HANSARD
Printed and Published by Nova Scotia Hansard Reporting Services
Ms. Maureen MacDonald (Chair)
Mr. Chuck Porter (Vice-Chair)
Hon. James Muir
Mr. Keith Bain
Mr. Graham Steele
Mr. David Wilson (Sackville-Cobequid)
Mr. Keith Colwell
Mr. Leo Glavine
Ms. Diana Whalen
WITNESSES
Department of Economic and Rural Development
Mr. Ian Thompson, Deputy Minister
Mr. Andy Hare, Director, Investment
Mr. Marvyn Robar, Director, Investment
In Attendance:
Ms. Darlene Henry
Legislative Committee Clerk
Ms. Sherri Mitchell
Committees Office
Mr. Jacques Lapointe
Auditor General
Ms. Evangeline Colman-Sadd
Assistant Auditor General
Ms. Averil James-Bonette
Director of Audit, St. Lucia Audit Office
Mr. Lenus Deterville
Audit Principal, St. Lucia Audit Office
Ms. Antonine Campbell
Director Parliamentary and International Programs
Canadian Comprehensive Auditing Foundation
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HALIFAX, WEDNESDAY, MARCH 11, 2009
STANDING COMMITTEE ON PUBLIC ACCOUNTS
9:00 A.M.
CHAIR
Ms. Maureen MacDonald
VICE-CHAIRMAN
Mr. Chuck Porter
MADAM CHAIR: Order, I'd like to call the committee to order, please. Good morning. Today we have before us the Department of Economic and Rural Development regarding ACA Co-operative Limited, so I'd like to welcome our witnesses.
Before we begin in our usual fashion, I would like to draw the attention of members to some guests we have with us here today on the floor of our House. We're very pleased to have with us Averil James-Bonette, who is the Director of Audit from St. Lucia, and Lenus Deterville. Welcome, thank you very much for being here. As well, we have with us Antonine Campbell, who is the Director of Parliamentary and International Programs with the Canadian Comprehensive Auditing Foundation.
Just to provide a wee bit of information, Nova Scotia has been paired with St. Lucia in an exchange to work on best practices around Public Accounts and Auditors General Office practices. Our Auditor General has been to St. Lucia last year for some training. So now our guests are here and they are having an opportunity to observe us and meet with the Auditor General and his staff. We will have an opportunity to talk with them further after our meeting today.
So with that brief introduction, I would now like to proceed in our usual fashion. We'll have introductions from the members, from the staff of the Auditor General's Office and from our guests. For the benefit of our guests who haven't been here before, which I think maybe that's Mr. Thompson, we ask that you observe the red light. When the red light is on, this is when your voice will be recorded in the Hansard. They tell us at Legislative Television that they would like us to not fiddle with the microphones, if at all possible. They have them positioned the way they like it. So, without further ado, Mr. Wilson.
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[The committee members and witnesses introduced themselves.]
MADAM CHAIR: Good morning, thank you. Mr. Thompson, would you like to begin by making an opening statement.
MR. IAN THOMPSON: I would, Madam Chair. Thank you and welcome to our special guests from St. Lucia, it's great to have you here.
Madam Chair, as we meet here today, clearly we're in the midst of a global financial storm and, needless to say, I've been on the job for eight weeks and I don't have all of the solutions to this global situation, but I am confident that Economic and Rural Development, with our partners at NSBI and InNOVAcorp and other agencies and departments of government, the federal government, municipal governments and the not-for-profits, I do think that we have the ingredients to build a stronger Nova Scotia once this economy turns around, a Nova Scotia with more opportunities for more of our citizens.
From my perspective, I think our assets are clear. Our geography, relative to Europe, Asia and the United States, is relevant today in a way that it wasn't for most of the 20th Century, at least other than in those times of war. Our market was once Ontario and today our market is the world.
We're part of the global aerospace industry, we have a major and relatively new financial services industry. We're selling our educational services in Abu Dhabi, we're selling our steel fabricating expertise in New York and Louisiana, we're selling new products from the sea around the world, and our government has entered into an agreement to sell our solid waste management expertise in Trinidad and Tobago.
While traditional industries, like the pulp and paper industry to name one, are challenged, we continue to hold our heads above water in some of these industries, where others have not. Then we have companies like Medusa Medical Technologies delivering electronic patient data, software products and services around the world, including in London, England - a great sale for Medusa Medical Technologies. MorSwift Machines of Digby designs and manufactures products in the international packaging industry. LED Roadway Lighting are in the roadway lighting business and they've got a new, highly efficient product and there's a world market for that.
That said, business access to capital in Atlantic Canada is a chronic problem and because of the global credit crisis, it's a bigger problem today than it was a year ago. While we have wonderful schools, universities and colleges in Nova Scotia, it's also true that we have good jobs that are unfilled because we don't have the right people with the right skills, in the right places, at the right time. Our biggest market is still the United States; four million people have lost their jobs in the United States and that's bad for us also in Nova Scotia. So
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that's in part the context in which I and my colleagues are here today and the context of which we think about how to proceed.
In my mind, at least, it's helpful for me to think about three areas of focus. Investment is one area and clearly we need to invest in our businesses. We need the best technology, we need the best equipment and we need to do more R & D.
Training is another area and when I think about training I'm not thinking strictly about our educational facilities, I'm thinking about on-the-job training, about community capacity building and about enhancing our collective marketing skills.
The third area is confidence. We need to remind ourselves frequently in Nova Scotia that we can compete and win domestically and internationally. Those of you who have played sports know how debilitating it can be to start the game feeling like you're going to lose. Well, it's a terrible feeling and it may not be that important in sports, but in life it is important, it matters a great deal.
As a department and with our partners, especially at InNOVAcorp and NSBI and other agencies, we're involved in these areas. On the investment side we're encouraging investment by making more capital available than otherwise would be the case. Through InNOVAcorp and NSBI we're venture capitalists supporting some of our newest companies that hold the potential to sell innovative products and services around the world. In our credit union partnership we're providing small loans to small companies and through the Industrial Expansion Fund we're providing support of various kinds, principally to the manufacturing and processing sectors. All those receiving support through the IEF and the criteria for support are listed in the 2008 IEF annual report.
In the area of training, we're helping to enhance the skills of Nova Scotians through the work that we do with the regional development agencies, through payroll rebate programs linked to training, and through various business advisory services. We're developing workshops to help identify opportunities to exploit the advantage that will come from province-wide broadband, high-speed service in Nova Scotia. We've established a voucher program that encourages small business to work directly with our universities and NSCC to find solutions to big business challenges and we provide supplier development workshops to help businesses become reliable suppliers to Nova Scotia. In the last reporting period the province bought goods and services worth about $728 million; 82.4 per cent of those purchases were made from Nova Scotian suppliers.
In the confidence area we're trying to enhance confidence by bringing attention to many of the positive things that we do well. We support the Celebrating Communities and the Power of Green conferences. We support the Open to the World magazine. We support the Export Achievement Awards. We support the I-3 Technology Start-Up Competition through InNOVAcorp. That competition last year attracted 121 formal submissions from
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across the province. All of this ties into our broader opportunities for a sustainable prosperity strategy and the bold commitments made in this Legislature. So we're happy to be here today to talk about some of these things and in particular about ACA Co-operative.
Like many others in the poultry industry, ACA has experienced higher costs and stagnant prices. The company estimated that it would lose $6 million to the year end, February 2009. It had to make tough decisions and 300 Nova Scotians lost their jobs. With a $3.5 million interest-bearing loan through the IEF, the company has been able to protect 1,000 jobs in the poultry industry. With this investment and the co-operation of a new partner, Maple Lodge Farms Ltd., ACA now has the financial room to develop new markets for its high-quality products and expand its operations.
Will the company succeed? I guess nobody can be certain about that. What we do know is that this is a respected company with a reasonable plan. We're supporting the business plan and the 1,000 Nova Scotians who work in the industry.
Thank you, Madam Chair, that's my opening statement and I look forward to your questions.
MADAM CHAIR: Thank you very much. Before we begin I'd also like to draw attention to our guests in the Speaker's Gallery who are workers from ACA, as well as their CAW, Canadian Auto Workers, representative.
Mr. Wilson, the opening round will be 20 minutes and you have the floor.
MR. DAVID WILSON (Sackville-Cobequid): Thank you, Madam Chair. I welcome all of our guests here today to oversee such an important topic. It was devastating to hear the news of the workers, the men and women who worked at ACA, who lost their jobs recently. It's devastating to the province, devastating to rural Nova Scotia, but most importantly it's devastating to those men and women who lost their jobs, and their families. It's such an important component of rural life to work in these plants, especially this processing plant, and the impact on the communities that these individuals live in is huge. I guess we're just starting to see the impact that this has on the surrounding communities that these individuals work in.
The agri-food industry has always been a cornerstone of the Nova Scotia economy and it's the means to sustainable rural communities, I believe, and the diversity of lifestyle choice historically enjoyed by us in Nova Scotia. So really, the first question would be, what does this closure mean for the future of farming in our province? I'm not sure who wants to take the first question.
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[9:15 a.m.]
MADAM CHAIR: Mr. Hare.
MR. ANDY HARE: Our goal is sustainability. I was actually there 30 years ago when Phil Kudelka, Fred Williamson and others from Eastern Protein Foods walked in our door at Industrial Estates Limited and brought this proposal to set up Eastern Protein Foods in combination with ACA Co-operative. At the time I was very excited about it and it was a very successful operation over a number of years at ACA. Unfortunately what has happened is the industry has caught up elsewhere with respect to further adding and processing of the type that Eastern Protein was doing and it has become a commodity product and ACA was losing money, not strictly because of the fact Eastern Protein was part of the process, but that was part of their problem, they could not make money with Eastern Protein. We were very concerned.
At the time we did the $3.5 million loan, our thoughts were not that Eastern Protein was going to close, but we did ask them over the six months that we thought $3.5 million would help them to find a solution and work with us and others, try to find a partner, and they did that. At the end of the day our hope is in the chicken processing business that we're going to have an industry there into the future and it wasn't going to be there if they were going to continue to lose $6 million to $8 million a year.
MR. DAVID WILSON (Sackville-Cobequid): So is it viable to have that industry here in our province, especially in our rural communities?
MR. HARE: We believe so. Maple Lodge is very serious about trying to work a partnership with the poultry producers of this province and they believe there's an industry there. Maple Lodge, with their plant in New Brunswick and their plants in Ontario, have national exposure in the marketplace and they are doing extremely well. They're in the province this week again looking at ACA and coming up with solutions with respect to turning that plant into a profitable proposition.
MR. DAVID WILSON (Sackville-Cobequid): So when we see these closures - and we've heard about it across the country, of course. I think fortunately in Nova Scotia we haven't seen the mass layoffs that we've seen in Ontario and other parts of the province, but it doesn't mean it's not as important. Just talk to the people in the gallery and the effects on their lives of what's going on today, and government needs to be there.
No question, government can't bail out every company in this province, taxpayers understand that, I think the workers at this processing plant understand that. But what government needs to do is to ensure that they're there for the workers, they're there for the families in this province that have no income right now. I'm sure many of them, the men and women who worked, maybe they were sole income earners and that's devastating to a family
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unit. So what is the government doing to assist those workers who currently find themselves in dire straits when it comes to an income on a monthly basis?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: I would say, at the risk of sounding like I'm passing the buck, there are programs that are in place. I know our Labour and Workforce team has been on-site, they've been meeting with the workers and attempting to identify other opportunities, and opportunities have made themselves apparent. We understand that some of the workers have found alternate employment but, of course, we will continue to work with those who can't and look at retraining opportunities, hopefully to get these folks back into opportunities that are consistent with their own life objectives.
MR. DAVID WILSON (Sackville-Cobequid): So what role does your department, does the minister, play? I know you said you didn't want to pass it on but ultimately your department is handing out cash, handing out money to corporations, to businesses throughout this province. What role does your department, your minister, play to ensure that when events like this happen, that you're there not only to give money to those businesses but to assist the workers, those individuals who are working every day to make these businesses viable in the province? So what's your role in that and what's the minister's role?
MR. THOMPSON: Well that is our role, that we work with business operators, owner-operators, to ensure that to the best of our ability, we can encourage the development of solid business plans for viable businesses. To the extent that support from government is required to make those business viable, to sustain those jobs, to give people a good living, then that's our orientation, that's our objective, that's our job.
MR. DAVID WILSON (Sackville-Cobequid): Now the unfortunate thing is that here we have the closure of ACA in a rural community which, as I said, devastates the economy in that whole area. The ripple effect, I would imagine, is severe. The unfortunate thing is we've seen in the past similar closures, like with Maple Leaf. We have such a high concentration of workers in that area of our province who have the same skill sets - I can't imagine the stress and the unknown to each of those individuals trying to vie for other positions, other working opportunities.
So how are you addressing the fact that we have a huge concentration of men and women who have a skill set, that many of them have probably worked there 30 years or more in these plants, what are you doing to address the fact that they have the same skill sets? Is the government there to, hopefully, retrain and provide opportunities for these individuals to get other training?
MR. THOMPSON: Well I'm not the best person to talk to about the retraining side of it but there are 1,000 jobs that we believe are now in this industry and that are tied to the
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ACA plant. By the support that is coming from our department and through the business plan that has been developed by the company, we believe those 1,000 jobs are more secure now than they might have been six months ago.
MR. DAVID WILSON (Sackville-Cobequid): So you mentioned Maple Lodge is the one who is in there now. What kind of support have you been giving to that business, to help them or to try to ensure that there are opportunities for employment for those who have been laid off and let go from ACA?
MR. HARE: I'm actually meeting with Maple Lodge today. I guess we'll know better, once I've had that discussion with them, as to where they see they are currently. The fact is they're not in there yet but they're being very helpful with ACA and showing them how to do it right and it's becoming a very good relationship.
What they're going to do with respect to expanding and things like that, that's what they want to do. They want to bring back - right now they get in New Brunswick and in their own Nadeau plant, 40 per cent of our poultry end up travelling that long trip up to northern New Brunswick to be processed. Part of their plan would be to allow those poultry to be processed in the plant in the Valley, which hopefully will bring more jobs back to our plant in Kentville.
You've been talking about ACA closing - ACA has not closed, Eastern Protein has closed. ACA hopefully will continue to grow over time and that's our goal, to work with ACA to make sure there is a future there for ACA or whatever the entity is that ends up being a chicken processing plant. Without that plant in Kentville, I don't believe you'll have a chicken or a poultry industry in this province.
MR. DAVID WILSON (Sackville-Cobequid): I know that going through all the information that was provided, it was recent that the $3.5 million, I believe, was disbursed to - I don't know if it was disbursed to Eastern Protein or ACA; no, it was ACA who received the $3.5 million - has all that money been allocated? I believe it has, just for the record.
MR. HARE: We've disbursed the full funding and that funding will help the operation to continue through the process that they're doing right now but it also assisted with respect to paying the employees of Eastern Protein and ACA up until the end of February as well, when the layoffs happened.
MR. DAVID WILSON (Sackville-Cobequid): And that's part of the concern that we're hearing now, the fact that these employees are still owed some severance, they're still owed some vacation time, some back time. That concerns me because I can't imagine losing my job, for one, but realizing that there's money still owed to me and it doesn't seem like I am going to get it. Have there been any requests from Maple Lodge for funding to assist them
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in trying to take over and employ some of these individuals? I know you say you're meeting with them today but has there been a formal request for funding?
MR. HARE: No, there has been no request yet at this point from Maple Lodge. Maple Lodge is not an owner of the plant at this time and it would be a partnership but it won't be in place for a time. They want to see this thing work, the processes that are being put in place and things like that. As well, the producers have things that they've got to do - they're the owners of ACA Co-operative, so they're still feeling their way through where they're going with the future. So Maple Lodge are almost more like consultants today, with the plan to be part of the ownership in the future.
MR. DAVID WILSON (Sackville-Cobequid): I read in one of the media news things that were provided to us that they are concerned with maybe taking in more of a role because of the fact that there is some outstanding severance and vacation pay. Is your department, is the minister concerned with the fact that we have workers in the province who are owed money and that right now it doesn't seem like there's any ability to get that money for them?
MR. HARE: They're working right now with PricewaterhouseCoopers, with respect to an overall plan with respect to Eastern Protein Foods and what comes out of Eastern Protein Foods. The employees at ACA Co-operative received - because of the fact that it didn't fall under the Bankruptcy Act, it was just a layoff - those people got whatever severance and vacation pay they were entitled to. On the Eastern Protein side, PricewaterhouseCoopers is working with them with respect to a plan and we're waiting for that plan.
MR. DAVID WILSON (Sackville-Cobequid): Now in our package, I'd like to just quote the Minister of Labour and Workforce Development. It is stated here, "This is an extremely trying time for the people at ACA and Eastern Protein, and we are there to ensure they receive any outstanding salaries, vacation pay and severance, and to help them find other jobs." That was from Mr. Parent, Minister of Labour and Workforce Development.
Is that quote, that comment from the minister, something that we're going to see in the near future? Is that a correct comment for the Minister of Labour and Workforce Development to say - that we're going to ensure and work with them so that they get this severance pay? Is that something that is doable?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: Certainly work with the families and with the employees and the later part of the statement, absolutely, it's doable. I think that as far as Andy has tried to describe, there is a process that is prescribed by law with regard to those workers at Eastern Protein and that process will have to run its course. Those who are creditors of the company
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will, in due course, be presented with a proposal, which they'll have the opportunity to vote on. I guess it's too early to tell exactly what the outcome of that will be.
MR. DAVID WILSON (Sackville-Cobequid): We all understand the process because there's so many people involved in this, from the federal government and PricewaterhouseCoopers who's overseeing the bankruptcy of Eastern Protein. That doesn't mean the government needs to sit back and just let that process happen. In my view, and I think in the workers' view, they need to play an active role and they need to advocate, they need to put pressure on all those different organizations that are playing a role in this - the federal government, for example. I know that our Leader, Mr. Dexter, had mentioned a little while ago in the media the fact that there's a federal government wage earner protection plan that could be used to ease the situation here. Has the minister investigated possibly getting the federal government involved in that wage earner protection plan that's available to Canadians when a plant closes like this?
MR. THOMPSON: I would say that to the best of my knowledge every available provincial and federal program is being canvassed to provide the maximum assistance that would be available to the employees who find themselves in this difficult situation.
[9:30 a.m.]
MR. DAVID WILSON (Sackville-Cobequid): And not to say that this program would help recover all the money, I think there's a cap of about $3,900. Can you prove to us that the minister, himself, who I just quoted earlier says he's going to do everything he can to get the wages and benefits for these individuals - are you aware of any letter or of any conversation, any phone calls, any trips to Ottawa to meet with his federal counterpart to ask about this plan?
MR. THOMPSON: What I am aware of is that people in Minister Parent's department are very actively engaged in this - they are on site, they are working with various agencies. These programs are all known to the department and the department is doing its best to determine how best to help those who unfortunately find themselves without employment at the present.
MR. DAVID WILSON (Sackville-Cobequid): You didn't really answer my question, but that's fair. I would concur, I think there are many people working hard within the department to try to assist these individuals. My role is to ensure the minister is working hard and to this date, in my view, he's not working as hard as he should be and he's not advocating on behalf of these workers as hard as he should be. I don't see him in the news talking to the minister on the federal side. I don't see him telling the workers that yes, we sent a letter off, I had a phone call, I had conversations with the federal government.
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Do you know how much money is owed in severance and in vacation time to the workers of Eastern Protein Foods?
MR. THOMPSON: I do not personally, no.
MR. DAVID WILSON (Sackville-Cobequid): I believe the severance is about $840,000, and vacation and sick pay is about another $464,000, so there's a lot of money there. I think the government needs to ensure that they are trying everything they can to recoup this money for these individuals and until they do that, I don't think you're going to see any company come in here and take over a company and try to get it going again, with an outstanding balance owed to the employees. I've been around collective agreements and know that decisions have to be made by employees when it comes to either, do they take a severance, do they walk away, or do they wait and gamble on being recalled, keeping their seniority and hopefully gaining work again. I just can't imagine the pressure that's being put on these workers in this area of the province to make that decision, it would be a difficult one.
I'm just wondering if you are aware of the recent media, especially yesterday, I saw on the news late last night, about the increase of the food bank down in that area of the province? Those operators at the food bank said no question, it's stemming from the closure and employment loss in that area. What role would your department and the minister play to ensure that the workers have enough food to eat, for example? Do you have a role in that or do you see a role for your department and your minister in ensuring that these people have the necessities to survive day to day when it comes to their food requirements, for example?
MR. THOMPSON: I would say, Mr. Wilson, that we try to do that to the extent possible by supporting viable businesses. There are 1,000 people working in the poultry industry and our particular focus is on trying to keep those businesses viable and support those where we can.
MADAM CHAIR: Order. The time has expired for the NDP caucus. I recognize Mr. Glavine for the Liberal caucus. You have 20 minutes until 9:54 a.m.
MR. LEO GLAVINE: Thank you very much, Madam Chair. Thank you for coming in from Economic and Rural Development today. Certainly the ACA issue is a very important one to our area - both from the fallout of Eastern Protein's closure but perhaps more importantly the very future of the industry itself - so I'll get to that in a moment. A couple of general comments probably to start out with.
It was interesting that is has been as late at last Fall that we finally put the term "rural development" in the Department of Economic Development. I think it was long overdue, to the point that I don't feel we have given rural development the kind of emphasis that has been needed. We know that in terms of rural development, agriculture, along with forestry,
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but agriculture in particular has been a key area relating to manufacturing and industries, especially throughout the Annapolis Valley. The crop industries seem to be doing pretty well, as I spoke earlier with Mr. Hare, the apple industry has truly turned a corner and is much more promising today.
We take a look at the pork industry which has been decimated, we're now down to 12 producers in Nova Scotia. The cattle industry, unless something strategic happens very quickly, will also face major declines in the coming months. The poultry industry, as we know, also is going to need a lot of attention, a lot of safeguarding to make sure that it is an industry in the Valley for the future.
I'm just wondering in terms of rural economic development, agriculture in particular, what is your department doing to revive these vital sectors of our rural economy?
MADAM CHAIR: Mr. Hare.
MR. HARE: I guess I'm Mr. Agriculture in the department, I work very closely with the Department of Agriculture on most of their committees related to their programs. Basically, with the ACA situation, I work very closely with Agriculture, Scotian Gold, Oxford Frozen Foods - the whole works of them are files that I deal with. We are working all the time with our counterparts over at Agriculture and we know most of the players in the industry - a lot we don't but a lot that we do, the bigger ones especially. We do our best to make sure we maintain a relationship so we know what's happening in this industry.
MR. GLAVINE: In terms of a little bit of a whole view of Nova Scotia, we now know that there are only five counties in Nova Scotia that continue to grow their population, so we've had considerable out-migration. Essentially, we're not providing Nova Scotians with the jobs they need to keep them here. I'm just wondering how your department is looking at a strategy to create work, have the proper work environments to keep Nova Scotians here and to keep those rural communities and counties vibrant for the future?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: Well it is a preoccupation of the department, there's no question. I tried in my opening statement to highlight a couple of the things that we believe are important to us. The expansion of the high-speed broadband across the province we think is going to create more opportunities for more Nova Scotians in places other than the urban centres.
We are sensitive to the fact that when we think about programs like the IEF, where are the jobs located? We recognize that province-wide there's lots of infrastructure that is provincial infrastructure - whether its schools, roads or what have you - which is underutilized. To the extent that we can support the expansion and the growth of rural Nova
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Scotia, we're trying to do that. We're concerned about capacity building in our communities, we're concerned about ensuring that to the extent that we can provide retraining opportunities, we can.
The InNOVAcorp I-3 competition has been a fantastic success in terms of attracting formal applicants from across the province - small businesses, people with good ideas and we're trying to celebrate those people with good ideas, support them with their good ideas and, hopefully, help them find ways to become financially viable and hire more people and expand Nova Scotia's prosperity from one end to the other.
MR. GLAVINE: Last Fall, ACA received $3.5 million in a provincial loan from your department. Just four months later the co-op has to lay off over 300 employees in the region. In my view, something is not right here. These are extraordinary and difficult times and I'm not advocating that businesses in jeopardy should not receive assistance from government. However, it seems to me that if government is going to provide millions of dollars in loans to a company, that company should be properly assessed and evaluated, proving that investments made by government, using taxpayer dollars, should be used in the best way possible.
How is it exactly that ACA received $3.5 million in September and then lays off 300 employees four months later? It's a question that I think remains puzzling to many people.
MADAM CHAIR: Mr. Hare.
MR. HARE: When we assessed the $3.5 million, we worked closely with parties like Grant Thornton, with their consulting group in the Valley who are very much involved with agriculture. We work very closely with the Department of Agriculture and others. Our goal at the end of the day was to put enough funds into ACA to maintain that operation, including Eastern Protein because we considered it all one at the time. We wanted to make sure that they had sufficient funds - and it was working capital that we put in - to maintain that operation for a period of time while they came up with solutions that would make that place sustainable and profitable.
We agreed to work with them, we agreed that they needed to find a partner out there. They went out to everybody but Maple Leaf Foods, I believe, that is in the industry on a national scale. The report, by the way, in July 2008, that the chicken farmers of Nova Scotia has commissioned, basically said that they needed to find a partner that could give them national exposure and that we needed one plant and we needed a producer, an organization or a group in the province that was united and would work together. That has been a concern as well, you've had two philosophies in the Valley, one the co-operative philosophy and one the other, the Maple Leaf or whatever you want to call it philosophy, has been a problem. That's why we've seen a lot of our poultry go out of province - when it didn't go to Maple
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Leaf, it went to New Brunswick. So we had to come up with some kind of a solution that would assist our one processor in finding a viable business plan and procedure.
Over the six months, unfortunately, part of that process meant Eastern Protein had to close. It had a good run but unfortunately, as a result, we've lost around 200 jobs at Eastern Protein. That hurts me a lot because I was there in the beginning, when it was set up, so it was disappointing. I know Ian Blenkhorn would say the same thing - he has told me, our goal is not to close Eastern Protein and that was disappointing to the ACA people, including the producers who owned the plant. But, at the end of the day, our goal is to find a viable solution and maintain at least 1,000 jobs and hopefully grow.
MR. GLAVINE: The two - obviously ACA and Eastern Protein were an integrated business. For the record, which one was losing the money here in the company? I mean, was this the only way to save perhaps the poultry industry?
We know that monies were there but did they go in the right place, I guess? Was Eastern Protein inefficient, was its problem gaining market share? What was wrong with the company today that we didn't know three or four years ago, that couldn't be corrected, I guess, is one of the ways that people also ask what happened to Eastern Protein?
MR. HARE: Both ACA and Eastern Protein were losing money and it was growing fast. After a couple of quarters last year, their best guess was that they were going to lose about half a million dollars last year. At the end of the fourth quarter, their number became $6.9 million. It took off, big time, very quickly and they had to do something to fix it quickly because we weren't interested in subsidizing any industry to the tune of $3.5 million every six months. Both sides were losing money and what's being determined is they should keep their business simple, they should process whole birds, or what they call whole bird parts sort of thing, as opposed to the tray pack business that they have been in the past, they're out of the tray pack business. As a result of the way they're going with their new philosophy, there was no product available to Eastern Protein to process. That's my understanding. So, as a result, we lost those 200 jobs.
MR. GLAVINE: In that regard, as you outlined the new approach, and I know you've been around economic development and industry issues for quite some time, are you optimistic that, in fact, ACA can get back the 40 per cent production which is going out of the province now, and become viable as we look ahead?
[9:45 a.m.]
MR. HARE: I believe those birds will come back, if they can build this relationship with Maple Lodge, that's Maple Lodge's plan. It makes a lot of sense because nobody wants to see the poultry of the province spending 10 to 12 hours on a truck going to New Brunswick. That's not healthy for the poultry, in the first place.
[Page 14]
MR. GLAVINE: The issue to workers obviously remains pretty paramount. I attended a rally in Kentville and you could certainly experience the pain they were going through, the uncertainty around their futures. Perhaps today one of the people we're missing is somebody from Workforce Development who could give us a picture of what is taking place.
I'm wondering if you could just outline maybe one, two, three steps that you're seeing that are being put in place to help workers transition? They're not going back to Eastern Protein, many still have long work futures ahead, so I'm just wondering what would be the one, two, three areas that you know considerable help is being given?
MR. HARE: It's difficult for me to speak on that side because my focus is on getting ACA to be a viable business and really that's where I'm working. There are people in the department, at least a person in the department, who would be working on that team with respect to the employees.
MR. GLAVINE: A large amount of affected employees are concerned, of course, they will lose approximately $1.3 million in back pay, vacation pay, sick benefits, and many employees are owed as much as $6,000. Now even if we weren't in difficult economic times, that's certainly a lot of money.
Have you heard within your department, Labour and Workforce Development, top government people, that workers are going to get some guarantee that, in fact, that money will come their way? Is there that commitment and that talk? I know it's not perhaps quite your department but I'm just wondering if that is part of the discussions here, as Maple Lodge and ACA move forward?
I think if these workers are left in the lurch and that fairness is not there for them, then again it's almost like two hits on these workers - losing their jobs and also losing what is rightfully theirs. I'm just wondering if you're hearing any discussions to try to have the very best outcomes for these workers?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: As you know, there are processes that are prescribed when a company seeks protection and that process is designed to ensure that to the extent that there are resources within the company that's challenged, that those resources get distributed fairly to the creditors. That process is underway and I don't think - well, I'm not going to prejudge the outcome or speculate on the outcome but there will be an outcome and creditors will be treated fairly, as required by law.
MR. GLAVINE: In terms of that compensation to the workers, has the equipment and the plant been sold at this point and what factor will that play in appropriate compensation to the workers?
[Page 15]
MADAM CHAIR: Mr. Hare.
MR. HARE: A fair question. The plant is still intact, that's my understanding, and there are appraisals being done. They own the building plus the equipment, so there's an appraisal being done on the building, there's an appraisal being done on the equipment, which is all wonderful because it will give you an idea of the value, but let's face it, at the end of the day, the truth will be when the equipment and building are sold, as to what the real value is of it. So we will have to wait and see what happens there, but the appraisals, I believe are being done this week.
MR. GLAVINE: In terms of the workers' future, actually from my account and assessment, the Valley has been hit, I would say, considerably hard with the economic downturn when you look at companies like Michelin as well, having workers impacted. I'm wondering, again, through Economic and Rural Development, are there any initiatives to try to get some employment as part of the investment fund to get people back to work that have lost jobs? If we're looking at the poultry industry, there are 700 alone between Cunard Poultry and now Eastern Protein. I'm wondering if there is some attention going to be given in terms of, again, if it's job creation even in the short term while some recovery is needed?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: As I'm sure you know, there is more money available through the Industrial Expansion Fund and we are now dealing with those who are looking to take advantage of this opportunity, they are from across the province and that would include, of course, the Annapolis Valley. In fact, there has been an announcement, as you would know already, with regard to a business in the Annapolis Valley.
MR. GLAVINE: Just to start down another road here, we know with the Industrial Expansion Fund, there are concerns and legitimately, many Nova Scotians are raising concerns about how that fund will be distributed and used. If we think back just a few short years, we all know the story of the loan to Magic Valley for a personal friend of the Premier, a loan to S&J Potato provided the financial benefit to the very minister that was requesting the loan and was the minister in charge of the Industrial Expansion Fund. So the purpose of the reminder of this information is to outline the potential for political influence during the process of providing financial assistance. I'm wondering if the monies, did they ever flow to Magic Valley and to S&J Potato?
MADAM CHAIR: Mr. Hare.
MR. HARE: I can respond to that because those were files that I dealt with. The Magic Valley project is continuing to proceed; we've probably disbursed about half the money with respect to Magic Valley and it's all related to additions to the park. S&J Potato - that related to some trailers that S&J Potato was purchasing in order to get over the roads that
[Page 16]
were in pretty rough condition, so that they could get out to the highway and sell their product and those funds have been disbursed.
MR. GLAVINE: Now we look at that 2007-08 Budget Estimates for the IEF, as outlined in the statutory capital items portion of the budget, it was $18.3 million; however, the government spent $45 million the last fiscal year. This year the budget for the IEF is $38 million. How many projects were included in the $38 million estimate for 2008-09?
MADAM CHAIR: Mr. Robar.
MR. MARVYN ROBAR: I don't have that exact figure right now, but there would probably be 15 to 20.
MR. GLAVINE: I asked the question because obviously you would have had to come up with an estimate somehow, so I wonder how that was done?
MADAM CHAIR: Order, the time has expired. Perhaps we can come back to that question in the second round. I recognize Mr. Bain for the PC caucus. You have 20 minutes until 10:14 a.m.
MR. KEITH BAIN: Thank you, Madam Chair and good morning. I guess I'll be jumping all over the map this morning. There will be some questions concerning ACA and Eastern Protein and as well, the Industrial Expansion Fund.
I would like to know the business evaluation process that an application from a firm like ACA would have to go through before being recommended by government for investment?
MADAM CHAIR: Mr. Robar.
MR. ROBAR: I can give you a general outline of the process. Basically, an applicant would come in and make a request or have a general discussion with the department. As a first lens to look at the application, we would look at the government's plan, Opportunities for Sustainable Prosperity. In that plan there are certain general parameters that we're looking for in a company - it would be sustainability, export sales, higher wages, generally that sort of parameter.
So we'd look first at the application through that lens and then if it passed that we would then say, okay, let's look at what the costs and benefits might be to this project. We would sort of have an idea that the benefits from the employment would be a certain dollar value, the request would be a certain dollar value, so we could compare the potential costs and benefits. Then we would go through a detailed assessment of that proposal, if the cost versus benefits appeared reasonable, which I believe are outlined in the back of the annual
[Page 17]
report on page 17, Evaluation Criteria For Proposals. Basically it's a standard business assessment looking at management, markets, risks, capital available.
Based on those criteria - passing the criteria for OFSP, costs versus benefits to be of value to the government and being able to support the application through a standard business evaluation - that's the process we would use to make a decision.
MR. BAIN: In the case of the $3.5 million working capital given to ACA, what would be the terms and conditions on that particular one? There would have to be terms and conditions spelled out, I'm sure. What would they be?
MR. ROBAR: I guess maybe Mr. Hare can answer those specific questions.
MADAM CHAIR: Mr. Hare.
MR. HARE: At the end of the day, there is a letter of offer that goes out to the company that includes those terms and conditions. In this case, there's security that had to be put in place, there was a requirement that the company start a process with respect to either hiring help to determine where we could fix the problems that obviously ACA had and that as far as we're concerned, they did a good job of that. In fact, the last $1.5 million wasn't to be disbursed until we were satisfied that there was a proper process in place. They needed a couple of million dollars very quickly, so those funds were going to be disbursed.
To be honest, the Bank of Montreal was quite comfortable with our offer and the fact that they've dealt with the company for a long time and they were willing to bridge our funds. So we didn't disburse until January, in the end, with our funds. There are a number of terms and conditions that we would have in place and primarily it was to have that plan and we had to be satisfied that we had sufficient security, that we felt comfortable that we would get these funds back, there was a good chance to get them back.
MR. BAIN: What would have happened to ACA and Eastern Protein if that $3.5 million loan hadn't been there?
MR. HARE: They would have continued to lose money and my guess is they would not be here today.
MR. BAIN: And the overall impact you said, the direct employment right now is about 1,000 people?
MR. HARE: They have about 650 people, pre-Eastern Protein closing and the layoffs at ACA. There are approximately another 650 people working directly on the farms, in the chicken and poultry industry. As well, you have truckers, you have feed producers, you have
[Page 18]
a lot of other people who supply. Probably the biggest impact with respect to spinoffs relates to the meat processing business.
MR. BAIN: On the government assistance that would be provided to the employees of Eastern Protein and any of the laid-off workers, could you explain what, if any - I know there's a transition team out there for Labour and Workforce Development but is that the only assistance that's there for those employees at this time?
[10:00 a.m.]
MR. HARE: It's difficult to talk with respect to what that group is doing because I'm not specifically involved with that group but I know there is a group working with the employees. It's a federal and provincial group, that do go right in and work with people in a company like Eastern Protein where there are major layoffs, or it could be TrentonWorks, or others in a similar situation. There's a process in place and that's through Minister Parent's department.
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: Also through the Government of Canada, the federal employment program.
MR. BAIN: Would your department know at this time whether many of those employees have found alternate employment or other employment?
MADAM CHAIR: Mr. Hare.
MR. HARE: We don't know how many but we understand that a number of them have been able to find other employment. Of the 302 employees who have lost their jobs in total - I think it is 302, is it not - I can't tell you how many have actually been able to find something. It's a tough time out there to be looking for jobs.
MR. BAIN: I guess what I'll do now is go to an overall discussion of the Industrial Expansion fund. All applications are reviewed, and we know that. What factors in an application will determine if something should go to NSBI or to IEF?
MADAM CHAIR: Mr. Robar.
MR. ROBAR: An applicant can approach any of the government entities. They could approach NSBI, they could approach the Department of Economic and Rural Development, so there's not anything in one particular application that would direct it one way or another.
[Page 19]
MR. BAIN: Would it be fair to conclude, though - we hear a lot of talk and a lot of criticism about the IEF - would it be fair to conclude that if the IEF didn't exist, there would be a lot less jobs in this province?
MR. ROBAR: I guess maybe by answering that I can expand more on the different roles. NSBI has sort of specialized in the information technology industry, knowledge-based sectors, financial services sectors, attracting investment inward from outside the province and it has really performed an exceptional role in that, creating a whole new industry in the financial services.
The Industrial Expansion Fund, maybe just by its name "industrial", has tended to focus on industrial businesses throughout Nova Scotia, many of which are based in rural areas just because of their - because that's where manufacturers like to be based. So over the period of 50 years, just about every significant rural business has received some assistance and help from the Industrial Expansion Fund. So I believe if you look at the Collins Report, an independent assessment that was done on the Industrial Expansion Fund over a five- or six-year period, you'll see that the fund assisted in the creation or maintenance of about 11,000 jobs.
So yes, without the Industrial Expansion Fund, there would be a significant impact on the employment in the province if that sort of vehicle wasn't there to assist our industries, when possible.
MR. BAIN: And all monies that are disbursed by the Industrial Expansion Fund are approved by Cabinet?
MR. ROBAR: Yes they are, every transaction regardless of size.
MR. BAIN: And anything that comes from NSBI has to be approved by Cabinet as well?
MR. ROBAR: Any payroll rebate has to be approved by Cabinet and any transaction over $3 million has to be approved by Cabinet also.
MR. BAIN: So essentially there's not much - it has to go to Cabinet and there's just different people who are disbursing the money.
MR. ROBAR: Yes, for the most part, yes. For any significant transaction, yes.
MR. BAIN: Would it be fair to say that all investments are based on solid business evidence, rather than political gamesmanship, as suggested by some?
[Page 20]
MR. ROBAR: Yes, I believe that - certainly everything that we're involved with, we do on a professional, business-like basis.
MR. BAIN: The economic climate, as we all know, has changed drastically, even more so recently. What's the difference from the economic climate today versus, we'll say 2006, 1999 and I guess I'm looking at the department itself and what changes the department had to have made to deal with those economic changes? That's a loaded one, I know.
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: I think it's a great question in the sense that from my perspective, I think it's important in our department that we are alert to what's happening in the bigger world and that we try to stay as nimble as we can be, to respond to the changing circumstances.
I had a conversation with a business person who told me that in his particular situation, he can almost tell the time of day when his sales started to decline - it was one day last Fall. So that's an anecdote but more generally, I think it's clear that we recognize in the department that there are now some very good companies that in normal circumstances would be able to access capital to allow them to modernize, to allow them to expand, to allow them to reduce their environmental footprint - good projects, good companies that cannot now get funding through traditional means.
The IEF expansion of the pool, if you like, is in part a response to that reality. We see an opportunity now. Fortunately, we have an opportunity to invest in companies that are able to enhance their competitiveness, that are able to modernize. If you believe that the world economy is going to turn around at some point and the American consumer is going to start once again to spend, and if we have taken this challenging time to invest in our industries and make ourselves more competitive, reduce our environmental footprint, to think more globally, then we'll have a better chance of coming out of this in better shape than some other jurisdictions.
So we are responding, we do recognize that the world has changed and we're trying to fill in where we best can, to help good Nova Scotian companies to prosper.
MR. BAIN: There was an independent report from Collins Management and it said that the Industrial Expansion Fund had created and maintained 11,000 jobs. I'd be interested, what is Collins Management?
MADAM CHAIR: Mr. Robar.
MR. ROBAR: They're an independent firm of economic consultants - economists.
[Page 21]
MR. BAIN: And we also hear that for every dollar invested by the Industrial Expansion Fund, there's $1.89 that comes back. What does that mean and who made the determination?
MR. ROBAR: That determination was made again by Collins Management. Basically it's the results of their findings, based on the model they used on a cash flow basis, so money going out versus money coming in. It gives an indication of the value of the fund and the return that the people of Nova Scotia are receiving from the investments that are made, in terms of tax revenue and interest income and repayments on loans.
MR. BAIN: So it's certainly a good return on investment, then. I'm sure there's lots of people who would love to have a return on their investments of that degree.
I'd be interested to hear the feedback you've heard from some of the recipients of IEF investments. I'm sure you must hear something positive or negative. What would some of that feedback be?
MR. ROBAR: You hear obviously a lot of feedback. Many businesses would tell you that they wouldn't have made investments unless this assistance was available. For example, we've had a long relationship with Michelin, as is the case with many multinationals, the Nova Scotia plants have to compete for their capital with every other plant in the Michelin chain. For example, the new truck tire project that was undertaken by Waterville - the new, super wide tire that some day will replace the tandem tires on semi-trailers - they had to compete with three or four different bidders on that; some of them in Southeast Asia, where costs are very much lower. The support of the government was one of the critical factors in determining where that investment would be placed.
Throughout the past five or six years, the investments or the assistance that we provided through the Industrial Expansion Fund, has allowed Michelin's plants here in Nova Scotia to win significant new investments. Part of the decision-making process at Michelin is obviously the rate of return and the assistance helps that. It's partly based on the labour force and their history with it, when they have some of the best labour force in the world in Nova Scotia.
As a result of these investments what has happened is that the Michelin plants in Nova Scotia are right at the top of the technological chain. What that does is it ensures that these are probably the last plants that will close, compared to what happened in Ontario with their BF Goodrich plant which was basically making a commodity tire, a gas station tire, where they could no longer compete with tires produced in China and Eastern Europe. As a result, we sort of invested to make sure that the future is here in Nova Scotia. That is one example of the comments that have come back from a company talking about why the Industrial Expansion Fund has been valuable to them.
[Page 22]
MR. BAIN: Thank you for that. I told you I'd be all over the map, so I guess I'm going to go back and talk about ACA and Eastern Protein. Is anything being done to ensure that the laid-off employees of Eastern Protein get their severance payments? Is the government considering possibly putting more money into ACA to look after those payments? I'd like to know where we stand and where we might be going?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: We're not at present considering putting any more money into ACA.
MR. BAIN: So a lot will depend on the talks that are going on with Maple Lodge to see where everything might be going, would that be fair?
MADAM CHAIR: Mr. Hare.
MR. HARE: Those funds that we're talking about - this $1.2 million, $1.3 million for severance and vacation pay - relates to Eastern Protein Foods, as opposed to ACA. Eastern Protein Foods, once again, are in a process with PricewaterhouseCoopers where they're putting together a plan with respect to what they're going to do with Eastern Protein Foods and that is due, I understand, on April 4th and we're waiting for that plan before anybody is going to assess what the next steps are.
MR. BAIN: And I guess that would be it, once April 4th comes, a determination will be made one way or the other with that?
MR. HARE: Yes, the goal at ACA is to have that done previous to April 4th because they know the employees and others are anxious to find out what their opportunities are to collect their funds and basically creditors as well are concerned.
MADAM CHAIR: Order. The time has expired for the PC caucus. The next round of questions will be 12 minutes per caucus. I recognize Mr. Wilson for the NDP caucus.
MR. DAVID WILSON (Sackville-Cobequid): I would imagine that the men and women who have lost their jobs, even though they don't have an income or they're still owed some money in back severance and vacation pay, but they do, I think, most of them, have hope. They have hope that this economic storm that we see across the globe stops, so that things can get back to where we would hope they would be. They have hope that they'll get what is owed to them. They have hope that they can provide for their families and some of them, not all of them I would imagine, but some of them even have hope that the government will be there to assist them, to ensure that they're there to support them to get through this devastating time.
[Page 23]
What we need from government - the minister, the government itself - is actions that show these workers that they can continue to hope that things are going to get better, things are going to turn around. In my opinion, as of today, the government, the minister, not yourselves because I know you work hard within your department, the minister and government haven't shown that they've done everything they can.
[10:15 a.m.]
I said in my opening statement that even though a lot of this that is transpiring is out of the hands of the minister and the government, we realize that, I think the workers realize that, but it doesn't mean that they can't play a role in hopefully making changes to the process and hopefully ensure that these workers get benefits and get involved in programs that will assist them. I'm going to give you the opportunity, hopefully, in some questions to prove me wrong, to say, yes, the minister himself is doing this, the government itself is doing this.
I talked about the wage earner protection plan earlier, I asked a question, so I'll ask you another question on that. One of the things we can do, that program, I believe, is only available for six months, has the minister, has the government made contact with the federal government to ask to have that extended to a year, for example? Can you tell me that the minister has written to the federal government about this issue on the wage earner protection plan to either ensure that workers are able to access that program and ask if that program can be extended, so that people in our province and across the country, for example, can gain access to that program, have it for a longer period of time? So can you give me evidence or can you tell me that you have knowledge of the minister having that request and asking those questions to the federal government?
MR. THOMPSON: As you know, you're talking about a minister to whom I don't report, it's not the department where I work, so I can't give you an assurance one way or the other there.
MR. DAVID WILSON (Sackville-Cobequid): I guess we'll have to hopefully try to get the minister to answer those questions. The other aspect is, of course, the bankruptcy procedure. We all understand that it's out of the control of government, it's in the hands of PricewaterhouseCooper and then you've mentioned April 4th we'll hear more. It doesn't mean right now the government could play a role in trying to change how that process is.
We know that with every bankruptcy there are two lists, secured creditors, unsecured creditors. I mentioned in my opening statement that the employees themselves are owed somewhere around $1.2 million in severance, vacation pay and sick pay. Unfortunately, they're pretty low on that list of unsecured creditors. How do we get them into that list of secured creditors and have you had discussions within the department to try to assist employees in our province to ensure that when closures happen - we've seen them in history
[Page 24]
and have had many of them over the last number of years - that their pensions, their severance and their sick time are at the top of that list, as high as we can get it, for the secured creditors, so that those employees can get funds? Can you comment on that for me?
MR. THOMPSON: My understanding, Mr. Wilson, is that the processes and protocols are governed by federal law, so there is a process dictated by federal law that determines how creditors are ranked and that process. I think where we can engage and where we have been engaged in this, is in this whole transition team exercise where we're teamed with federal departments - and when I say "we" I'm not talking about our department. There are people who are on the ground dealing with the workers, their families, trying to find early opportunities to make sure that they don't have to endure hardships beyond those they already have endured.
MR. DAVID WILSON (Sackville-Cobequid): I understand that it is a federal thing, but the provincial government has a role to play in that. I think they need to take a more proactive role in ensuring that we have a voice and that the workers have a voice on the federal side, not only from our individual MPs across the province, from our provincial government. The other thing the government should be asking for are changes in the wait times for EI benefits, for example, extending those benefits when we have things like closures of a plant. Are you aware of the minister or the government inquiring about extending EI benefits, shortening wait times so that when employees find themselves without a job that they get funds in a quicker manner than the current process?
MR. THOMPSON: Once again I would say that it's not within our department's responsibilities and I'm reluctant to comment on what another department may be doing.
MR. DAVID WILSON (Sackville-Cobequid): I understand that, I appreciate that and I realize that, but I think it's important that we get that out, that we need that from our government, from the minister that represents your department especially because you are the individuals who are funding these projects and when they go awry and when they fail, your department shouldn't just say, it's not our problem anymore, there needs to be some kind of cross-support for different agencies, different programs.
One of the things we've seen or we hear about and we'll ask you about is a strategy. The province needs strategies in all kinds of different aspects of governing. In the process, is there a provincial agricultural strategy that includes processing, so that we know where we're going to go in the future, what the future is going to hold here in Nova Scotia around an agricultural strategy for the province and processing here in Nova Scotia?
MADAM CHAIR: Mr. Hare.
MR. HARE: I would suggest that would probably be the Department of Agriculture that would have that strategy. We have, obviously, our strategy in our department,
[Page 25]
Opportunities for Sustainable Prosperity, which covers all sectors including processing if you so wish. We spend a lot of time with the agriculture and processing side, but we can't make the decisions as to what they're going to process, or what they're going to do, but we work very closely with our sister departments to make sure that we're aware and we're there when there are opportunities that arise.
MR. DAVID WILSON (Sackville-Cobequid): I think that's part of the problem that we see, not only just under your department, under Agriculture, under Health, everything, is that we have these silos of government agencies, government departments and far too often when we see an episode or an event like the closure of this plant, the resources and the supports come from all different areas. There is not one person, there's not one kind of group of individuals that will oversee a closure of a plant or even in health care. In your role, in your capacity, do you see the need for the ability to have these silos kind of broken down so that each department knows they have someone they can go to to ensure that when there's a closure of a plant like this one, that the workers have the support of government, not just to say, we give the money out to the companies, Community Services will be there if they need support with food, or that stuff, or health care will be there in case they need support in medical services? Do you find there's a role for you, in your department, as deputy minister, to ensure that government recognizes the importance of having a collaborative approach - we hear that word in health care all the time - to problems and issues like the closure of a plant like this one in the Valley?
MR. THOMPSON: Yes, I do, it makes perfect sense to me. We have to remind ourselves always that there's only one taxpayer, there's only one citizen and siloed thinking is generally not good. I don't doubt that from time to time it happens. I can say to you that many of us work at trying to break down those silos. When you think about the Industrial Expansion Fund, 17 per cent of what has come out of that fund in the last six years or so has gone to agricultural-related processing activities and industries, so in our department we are sensitive to the need for support in the agricultural sector. To your general question, are silos good? No, they're not. Are we trying to not be siloed in our thinking? Yes, we are trying to do that.
MR. DAVID WILSON (Sackville-Cobequid): So with this closure, will we see a reduction - you said 17 per cent has gone toward supporting that industry. Are you now looking at the fact that this is an industry that we might not be able to support or sustain? Is that the thinking or is it - maybe if we had 25 per cent going toward the agricultural industry and that sector, that maybe we can hopefully sustain it and increase the number of jobs? The agricultural industry in this province is so important and we continually hear people just walking away from it. Would we see an increase from 17 per cent up in the future or because what we see today and the environment we're in, we might see a reduction of that? Where do you see the funding toward this sector being in the future?
[Page 26]
MR. THOMPSON: Well I can assure you, Mr. Wilson, that we won't engage in identifying sectors that by definition we will not be supportive of. We will be supportive of good businesses, good business plans where they have good plans, have opportunities to be successful, where they have the capacity to meet their obligations and to employ Nova Scotians, we're interested in talking to them and the agricultural sector would certainly be part of that.
That said, we are responsive in the sense that typically we are contacted by businesses with their business plans and say here's what we'd like to do and we assess those. We would hope that there would be lots coming from the agricultural sector, but I can't speculate on - well I could speculate, but it wouldn't be worth anything if I was to speculate on what might happen in that sector.
MADAM CHAIR: Order. The time has expired for the NDP. I recognize Mr. Glavine for the Liberal caucus. You have 12 minutes.
MR. GLAVINE: Thank you very much, Madam Chair. I guess I could talk a bit about my days of catching chickens, but I'd rather maybe work at catching a little more information on the IEF fund. So I'll go back, Mr. Robar, to the question, saying there were 15 to 20 projects. I'm wondering how you came up with the estimate of that budget amount of $38 million?
MADAM CHAIR: Mr. Robar.
MR. ROBAR: Yes, the budget estimate is prepared based on what the commitments of the fund have already been in the past. Some of the commitments we undertake are multi-year commitments, so the funds may not flow in the year that it is approved; it may flow over several years. In discussion with the clients, you attempt to forecast as best you can what their cash flow requirements will be and then you also make a provision for anticipated transactions, so that's how the budget amount is arrived at.
MR. GLAVINE: Do these projects come from ministers, their political staff or the Premier's Office? Where would they come from?
MR. ROBAR: They come from a variety of sources. They could come from companies that have a past history with us, they could come from a minister's office - many companies will contact a minister saying I have this idea, what should I do with it and the minister will refer them to the appropriate source - or it could come from just word of mouth. There is no one single source.
MR. GLAVINE: I guess there would be a lot more companies going bankrupt if we had an estimate as poor as the one for 2007-08, when the estimate grew by 150 per cent. I was wondering how you account for that in that year?
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MR. ROBAR: It's a very difficult number to come up with. Unlike a normal operating budget where you have set parameters of salaries, wages, rent, heat and lights, this is an exercise in trying to forecast the future. You can do your best, but then who could tell that the economy was going to take a major decline in October. Who can tell when some new opportunity - an expansion at Michelin or something like that - would come in, and we want to respond to those. So if it makes economic sense and the capital is available, then it would be - why wouldn't you take advantage of something like that? It's a very difficult thing to predict.
MR. GLAVINE: So in this particular year, how much more will the final number likely exceed the budget estimate, since we're now down to less than a month in this particular year's budget?
MR. ROBAR: Could you repeat that?
[10:30 a.m.]
MR. GLAVINE: I'm wondering, as we go along in the budget year and looking like we'll definitely be over this year, how much are you anticipating will it exceed the budgeted amount?
MR. ROBAR: I believe the current forecast is $52 million in capital advances.
MR. GLAVINE: So why isn't the Cabinet spending authority capped at what they budgeted for the fiscal year, with, of course, some variance for flexibility, as you outlined a moment ago? Wouldn't you see that as a more responsible way of handling perhaps the taxpayer dollar here and the commitment made through the budgetary process? I think we've had some instruction, perhaps, from the Auditor General around this area, that budget estimates be just that and not have this very loose estimate.
MR. ROBAR: Yes, the amounts you're referring to again, are not expenses - it's capital advances. So it's not exactly an expenditure of funds - it's an advance of funds.
MR. GLAVINE: I guess in just kind of closing on that theme, if you have a budget amount every year that is planned to be spent by the Industrial Expansion Fund, why wouldn't there be a business plan of probably activities and focus for the course of a year?
MR. ROBAR: Well the business plan for the IEF is contained within the business plan of the department and again, it's quite variable. For example, two years ago it was $16 million in approvals and last year it was $60 million in approvals. So it really depends on the circumstances. So it's very difficult to forecast that with the degree of variability that would arise in any one year.
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A significant transaction that might have gone through in April and completely skewed the figures, if it had gone through in March. So it's very difficult to get a handle on that.
MR. GLAVINE: On February 17th there was an announcement that the fund would go to $175 million. The last time an increase occurred was in November 2005, which was $50 million. Who asked for the limit to be increased?
MR. ROBAR: We prepare monthly financial statements for the fund and as we see the availability of the capacity of the fund increasing to the level where the authority has been used up, we would advise the deputy minister who would advise the government that we were running out of capacity in the fund and that also it would be based on the number of businesses coming in to see us. So within the last three months, the number of requests has really increased substantially. Again, it's mainly from very good corporate clients that can no longer access capital through the banks or through their internal company funds.
MR. GLAVINE: About five minutes remaining so I'm going to share my time with my colleague.
MADAM CHAIR: Ms. Whalen. You have until 10:38 a.m.
MS. DIANA WHALEN: Thank you very much and welcome this morning. I'm sorry I wasn't here for your opening comments, Mr. Thompson, but I've read your remarks.
This morning I was at the breakfast where the Premier announced a sort of sketch of a plan for investment and stimulus in the economy. It's called Building for Growth and it's an infrastructure plan; $1.9 billion over three years. He says it is going to maintain or create 20,000 new jobs - new or maintained. So this seems to be very closely allied with the aims of what we're talking about here today - your department, your aim - and in your introduction you talked about investment being one of your top three things.
What I'd like to ask you is whether or not the government looked at their infrastructure plan through an economic lens?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: I would say yes.
MS. WHALEN: And given that we have a Department of Economic and Rural Development, could you tell me what your involvement was in helping to devise this outline of a plan?
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MR. THOMPSON: Well I would say that generally all departments have contributed to this exercise, so we would be a contributor like other departments.
MS. WHALEN: Could you be a bit more specific? I mean I would think your department would be the lead department, along with NSBI, in knowing where infrastructure money should be spent to have the greatest bang, the greatest impact on our future.
MR. THOMPSON: There have been discussions in which I have participated with various departments. There are a couple of challenges - one is the shovel-ready notion, which is something that has become a cliché in the last six months, and then concern around making sure that where we do invest, that we don't in the process create long-term, ongoing expenses.
So I would say that most of the deputies have participated in discussions around these lines and we have all made our contributions.
MS. WHALEN: When you say you didn't want long-term expenses, did you mean operational costs, after the fact?
MR. THOMPSON: Exactly.
MS. WHALEN: In terms of the focus and sort of picking sectors or areas, were you involved in that? The plan is really quite vague at the moment, there's just a dollar figure and a few other sectors that have been identified. Were you involved in identifying sectors?
MR. THOMPSON: You're at an advantage, Ms. Whalen. I actually haven't seen the document as of 7:30 a.m. or 8:00 a.m. this morning. As I say, I have been engaged with the department in the bigger exercise and I have seen drafts but I . . .
MS. WHALEN: You have seen drafts. I hope you've at least seen the draft, Mr. Thompson, in your role as deputy minister.
It's a very important thing for us and I think we want more detail on where it's going. One of my questions was, had you seen the plan before, so you've seen at least an earlier draft of it. We can't say whether it's the same thing we were given today or not.
My concern is that this document should lay out how we have a foundation to repay the debt that we're going to incur in spending for this stimulus. I'm not sure that that's there and I would have thought that Economic and Rural Development and NSBI know the sectors and know the priorities that Nova Scotia should be looking at because we certainly have a lot of special interest groups and areas that are lined up.
[Page 30]
Just to go to one specific, would you say that renewable energy is one of the bright spots in our future here in Nova Scotia? I don't see a lot in the plan on renewable energy.
MR. THOMPSON: One of the things we're seeing, Ms. Whalen, through the Industrial Expansion Fund - which is obviously part of Economic and Rural Development - is we are seeing more companies that are coming forward and saying to us they have been unable to access capital that will allow them to make improvements in their own operations that will reduce their energy costs. So we're certainly seeing it in that sphere.
MS. WHALEN: Can I ask you about training?
MADAM CHAIR: Order, I'm sorry. The time has expired for the Liberal caucus. I recognize Mr. Porter, you have 12 minutes for the PC caucus.
MR. CHUCK PORTER: Thank you, Madam Chair, and I, too, will apologize for being late. Unfortunately there was a traffic collision on the bridge and we were quite backed up this morning so I do apologize and welcome you here and thank you for being here to answer some questions.
I know I have only a few minutes. I have a number of questions and I just want to pick up, Mr. Thompson, where you just left off with the 20,000 new jobs or maintained or whatever that might be. By way of that, do we have any idea or are there specifics about size? Big company, small company, does it matter? Do we have any idea of how many of them will be new, versus how many of them will be growth, from companies like - I'll use one of my own, Nu-Air, just an example. They are a company that is still thriving, actually, which is wonderful, they're hiring.
I know you said you saw only the draft. I haven't seen any of yet but I'm very interested to know where this is going.
MR. THOMPSON: Well I won't comment specifically on the announcement this morning but I will say that in our department we are seeing a lot of activity from both large and small companies. You may be aware of the Small Business Loan Guarantee Program that we operate in conjunction with the credit unions. There are now 400 outstanding loans - the program has been a big success, we have just been advised that another threshold has been met. I think we have now guaranteed in the area of $15 million. The average size of the loans that are in that program are $64,000. We are seeing activity from both large companies and from small- and medium-sized enterprises.
MR. PORTER: And we wouldn't see that changing? We would predict carrying on assisting as many as possible within that from this new spending?
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MR. THOMPSON: Absolutely. I think part of the good news here is that for the most part the people who are contacting us are contacting us with what seem to be pretty solid business plans and successful companies, profitable companies with good records of success.
MR. PORTER: I realize ACA, Eastern Protein is a huge loss for the Valley and when I first learned of that, Mr. Blenkhorn actually called and we spoke a bit about that. He was very good, he was informing the members, I think, throughout the Valley of this happening. Certainly some of those people live in my area and some of them have lost their jobs, some of them are moving away unfortunately - still within the province, but to other areas where there are employment opportunities perhaps going on, so big or small doesn't really matter to me, we're fighting every day. I'm very fortunate to have a good officer there in Economic and Rural Development who I can easily pick up the phone or e-mail. He's very good about three people working, two people working or 50 people working - it doesn't matter, they're there.
The credit union program, I agree, has been a great program in our area, it has been very successful I think and throughout the province, so it's good to hear those numbers are growing and I hope that stays in place for a good long time to come because that is very helpful to that small business sector and we have a huge small business sector as you know. We have heard a lot about that in recent reports and so on as to the needs surrounding those folks.
Just back quickly onto Eastern Protein on some of the questions and issues raised this morning. The call that I did receive from Mr. Blenkhorn, he spoke about the reasons and stated this was a business decision, this is what we had to do to become profitable and to survive and maintain some of the jobs that would be left. One of the questions, of course, that I asked and I can't speak for other members, but I would assume they would ask - was there potential that some of these people would come back to work? He felt that that was a possibility. Do we know in any of the discussions that have been had how many people may come back to work or if, in fact, there will be people who were laid off coming back to work in some fashion within that Eastern Protein/ACA - whatever you want to call it - group?
MADAM CHAIR: Mr. Hare.
MR. HARE: We're talking ACA potential and we're talking with the hopes that the poultry that is now being processed at Nadeau in New Brunswick coming back to the ACA operation, that that will allow for people - I don't know how many and they don't know how many - to come back to work at ACA.
MR. PORTER: Thank you. That's what I wanted to clarify as well - we hear a lot of talk about which is it, ACA is the head company here, et cetera. The 40 per cent is somewhat concerning obviously, leaving the province to go as far away as New Brunswick, which isn't that far, but it's quite far, as you suggested earlier, Mr. Hare, when it comes to the
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transportation of poultry and food and so on. What's going to bring that 40 per cent back? We talked a little bit about Maple Lodge, where are we with that? Does this look like this is going to happen or is this still too iffy? We talked about some dates into the future, next week or in the next few days, but there must be some indication that this is worth some valuable chat, as we would call it.
MR. HARE: As I mentioned earlier before you arrived, Maple Lodge are actually in the province this week and they're continuing discussions with the ACA management team with respect to a form of partnership, with respect to the ACA plant.
MR. PORTER: Are we involved in that at all, as in government, in your department?
MR. HARE: I'm meeting with Maple Lodge today.
MR. PORTER: Is there any reason to think - and this may be a very difficult question and I would only ask you to speculate, I guess, at best - this would not happen, that the 40 per cent business would not come back to Nova Scotia? It's not that we don't have the people to go to work and process.
MR. HARE: There's no reason that it wouldn't come back.
MR. PORTER: Are they, again, looking at government for assistance here in helping make all this come together or are you able to speak to that?
MR. HARE: At this point, there's no request.
MR. PORTER: Great. I want to talk a little bit about the money owed. We've been hearing about a $1.2 million figure that was tossed out this morning that was owed in wages, benefits and salaries, et cetera to the staff, and we look at the sale of the Eastern Protein assets. When things like this happen, from your experience - we know we're not getting the price they paid for it, I think that's a given, it's not used anymore, it's used equipment, it's whatever. What's fair? What's a valuable price here? There must be some idea that, you know, you're going to get 75 per cent of the valued asset, or 60 per cent. Do we have some kind of figure to start with?
[10:45 a.m.]
MR. HARE: There is, I believe it's this week or possibly last week, an evaluation being done of the building and the equipment of which they own both. Once that's determined, they will be basically put up for sale. It would be great if somebody would come in and say, we'd like to continue the Eastern Protein business and ACA would be quite receptive to that. It would be difficult because ACA have determined that it just isn't a viable
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alternative for them but who's to say that somebody else can't come in a do a better job, and they would be open to that.
MR. PORTER: And I guess that's where I wanted to go next. We just saw Eastern Protein shut down because the processing business wasn't viable. What is the opportunity that somebody is going to come in here and make it viable? These people are all together in the same industry, I would have thought that would have been the best opportunity and I'm not a businessman, maybe I'm only guessing that would have made sense - chickens, processing, et cetera, all in one would have been where the business was. Obviously we already know it's not, from a business perspective that did not work. What would lead us to believe that somebody is going to come in and buy this equipment and/or start it up in Nova Scotia again?
MR. HARE: At this point, there is nobody that has stepped up and said that they want to take over the business. Unfortunately, elsewhere in the country the wages for that type of business are much less than what was being paid at Eastern Protein - closer to minimum wage jobs, to be honest.
MR. PORTER: And that's allowing them to survive, is that what you're clarifying for me?
MR. HARE: Yes, that's where the industry has been. The other thing is with the plan to go ahead where they're talking whole birds or whole bird equivalents, in sales there is no product from ACA that would be made available because 20 per cent of the bird in the past would have been available to Eastern Protein for further processing and the rest would go to tray pack and go off to Sobeys or wherever, Co-op Atlantic. With the plan to sell whole birds and Maple Lodge is assisting with that, there's just no product available for further processing at Eastern Protein, or not enough.
MR. PORTER: So it just eliminates it all together? What's the percentage?
MR. HARE: Pretty well eliminates it.
MR. PORTER: Is the balance garbage here - I guess, is what I'm asking - or is it actually getting shipped off for processing somewhere else?
MR. HARE: The rest of the product?
MR. PORTER: Yes.
MR. H ARE: If somebody wants to buy from ACA at a commercial value, I think they would sell the product to them, to whoever. Right now for most of the marketing, my understanding is it will be done through Maple Lodge, who have markets for whole birds.
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MR. PORTER: So this week, next week sometime we should have a better understanding of what and if that building will go for sale, what it may be worth. Again, as you've said, there's nobody knocking on the door saying we'd like to purchase your plant and your assets?
MR. HARE: That's right. Basically our thoughts are it's probably worth about $15 million to replace it. To sell it, we'll wait to see what the number is that the evaluators come up with, but I'm sure that it's much less than the $15 million replacement value.
MR. PORTER: No question, I think that's probably a fair statement. So we still have these folks who are now unemployed. The Valley has been hit significantly hard in comparison to some of the other areas. The HRM seems to be thriving fairly well. I know Cape Breton has taken some losses, but certainly in the eastern Valley, anyway, where I come from and represent, we've had some significant job loss.
Economic development, again, I don't know all the details, $1.9 billion seems like an awful lot of money. It would be very interesting to see how that's going to get broken down. What are we looking at here and how are we going to put them, 20,000 people to work or maintain that, I'd like to know a little bit more.
I'm not sure if you can go into that at all, Mr. Thompson, I don't know how much of it even in the draft, if you can expand on any of the thoughts - how that $1.9 billion, over how many years, how much progress.
We're in a recession right now; depending on who you talk to and which analyst you listen to and which newspaper you read, you get a different read every day how long we're going to be in this, so that's not a fair assessment either. We really don't know, I think is the right answer and maybe you've suggested it, when the United States consumer starts purchasing, we tend to see things on the rise.
I know in Nova Scotia we're not immune to this, we've seen it more than just this time around. I know in my working life we've seen it already and we've seen it come back. How long, with this idea of $1.9 billion in spending, 20,000 jobs on the line, to be assisted, helped, increased, renewed, what are we looking at in a time frame here to get this spending underway and get things going?
MADAM CHAIR: Mr. Thompson.
MR. THOMPSON: Well, I think the government, we certainly understand that a stimulus is only a stimulus if it happens in a timely fashion and a stimulus in three years time is not going to be an adequate response. So the objective is to stimulate.
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You're right, we don't know how long this recession is going to last. We don't know how long it's going to be before the American economy starts to turn around and those who buy, for example, our Michelin tires, once again start buying tires to give an example.
I think the challenge, while we wait for the turnaround, is to invest in ways that will allow us to be stronger when the economy does turn around and that would certainly be the objective.
MADAM CHAIR: Order. The time has now expired for the questions. I would invite the deputy to make some closing comments, if you wish.
MR. THOMPSON: Well, thank you, Madam Chair, and thank you to members of the committee for your indulgence of a new deputy minister. As you know, I've been there for only a couple of months now. Mr. Wilson raised the issue of silos and so I am sensitive to the fact that there are things that collectively we may be imperfect about, but what I am confident about is that with InNOVAcorp and with NSBI and various agencies and the support we give to the regional development authorities, et cetera, that we do have a good portfolio of tools and, more importantly, we have a group of people who are conscientious and dedicated to trying to enhance the prosperity of Nova Scotia and try to help create more opportunities for more Nova Scotians.
So while we may be imperfect, I can assure you that everybody comes to work each day, trying to do our best for our province. I thank you for your attention and your interest.
MADAM CHAIR: Thank you very much. On behalf of the committee, I'm sure we're all very much better informed as a result of our meeting this morning, so thank you for being here today.
I don't think we have any other business on our agenda at this time and there were no requests for additional information from the department. So without any further discussion, we stand adjourned until we meet again. The subcommittee will meet in five minutes. We'll take a brief adjournment.
I would invite members of the committee to meet with our guests from St. Lucia; a reception has been organized, a meet and greet in the Uniacke Room at 11:15 a.m. Thank you very much.
[The committee adjourned at 10:53 a.m.]
