. There is the $2.1 billion Gateways and Border Crossings Fund, launched it in 2008, and due to expire in 2018. There is also the New Building Canada Fund, which, according to Infrastructure Canada, has $14 billion to spend, of which $4 billion belongs to a National Infrastructure Component.
There is no specific fund for ports; rather, ports must compete for funding with other projects.
As an example of a National Infrastructure Component -funded port project, this July the federal government announced that it will give Port Saint John $68.3 million toward a $205-million terminal improvement project.
Unfortunately, these funds are designed for big-ticket projects, Zatylny notes. “A decade ago the feds used to put up 50% of funding. Now it is one-quarter to one-third. Now the ports have to come up with the other two-thirds. But the challenge with the Building Canada Fund is that projects have to be worth $100 million or more to qualify. It is hard for smaller ports or large ports with smaller projects. So the Building Canada Fund has this imbedded barrier for participating in the fund. CPAs have smaller projects that they cannot get funding for. The Building Canada Fund will entertain smaller projects on a case-by-case basis, but the CPAs still have to [present] a full business case.”
This is a lot of work and expense, knowing that their projects do not meet the threshold.
Then there are provincial initiatives, large among them right now the Quebec government’s pledge to invest over $1.5 billion in the Quebec maritime strategy. This March the provincial government announced, for example, that it is reserving $95 million in the provincial budget for access road improvements and the restoration of Alexandra Pier and the Iberville Passenger Terminal for cruise passengers at the Port of Montreal.
“It is possible to find funding if projects are profitable. But you will find, in certain cases, projects with benefits to the local economy that are not that beneficial to CPAs. If we were a private company we would say there is no business case, but for us we are a factor in the local economy. This is where governments will step in and look at the value of projects to the local economy, and see where they want to invest,” Auclair says.
One strategy for finding rehabilitation funding is to develop capital projects that include a maintenance dimension that makes sense to a private developer. For example, the MPA rescued a huge grain terminal from possible demolition by making a deal with CanEst Transit to repurpose it into a cleaning and containerization terminal. CanEst invested $20 million to retrofit the terminal with all-new equipment. The MPA put up $4 million to improve the terminal, rail and road access.
“The challenge for ports is to be active and look out for projects. Two or three years ago we made a decision to invest and try and find partners. We are also trying to create added value services; for example, the old grain terminal, which could have been torn down. CanEst came in and is now containerizing grain. In the end, the infrastructure, which was not in good shape, is now in top shape and will create revenues. This is an example of how you reinvent yourself,” Auclair says.
Auclair adds that Public Private Partnerships between governments, CPAs and private companies are on the increase. “This is basically the model in how we are going in infrastructure.”
However, he notes, “If you are a smaller port serving the local community, there are no growth projects. So you need $16 million to repair a wharf. Where do you get the money? If you have a project that is profitable, the banks will look at it. But if you are going to pay for maintenance, they might get a bit worried. There are CPAs in this position.”
“What Port Authorities have to do, with a lack of federal funding, is attract funding. It is much easier for ports with well-established traffic to attract investments. It is much more difficult for smaller ports. It is not as attractive for private investors,” notes Knezevic.
Such challenges notwithstanding, the Port Alberni Port Authority has applied to the New Building Canada Fund for $561 million toward a $1.7-billion project called PATH (Port Alberni Trans-Shipment Hub), for which it already has a pre-feasibility study in hand.
“The significance of being a Federal Port is that we can apply for federal funds,” Knezevic says. “Especially for smaller ports, we wouldn’t be able to get smaller projects off the ground let alone a $1.7 billion project.”