Just one of three targeted jobs materialize through N.S. payroll subsidies

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HALIFAX — Just one in three potential jobs announced by Nova Scotia’s economic development agency through its payroll rebate program actually materialized over the past four years, a figure rekindling debate over the impact of the incentives.

Data obtained by The Canadian Press covering April 1, 2013, until mid February this year show 2,176 people were hired out of the possible 6,575 approved for subsidies in that timeframe — 33 per cent of those possible among companies that had active files in the time period.

For example, when Conifer Financial Services qualified for a rebate over seven years ago, the news-release headline said, “International financial services firm chooses Nova Scotia for growth.”

The firm qualified for rebates worth $5.2 million if it created up to 350 jobs over seven years, and a senior executive said Halifax was among its fastest growing locations.

But three years in, the company had hired 23 people out of a possible 100 by that date, according to the database.

Similarly, the economic development agency announced three years ago that information technology giant CGI Group Inc. could earn almost $11 million in incentives if it created 450 new positions over seven years.

The most recent update for 2014-15 had the company creating 11 of 200 possible jobs up to that year, just over the minimum required to qualify for any subsidies. The company didn’t respond to a request for comment.

Of the 62 firms on the government’s list, three exceeded the job targets, but there were 22 that didn’t list any jobs created under the program.

Laurel Broten, chief executive of NSBI, says the unused money remains in the public treasury, and the incentives — averaging about eight per cent of salaries — are only paid out from public coffers after an audited statement shows the positions were created and tax revenues received.

The agency has budgeted between $10 and $12 million annually for the incentives for the past three years, and the chief executive says that’s about half of what is available annually to the firms under the program.

“This is a tool that protects the public money in a way that doesn’t have you outlay cash and then have no jobs,” she said.

She also says there is tough competition from other Canadian provinces and international locations to attract companies such as the Royal Bank of Canada, and the rebate incentives keeps Nova Scotia in contention.

However, economist Philip Leonard, who teaches at the University of New Brunswick, says he’s dubious about the effectiveness of the rebate programs.

“It’s an unknown. How many times do you think a company would have located in the Maritimes anyway, and then as they come in realize there is a program and say ‘We might as well get it too’?” said Leonard, who has background evaluating federal government programs.

The money allocated for salary rebates could also go to lower taxes for business or improve government services, he said.

Kevin Lacey, Atlantic director of the lobby group Canadian Taxpayers Federation, also adopts that position and says the payroll rebate program amounts to “a false promise.”

“The government is more focused on the announcement at the front end than the results at the back end. Too often you see commitments made to communities starving for jobs but in the long run the jobs don’t materialize,” he said.

“This is a failed, old economic strategy that has to change.”

Broten says the agency’s goal is a minimum 30 per cent return on investment, and the payroll rebate program produces far more than that from income taxes generated that might not otherwise have occurred.

She said since she’s come into the job in 2015 she’s tried to get a better estimate of how many positions a company might actually create, and has toned down the news release language.

“Past client performance would not want us to lock up public dollars that can be directed to other things, other payroll incentives as an example,” she said.

The news releases now use phrases such as “up to” or “to a maximum” to describe the possible number. Since 2013, the releases also mention the minimum number of jobs the firm must create to qualify, along with the cap on possible incentives, and there is a website where the public can track the progress of firms in meeting their goals.

Conifer president Jack McDonald in a telephone interview that his firm makes an estimate, but business plans can change.

“We’d given a range of what it would be, and it was coming in at the lower end of the range,” he said.

“Notwithstanding we haven’t had the sheer volume of new opportunities we’re hoping for … it (the incentives) makes a difference in us allocating where future work is going to go.”

Meanwhile, some companies have stayed on the rebate rolls for over a decade.

A spokesman for the agency confirmed that Web.com in Yarmouth, formerly known as Register.com, has had a series of rebates since 2002; technology giant CGI Canada has been getting money since 2004; financial services firm Citco has been in the program for over 11 years.

Financial services firm Mitsubishi UFG, formerly known as Butterfield Fulcrum, has been subsidized for over a decade.

Broten said she will still do fresh deals with existing companies who are long-time NSBI clients if they’re willing to keep on creating new jobs in the province.

“We want new, incremental jobs. And if an entity is in a competitive situation … yes we’re interested in having those new jobs come here,” she said.

Follow Michael Tutton (at)Twitter mtuttoncporg.

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