Home > Uncategorized > Morgan Stanley sets up in Montreal

Morgan Stanley sets up in Montreal

From the G&M:

The Quebec government has lured New York finance powerhouse Morgan Stanley to Montreal with a generous package of tax credits. Morgan Stanley says it will invest $200-million to build a technology centre in the city and create 500 jobs. Quebec Premier Jean Charest said a key element in winning over Morgan Stanley – which looked at several other locations around the world before settling on Montreal – was a new program in the latest provincial budget that provides for tax credits of up to $20,000 per employee for companies that create new jobs in the technology sector.

From the CBC:
Jerome-Forget said the province will give the company up to $60 million in tax credits over the next six years.

Morgan Stanley said it plans to hire mathematicians and computer science engineers. It’s now looking for a location. The investment bank has other technology centres in Budapest, Glasgow, India and Shanghai.

My comments:

$60 million in tax credits. For 500 jobs. Average salary of $60k. It looks like Charest is looking foward to Year 6. The average provincial income tax on $60k would be around $8k (check here). There would be a multiple on that from indirect and induced economic activity of maybe $6-7k. The company might pay a few hundred grand in property taxes on their facilities.

It is difficult to determine corporate taxes that Morgan Stanley might pay because corporate taxes are levied using some formula based on sales in the province not on a ‘technology centre’. It is unlikely they will pay corporate income tax in Quebec. So my question is simple. What is the tax credit against? I can’t see how it could be against corporate income tax if they don’t pay much if any in Quebec?

Anyway, I haven’t had the time to study the Quebec program on this but I am curious.

Secondly, can they get Mathematicians and engineers in Montreal for an average (meaning some over and some under) of $60,000/year? Maybe.

This looks like a loss leader for Montreal. If there is payback to the government – it will be well after the five year period (based on what I can see).

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  1. nbt
    May 5th, 2008 at 17:44 | #1

    Bloomberg: “We very much wanted to come to Montreal because it is a place that has got a great pool of talent, but at the end of the day, we have to make a financial decision too,” Rosenthal said.

    Three quick things here. Firstly, when you’re talking about high end technological jobs, they move to where the talent is (as noted above).

    Secondly, the talent (as Richard Florida has outlined in his 3Ts theory) moves or clusters to areas where the populations exhibits the most tolerance (i.e. welcomes diversity). Fredericton or Moncton? Absolutely not. Toronto or Montreal? Without a doubt.

    And finally, why did Morgan Stanley not even give us a look? Two reasons: 1.) The market is not only too small, it is declining and 2.) our talent pool is slim since the province under McKenna decided to market (or focus) on less talented individuals who could be paid low wages for low end tech jobs (i.e. call centres).

    In other words, what you may call a success in call centres, IMO, is more of a roadblock to future investment since the policy did nothing to address the working needs of talented folks.

    To be honest, it did the opposite, it drove them and the possible investors like Morgan Stanley away.

  2. mikel
    May 6th, 2008 at 12:18 | #2

    This may be a case which involved both the feds and the province. This helps out the feds because they aren’t providing the tax credits and they get the income tax (sort of) from the jobs.

    This is also an attempt to build up more of an industry presence, and its useful to know exactly what that COSTS.

    However, it certainly has nothing to do with TALENT. Thats just crazy. Would they have moved there WITHOUT this offer? I highly doubt it. This is a company whose purchase of B-S just got backed by federal legislation in the US. They got an investment house for a song, and the fed picks up the risk.

    The types of jobs provided here could have been as easily found in Ottawa, Toronto, Vancouver, Calgary, hell, probably even Halifax. But I doubt other cities were in the position to put up that kind of dough.

    It’s certainly way out of the ballpark for NB, this is a whole different league than RIM (unless there is something about that deal we don’t know). No NB government could cough up that kind of dough, and NB doesn’t even have a functioning public market let alone a market ‘industry’.

    Canada has always been about ten years behind the US on hot button issues, this is very common in the US, but of course MS wants to avoid the US like the plague-they have no liquidity, Canada does.

    This is the same kind of deal, with different numbers, that NBers are well used to: ‘give us a property tax break or we won’t build a terminal’; ‘give us more money or we move to Quebec’. While the corporate welfare ‘whipsaw’ is new to a lot of canada, NBers are well acquanted with it-for about forty years or so.

    With the call centres though, McKenna didn’t strike me as the pick and choose type. Call centers was simply what could be had.

    It again comes down to industry. To do something like this you need a financial services industry, you need a market where the government doesn’t both ‘sell’ AND ‘regulate’ because companies like MS like to be able to show they are clean, the only dirt they get is tax credits and loan guarantees. In the finances services, NB is nowhere, sorry to say, but way out of the MS league. Again, it COULD be, with the right regulations and policies, but without that you can’t expect companies to take it seriously. The ‘but we’re so pretty’ line only goes so far.

  3. Anonymous
    May 6th, 2008 at 17:01 | #3

    And Merrill Lynch set up a global technology centre in Toronto with no financial assistance. Instead Ontario decided to develop a dedicated financial services information system program at either York or U of T. Zero subsidies.

    I actually think that the Ontario financial services strategy is one of the better in this country. A industry/provincial/city joint venture that is basically run on a bare bones budget (only two-people). They recruited a former provincial finance minister and gave her a clear mandidate to work with industry and education institutes in the city to grow the industry.

    http://www.tfsa.ca

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