Jack Mintz: Welcome to the world of creative funding for public works

On balance, it’s better to let Canadians themselves choose whether they want to contribute to renovate a politician’s home or not. Photo by James Park/Postmedia

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Deeply indebted governments are looking for creative ways to cover the budgetary cost of their spending. One approach, instead of soaking taxpayers with more taxes, is to use a foundation and allow private donors to contribute to the cost of building public works. At least, that’s the idea.

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If not done right, however, such foundations raise conflict-of-interest concerns, with donors expecting a payback down the road. And the donations are partly funded by government anyway, as big donors happily claim tax credits while taking credit for their charity.

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In the U.S., President Donald Trump is using the Trust for the National Mall to fund his 999-person White House ballroom, for which the latest estimate is US$800 million to build. The foundation is expected to raise half the money, with security expenses covered by the government. The White House and investigative journalists have disclosed a partial list of 37 contributors, including Amazon, Blackstone’s CEO Stephen Schwarzman and the Lutnick family. But since the trust is not required to reveal donor names, eyebrows continue to be raised about potential conflicts.

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In 2020, the World Health Organization created the WHO Foundation to fund health programs in poor countries. Donors include the Gates Foundation and medical device and pharma companies. Under Swiss law, donor names are published only if the donor agrees. As of 2023, 48 per cent of donors contributing over US$100,000 were listed as anonymous, again raising concerns about transparency and undue influence.

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Here at home, the latest entrant to the foundation game is the Rideau Hall Foundation, which Ottawa has created to cover the cost of rehabilitating 24 Sussex Drive. The final cost is not yet known but the RHF is expecting to raise $50 million to cover construction costs, though more will likely be needed for security and other costs. RHF will be disclosing all donor names, however. On transparency, at least, Canada gets it right.

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With Ottawa splurging tens of billions of dollars lately, fixing up 24 Sussex may seem a mere trifle to add to the federal debt — even if it’s a lot more house than you or I would ever buy. But every dollar counts, so offloading the cost onto the RHF donors looks like a good tactic.

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But creating a foundation doesn’t mean taxpayers are off the hook. About a third of the money the foundation raises will be covered by governments. When Canadians contribute to a foundation, they can claim both federal and provincial tax credits. The federal credit is 14 per cent for the first $200 of annual donations and 29 per cent or 33 per cent for taxpayers in the top income bracket for donations in excess of $200. Provincial credits are in addition to the federal credit, with the combined federal and provincial top tax credit rate equal to 58.75 per cent in Quebec, 54 per cent in Alberta, 53.5 per cent in B.C. and 51 per cent in Ontario.

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Most donations are made by the highest-income taxpayers. According to the latest available data, Canadians in the top two income brackets claim almost three-fifths of donation credits. On top of the charitable tax credit, donors who give marketable securities to a charity can claim an exemption from capital gains. That adds about another five per cent to the cost of donation tax relief.