Three examples of economic development or economic development gone wild. First, Alberta cuts its oil & gas royalties to the bone again to stimulate new development. Depending on how you read this article, it looks like over $2 billion worth of cuts. In an economic sense, this is exactly the same as a tax incentive or any other kind of incentive. It’s worth cash money for development and it’s forgone revenue for government to stimulate new economic activity. New Brunswick hasn’t got oil so I still wonder why this province (and region) gets so much grief when it tries to offer some type of incentive to attract investment.
Second, I see the Tories and the Libs in NB are trying to one up each other on who can dole out the most tax dollars for risky, near bankrupt companies. The Tories are crying foul over Atcon, the Libs are firing about about Atlantic Yarns (close to $80 million). The Tories are crying about the $60 million Caisse bailout and the Libs are pointing to the $60 million to AV Nackawic. I think in all of these cases (except the Caisse) the government felt its back was against the wall because these very large employers were threatening to close and put hundreds of people out of work. I still think government has to be very careful with taxpayer money – particularly when it comes to what economic developers call ‘troubled’ companies. Maybe in these cases you have to let the company go under and you use the money to attract a company with a great, long term business model. Consider Daewoo in Nova Scotia. There is no doubt the Libs and the Conservatives are equally bad on the bailout side of the ledger.
Third, I see Siemens is moving a 550 person plant from Ontario to North Carolina. There are a few things going on here. The article talks about the tax incentives offered by North Carolina. That may be true but Ontario has always bellied up to the bar on incentives (usually with the Feds in tow). No, I think this is about moving from a union shop to a non-union shop. Siemens will save millions per year on a 550 person payroll. If this is the case, what’s the alternative? I don’t like the race to the bottom mentality. The other thing about Ontario – and this is pure speculation – is that deal with Samsung that gave them lucrative power contracts and hundreds of millions of incentives to set up wind energy in Ontario. I suspect other large wind energy players (like Siemens) would have wanted to take a crack at that business. Just a random thought but when a province aligns its business (wind power) with a specific vendor like that it is bound to annoy other players (I read an article that a number of smaller Ontario firms are upset about the Samsung deal).