Province Denied CBRM REN Request

On 8 June 2016, at a “special” CBRM Council meeting, Mayor Cecil Clarke surprised councilors with the announcement that the CBRM had withdrawn from Regional Enterprise Network (REN) 6, an economic development organization incorporated in October 2014 and including the CBRM, Richmond County, Victoria County and Inverness County.

CBRM councilors, needless to say, had no input into the decision to withdraw from the REN — Clarke simply presented it as a done deal. He then put this motion before them:

Motion to approve the Business Cape Breton (BCB) Business Plan and Budget as presented; and to designate Business Cape Breton as the sole economic development entity for CBRM.

BCB was one of two agencies delivering programs for REN 6, the other being the Cape Breton Partnership.

District 6 Councilor Ray Paruch and District 3 Councilor Mae Rowe complained that they had not been warned the CBRM was leaving the REN. Nor were they told they’d be asked to designate BCB the municipality’s economic development “entity” prior to the June meeting.  (District 4 Councilor Claire Detheridge and District 7 Councilor Ivan Doncaster were not present.)

Clarke told council the decision had been made because the CBRM was paying too much in HST for services performed by the two REN delivery agencies.

Paruch voted against the motion, but it passed, meaning the CBRM agreed to declare BCB its economic development “entity” and to give the organization $233,956 for the 2016/2017 fiscal year.

Clarke said the province would be asked to provide matching funds, in effect treating the CBRM as a separate REN.

 

Follow the Money

So, did the province give the CBRM its share of the REN funding?

I’ll let the Department of Municipal Affairs answer that one. Spokesperson Sarah Gillis emailed me on 1 February 2017 with answers to three questions:

Has the CBRM informed the Department of Municipal Affairs formally that it has left REN6?

Yes, the Department of Municipal Affairs is aware that CBRM has left REN6.

Has the CBRM requested that it be given its share of the REN6 funding directly (or through Business Cape Breton)?

Yes, CBRM has requested funding from the Department for a separate REN.

Has the provincial government agreed to this and has it provided the CBRM with any such funding?

No, the Department of Municipal Affairs has not approved or provided funding for a separate REN in CBRM.

Contrast that with what a mystery person at BCB told me when I asked the same question about provincial funding (I contacted them through a generic “information” email and the replies I received were unsigned).

CBRM has received funds for 2016/17 from the province. They were applied to a prioritized economic development initiative IE the Glace Bay/Dominion/Reserve Mines Revitalization planning. BCB is implementing this project.

Which is true, but is not the same as the CBRM applying for and receiving REN status and funding. The $225,000 for the revitalization plan was announced in January 2017, seven months after the CBRM left the REN.

In a full-page interview with the Cape Breton Post on 21 January 2017, BCB CEO Eileen Lannon-Oldford neatly dodged the question of whether the organization had received provincial funding after the CBRM left REN 6 by talking about what she hopes will happen next year:

Q. What’s the status of your funding from the province with the splitting last year away from the REN (regional enterprise network)?

A. (The request would be for) the province to match the same dollar level that the CBRM is putting in for economic development.

But Lannon-Oldford also admitted that ACOA has withdrawn funding for BCB’s small business development program (I’ve asked ACOA why it suspended funding but have yet to receive a response). She said the loss of the ACOA funding had affected three positions, but BCB’s staff has been reduced by more than three this past year. Here’s the list from the 2016/2017 business plan presented to council:

Business Cape Breton staff, 2016/2017 business plan

 

Here’s the list from the website — the screenshot was taken 30 January 2017:

 

REXIT?

I’ve asked the Department of Municipal Affairs a follow-up question — why was the CBRM’s request turned down? But I don’t expect an answer before press time because I just asked 10 minutes ago and I am not a completely unreasonable person.

While we’re waiting, it might be interesting to look at another mystery surrounding the CBRM’s exit from REN 6 (or ‘REXIT’ as I’m cleverly calling it) — how and when was it accomplished?

The REN’s founding document, the Inter-Municipal Agreement, signed by Clarke and the wardens of Inverness, Victoria and Richmond in Dundee on 23 October 2014, sets out a very clear process for any municipality choosing to leave REN 6:

A Municipality may withdraw from REN 6 at the beginning of any fiscal year by giving written notice to the Chair of the Liaison and Oversight Committee and the Chair of the Board of Directors a minimum of twelve (12) months in advance of the fiscal year in which the participating municipality intends to withdraw.

The REN 6 fiscal year runs from April 1 to March 31st. To have withdrawn at the beginning of the 2016/2017 fiscal year — on 1 April 2016 — Clarke should have given written notice by 1 April 2015.

Did he?

I asked the chair of the REN 6 board of directors, Brad MacDonald, if he had received such a communication from Mayor Clarke but he said it would have been a matter for the Liaison and Oversight Committee.

I asked Victoria County Warden Bruce Morrison, the chair of the Liaison and Oversight Committee, if he had received written notification from the CBRM that it was leaving REN 6 and he solved the mystery, telling me in an email:

At the May 26th meeting of the Liaison and Oversight Committee for REN 6 Mayor Clarke indicated CBRM…no longer wanted to be a partner of the REN. A motion followed later in that meeting, was passed that the  REN would not require a year[‘]s notice from CBRM to exit the REN.

That’s the “when” answered: Clarke withdrew from REN 6 12 days before he made the announcement to council.

But what about the “Why?”

 

Tax Dodging

Clarke told council the CBRM was leaving REN 6 because it was spending too much on HST for services rendered by the two delivery agencies. Here’s how he explained it to the CBC at the time:

CBRM Mayor Cecil Clarke told CBC News the municipality withdrew because “the process around the REN was becoming cumbersome.”

“In the whole process, Business Cape Breton was representing the interests of the CBRM and a lot of the delivery for the other three municipal units was being done by the Cape Breton Partnership,” Clarke said.

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.

There are two problems with this. First is the mayor’s assertion that BCB served the CBRM while the Cape Breton Partnership served the other municipalities. Trying to get to the bottom of the HST issue last June, I asked CBRM CAO Michael Merritt how much the CBRM was paying in HST for services provided by the REN agencies. He replied by email:

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.

Unfortunately, this breakdown does not show whether the CBRM purchased services from both BCB and the Cape Breton Partnership in fiscal 2015/2016 as the HST figures are for the entire REN.

Merritt’s reply does show, on the other hand, that while the move to declare BCB the CBRM’s economic development arm was intended to solve the HST “problem” (if paying taxes is a problem, which it probably shouldn’t be for a government), Clarke announced the municipality had left REN 6 before getting a ruling from the Canada Revenue Agency (CRA) on this question. Lannon-Oldford, in the 21 January Post interview, claims that, to her knowledge, the CRA has yet to render a decision on it, which means the CBRM may have to pay HST on services provided by BCB regardless of the “economic development entity” designation.

 

Transparency

I emailed CBRM spokesperson (or Mayor Clarke’s spokesperson) Christina Lamey to ask about provincial funding for BCB but — as has become our norm — she didn’t respond so I can’t tell you what the Mayor has to say about being denied REN status and funding.

Victoria, Inverness and Richmond Counties have moved on, signing an updated  Inter-Municipal Agreement in January 2017. REN 6 exists now with three members.

Where does that leave the CBRM?

Good question.

NOTE: This story has been updated to remove the line, “According to the CBRM’s own figures, it purchased services worth almost exactly the same amount from BCB and the Cape Breton Partnership in fiscal 2015/2016,” because the HST figures quoted apply not just to the CBRM but to the entire REN. The Spectator apologizes for the error.

 

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