As the Liberal government takes steps to launch Canada’s new infrastructure bank, Toronto has emerged as the likely home for the bank’s headquarters, according to sources and industry observers.

“Choosing to set up the infrastructure bank in any location other than Toronto would be the first signal this is sinking into the political muck,” former federal cabinet Minister David Emerson told BNN in a phone interview. Emerson previously led the government’s transportation policy review, which explored issues such as the privatization of Canada’s airports.

Finance Minister Bill Morneau unveiled the government’s plan to create the infrastructure bank during last fall’s economic update, following a recommendation from his Advisory Council on Economic Growth. The bank is expected to help fund massive infrastructure projects in Canada by attracting large institutions from around the world as partner investors. Its goal is to leverage up to five dollars in private money for each dollar the federal government puts in.

Multiple sources tells BNN that in the months since Morneau’s announcement, a group that involves Infrastructure Canada and Finance Canada have been working on the potential framework for the bank, which will operate at arm’s length to the government – a similar operating structure to that of the Canada Pension Plan Investment Board. Those sources also said the bank may ultimately employ upwards of 50-100 people, a staffing level that would resemble what is typically seen at investment banks that focus on deal-making.

Brook Simpson, press secretary to Infrastructure Minister Amarjeet Sohi, told BNN that no decisions have been made yet on the bank’s structure, staffing, or location.

In recent weeks, infrastructure bank representatives have been meeting with potential investors and stakeholders to help raise awareness on the bank’s role. “The government deserves credit. They’ve been consulting with all the players, including the pension funds,” Mark Romoff, president and CEO of The Canadian Council for Public-Private Partnerships, told BNN in a phone interview. Romoff confirmed he has been included in the government’s outreach.

Prime Minister Justin Trudeau previously hosted many of the world’s leading pension funds at a November gathering in Toronto, as part of the broader plan to attract more foreign investment to Canada. Investors who attended included the China Investment Corp., Abu Dhabi Investment Authority, Qatar Investment Authority, the Hong Kong Monetary Authority, one of four Swedish national pension funds, the Norwegian pension fund and Singapore's sovereign wealth fund. All told, the investors in attendance represented more than $21 trillion in assets.

Toronto is already home to several leading pension funds with a history of investing in infrastructure, such as CPPIB, which has nearly $300 billion in assets. The OMERS pension fund has more than $85 billion in assets, while the Ontario Teachers’ Pension Plan oversees more than $170 billion in assets. Trudeau recently named former Teachers’ CEO Jim Leech as special advisor to the infrastructure bank.

Toronto Mayor John Tory sees his city as an ideal spot for the bank to be based. “The Mayor believes Toronto would make the most sense as headquarters for the infrastructure bank,” wrote Keerthana Kamalavasan, Tory’s senior communications advisor, in an emailed statement to BNN. “We are the financial centre of the country where billion-dollar infrastructure deals are being discussed every day and where billion-dollar infrastructure projects are being built in the next five to ten years.”

Toronto’s front-runner status comes as other Canadian cities publicly lobby to house the bank’s headquarters, including Calgary and its mayor, Naheed Nenshi.

“I know the federal government is actively considering Calgary. I made the pitch to cabinet when they met in Calgary last month; it was warmly received and we’ve continued discussions since then,” Nenshi told BNN in an email. “I know that many of the key stakeholders in Calgary are writing to Minister Morneau in support of this opportunity, which I greatly appreciate. The City of Calgary and Calgary Economic Development are also connecting with the key decision makers and advisors on this file. We have invited these folks out to Calgary to speak with leaders in Calgary’s financial services industry, and we will continue to engage directly with the right people in Ottawa.”

Montreal has also pitched itself as a potential destination for the bank. “Clearly that bank has to be based somewhere. And we, in Quebec, have put forward some strong arguments that Montreal would be an excellent place to base the bank,” Quebec Finance Minister Carlos Leitao told BNN in a recent interview. “We do have expertise in that field. We have several institutional investors that have played a key role in the development of new ways of financing infrastructure…Caisse de dépôt being the most prominent example.”

Industry observers fear locating the bank anywhere but Toronto would send the wrong message to potential investors about the bank’s independence. “If you’re living in North Dakota, you have to accept that New York is the finance capital of the United States. I think in Canada, we have to learn to do the same,” added Emerson. “Toronto is the centre of our financial industry. And any foreign investors who come to Canada to explore financings go to Toronto.”

Lou Serafini Jr., president and CEO of infrastructure investor Fengate Real Asset Investments, highlighted in an emailed statement to BNN that “many construction contractors and operators run their North American public-private partnership operations out of Toronto — these are companies who understand how public and private sector entities can work together seamlessly.”

Multiple sources told BNN bank representatives could still be spread out across the country, even if Toronto is selected as the bank’s headquarters. “They may want to consider having a very small presence in other key centres. They could have a few people based in Vancouver, Calgary or Montreal,” said one source familiar with the government’s thinking.

Some investors, such as pension funds, have sought clarity on the types of investments which will be financed through the bank. Traditionally, infrastructure investors have preferred so-called “brownfield” assets, which are perceived as offering steadier returns over the long term. These include projects that have already been built, such as airports. The infrastructure bank, however, is expected to focus on not-yet-built “greenfield” projects to satisfy the country’s future infrastructure needs. Winning over institutional investors will likely require these projects to build in realistic long-term return expectations. The government has previously said the bank’s mandate is to focus on projects with revenue-generating potential.

“With greenfield projects, it can be attractive to the larger pension funds when there is a revenue stream attached to it. These funds need to ensure they’ve got consistent returns to meet their obligations,” added Mark Romoff from The Canadian Council for Public-Private Partnerships.

The bank’s mandate is to invest $35 billion, with $15 billion available for projects that don’t guarantee a full return on investment. The other $20 billion will be used to invest in equity or loans that won’t count against the government’s spending.

Morneau may provide an update on the legislative framework for the infrastructure bank during the upcoming federal budget, while the actual legislation for the bank is likely to be tabled in the House of Commons later this year. Some of the bank’s other priorities will including choosing its leadership team, such as its board of directors. Multiple sources suggested to BNN that the infrastructure bank’s CEO search could ultimately be global, in an effort to attract the best candidate for the job.

“They may take a page out of the Bank of England’s playbook,” said one source who did not want to be named. The Bank of England recruited former Bank of Canada Governor Mark Carney in 2013, making him the first non-Briton appointed to the post. Leech, the infrastructure bank’s special advisor is expected to assist in that process. Leech did not immediately respond to a request for comment.