A golfer hits from the tee on the 528 yard, par 5, 18th hole at Cabot Cliffs in Inverness, N.S. on Wednesday, June 1, 2016. THE CANADIAN PRESS/Andrew Vaughan

Of government and golf courses: Mulroney’s East Coast experiment, 30 years later

HALIFAX — Ben Cowan-Dewar was a bright-eyed 25-year-old entrepreneur when he visited Inverness, N.S., and saw a jaw-dropping landscape fit for a luxury golf course.

Past the abandoned mines and hardscrabble edges of the Cape Breton village, he envisioned a boutique 18-hole course and upscale resort perched atop craggy cliffs.

“It was a magical day,” Cowan-Dewar said recalling his first impressions of the coastline. “There was a mile of ocean frontage that mirrored the great links courses of Scotland and Ireland.”

The trouble was money.

Finding capital is tricky for any entrepreneur. But banks are notoriously nervous about new ventures in rural regions — even golf courses in picturesque locations destined to attract well-heeled golfers.

To help build Cabot Links, and later its sibling Cabot Cliffs, Cowan-Dewar’s company turned to private financial partners and taxpayer-backed assistance.

Cabot Links at Inverness LP cashed interest-free loans of $6.5 million from the Atlantic Canada Opportunities Agency (ACOA), while the government of Nova Scotia inked an $8.25 million cheque for a low-interest loan.

Several years later, the business is on track to repaying the loans, and the golf course is held up by economic development guru Donald Savoie as an innovative way to bring jobs and prosperity to a rural area.

“They’ve added a new Grade 1 classroom (at the local school). People are moving to the community,” said Savoie, the architect of ACOA and an influential Universite de Moncton professor. “The unemployment rate used to be in the double-digits and it’s now virtually zero.”

Critics argue the golf courses are government-subsidized playgrounds for millionaires. They say most of the jobs are seasonal, and question why taxpayer dollars are helping a private business cater to wealthy golfers.

But the economic impact of the two golf courses is incontrovertible: Hundreds of people work at the resort, and the town has a new restaurant and coffee shop.

It’s a glimpse into a polarizing economic development debate that for this story starts on a spring day 30 years ago.

……

In 1987, Prime Minister Brian Mulroney stepped off a plane in St. John’s, N.L., with a massive economic experiment.

Atlantic Canada was a have-not region steeped in economic misfortune and staggering unemployment.

The fisheries were in a downturn, coal mining was dying and military bases were shuttering.

It was time to relieve the burden of regional disparity, Mulroney said, to create an economic renaissance in a struggling region.

His solution: The Atlantic Canada Opportunities Agency.

“We begin with new money, a new mission and a new opportunity,” he declared optimistically. “The agency will succeed where others have failed.”

The experiment unveiled on a spring day three decades ago has exceeded expectations for some. Thirty years, $10 billion and 56,000 grants and loans later, ACOA stands as a lasting legacy of the Mulroney government, a recognition by Ottawa that Atlantic Canada had been short-changed since Confederation.

But economic malaise continues to grip the East Coast, and while ACOA has spurred jobs and startups, critics say it has simply propped up failing firms and padded the coffers of private enterprise.

Thousands of loans worth more than $425 million have been written off over the last three decades, unpaid by insolvent firms. Eyebrows have been raised when top-level ACOA positions have gone to allies of the governing party.

And despite Mulroney’s avowal on that June day 30 years ago that “the region does not need another bureaucracy,” the agency now has a staff of 651 in its Moncton, N.B., headquarters, Ottawa and across the Atlantic region.

In all, its operating costs, including salaries, office rentals and equipment, have tallied up to almost $2 billion over the last three decades, roughly one-fifth of its $9.5 billion in total spending over 30 years.

The agency has been described as a boondoggle masquerading as economic development, a vehicle for pork-barrel politics, patronage appointments and make-work projects.

Concerns have been raised about repeat users, firms that have secured money from ACOA year after year for decades.

Atlantic Wallboard — a gypsum wallboard manufacturer under the powerful Irving empire — received more than $40 million in “conditionally repayable” loans, for example, which means the money is only paid back if the investment is successful.

Whether the loans have been repaid, or how much has been paid back, is “subject to client confidentiality and cannot be shared,” ACOA spokesman Robert Bourgeois said in an email, adding only that Atlantic Wallboard is a client in good standing.

In a perfect world, said Savoie — author of “Looking for Bootstraps: Economic Development in the Maritimes,” released earlier this year — governments wouldn’t give grants to big businesses flush with cash.

The problem, he said, is companies can pick up and move to Maine or North Carolina in search of more favourable treatment. Savoie said some companies “shop around” for “juicy morsels of government assistance.”

“There are places in the U.S. where they won’t pay taxes for 10 years,” he said. “We could be holier-than-thou and say we’re not going to help the Irvings or the McCains. They’ll say ‘Fine, we’ll just go somewhere else where governments are happy to help us.”’

Ian McAllister, economic adviser under former Newfoundland and Labrador premier Joey Smallwood, disagrees. We should let them go, he argued.

“If a company comes up to me and says ‘If you don’t give us a grant we’re going to go south of the border’ I would shake their hands and say ‘Well enjoy yourself’ because that is not a good case,” said McAllister, who headed the regional development unit of the federal Finance Department in the early 1970s.

McAllister said the promise of “jobs, jobs, jobs” shouldn’t be enough to obtain public money, unless there is a thorough and compelling cost-benefit assessment attached to those jobs.

“The companies that are the most capable of extracting funds through programs are the big multi-national corporations,” he said. “But we shouldn’t have to bribe them to come here.”

……

Before ACOA, economic development meant building big industrial parks and luring outside investors with handsome cash grants.

Savoie’s vision was a sharp departure. Regional development should be endogenous, he said, harnessing the energy and skills of Atlantic Canadians.

Two months after ACOA was born, his vision was emulated in other regions. “Now every postal code in Canada has a regional development agency,” Savoie said.

There are six agencies in all: Atlantic Canada, northern Canada, western Canada, Quebec regions, northern Ontario and southern Ontario.

Advocates of ACOA-style economic development say it helps beleaguered towns and gives local entrepreneurs a fighting chance.

In the early years, ACOA was lambasted for creating an uneven playing field through generous grants. But it has increasingly moved towards repayable loans.

Although more than 80 per cent of the 56,000 awards handed out are so-called non-repayable contributions, or grants, the vast majority of those are to cities and towns, universities, and not-for profit organizations.

Atlantic Canada’s still-weak economy could be worse without ACOA, its backers contend.

While statistics show the region continues to lag the rest of the country, figures also show the economic chasm dividing the East Coast from the rest of the country is closing.

In 2016, GDP per capita — a measure of economic activity — rose to $37,980 per person, or 82 per cent of the national level, up from $30,600 or 76 per cent in 2000, for example.

Joblessness in the Atlantic region is also better, at just over nine per cent, down from a staggering nearly 14 per cent in 1987.

But whether those improvements are due to ACOA is hard — impossible even — to gauge.

ACOA spokesman Bourgeois offers a list of statistics that support the agency’s existence: Fifty-seven per cent of ACOA-assisted firms are still operating five years after starting up, compared to 31 per cent without support. Sales and labour productivity are also higher and grow faster for firms cashing ACOA cheques. And for every dollar ACOA has spent, the region’s GDP grew by more than $5 over a five-year period, with the GDP of all four Atlantic provinces combined about a billion dollars higher in 2012-13 as a result of investments.

……

After 30 years watching the agency grow, the Savoie says he’s hopeful about its future, calling the newly minted president, Francis McGuire, “a bolt of energy.”

“He’s shaking things up,” Savoie said of McGuire, a former businessman who became ACOA’s deputy minister in June. “He’s bringing a new level of energy, a fresh perspective.”

McGuire has an ambitious plan to raise Atlantic Canada’s profile in Ottawa and says he’s ready to lead the agency down a new path.

“ACOA over the years has not played as aggressive a role in terms of advocacy,” said the former president and CEO of Major Drilling Group International Inc.

Looking forward, McGuire said ACOA needs to help companies with changing demographics, skills mismatch and the need for increased automation.

In a recent interview on the agency’s 30th anniversary, Mulroney admitted ACOA hasn’t been perfect.

“But I think it did a lot of good,” he told The Canadian Press. “It’s done a tremendous job in helping small and medium business in Atlantic Canada.”

Mulroney added: “I think that governments obviously have to play a role. And one of the key roles obviously is creating a climate within which the private sector can flourish. But you’d have to be foolish not to understand that in a region like Atlantic Canada the government must be there to be of assistance. This is not like downtown New York City … it’s not as easy to attract industry here.”

Ben Cowan-Dewar says his world-class golf courses would never have happened without government backing.

“Financing was a massive challenge. The farther you get from a major city, the harder it is to find financing,” he said. “The combination of it being rural and the relative market size … there just seemed to be so many odds stacked against us.”

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