Classic case

The Canadian Press is running a story (picked up here) about seven firms that have received funding from ACOA for the past 20 years. 

This is a classic case of what I have been talking about.  Read the article and then cross-reference it to everything I have been saying about journalism, the need for transparency and the need for a ROI on public investments in company expansions.

First, it is blindingly missing in this story any reference to the thousands of companies that have received assistance maybe one or two times over 20 years.  The intent of the article is to discredit ACOA and its funding without any balance.  Now my journalist friends keep telling me that ‘balance’ is not their job but I think in terms of public policy it should be. 

The other thing the journalist missed is any reference to the benefits of the investments in these firms.  There may be none but there may be substantial.  We will never know from this article.  My point is that if those investments in seven firms ($41M in total) had led to 50,000 new jobs and $500 million in new tax revenue, most reasonable people would be highly supportive of the deals.  How could there be a story about loans to industry without any reference to the potential benefit to the taxpayer from making those investments?

Of course, CP might say that ACOA wouldn’t share that information which brings me to another main point.  ACOA should be showing directly what the rationale is for investing in these firms.  Ideally there should be a direct ROI to the taxpayer (as I have said $1 invested by the Crown should lead to $3 new tax dollars or some such metric). There may be other reasons to invest in these firms but all economic development organizations should be clear about it.

They should also be clear that everyone is doing it.  It is hardly fair for CP to slam ACOA without mentioning that these types of grant, loan and tax-incentive programs exist in almost every province and state in North America. 

I could go on but I think you get my point.

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13 Responses to Classic case

  1. Anonymous says:

    They say the best defence is a good offence; which is why it is no accident that the Dal professor neglected to identify Atlantic universities as ACOA ‘repeat offenders’.

    Nothing against university funding, we need to do it . However, if ACOA continues to morf into yet another university funding program, we do need an alternate economic development funding agency to replace it.

  2. mikel says:

    If nothing else, the Irvings comments really train you to be concise with only a thousand characters allowed, I’ll just repost what I posted there:

    ACOA publishes funding at their website. Ironic the first complaint is “startups don’t get money” but then “we’d rather see lower taxes”. Which is it? Oxford Food gets some money but X doesn’t. Who is the X, THAT is the question. Who is applying that gets refused, do a little research Irving and find out, don’t take somebody’s word for it.

    We’ve seen trillion dollar bailouts of virtually every corporation in the capitalist world, and the complaint is about $40 million going to rural areas? Get real. While individual projects and the methods should be audited, it is provincial funding going to cronies that is more a problem. ACOA should be funding MORE. Here in Waterloo the feds give more to the Perimeter Institute (theoretical physics) than ALL the funding ($57 million in one year alone).

    There are two options-simply socialize the entire economy, or have those ‘lower taxes’ and nothing else. There’s a model like that. It’s called “the third world”.

    Who the startups are that aren’t getting funding is a VERY important question, and who else is getting refused is fairly pertinent too.

  3. OK, first, the article is a hatchet job. But second, the criticisms are valid.

    There may be mitigating factors, as you suggest, but they are increasingly difficult to find.

    You suggest, “if those investments in seven firms ($41M in total) had led to 50,000 new jobs and $500 million in new tax revenue, most reasonable people would be highly supportive of the deals.” True, but the evidence seems to be that the return was nothing like this. We’re more likely talking 50 jobs than 50,000.

    What was the return? Well, we don’t know. But when the same 7 companies get new money every for 20 years, and when an additional 82 companies got money at least 10 of the 20 years, it is arguable that the money is not helping these companies stand on their own. And it makes us wonder how it could be spent in such a way that it does enable companies stand on their own.

    Arguably, what is *in fact* happening is that the money is acting as a local industry subsidy, which (when combined with other local industry subsidies, such as special tax deals from the local or provincial governments) gives existing Maritime industries an unfair advantage over companies that might relocate here.

    Who is going to set up a frozen food industry when they see that Oxford Frozen Foods has millions of dollars in subsidies? A critic might simply see the $12.1 million subsidy as a way for Oxford to monopolize the local blueberry crop. Certainly their web site (which was suddenly taken down, but you can still see internal pages here http://www.oxfordfrozenfoods.com/hr.htm ) suggests nothing otherwise. No innovation here!

    I don’t agree with the proponent in the story, that the way to stimulate corporate activity is to lower taxes. For one thing, taxes are already very low – it’s like interest rates, once you get to a 0.5 percent rate, the old refrain ‘lower the rate’ doesn’t work any more.

    But what we need to be doing is creting incentives for *new* industry, to provide competition for the old ones. Sobey’s has actually started building new stores now that Superstore has established a presence. Kent started opening on Sundays once Home Depot moved in across the street. One could only imagine what would happen if we had competition for Irving in oil, transportation and forestry, of McCains in food production!

    Or even better, more ACOA money could be used to seed industries in the new economy. We should be working on biotech, alternative energy, information technology, etc. – high paying jobs with low resource impact. This, of course, requires better infrastructure – lower power rates, better telecommunication (especially wireless), efficient transportation – all things the province lacks.

    I propose, from time to time, only half in jest that each person would be eligible for only one gran t in a lifetime. Say, a million dollars. The same requirements upfront would apply – they would still have to have a business plan, they would still have to have a product. And they would need business support, access to infrastructure, and marketing assistance. But once the money ran out, they could come back for more each year; it would be someone else’s turn.

    Clearly, after a company has received five or ten grants, it’s no longer about starting something new. Rather, it becomes all about entrenching their position. At that point, the grant money stops helping the economy, and starts hindering it.

  4. First of all I used a wildly out of whack job creation number on purpose to try and make the point. Second, I agree with all of the comments related to value for public dollars spent.

  5. Pingback: UB Blogs » Blog Archive » The ACOA Case

  6. Samonymous says:

    I THINK WHAT NEEDS TO BE FURTHER INVESTIGATED IS WHY DID THESE FIRMS CONSISTENTLY RECEIVE FUNDING FROM ACOA. WAS IT POLITICAL? WERE THEY GOOD INVESTMENTS? HAVE THE FIRMS BECOME RELIANT ON THESE GRANTS IN SO THAT THEY BUILD THEM INTO THEIR ANNUAL PLANS AND ACCOUNTING? PLUS, WHAT IS NOT SEEN HERE IS THE IMPACT CORPORATE WELFARE HAS ON SMALLER FIRMS THAT ARE NOT ON THE ANNUAL LIST OF GRANTS. WAS THERE CONSIDERABLE FAILURE WITH THOSE START UPS THAT DIDN’T RECEIVE GRANTS? FURTHERMORE, WERE THE GRANTS OFFERED TO FIRMS THAT PRACTICE ENVIRONMENTAL AND CORPORATE SUSTAINABILITY? WERE THEY POLLUTERS? ALL FAIR QUESTIONS THAT THE ARTICLE DOESN’T DELVE INTO.

  7. mikel says:

    It’s not JUST the job numbers, but also the job quality and opportunity-plus salary of course.

    Most of the seven are in Newfoundland, hardly surprising. Interesting that the Genesis Group, the commercialization of University Research got the most, 6.8 million.

    The Newfoundland companies also tended to have a low number of employees, 60 at the most (getting 2.1 million).

    In NB Marwood in Fredericton got the most, 6.7 million, they employ 250 employees, in, you guessed it,wood.

    Contrast that to PEI, where BioVectra also got 6.7 million, although they only have half the employees, which do you think provides bigger salaries (they make components for the pharmaceutical industry).

    Terra Nova Marine got 2.6 million, and they only employ 20 people, makes you wonder whether restaurants and retail stores should be applicable to apply.

  8. Samonymous says:

    Terra Nova Marine got 2.6 million, and they only employ 20 people, makes you wonder whether restaurants and retail stores should be applicable to apply.

    HaHa! Good one, mikel! I remember secondary schools (in NB) being on the recipient list for an industrial grant via TPC {Technology Partnerships Canada]. Not sure what’s up w/t that?

  9. Anonymous says:

    For those of you interested in doing some of your own research, you can go to this link to produce reports on ACOA funding:

    http://pub.acoa-apeca.gc.ca/atip/e/content/list.asp

    For the Dal professor so very concerned about organizations getting repeat funding, if you plug in Dalhousie University, the report generates 82 Dal projects totaling $115 mil. Dal is doing not bad considering ACOA’s mandate is to promote economic developmment through the growth of jobs at SMEs. Guess who has even more projects? UNB at 98 but total project funding is less at $88 mil.

    Someone does need to fund universities; if it is going to be ACOA, then we should be lobbying the Feds for a seperate program to fund SMEs.

  10. Anonymous2 says:

    Any articles on repeated offenders at Industry Canada’s proactive disclosure section.

    http://www.ic.gc.ca/app/ic/pdgc/lstQrtrs.do?lang=eng

    I guess these are the investments not handouts.

    How about the Western Economic Diversication?

    http://www.wd.gc.ca/eng/333.asp

    Any repeat offenders there?

    Just sayin’.

  11. Samonymous says:

    I see the recreation facilities at a post-secondary institution (which raises significant money from private donations — they are the proud owners of the Wallace McCain Center) got a boost from ACOA’s RInC for votes program. See below:

    http://athletics.mta.ca/

    And they sent an unelected and accountable Senator to doll it out. 😉

  12. mikel says:

    Was that really supposed to say “accountable” Senator?

  13. Samonymous says:

    HaHa! Absolutely not!

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