Three Cheers for Corporate Welfare!

On January 15, NSBI issued the following press release:

Nova Scotia Business Inc. (NSBI) has approved a business development incentive in the form of an innovation rebate for Canadian Maritime Engineering Limited.

For over 30 years, the company has serviced a range of marine and industrial companies including machining, mechanical, welding, fabrication and specialty coating.

Canadian Maritime Engineering Limited is investing in new infrastructure and equipment to expand its North Sydney operations. The company is proceeding with a $3.16 million capital investment to increase capabilities to manufacture steel and aluminum small and medium marine vessels.

This investment by the company will allow its seasonal operation to operate year-round, making it more globally competitive. [emphasis mine]

Okay, stop.

Have you ever heard CME’s North Sydney operation billed as “seasonal” before?

No, me either.

Canadian Maritime Engineering Ltd. sign, North Sydney

Canadian Maritime Engineering Ltd., North Sydney

When CBRM Mayor Cecil Clarke and his team of special advisers — Mike Moore and lawyer Jim Gogan — were busy pushing the deal through Council in December 2014, they were not promising “seasonal” work. No, Council was to sell Archibald’s Wharf, a waterfront recreation property in North Sydney, to CME in return for great things:

CME brings to the Port of Sydney significant expertise in custom engineering and manufacturing. The result should be a wide range of opportunities for our region with very positive private sector investment and job creation. (Issue Paper presented to CBRM Council, 2 December 2014)

“I guess the thing for me, would be their (CME) promise of jobs in the CBRM, particularly on the Northside. They’re talking anywhere I understand from a low of 50 to a high of 100 — you’re talking $55,000-60,000 per person, and if that were true, it’s time that we started saying yes to economic development.” — District 1 Councilor Clarence Prince, 18 November 2014)

In April 2016, when NSBI offered CME a five-year payroll rebate, it was based on the company spending $17.5 million in salaries to create “a maximum of 80 new jobs” — not “80 new seasonal jobs.” The government expected to collect $1.9 million in “personal income taxes” from those workers over the five-year period, which means it intended to hand back 74% of that to CME.

I’ve noted before how enthusiastic the Cape Breton Post has been about CME’s North Sydney operation from the very beginning, and the tradition has continued into 2019. On January 17, the paper reported on that innovation rebate the company received from NSBI — worth $756,000 — and in the process offered some new CME job stats:

The current complement of staff ranges from 60 to 75.

CME president and co-owner Tony Kennedy said the expansion will add 20 to 30 jobs to the North Sydney office within the year.

Kennedy estimates the number of additional hires involving various skilled trades could jump to 60 employees by project completion in 2020.

Let’s pick that apart a bit:

CME is now employing between 60 and 75 people, huh? I’m not so sure about that, but even if it were, we now know, because CME said so (because it is suddenly in its own interest to say so, because it bolsters its case for getting more public money) that these are seasonal jobs. Moreover, we have no idea how long the season is or how many of these workers are actually locals.

And presumably the (maybe) 60 employees to be hired “by project completion” will be people hired to work on the expansion. How many will be retained beyond the project’s completion?

It occurred to me that one way to determine how many people actually work at CME’s shipyard would be to see how much of that payroll rebate the company has claimed, so I asked NSBI and received the following (email) response from media relations adviser Emily Neil:

Canadian Maritime Engineering has a payroll rebate beginning in April of 2016. Through the rebate, the company has earned one payment of $84,000 for the creation of 12.6 FTEs [emphasis mine] during 2016 – 2017.  Thus far, this is the only submission the company has made to NSBI for payment.

Did you catch that? The company has created 12.6 full-time equivalent jobs since 2016. As Neil explained:

The rebate program is for positions as full-time equivalents (FTE). Companies signing payroll rebate agreements are required to submit an audited report to NSBI that shows the full-time equivalent positions generated in order to qualify for a payment from NSBI. These are often one person in a full-time position or may sometimes be a couple of people in partial positions or part time that add up to a full-time equivalent.

And before you say, “Maybe they already had 40 or 50 people working at the shipyard in April 2016 and these were just additional jobs,” I checked. The Post reporter who visited the shipyard in October 2016 found “about two dozen” people at work, some of them pouring concrete for a new fabrication hall.

If CME had created more jobs, presumably CME would have claimed more of the rebate.

So how to reconcile what Kennedy is telling the Post about his staff size with what the NSBI figures are telling us?  I’d say it’s pretty clear those workers aren’t actually getting many hours — and many of them may not be CME employees at all but contractors. And how does this jibe with what residents of the CBRM were promised when Archibald’s Wharf was sold to CME?

In a word, it doesn’t.

But it does reinforce my conviction that the business incentives system in this province is, to use a technical economic term, whack. I actually have some further numbers to prove that, but first, let’s talk about another happy private sector recipient of NSBI’s largesse this month.

 

Tax Cuts

Before we get into the details of this particular case, which involves the Sydney Call Centre, can we talk for a moment about its owner, Anthony Marlowe’s, Twitter account?

These days, the Iowa businessman (and Sydney’s own personal Jesus) users Twitter mostly to retweet stories about himself written by fawning Canadian journalists. But prior to Marlowe’s arrival in Sydney, the feed served primarily as a 24/7 Donald Trump amplification machine.

Here’s Marlowe endorsing Trump’s characterization of himself as a “very stable genius” back in January 2018:

Here’s Marlowe celebrating, along with the president, when a Texas court struck down Obamacare — a move that, according to the New York Times, could “threaten the survival of the landmark health law and, with it, health coverage for millions of Americans, protections for people with pre-existing conditions and much more.”

 

Here he is joining the president in deriding most of the mainstream US media as “Fake News”:

 

While helping members of Trump’s cabinet disseminate stories from a “real” news site — The Daily Caller:

 

Occasionally, he has branched out and retweeted other Trumps– like Donald Jr, suggesting Bill and Hillary Clinton murder people:

 

But for our purposes today, the most interesting of his retweets is probably this one:

Yes, Marlowe is endorsing Trump’s tax cuts for wealthy people — like Marlowe. Cuts that will put a $1.5 trillion hole in the US budget. Cuts that were so popular with the American public, most Republican candidates in the 2018 mid-term elections didn’t mention them.

Cuts that, now that they’re starting to file their 2018 taxes,  even Trump voters are beginning to hate:

Now I want you to hold that thought — the thought that Marlowe doesn’t want to pay taxes — while you read this:

February 4, 2019

Nova Scotia Business Inc. (NSBI) has approved a business development incentive in the form of a payroll rebate for The Sydney Call Centre Inc.

The Sydney Call Centre Inc. has the potential to create up to 750 jobs under the three-year payroll rebate agreement. Based on the maximum growth forecast of the agreement, NSBI estimates the company could spend $49,500,000 in payroll.

It is also estimated employees in those jobs would contribute provincial tax revenues of $5,053,000 through their income and consumption taxes. As a result, the company would earn a rebate up to $2,475,000 over three years.

You see, Marlowe may not want to pay taxes, but he’s happy to help himself to yours.

And look at the amount: $2.5 million — that’s $1.0 million more than he paid to buy the call center in the first place. Basically, we’re buying the call center for him and throwing in another $1 million out of sheer gratitude.

That rebate represents 49% of the $5,053,000 the province expects to generate in income AND consumption taxes from Marlowe’s 750 workers. (Think about that: NSBI has to include consumption taxes in that figure to make it seem substantial. And even at that, it works out to $1,340 per worker per year. Why? Because the jobs Marlowe is creating aren’t high paying.)

And yet, those taxes paid by his workers will fund all the things a businessman like Marlowe needs to operate: roads, legal systems, education systems, healthcare.

I compared the figures attached to the Sydney Call Centre to the most infamous payroll rebate of all — the eight-year rebate granted to IBM to create 750 jobs in Halifax.

The same number of jobs, but look at the difference in salaries — those IBM workers were expected to take home $251,397,422 in “salaries and benefits” and pay “direct taxes” (no need to include indirect “consumption taxes” to pad that out) of $29,264,000. That’s $4,877 per worker per year. Mind you, IBM stands to get an even bigger share of that back — $22,633,683 or 77% of what the provincial government raises in taxes from its workers.

If you must pay businesses to set up shop in Sydney, couldn’t you at least target good businesses?

Whack, I tell you. Whack.

And I promised further data to back that up, so let’s have a look at it.

 

Call center? What call center?

In 2013, the Canadian Press FOIPOPed the figures on the payroll rebate system from NSBI. They had to FOIPOP the information because, as was noted in the article, although NSBI likes to announces the programs with great fanfare, it isn’t so keen on following up on them. According to CP, then, as of 2013:

A payroll rebate program intended to create up to 12,000 jobs in Nova Scotia has generated about half that figure, a provincial Crown agency says.

Nova Scotia Business Inc. had hoped to hit that job growth target by offering payroll rebates to companies as an incentive to hire.

But the business development agency says the rebate program only helped create about 6,000 jobs after companies started receiving the money between 2002 until 2007, the first five years it was in place.

Payroll rebates were offered to 50 companies in the hopes of creating jobs, usually over a three- to five-year time frame. Of the $142 million in rebates offered, about $53 million was spent, Nova Scotia Business Inc. says.

More damning still:

Thirteen companies that created jobs after receiving payroll rebates are now closed or don’t operate in the province, The Canadian Press was able to determine through interviews with Nova Scotia Business Inc. and officials with some of those firms.

Call centres set up by Teletech Inc. in Amherst, N.S., and Halifax had created 704 jobs, but the Amherst centre has since closed. MacAskill said he is unaware of the status of the Halifax operation.

“I’ve heard sometimes they are employed here, and sometimes they’re not,” he said. Calls to the firm’s Colorado spokesman were not returned.

There were also 14 instances where companies that were offered the payroll rebates never accepted them or didn’t create enough jobs to qualify.

Okay, stop.

The vice president of NSBI didn’t know whether the call center they funded in Halifax was still operating? What the hell?

The big success story cited by MacAskill was — wait for it — Blackberry, which had been lured to Nova Scotia in 2008 but would announce plans to shutter its Halifax operation, throwing 350 people out of work, just four months after that CP story was published. As the CBC would note:

The province offered $19 million in subsidies, including $14 million in payroll rebates and $5 million for training and recruitment. The company was told it had to create 1,200 jobs over five years to get the full rebate.

BlackBerry drew almost $11 million from the payroll rebate program over a six-year period ending in February 2012, Nova Scotia Business Inc. has said.

The Nova Scotia government announced it would give BlackBerry $10 million over five years to create a Centre of Excellence and guarantee at least 400 jobs in the province at an average salary of at least $60,000 a year.

It’s not known exactly how much of that money the company has received, but BlackBerry said Thursday it is paying back a $2 million contribution.

I went looking for more up-to-date numbers on the payroll rebate program, and found this in NSBI’s 2017-2018 Annual Report:

63% return on investment projected on authorized payroll rebates.

The word “projected” makes my eyebrow shoot up — as does NSBI’s “goal” for return on investment: 30%.

I can’t find a figure for total jobs (or full-time equivalents, if you will) created as a result of payroll rebates so I’ve asked NSBI to supply me with the information.

I don’t expect to be impressed, but who knows? Maybe I’ll end up as surprised as a middle class Trump supporter filing her 2018 taxes.

 

 

 

 

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