Business Cape Breton Part I: Stop and Smell the Roses

Lisa Raitt and Cecil Clarke hanging flower baskets.My quest to determine what exactly is up with Business Cape Breton (BCB, formerly the Cape Breton Small Business Centre, formerly the Cape Breton County Economic Development Authority) began in June when CBRM Mayor Cecil Clarke surprised his council with the news that the municipality was leaving the Cape Breton Regional Enterprise Network (CB REN) in favor of declaring BCB the municipality’s economic development arm. (You can read about it here.)

I spent a couple of weeks trying to get information directly from BCB (I’ll report on that next week, in Part II of this series) before giving up and trying to get information from the CBRM which, unlike BCB,  is subject to Freedom of Information Protection of Privacy (FOIPOP) requests. I sent one to the municipal clerk, requesting “details of the financial relationship between the CBRM and Business Cape Breton,” “documentation showing how much money the CBRM has provided BCB since 2013, including sustainability grants” and asking what cut of the “CBRM Blossoming” money BCB receives for administering the flower-basket program.

I received this answer from Jennifer Campbell, manager of finance for the CBRM:

CBRM’s financial relationship with BCB is limited to funding for core operations and REN activities, as approved by mayor and council in February 2013. Ongoing funding is included in the CAO’s budget and approved annually by council. BCB is engaged for other projects on an as needed basis.

Campbell also provided a “summary of items paid to Business Cape Breton (BCB) (formerly Cape Breton Small Business Development Centre) by Cape Breton Regional Municipality for the period January 1, 2013 — July 28, 2016.”

A note on this: The federal government announced it would cut CBCEDA’s funding in 2012, but the organization did not officially cease operations until March 2013. The Cape Breton Post reported in April 2013 that CBCEDA CEO Eileen Lannon Oldford and her staff were still on the job because the CBRM, which had approved $250,000 in funding for the new REN, had advanced $150,000 of that to CBCEDA. The Cape Breton Small Business Development Centre was formed in June of 2013 and became Business Cape Breton in August 2014. (WAKE UP! It’s about to get interesting.)

Here’s that “summary of items” which I’ve rendered as a beautiful table, complete with an entirely unnecessary “search” option:

ProjectFunding Amount
Port Consultant Services376,601.25
Core Funding471,684
Downtown Blossoming (Sustainability Funding)125,260
Resiliency Education Leadership Adventure and Youth Service (RELAYS) Project (Sustainability Funding)75,000
CBRM REN Funding111,977.50
Other cost reimbursement13,313

And here is some more “detail” on the spending, if “Port/Professional Services” or “Port File/Advance/Expenses to May 31/14” mean more to you than “Port Consultant Services.”

CB General Operating Vendor Line Item Doc

I figure $106,000 (more or less) of that $376,601.25 in “Port Consultant Services” was for work commissioned from port consultant Neil MacNeil by the then-Cape Breton Small Business Development Centre (because apparently the original vision for the port was more of a “Mom and Pop” operation). That leaves another $270,000 in fees about which I’d love to tell you more but that — literally — is all she wrote.

And here’s another interesting piece of information:

The Downtown Blossoming Project fees include a 10% administration fee. In 2015/16, the Municipality paid the contractor directly and did not advance money to BCB for this project.

So I have to ask: why, in 2016/17, did the CBRM decide to pay through BCB again? And are we to understand BCB received a 10% project fee on the $102,000 it received this year (for a program across the CBRM) and the $23,000 it received in 2014 (for a program limited to Downtown Sydney?) That second sum, need I remind you, a “sustainability” grant BCB does not qualify for? Could BCB really have been paid $12,500 for calling the nursery to order a bunch of flower baskets?

The RELAYS program for at-risk youth, which was to launch in April 2016, will receive $3.9 million from the feds and $600,000 from the municipality over five years. According to Campbell, “The RELAYS project funding included $8,170 in administration costs paid to BCB which included rent and related office costs for project staff.” I have no idea what time period that refers to because my table, although beautiful, is woefully lacking in data.

Excluded from the above is CBRM’s contribution for start up funding and operating funding for the Regional Enterprise Network totaling $279,240. This funding was issued to, administered and dispersed by the Municipality of the County of Victoria.

So to find out how much (if any) of that $279,240 wound up with BCB, I will have to FOIPOP the County of Victoria.


Taxing Work

I also asked to see documentation showing how, exactly, the CBRM was losing “thousands of dollars” paying HST to BCB and the Cape Breton Partnership (the other “delivery” organization for the CB REN) which, as the CBC reported on 15 June 2016, was one of the mayor’s chief reasons for wanting to withdraw from the REN:

Because the municipalities were contracting the services of the two agencies, HST had to be charged, said Clarke. That meant municipalities were spending “tens of thousands of dollars” that did nothing to create economic development.

The documents I received from the CBRM (which I will post here so you can print them out for beach reading) show the mayor expressing concern about HST during a Joint Meeting Liaison and Oversight Committee/REN Board of Directors on 11 April 2016:

The 2016-2017 proposed project budget was reviewed.

Mayor Clarke indicated that there were three budget line areas he felt needed addressed [sic]. The first was the HST for the two fiscal years — 2015-2016 and 2016-2017. He indicated he would like to see the Ottawa/Cape Breton Day renamed to Advocacy, as he felt there should be flexibility for this budget item. Also he questioned on the Victoria County Administration fee.

BCB and CBP had not included the HST component in the initial budget, but after that learned it could be significant in their contract roles with the Board.

Discussion took place on the HST matter. It was felt a legal/accounting opinion should be requested on this issue.

The Committee felt that before moving forward, further clarity on this issue is needed.

Mark Peck agreed to look into this matter and report back on the information received. It was felt as it was a Canada Revenue requirement; an opinion should be obtained from CRA.

Did “Advocacy Day” ever became a thing? If so, I totally forgot to celebrate it this year.  As for the opinion sought from the CRA, the CBRM’s Chief Administrative Officer (oh, give him a name, call him Michael Merritt) told me this:

The reference that the Mayor is speaking to is in regard to potential CRA interpretation. With regard to the HST implications of the overall project for the CB REN, the following is an estimate based on figures presented at the end of February for projected expenditures to March 31/16 for the fiscal year 15/16:

BCB – $17,416.14

CBP – $16,993.24

Total (CB REN) $34,409.38

The $34,409.38 is the impact on the overall REN budget with regard to HST expense after all rebates were taken in to [sic] consideration and allocated to each entity.

We have not received an official ruling (in writing) with regard to CRA and HST.

To repeat “We have not received an official ruling (in writing) with regard to CRA and HST.” Does that mean they have received an “unofficial ruling?” By Snapchat? If so, why did the mayor make no reference to it when presenting his HST argument to council? Did Clarke pull out of the REN without waiting for a ruling from the CRA on the issue he claimed was the reason for pulling out of the REN? What if the CRA comes back, slaps him on the back and says, “No worries, old chum. You take that $34,000 and create economic development. Or pay BCB to call the florist. Whatever seems best.” Won’t he feel foolish?

On the other hand, the province has yet to sign off on Clarke’s plan to make BCB the CBRM’s economic development arm and even if no one runs against him this fall, we could elect a council that would insist on evaluating the work of BCB before signing off on that plan. It could mark the beginning of a whole new period of accountable government in the CBRM. We could call it, “Democracy Blossoming.”

letter to applicant File 102 – July 29-16 with Decision – signed