HALIFAX, THURSDAY, OCTOBER 5, 2017
SUBCOMMITEE OF THE WHOLE ON SUPPLY
2:55 P.M.
CHAIRMAN
Ms. Suzanne Lohnes-Croft
MADAM CHAIRMAN: Order, I will call this meeting of the Subcommittee on Supply to order and we will continue with the Department of Business questions by the Progressive Conservative caucus. I think it’s like 58 minutes. Right? Fifty-nine? Okay.
MS. ALANA PAON: I just wish to thank Madam Chairman as well as the honourable minister for at least giving me one minute to get my feet wet last time around before we had to adjourn. I wanted to start by asking my question again that we left off with the last time around. I’m not going to get into any grand soliloquies, here. It’s not my style. I’m really kind of a more point-form type of girl. We’re here to talk about the budget. So, let’s just get at it.
The Department of Business is estimated to see an increase just shy of about $60 million, I think, for this year. Most of the increase falls under Grants and Contributions as I understand under Page 4.2 in your business plan. I have some questions on those but I’d like to address some of my other areas first.
So, my first question is operating costs are set to increase by about 60 per cent over last year’s estimates and it’s nearly tripled last year’s actuals, if I remember the numbers correctly. So, can the minister offer some details on why administrative costs will see an increase of this magnitude?
HON. GEOFF MACLELLAN: Thank you, Madam Chairman. To the member, that difference in administrative of, I think it’s $3.9 million give or take, is associated to the amortization on the capital lease that we have for the new Halifax Convention Centre.
MS. PAON: Can the minister just expand on that a little bit more, why so much?
MR. MACLELLAN: Sure, so, I think I can freestyle on this one for the most part. I’ve been involved with the Halifax Convention Centre in our previous mandate from my role of Minister of Transportation and Infrastructure Renewal where we managed the capital build of the project. Essentially, the provincial portion that we begin to pay, so, the amortization basically, the lease will begin this fiscal year. So, the portion associated with the number of months so far in the calendar year would be that $3.9 million.
MS. PAON: Okay. Page 4.3 under your business plan as well, I’m noticing when comparing this year’s estimates and last year’s actuals, senior management will increase by 1 full-time employee and it’s about $200,000, I believe. So, can the minister say whether the full funding increase is for that one position?
MR. MACLELLAN: Thank you, Madam Chairman. So, the associated increase in that line item is connected to two transfers that we had into the senior management level, one from corporate services and one from business relations. So, it’s the salaries associated with two positions that were transferred into the Department of Business.
MS. PAON: So, they’re two transfers not a new hire?
MR. MACLELLAN: That’s right.
MS. PAON: So, just to be clear, Madam Chairman, it says funded staff an increase of one. So, there’s not a new staff person. There are just two people that are being transferred is that correct?
MR. MACLELLAN: Yes, that’s correct and they are transferred from within the department.
MS. PAON: Thank you, Madam Chairman. A supplementary question, I guess, to that too. It just appeared to me that there was a new hire being done. So, I guess, it’s not a matter of positions being filled. If they were transferred, they’ve already been filled.
Does the department, considering that we’re well into our fiscal year, still anticipate that it will be a $200,000 price tag? Will the $200,000 be used this year?
MR. MACLELLAN: Yes, that’s right. Their salaries actually came from other line items. So, they were moved into this particular department at this level. So, they’re not increases in the budget, per se. They’re transfers in from another departmental budget.
MS. PAON: My third question would be, in Page 4.4 under Supplementary Information, Department and Crown Relations is set to receive about $2.7 million more in funding I noticed. Can the minister provide some detail on the function of this division and perhaps some performance indicators and the reasons behind the increase? Quite a substantial amount of money, in my world, anyway.
MR. MACLELLAN: That increase, $2 million of that total amount of increase, is for our new program with the iconic tourism sites, so, $2 million that we’ve allocated through this budget is found there. The second piece, the capital rebate program, that’s a legacy program from the previous fund, the Jobs Fund, that wasn’t part of our government mandate and this was a legacy investment that’s part of that $409,000. It went to two operations, one was Pratt & Whitney and the other was PepsiCo.
MS. PAON: Madam Chairman, to clarify, I’m sorry, Pratt & Whitney and Pepsi-Cola. Can you explain a little bit more about this legacy investment? Those are very large corporations to be getting rebates.
MR. MACLELLAN: We don’t have details here. We can certainly go back. This, again, to be quite clear, this wasn’t our government’s decision. These are legacy investments that were well before our time. They came from the former ERDT Department. So, I know that the capital investment program was for the standard programs that existed a few years back for machinery, equipment, technological upgrades. Obviously, with PepsiCo and Pratt & Whitney, they are significant-sized operations. So, I’m not sure what the genesis was in terms of those decisions. They weren’t decided upon by our government, neither my predecessor and certainly not myself. So, they’re just legacy pieces in the budget that are existing until they’re paid in full and, then, obviously they’re finished.
MS. PAON: Madam Chairman, just to be clear, that’s $700,000 went to Pratt & Whitney and Pepsi-Cola. Is that correct?
MR. MACLELLAN: If the member could, could you explain where the $700,000 came from?
MS. PAON: Well, it was $2.7 million that we were speaking about in the beginning, so, I thought you had mentioned that $2 million was for the iconic tourism sites. Am I correct? Did I get that incorrect?
MR. MACLELLAN: Yes, the original change that we’re looking at in the line item is $2.4 million. I’m not sure if the $2.7 million was my number or your number but I’m looking at the line item here. It’s $2.403 million, so, that would account for the respective investments with tourism and the capital rebate program.
MS. PAON: Okay. My fourth question would be in Page 4.5 of your Estimates and Supplementary information. Similarly with the Corporate Policy division, this wasn’t a budget item in last year’s Estimates, now it’s $657,000. What does this division do? I’m not clear with what the division does and I apologize, I’m new to government. Could you explain to me what this division does and why the department created it?
MR. MACLELLAN: With this particular line item this essentially becomes our policy shop so none of the dollars under this particular line item are new dollars. They’ve been transferred in, in a variety of ways from other departments.
Basically, as the member may know, our government transferred program and mandate from the old ERDT to the Department of Business so really by and large we became a policy shop, so a lot of what we do now is connected to crafting policy and when we have policy how the details are pulled together with respect to Cabinet submissions and of course strategic planning. So that’s sort of the policy arm of that particular division.
There’s also corporate management as well, like occupational health and safety, record-keeping and record management, things of that nature. Really the function of the line item you are referring to all centres around our policy work and really that has become the overarching mandate of the current Department of Business.
MS. PAON: Madam Chairman, I’m finding that the inner workings of government departments can be a little bit of a labyrinth so it’s interesting to hear about so much money being spent on I guess strategic planning and corporate policy, so thank you for that answer. I may be asking more questions later on.
My fifth question is again in the same documents - and again I want to apologize for going line for line but I find these kinds of things rather interesting and we’re here to talk about budget. The Halifax Convention Centre, lots of great news and controversy obviously around the building of the convention centre. The amortization was estimated at $1.1 million, I believe, for 2016-17 but nothing was actually booked. This year the amortization is estimated at more than $5 million - I believe that’s correct.
First, just to clarify, is this the old convention centre that we’re talking about, because I know we’re making a transition obviously this year, or is it the new convention centre and can the minister outline the amortization schedule and some of the insights into this volatility?
[3:15 p.m.]
MR. MACLELLAN: This amortization piece around the convention centre, in fact, it’s all related to the new centre. The numbers are completed for the old centre so to speak. So, this particular line item it has to do with the amortization which obviously takes place once the facility is open. So, originally, for last year’s budget, the developers of the centre had it pegged to potentially open in September of 2017. So, there would be amortization for the current budgetary year to reflect some of that amortization cost but, now, we’re looking at December potentially best-case scenario but, more like, early in 2018. So, with that, that budget is the estimated reflection of what the amortization should be for the next fiscal year.
MS. PAON: Can you just tell me, does that account for the volatility that I was asking about as well? Yes, okay. Okay.
MR. MACLELLAN: Yes, it does. Again, this was all based on the schedule that was developed and formulated a couple of years back. So, these budget items, line items reflect our current estimates on where the convention centre is going to be, so, we’ll, obviously, I think, everyone is collectively hoping that they’re on the current schedule and that it will be open as soon as possible as we’re getting into the event season and there’s many things, as we all know, booked for the new convention centre. So, we’re hopeful that this amortization schedule will be the actual when we’re sitting here this time next year.
MS. PAON: Thank you, Madam Chairman. It’s fascinating having a conversation with someone but not allowed to speak to them directly.
MADAM CHAIRMAN: It’s for Hansard to turn on the microphones.
MS. PAON: I understand. I understand quite well.
I see that the Trade Centre Limited is now Events East Group and I believe that that was transitioned in April of this year and it has been zeroed out, I believe, in the department’s expenses. Is Events East Group still under the auspices of the minister’s portfolio? Is that correct?
MR. MACLELLAN: Yes.
MS. PAON: Where does the department account for the expenses for Events East? Is it a separate corporation?
MR. MACLELLAN: We wouldn’t have the Events East budget as accounted for this exercise because there is no grant that’s given to Events East or the Crown Corporation. So, it’s not reflected in this particular information. So, the Trade Centre Limited, now Events East Group, wouldn’t be reflected in our Estimates booklets.
MS. PAON: As I’m learning about this portfolio that you hold and that I’m supposed to critique, I find Innovacorp absolutely fascinating and I’ve been asked many questions about what exactly Innovacorp does and you do have somewhat of an explanation online about what the corporation does for the province. Could the minister please explain to me, does Innovacorp - because it’s not clear to me whether this occurs or not - whether Innovacorp goes out to scout companies or do companies mostly apply and come to you? How do people get to know that Innovacorp exists? Do you scout out companies? How does that work?
MR. MACLELLAN: To answer the question, I just wanted to get a couple of specifics. I would agree with the honourable member that it certainly is a fascinating entity and for me, quite frankly I didn’t know a whole lot about how impactful Innovacorp is until I had the privilege of undertaking this portfolio.
They have a pipeline system where they do have - it’s just under $1 million of investment - a developmental pipeline so they’ve got many companies that are start-ups that are in the incubation period of their operation that are seeking support and seeking the many tools that Innovacorp has, so they certainly do have a means to go out and identify a track and support entrepreneurs, start-ups and those businesses that are relevant to technology hubs, innovation hubs and the whole notion of developing businesses by way of innovation.
I guess the philosophical answer is that there’s a very strong - it’s actually shocking - innovation ecosystem here in the province. We’re doing tremendous work here in Halifax. There’s a new Momentum Centre in Sydney and the innovation ecosystem has been gaining momentum steadily. The work that Innovacorp has done with its own programs and investing in start-ups, the venture capital aspect of Innovacorp and the fact that companies are building on their strength and growing their product development and their business plans so they can access money through the federal government, leverage private sector dollars through venture capital, so there is a whole host of ways that Innovacorp does support businesses and there’s hundreds of businesses over the last number of years that have been through the system.
Really they are an incubation and start-up program whereby when companies really begin to take off and their business plan and their model and their product or service - what have you - is established, really then it becomes about the private sector taking over. Innovacorp builds the foundation really for a lot of these businesses and by and large then gets out of the way and lets the natural sort of economics of market and product development and product and service development take hold so it is a very vibrant ecosystem. We’ve heard a number of times through major lenders and investors over the last few months that Halifax in particular, but Nova Scotia across the board, has a booming innovation platform and template.
I think if you dive deep into some of these recent investments, some of the tech start-ups, what we’re doing around oceans, that the Centre for Ocean Ventures and Entrepreneurship, COVE, we’re at the cutting edge and pretty significant innovation breakthroughs and Innovacorp really is at the leading role with respect to that. So, Innovacorp does tremendous work in that field but, to answer the original question, they’re easily found and, in that world, innovators and companies that are looking to get off the ground do find Innovacorp but they also do have a system whereby they also go out and recruit potential suitors for some of their programs.
MS. PAON: Madam Chairman, I’d like to know, since Innovacorp seems to be providing this foundation to all these companies, what’s the matrix system that Innovacorp utilizes to be able to choose what projects it works on? Are these mostly larger-scale companies? Do we have medium-scale companies? You know, what are we talking about here? I’m just curious because I’m a small-business owner and I know there are several people that are, even around the table here, are small-business owners and I know the difficulties certainly surrounding business ownership in this province. I am just curious to know, I guess, the first part of my question is, you know, what I’ve already asked but also, what is the prioritization process and how many of these businesses actually matriculate past Innovacorp? How many of them make it is really what I’m asking?
[3:30 p.m.]
MR. MACLELLAN: Madam Chairman, I would like to thank the member for her patience. I just wanted to make sure I gave a fulsome answer and again there’s a number of different components of Innovacorp and the success that they’ve had.
Just in a nutshell, for the most part it’s not a measurement of the size of companies but by and large they are start-ups so you don’t see a lot of corporations come into the Innovacorp ecosystem. It’s usually the individually and independently developed ideas that may be supported by a conglomeration of people. It’s almost always - at least a lot of the examples that I have, they are start-ups.
In the pipeline sort of formally now there’s about 40 companies that are officially kind of in some of the programs but that’s just a small portion of what’s actually a touchpoint for Innovacorp through the many developmental sandboxes, the start-up sandboxes that we have at post-secondary education institutions across the province. They are in daily conversation with Innovacorp and with that innovation system here in the province to continue to move their business plans along.
Again, we’ve got Volta Labs, the COVE, Momentum in Cape Breton, all of these places are the motherships of innovation that are well supported by Innovacorp.
The key aspects of Innovacorp, again with the fact that many of the businesses are start-ups, it’s capital investment, it’s having the ability to identify and attract that capital, then leverage that capital to bring in additional funds and continue to access private sector monies as well and grow again, turn this incubation process into a full-fledged private sector operation that is completely free of government involvement once they are up and running, and of course, the mentoring idea so that a lot of times the ingenuity with Innovacorp is the fact that they’ve got a network of mentors for different sectors, different industries that come together and can help stimulate ideas and of course grow particular entities, projects and businesses.
The investment level, so to speak, for Innovacorp is not dissimilar to what you’d see in private sector venture capital so this is a great part of Innovacorp with respect to what their expectations are about investments. They strive to see a return of five to 10 times what they invest. So when you’re talking about a Nova Scotia start-up, when Innovacorp, the independent board - obviously these are not decisions that are made by myself or anyone in our department - the Innovacorp board is independent, they are professionals who have made a contribution to Nova Scotia and they make these calls about the investment decisions, so again at a level of about five to 10 times of expected return. That’s a significant echelon for an operation, an entrepreneur to hit.
When Innovacorp invests in a company they’ve done their diligence and they certainly expect results before the relationship ends and the company sort of fully integrates into the private sector.
Many of them are successful, there’s no doubt about it. A lot of the investments that Innovacorp makes are high risk and that’s okay. That should be where Innovacorp lands, it shouldn’t be low-risk entities. Anything that’s low-risk, so to speak, probably can attract private sector dollars and support. It’s these high-risk, innovative companies that are on the edge of new and advancing ideas and developing new ideas really is what this is all about.
I just wanted to sort of highlight two Nova Scotia companies that have gone through the Innovacorp pipeline. One is a technology called SkySquirrel, which is a drone technology that covers wine vineyards. This drone technology has the ability to identify disease in a particular vineyard and so it obviously saves time, it saves money and it saves the operational challenges for the vineyards that we have. The wine producers in Nova Scotia when they can apply this drone technology they can identify disease. They can cordon off the affected area, which obviously has a positive impact on their overall operations.
So, that’s one great technology that we think is really going to continue to grow and evolve and that company which started here has now attracted a significant amount of attention and investment and business all over the globe. So, that’s a good thing. You can think of the many regions of the world that are wine specialists. They don’t have this measure of technology and this level of expertise that really creates efficiency in performance in their operations.
The second one that comes up often is a company called Spring Loaded Technology and what they do is, it’s a knee apparatus, a knee brace that really developed out of an idea for Canadian Armed Forces soldiers who have been impacted by obviously the challenging profession that they operate in and many have lost limbs and have disabilities associated with their time in the Canadian forces. So, what this is is basically a knee brace spring technology that makes mobility easier for those who have some kind of affliction or an injury, long-term disability with their limbs, with their knee in particular. So, again, that’s one that came directly for the Dalhousie sandbox here in Halifax.
So, you know, we don’t give ourselves enough credit as a province for coming up with innovative, leading-edge ideas and I think that Innovacorp is involved in that world every day. So, that’s kind of a breakdown of who they invest in, how they invest, the level of risk that they have, and some of the good stories that have come out of the Innovacorp work.
MS. PAON: I thank the minister for his response. It’s always wonderful to hear some good-news stories and I thank you for clarifying as well that most of these projects are high risk. What I didn’t hear in your response is exactly what percentage of these companies actually do matriculate out of Innovacorp. How many of them succeed?
MR. MACLELLAN: Thank you, Madam Chairman. We don’t have that specific breakdown but I’m sure we can pull together or we’ll ask the good people at Innovacorp to pull some of that together. They would obviously have an inventory of who’s been through what programs and how we identify those that have succeeded so to speak. The one thing that Una mentioned that I didn’t mention in my opening remarks was that we have the highest level per capita in the country of start up. So, for our innovation world that we have here in the province, there is a lot of success coming out of that and clearly there’s a correlation between when Innovacorp came on stream and the level of success that we’re seeing through innovation and our entrepreneurs.
MADAM CHAIRMAN: Did you have more to say on that, minister?
MR. MACLELLAN: No. The only thing I would add though is we do have - I’m not sure how much more the member wants to talk about Innovacorp but Malcolm Fraser is here, our new president and CEO of Innovacorp. So, we can switch him out with Una if you wish or it’s up to yourself. So, maybe, we can just keep going and we can do it.
MS. PAON: To the minister, I just really wanted to know a little bit more about the decision-making matrix but that, perhaps, could be a supplementary meeting that I could have with the minister and the minister’s office later on.
MR. MACLELLAN: Definitely, yes.
MS. PAON: Continuing on to Innovacorp but on a bit of a different tack, I notice that the funding for Innovacorp has been reduced by about 10 per cent, most of which I think belongs to the Productivity and Innovation Voucher Program. So, I’m noticing that there was a transfer of the Productivity and Innovation Voucher Program in your estimates 2016-17 under revenue, however, if we go into and I’m assuming that this has been moved to NSBI since that’s what it says within the business plan for NSBI, you’ve got your performance measures, your measures, your results and then your targets. So, money was moved in the way, I think, of about $1 million, for this Productivity and Innovation Voucher Program from Innovacorp to be clear to NSBI in 2016-17 and, yet, there are no results for 2016-17 for that voucher program. There are results for the voucher program in 2015-16 under NSBI and it says the Productivity and Innovation Voucher Program wasn’t delivered by NSBI at that time which makes sense considering I think it would still be under Innovacorp. There are no results for 2016-17 and, yet, there’s $1 million that was transferred. There are targets for 2017-18. So, where did the $1 million go in 2016-17?
MR. MACLELLAN: So, that particular line item, it was approved to move to NSBI but it didn’t actually move. It did stay with Innovacorp. They did allocate those funds as per the program parameters as always. So, again, we can, via Innovacorp, get the details on how that was spent and where the allocations went for this year and, then, moving forward, it will in fact be with NSBI.
MS. PAON: So, Madam Chairman, just to be clear, there was no transfer of the $1 million in 2016-17 to NSBI from Innovacorp. Is that correct?
MR. MACLELLAN: Yes, that is correct. The budget transfer was 2017-18.
MS. PAON: So, I was comparing the Estimates document, Innovacorp Business Plan, Public Accounts and I noticed that provincial funding for Innovacorp was estimated at about $9.6 million for 2016-17 and, according to the forecast in the business plan, funding was going to be $10.5 million and, in Public Accounts of 2016-17, funding was reported at $10.5 million but the actuals in the budget, the estimate is only reported at $9.3 million. So, could the minister explain why the Budget Estimates would have provincial funding for Innovacorp recorded at $1.2 million less than Public Accounts?
[3:45 p.m.]
MR. MACLELLAN: The difference of the funding is connected to three particular projects; $500,000 to the Momentum Innovation Program in Sydney at New Dawn, $500,000 to Volta Labs here in Halifax and $140,000 to the COVE start-up yard. That would account for the difference in those two particular budget pieces.
MS. PAON: I’m going to move away from Innovacorp, give it a break. You asked me a couple of days ago not to be too hard on you so we’ll move away from Innovacorp.
I’m happy to see that the funding for the Film and Television Production Incentive Fund - which I think is what the new name is, they always like to make things very long in title, it seems - has more than doubled from I believe last year. How does the $22 million that is now budgeted compare to the amount of funding that the film industry would have received under the old film tax credit.
Supplementary to that, I’d like to know how many productions you anticipate that $22 million will actually fund?
The difference in the old tax credit versus our incentive fund is a little bit over $1 million - $24 million was the final spend in the tax credit and as the member said, we’re at, $22.8 million. That $22.8 million generated 49 productions.
MS. PAON: Minister, to be clear again, the $22.8 million funded 49 productions - in comparison to how many productions that would have been funded very similarly under the film tax credit?
MR. MACLELLAN: We don’t have that number. That’s something that probably the Department of Finance and Treasury Board could get for us but we have just the details, the components of the new fund.
MS. PAON: Does the minister anticipate that the $22 million reflects the amount of money that NSBI anticipates that it will invest in new productions? Or does it reflect funding that is already committed for productions for this fiscal year?
MR. MACLELLAN: That’s the expectation for projects that are approved and committed. The total amount of the Nova Scotia expenditure on those particular productions is just under $80 million, so it $79.9 million.
MS. PAON: Again I’d like to clarify things, make certain that I am clear; the $22 million has already been committed, is that correct - for this fiscal year, all of the $22 million?
MR. MACLELLAN: It’s approved for the 2016-17 year, it gets paid out after the fact. But yes, it’s approved funding based on projects that we’ve already made the commitments to but it’s paid out after those productions are completed.
MS. PAON: Madam Chairman, I’d just to ask the minister, obviously the changes in the film tax credit in 2015 caused a lot of hardship for many people in the film industry in Nova Scotia, many of which I knew personally at that time, having worked in the film industry myself at one time. Many people went bankrupt, many businesses had to close. There was a great deal of tumultuous time, especially considering that the decision was made in the Spring, which is when productions really start to move forward in the film industry.
I’m curious to know, has your department, NSBI, ever considered doing a study, commissioning a study regarding the impact of cancelling the Nova Scotia film tax credit, what that impact was on the province? How many people had to migrate out of the province? How many people went bankrupt? How many people lost their jobs? How many people lost their homes?
MR. MACLELLAN: The short answer for NSBI’s perspective is no, they administer the program so obviously they are subject to the way the government structures this particular incentive fund. From their perspective that wouldn’t necessarily be on them.
From our perspective, clearly we made this decision to migrate to the Film and Television Production Incentive Fund. I think everyone around the table is aware of the history and how the Film and Television Production Incentive Fund played out versus the tax credit. First of all, I can give kudos to NSBI for their collective relationship with Screen Nova Scotia. I do want to say from my own personal perspective, Mike Volpe and Erika Beatty have been great to deal with. They are two people who play a significant role in film and screen and the whole industry that we have here in the province, they have been very helpful in terms of relaying information about productions, relaying information about opportunities moving forward and clearly they have voiced their opinions and suggestions on some things we can do moving forward.
They have been fair and objective champions of film here in Nova Scotia and the efforts of Screen Nova Scotia and they’ve really taken a positive tone in terms of how we continue to build this industry here in the province.
Again they’ve made a number of suggestions. This is a personal connection I have with Mike and Erika in particular and they’ve been very fair to deal with for us. I think one of the things for the member that was a concern of Screen Nova Scotia was that at the time when we transferred from the tax credit to the Film and Television Production Incentive Fund was that there were a number of productions - and you may know this having connections to the industry - that were still in the pipeline so they were still sort of taking place. Then it became about when those projects were completed or the time lapsed for their production, what would happen next or what would be the new round.
Obviously when you do compare the numbers - going back to your opening question - the investment is very much similar. The fact that the demand is still there and the request for funds to support productions here in the province is clearly significant, that’s a very good thing.
I think it’s incumbent, certainly on NSBI but on our government, to really continue to build on the relationship with Mike and Erika and all those at Screen Nova Scotia, identify if there are gaps. Looking at other jurisdictions and seeing what’s happening in other places helps us to understand and appreciate what works and what we can be doing differently. I’ve made that commitment to those two individuals in particular but across the board that I’d be willing to have discussions about new opportunities and new ideas that they have where we can play a role.
Based on the incredible talent we have here, the incredible system that they have built up over the last decade and longer, we still have a vibrant industry here. Again, I’m not going to suggest that people aren’t concerned about the future because they are. I think despite the history and the challenges that we had, we understand and recognize that there still is a film industry here and it’s the good people who are leading the charge who are keeping us aware of many of the opportunities and again, many of the challenges as well so we’ll continue to keep that dialogue open.
Again, just from an individual perspective, there are two great leaders who I am proud to have a relationship with now and we’re going to continue to listen to them and do what we can and hopefully we’ll see a bit of . . .
MADAM CHAIRMAN: Order, time has elapsed for questioning from the PC Party. We will turn it over to the NDP.
The honourable member for Dartmouth North.
MS. SUSAN LEBLANC: I’m going to ask some questions. In our caucus we have divided the spokesperson rules between business and film, recognizing that film and the film industry is an entity unto itself. My background is in the film industry and also the theatre industry, the theatre community. I’ve worked on many films in this province. Many of them, the best ones, the best experiences for me - the best ones were where I had the biggest roles. (Laughter)
The best experiences for me were largely the homegrown productions. So working with Scott Simpson, Tom Fitzgerald, Stephen Reynolds when he directed me in an episode of Haven. People who are from here who were part of that growth of the industry back in the day - and you know for a performer or for anyone who works on films and if you go to the film festival you notice that there is a sense of pride more so in those productions and those things going on than the big productions coming in, which is awesome for crew employment, not so awesome for actor employment and is good for the spinoffs in local communities.
I just want to say that I’m coming from that perspective at this moment so I’m going to start off with some general film questions and I’m going to maybe possibly repeat a couple that the Progressive Conservatives asked, just because I was trying to follow what was going on.
[4:00 p.m.]
My first question is, looking at the NSBI’s business plan I notice there is a significant increase for - sorry, the estimate for 2016-17 was $10 million and there’s a significant increase to almost $23 million, so can you explain? I think, correct me if I’m wrong, but what you said is that money is the money for the film fund, is that correct, that increase?
MR. MACLELLAN: Yes, that’s correct.
MS. LEBLANC: Is that increase a one-time increase or should the film and television industry and producers expect that level of funding will go on in future years?
MR. MACLELLAN: I guess it’s as simple as, just in discussions with Laurel and clearly I’ve seen this from the Cabinet perspective but we basically responded to the needs of the film and Screen Nova Scotia moving forward. The number was pegged at $10 million.
Each and every time that the screen officials came to NSBI to look for increases, when there was an increased demand for funds from the program, they were received. Each and every time that NSBI came back to us to look for increases - The Mist would be a good example and I certainly take your point about the home-grown community and local productions which are great in all areas of Nova Scotia, but certainly you do welcome the big ones as well and The Mist would be one example where when that opportunity came, NSBI encouraged us to support that and obviously that’s the case.
To answer the question, I guess it is a moving target in the sense that we’ll respond to the demand. NSBI and Laurel and her team have been incredible at keeping contact with Screen Nova Scotia representatives but moving forward, any of those conversations and discussions that are had, certainly there’s a technical level that will involve NSBI to some of the individual producers and those who are submitting the applications.
For me, this will be about conversations with Erika and Mike to try to figure out what’s working and what isn’t, what’s right-sized and what we can do to help foster and bring back that positive attitude, quite frankly towards government. I don’t think it’s about the industry, I think everyone is still positive and upbeat and while I’m not sure if I’ve seen a sector that loves what they do more than the film folks, that’s an incredible value that we certainly want to rebuild the relationship between ourselves and Screen Nova Scotia.
Anything we would have in terms of special requests and specific things, I think I would hear directly from Mike and Erika on that. Certainly I think the name of the game here for our Film and Television Production Incentive Fund is to be as responsive as we can and when opportunities come, we’ve got to give them every consideration.
MS. LEBLANC: To that end then, have you decided if there’s a cap?
MR. MACLELLAN: I guess we’ve decided that we will be responsive so that that’s pretty much the answer. I want to be up front about where we’re at with that. Is there a cap? It was supposed to be $10 million and now it’s $22.8 million, so I think it’s self-evident what happened there, in terms of a cap or not.
Obviously we want to make the investments that are seen as being valued and are seen as being impactful for the industry and for the province. I think we’ve done that in the last two years since this transition has taken place.
Again, we’re going to do what we can as projects and requests come in. Clearly, like everything else, every budget line in every department in government, the budget line is essentially the cap. But things change over the course of a year, you make decisions as you go. For me personally, again having this relationship with Screen Nova Scotia people, we would hate to see it be under-utilized. I can’t envision a situation where that would be the case, and truly that would be bad news if that was the case. In talking with Mike in particular about the trends, we want to make sure that there is that level of over-subscription to the extent possible. We’re going to continue to talk to industry directly and fund whatever we can. Hopefully those projects keep rolling in, and we don’t have any lull in activity because this industry is important for many people.
MS. LEBLANC: Given that you’re going to be responsive, which I totally appreciate, and given that the funding now is at a level that is pretty much what the film tax credit was when it was dismissed, I guess it begs the question, why did you take away the film tax credit, because you know what happened? It threw the industry into a huge tailspin. My colleague has already talked about how many people lost their jobs, and many people left the province. Where do you see the necessity for that happening, or why that happened? If the fund is responsive, and if the money is basically at that same level, then why put the industry through that? As you say, it’s an industry of people who love what they do more than anything. It’s a strong industry. Those people contribute so much to the fabric of Nova Scotia at a larger level. I love that you’re saying you’re going to be responsive, but I find it hard to hear that part of it.
MR. MACLELLAN: Obviously, there are certain details I can’t answer. Look, in terms of responsibility for the decision at that time, I take it fully as a member of Cabinet. I was at the table, so there’s no doubt about that.
The adjustments that we made and what we were focused on were the piece about - the original tax credit was about labour, and this is an all-in spend connected to what is being spent in Nova Scotia. That was a key driver for us.
Again, looking at the funding levels, we identified this as being in the range of $10 million, and now we’re in the $22 million range. I guess everyone around the table - and certainly you being a veteran and a performer of the film and television and screen industry and performing arts - we’re in a very different place in terms of what should happen moving forward.
That decision was made. We’re accountable for that as a government. We know that it didn’t create a lot of friends for us in the industry. There’s no question about that. The history is finished on the film tax credit. It was our call to turn it into an incentive fund. We take the repercussions of our decision at that point, going back a couple of years.
Now for me, it’s just about moving ahead and hopefully rebuilding our relationship with Mike and Erika and their team and ensuring the global industry - certainly what’s taking place across Canada and in the U.S. - that we are open for business, and we want producers, we want investors, we want directors, and we want our own people to come back or stay here. We will continue to do what we can moving forward.
MS. LEBLANC: I’m just going to quickly ask you this question because I don’t want to forget about it later. You may have heard, and I may be wrong about this, but I remember when the new fund was implemented, people talked about it being like the Alberta model. Does that sound right, or am I getting that mixed up? People are nodding in the background.
Alberta just made a big announcement regarding their fund. First of all, they have increased their fund to a $45 million fund. But one of the interesting things I find about the fund is that they have implemented a points system, so funding is based on points as to what the benefits to Alberta are: are they going to use the Calgary Film Centre or whatever it’s called? Are they going to hire this many local people? Are they going to be spending this much time, or whatever? They rate it, and they rate how much money they give on that system. Do we have a system like that? Would you consider implementing that type of system? To me, that would address some of the issues about supporting local homegrown talent.
MR. MACLELLAN: Our formula does certainly have an element of Nova Scotia content and homegrown talent. That’s part of that. Again, the switchover was largely about the investments and the expenditures that took place in Nova Scotia.
With respect to Alberta, what I have seen so far looks like a very interesting model. As time goes on, and we can sort of absorb what they’re doing and how it is impacting their industry, we would definitely consider that.
I can tell the member in absolute honesty that for me, every one of these discussions will be driven largely by Mike and Erika. If they see something - and I can guarantee I probably have a text about it already from Mike Volpe - if they feel that there’s something we can do, they have a general sense. I think of our first discussion, which was a great one, on the set of Mr. D about where we are in the general range of where we’re going to be in terms of expenditures for the most part. Again, they’re going to make suggestions and give ideas on how we change things and do things differently.
From my own perspective - I don’t want to speak entirely on behalf of the Cabinet, but I know that I’m going to advance the things that they suggest as being good ideas that are impactful things. Obviously we’ll do a jurisdictional scan and look at how Alberta’s industry reacts and how successful that’s going to be.
Look, there’s a direct correlation between investment and activity. There’s no doubt about that. I think that’s obvious for all of us. But if there are things we can do differently and better, and if it was about establishing a point system that would create more value and quite frankly create more activity here, then there would be no reason why we wouldn’t consider it. I really think that, like in many other aspects of governing, we have to let the industry advise us on what the best way forward is. I’m certainly going to do that with Screen Nova Scotia.
MS. LEBLANC: In the increased amount, the $23 million, is there any internal line in that number that reflects money for equity funding, equity leveraging or production development?
MR. MACLELLAN: No, there isn’t, but that is the ongoing conversation with Mike and Erika now. That’s one of the things that, when we spoke last, they’re framing up around that and seeing that as being a valuable addition to the current complement now. We’re talking about that internally to see what the mechanics would be of that and how we would identify the funding. That’s a perfect example of something that NSBI, now having some involvement with Screen Nova Scotia and the film fund, may be aware of.
I didn’t realize that it would be such an important injection to have that sort of floating fund. It seems like it would be productions at the ground level that would be developing the plan and such. You could educate me on that. That’s something that really seems to be at the forefront of Screen Nova Scotia’s efforts now. That’s an ongoing conversation.
MS. LEBLANC: In the performance measures in the NSBI business plan, specifically No. 3, there’s a target of a 15 per cent increase in the actual payroll generated by NSBI clients. I’m just wondering if that applies to the productions that receive awards from the Film and Television Production Incentive Fund.
MR. MACLELLAN: No it doesn’t. That’s connected to the Strategic Investment Fund, not particularly for this one.
MS. LEBLANC: I’m wondering if the department can provide any estimate of the economic spin-off effect of the Film and Television Production Incentive Fund for last fiscal year. Are you tracking those numbers right now? If you are, then what are the numbers from last year? What are the anticipated numbers for this year, based on this new money?
[4:15 p.m.]
MR. MACLELLAN: We have a general sense as to what that investment is generating. For last year, that $22.8 million was based on a projected Nova Scotia expenditure of just under $80 million. For the incentive fund since its inception, 58 applications, a commitment from the government over that period of $30 million and it has generated an eligible Nova Scotia expenditure of just under $104 million.
MS. LEBLANC: So the regulations around the Film and Television Production Incentive Fund state that the funding goes to productions of a Nova Scotia spend of more than $25,000. I’m wondering what happens to the productions that don’t meet that threshold right now?
MR. MACLELLAN: I guess to answer the question, we can’t really say what happens with any of the productions under that market because we haven’t seen any, we haven’t turned down any. Any productions that have applied have not been under that threshold. They have always applied and two of these sort of other funding options are obviously the Eastlink Fund and a new fund that is being developed by CCH that’s not in play yet but is existing at this point and years moving forward.
To answer the question, we haven’t seen any that are under that threshold so fortunately we haven’t turned anyone away that has applied.
Do you want to go back to Innovacorp?
MS. LEBLANC: I’ll have a question about Innovacorp later. Just to be clear, because my next question was, do you have a record of the number of applications that were made that did not meet the minimum, but basically people don’t apply if they don’t make the minimum. Okay, great.
Can you explain the rationale behind the 0.5 per cent application fee? I’m wondering how those fees are accounted for. Like how are they taken in as revenue? How are they categorized? Where do they show up in the plan of the budget?
MR. MACLELLAN: That percentage is used basically in a self-sufficient measure. We use those dollars that are allocated for that percentage to administer the fund, so it’s not a revenue source per se, it’s used to administer the fund. I guess the key piece is, and this is something that certainly the industry has stressed to us, this is one of the good parts, that the incentive fund returns and comes back, and is more responsive so it’s a quicker turnaround time than the tax credit.
Part of that is to have that percentage used to apply the resources to get things turned around much quicker than under the old fund.
MS. LEBLANC: So when the film tax credit was cut - I think I have this right in my mind - NSBI took on the funding of film but also other creative industries. I was involved in many consultations, I forget now who ran all those consultations. We were there with Music Nova Scotia, with the crafters. There may be people in this room who sat around the table because I remember it was very new for the people at NSBI to be working with artists. We were trying to explain how making art for export was a little bit different than perhaps other types of business.
My company was around the table because we were exporting, doing international touring and that kind of thing. By the end of all those consultations, which I was grateful for, but also when you are in the arts, budgets are small in general so it’s a lot of time and energy to consult in that way. We worked very hard at making that fund, which is now the Creative Industries Fund, make sense, really excited about it.
Then when I went to apply for it, I was told that it was kicked back to the Department of Communities, Culture and Heritage so I’m wondering about that decision. I’m wondering why it didn’t stay at NSBI because in fact it actually kind of made sense to me that it was there, in terms of export and export development and that kind of expertise that is at NSBI. Can you talk a little bit about that?
MR. MACLELLAN: Basically in a nutshell, the decision was made to transfer that particular fund to CCH, through the consultation, as Laurel has indicated on behalf of NSBI. You said yourself there really was a buildup, I think, of knowledge and understanding and appreciation for the entire industry, the new fund, how it was going to be applied and sort of who was going to administer it. The consultations certainly - the information and the expertise, the knowledge that was gained certainly wasn’t lost, but CCH showed to have - because NSBI had that sort of export focus, and you had said that was a good thing. I don’t know if that was shared collectively across the board with respect to the export. You could probably elaborate on that.
CCH wanted to administer that fund and play a role because of the creative industry’s tie-in. A lot of the information and the knowledge was transferred and NSBI worked closely with CCH to kind of make that transition a little smoother. Certainly the CCH folks are geared up and engaged to make sure this is as successful as possible. It was just a decision that was made and now that transition to make sure that the knowledge and understanding is there is really what’s key at this point.
MS. LEBLANC: Going back to the film fund for a second. As you mentioned earlier, the film tax credit was a labour credit, and the new incentive fund is an all-spend. I think there are benefits to both, but I do think there will be increased economic spin-off from a labour credit because it’s people that spend money - not lumber. Lumber doesn’t spend much money after work. So I’m wondering if you’ve been tracking that at all.
Number one, how much money has been spent on people with this new fund as opposed to other budget lines in film production? I guess that’s the main question.
MR. MACLELLAN: Just based on the rough breakdown it’s probably, according to the NSBI understanding and knowledge of this fund. It could roughly be considered as 50 per cent, the labour component. So the projected Nova Scotia expenditure of $80 million, you’d roughly be talking half of that.
What they don’t glean - and I know you didn’t mean to character assassinate lumber like that. Lumber is fantastic. (Laughter) The reality is that the goods and services connected and the people connected to those goods and services is a labour value as well. I know that you know that already, but to give the direct proportion it would probably be half direct labour and the other component of that would be the goods and services side.
[4:30 p.m.]
MS. LEBLANC: I understand that part. I just want to make the point that from a labour point of view, the fact that the tax credit, being a labour credit, benefits the province because it keeps people here. It keeps people employed, especially crew. There are crew that can work 365 days a year on film sets. My understanding is that the producers do enjoy an all-spend system, it doesn’t do anything for our homegrown acting talent - it does some, but it doesn’t give any incentive for hiring local actors. We have three universities, three post-secondary programs that are graduating professional actors in this province and most of them leave. It’s a shame because the film industry was one way of padding one’s income in between feeder gigs and that kind of thing. The fact that there’s not an emphasis on labour is, in my opinion, a real - well maybe tragedy is a little harsh - but it’s really unfortunate. I just wanted to get that on the record.
MR. MACLELLAN: If I can, and I’ll make this very brief. I want to say this for the record as well, when I went with Mike and Erika to the set of Mr. D and the impact of actually seeing a production - and I know that Mr. D is a whopper, this is relatively speaking but the staggering amount of people who are associated with the production of that was - and I’m sure it was their intention to have me feel that way and I felt that way overwhelmingly. I couldn’t believe, I mean it was at a local rink here in metro and I go in there at nine o’clock in the morning, the parking lot is packed, your technical people are outside with the trucks, lining up gear, cameras, speakers, sound. This is a hockey rink and it’s jammed so the walk from the entrance to the dressing room where Gerry Dee was shooting a particular scene, you are fighting your way through people - it’s actors and actresses and extras and sound people, the people surrounding the directors.
I know we’ve heard all the statistics through the course of this conversation with industry over the last couple of years but to actually see it for yourself, you can see the significant impact with respect to the labour piece.
MADAM CHAIRMAN: Did they offer you a part?
MR. MACLELLAN: No, they couldn’t fit in the accent, it didn’t work for Mr. D. So I do take that and that does make sense with respect to the labour piece but to see - there was a group of actors who were part of a hockey team and they just looked like hockey players but they were all actors who are part of local groups. When you see it for yourself, you really do understand the impact so the points you are making are certainly not lost on me, for sure.
Just to finish up, the member would probably know this or be aware of this, there is an additional incentive that’s geared towards home-grown talent so if you have 60 per cent of principal performers, there’s an additional percentage point that’s added to that. I’m not sure, member, if you may have been aware of that or not but that is an additional 1.5 percentage points for all eligible Nova Scotia costs granted to productions with no less than 60 per cent of all principal performers, actors, stunt performers and stunt actors are Nova Scotia residents.
MS. LEBLANC: Actually I think I did know that but that’s great.
I agree with you, we could have a whole conversation about this, how great our film industry is. It’s very exciting being on those sets. I just wanted to make the point that probably most of those people who were crowded into that hockey rink were non-union extras. Yes, it’s good, they’re making money but they’re making minimum wage. They’re not making the quality union fees that professional actors who do it for a living, professionally all the time, rely on. But anyway, thank you very much.
I agree, I was a script reader on the first season of Mr. D so I’d sit around and hash out the scripts with the actors, it was really fun.
I’m wondering about Innovacorp - here’s my Innovacorp question. It’s kind of a more philosophical question so you don’t need to get numbers out or anything. I appreciate the emphasis on young start-ups in this province, I think it’s really a good investment. I’m wondering how you define or how the department defines “innovative” and secondly, I’m wondering if there’s ever any thought to the idea of Innovacorp crossing out of the Department of Business and collaborating with projects in other departments?
Maybe this is already happening and I’m not that familiar with it, but for instance in CCH, I know CCH is talking about an innovation fund, which I think is great. It’s interesting to bounce around what innovative actually means in these cases, but I’m wondering if that ever happens or if that would be something that Innovacorp could ever entertain.
MR. MACLELLAN: I think that there are a number of examples that you could use inside of defining innovation and certainly how government can use innovation. I guess from a technical perspective for me and how we would define innovation is looking at new opportunities and creativity, either with a new product or an already existing product or service. That would be the technical definition.
I think innovation is really the overall nature and direction of our economy. I said this at the opening of the Momentum hub in Sydney and also said it during the opening of Volta Labs. Even our generation - I’m almost 40 - when we left high school and went to post-secondary school, education, training, the focal point was get an education so that you can get a job and you can make money and you can have a pension and a health plan and retire and be comfortable. That was sort of the goal for my generation and certainly those who came before me to a certain extent. Things have changed so drastically from that.
High school students and young adults who are going through PSE of any nature, many of them are thinking about how they become entrepreneurs. They find an idea, develop that idea, collaborate with other people, use these innovation hubs, these sandboxes, to develop their idea, and bring in some investment, whether it be Innovacorp or private sector. They’re looking at ways to employ themselves, to make profitability from their own ideas and their own business start-up and to put people to work for them working on that idea.
The other part of it we talked about in the previous line of questioning when we talked about high risk. Innovacorp is high risk to a certain extent, the investments they make. Innovation is high risk. You see a lot of the entrepreneurs - look at the Jevon MacDonalds of the world. They may fail often, and their failures bring about alternative ideas from the line of where they were going. They had a business model, a plan.
It didn’t work from a technology perspective or a practical market perspective, but they have gleaned components of that and put it into something else. Other people at their hub, their innovation site, would come in and say, look, if you didn’t do it this way but you did it that way, you could create a completely different opportunity.
For me, innovation is that kind of network, that ecosystem of people who are continuously working on different things and moving in directions. These entrepreneurs, the innovators of today who are found right down the road at Volta, for example, are always thinking, and they’re always trying to move on.
It isn’t about a paycheque and comfort and some assets in the bank. This becomes about the spirit of entrepreneurship and continuing to advance society and advance the products and services in whatever particular industry they’re interested in.
That’s certainly how I define innovation. You could Google a definition and come up with a number of different things, but for me, it’s the way of the new economy. I think that’s based on some of the foundation pieces we have as a province, our post-secondary education opportunities, some of the policy and government investments. That’s not tooting our horn, that’s just what’s in place in Nova Scotia across the board.
That has really been materializing for the last number of years. It predates our government, the opportunities that people have, some of the social programs, some of the access to technology. We’re positioned here to really take on a lot of the leadership roles of innovation and creating a new economy. That’s all good news.
With respect to government, it wouldn’t be Innovacorp’s role to look at a department and try to figure out where they can innovate, but I think that government innovation and how we utilize the new opportunities and new ideas coming from entrepreneurs, the private sector, and great thinkers is that you can look at a number of departments.
For me, under the Business portfolio combined with the Trade portfolio, the market for seafood globally is beyond any of our wildest dreams in terms of what’s out there for us through CETA, through NAFTA, through growing relationships with China. We’re exporting $1.8 billion in seafood, and ladies and gentlemen, that’s just the beginning. I don’t know if we have enough product to send to the markets that covet our particular seafood.
What’s interesting is when we talk about that, we always migrate to lobster or snow crab or ground fish, but it’s so many other things. Louisbourg Seafoods has spent $6 million on sea cucumber research, and the return on that is tenfold to that $6 million. That’s just getting out of the gate with the current markets, let alone the markets that are emerging. That’s the innovation piece where fisheries and export and trade tie into the private sector operators who are investing and who are researching. Of course with COVE, the Centre for Ocean Ventures and Entrepreneurship, we have to make smart investments and create an environment where they can continue to develop these things.
[4:45 p.m.]
Another opportunity in the ocean sector that just popped into my head is the idea of seaweed. Seaweed was just an annoyance for so many years, from the beginning of time, and now there’s literally hundreds of applications for seaweed, from lawn fertilizer to a number of different uses it can have, for preserving different applications. It is absolutely unlimited and we have companies popping up all over the province just looking at how they would take in and process and put value-add on seaweed.
We’re getting there with some of that stuff, that’s the innovative part of where government and the private sector sort of overlap. Again, with the seafood exports, if we have the ability to store and transfer our seafood products and get them to market live, then the value would be exponentially higher than it even is now. From that perspective there’s companies here in Nova Scotia that are looking at those opportunities, how we can create a containerized system that could get lobster, for example, live to China. If we were able to do that, we would capitalize and open up markets that we really didn’t predict existed.
The final sort of tie-in for me, and it’s not business connected but it’s certainly energy and we did discuss it, some of the members were here for this conversation. When we talk about renewable energies and how we’re going to move forward with creating a greener economy and lowering our impact and our fossil fuel footprint and reducing GHGs, it’s great to have renewable energies but the challenge now becomes - and wind is the best example - that we can’t store it. So you’ve got geniuses like Elon Musk, who really have focused a lot of Tesla’s R&D investment into battery storage, and their leading person, the Ph.D. who is sort of at the forefront of that technology is right here at Dalhousie. So how we contribute to Dalhousie research, the Dalhousie sandbox, and how we support Professor Jeffrey Dahn in doing that really could be a game-changing moment for us with respect to energy storage and with respect to the value of renewable energies of which we have an abundance.
Innovation comes in many forms and I guess using Innovacorp to create innovation in departments isn’t that much at the forefront but just departments thinking in an innovative way is really what’s key for all of us and a key driver, regardless of what department you are in. Obviously business is one part of innovation, energy is another, health care, the list goes on.
Being innovative as a province is really not only what we want to do to advance our economy and provide opportunity for our people but just in terms of attracting that investment, having an innovative approach and mindset and overall reputation really is a key to our future here in the province.
MS. LEBLANC: Thanks for that. I’m going to move on to some other questions. The budget for Business Relations and Innovation was underspent by roughly $1.6 million last year. However, this year the same budget line has increased by $14.5 million. Can you explain that increase? What does it reflect?
MR. MACLELLAN: Thank you, Madam Chairman, and I appreciate your patience on that one. With the underspend, basically these are line items that would normally be spent but just because of circumstances of the investment, they were not. I’ll go through the underspend first and then move to the change for this year.
The two areas of underspend were: Invest Nova Scotia underspent by $4.4 million. Rural High-Speed Internet was underspent by $3.5 million and the Innovation Ecosystem was underspent by $6.6 million. That would attribute to the underspending of that budget, that they underspent by $1.6 million and when you move up to the $12 million increase, obviously we’re putting a big amount in Rural High-Speed Internet so that’s $8.5 million.
The Innovation Rebate Program, is a five-year pilot project being conducted by NSBI, so that’s the NSBI Innovation Rebate Program and the Innovation Strategy is a link to developing innovation on the export side, so it’s connected to Volta Labs and there’s some other components of that but that’s predominantly innovation connected to our export endeavours.
MS. LEBLANC: Okay, to backtrack, in the areas of underspend you said how much was underspent on Rural High-Speed Internet? I just missed the amount that you said that was underspent on Rural High Speed Internet.
MR. MACLELLAN: The underspend, it was budgeted but not spent on projects, was $3.5 million.
MS. LEBLANC: On the rural high-speed?
MR. MACLELLAN: The rural high-speed, yes. Invest Nova Scotia was $4.4 million. We also have an overspend on the Innovation Ecosystem of $6.6 million, so that’s why it’s only $1.6 million as an underspend.
MS. LEBLANC: Just to be clear, so you underspent on Rural High-Speed but this year you’ve increased the budget to $8.5 million.
MR. MACLELLAN: So that’s an increase - a total budget is $14.5 million.
MS. LEBLANC: Can you explain why that didn’t go forward at that time?
MS. LEBLANC: So last year the number of full-time employees for Business Relations and Innovation was estimated at 13 but the department only funded 5.4 positions. Can you explain that? This year you estimate eight full-time employees for the budget line so can you just talk about that fluctuation.
MR. MACLELLAN: Basically, as I explained earlier in the session, the overall transition from the ERDT to Business, certainly there were a number of significant changes. A lot of the staff differential you see there, when we did the reorganization there was a reallocation of staff and sort of identifying different positions that would be required.
We clearly identified a number of vacancies and then we basically refilled those positions, based on the need for the current structure. So we had a number of vacancies identified, some were filled but because it was an internal reorganization in the Department of Business to the Department of Business, many vacancies were identified. Some were filled, some were repurposed and some just remained as vacancies.
MS. LEBLANC: Did anyone lose their job?
MR. MACLELLAN: No.
MADAM CHAIRMAN: Order. Time has elapsed for the NDP caucus.
We will now hand it over to the PC caucus for one hour.
MR. MACLELLAN: I was under the impression from the PC caucus that we were going to transition after two hours into Trade. Are you going to stay on Business? Is that the plan? Just because we have Trade folks here so should we transition out or just keep as is?
MADAM CHAIRMAN: The honourable member for Cape Breton-Richmond.
MS. ALANA PAON: Madam Chairman, I’m still on Business. I’ll let you know.
Minister, I have just a couple of questions again, and I’m sorry for going back and being so dry on this but these numbers absolutely fascinate me and the business plan.
I’m back into the documents, your actual budget. I’m on Page 12, underneath the Estimates for General Revenue. Under the Department of Business your estimate for 2016-17 is a little bit over $59 million. The actuals are much less. Then your estimates for 2017-18 go back up to $59 million. Can you explain why there’s such a huge discrepancy between your estimate and your actuals, for 2016-17? Where did that $59 million go, basically? Was it reallocated somewhere else?
The minister is asking what page - so Page 12, under Estimates in your budget document. It’s for General Revenue Fund. I’m assuming that you are anticipating $59 million in revenues from somewhere and didn’t actually get it but anticipating that you will get it again this year.
[5:00 p.m.]
MR. MACLELLAN: Thanks for allowing for that clarification. It’s the revenue that we will collect from the HRM, that’s recorded as revenue for the Convention Centre. So upon substantial completion they pay us that amount but because we haven’t reached that completion point yet, we haven’t received that as revenue, so obviously we anticipate that we will in this fiscal.
MS. PAON: Madam Chairman, I thank the minister for the clarification.
I’m going into the Public Accounts documents actually which is directly related to Estimates and Actuals for the Department of Business. I’m just taking a look here, and it’s not that I’m generally opposed to any kind of a grant towards child care - I want to make that an understanding - but I do notice that under your department there’s a $2.5 million contribution under Grants and Contributions that was given to Cape Breton University Campus Child Care. Could you explain what that grant was for?
MR. MACLELLAN: That actually is, I regrettably admit, just a typo. That has nothing to do with the child care centre at CBU. I’m sure they would be very excited to receive $2.5 million but that’s not the case, it was a general injection that was not connected to the child care spaces there.
MS. PAON: So if the minister can just clarify it, the $2.5 million never went to CBU? The $2.5 million was never spent, it never went to CBU - or just to make sure I’m clear on that. I’m clear that it didn’t go towards child care at CBU.
MR. MACLELLAN: They did receive it, it’s connected to our endeavours there with the Innovation Hub, so any of the innovation mandate work that’s being conducted at CBU, obviously there’s a number of different fronts by which they’re playing a role there, the sandbox being one of those. We do a number of different innovation-related initiatives there so the total amount is $2.5 million.
MS. PAON: May I ask the minister, that $2.5 million, I understand that it’s going towards innovation endeavours. Was that money through NSBI? Innovacorp? In general underneath the Department of Business? Where would that $2.5 million have come from? Which Crown Corporations?
MR. MACLELLAN: It was directly from the Department of Business.
MS. PAON: Could the minister clarify which grant program that would have been under from the Department of Business, if it was, in fact, a grant at all?
MR. MACLELLAN: It’s funded through Business Relations and Innovation.
MS. PAON: Thank you, minister. I am also going to ask a question and I believe I may already know the answer but I just wanted to again clarify. There seems to be approximately $75,000 worth, or thereabouts, that has gone to many municipalities in the province through the Department of Business. Can you clarify for me if that $75,000, or slightly less, went through to the RENs - the Regional Enterprise Networks? Or did it go to something else within municipalities? I noticed that some municipalities have received it and some have not.
MR. MACLELLAN: Those $75,000 injections went towards community Internet. So any municipal projects that would enhance connectivity would be part of that $75,000.
MS. PAON: If the minister could explain slightly - just digging in a little bit deeper here as I know some municipalities had applied for that grant and had not received it, could the minister clarify exactly what the parameters were for that? I understand it was for enhancing Internet but was that just enhancing a certain provider for Internet? Or was it just across the board? Could you just give me a little bit more of an extrapolation?
MR. MACLELLAN: The two main criteria that were applied to this particular envelope of funding was that the money be utilized towards direct connection for businesses or residents - so not infrastructure outside of something that would make that direct connection.
Secondly, the deliverable speed would have to be five megabytes per second or higher. There were a number of instances where some of the applications didn’t meet one or both of those criteria.
MS. PAON: I’m just going to go back for a moment to a question I posed to you earlier regarding the Estimates document. It was again within the Innovacorp business plan that the provincial funding for Innovacorp that was estimated at $9.6 million and then forecasted in the business plan for $10.5 million and then Public Accounts in 2016-17 funding was reported at $10.5 million.
I appreciate that you’ve given me a response on that earlier and I’ve just given it a bit more thought and I’m wondering if the minister would be willing to provide a schedule that would reconcile what was presented in Public Accounts, in comparison to the budget documents?
MR. MACLELLAN: Yes, we’d be happy to do that, member. We’ll get that information to you as soon as we can possibly pull it together, which will be very quick.
MS. PAON: If the minister will allow, I’m going to leave Business, finally. I’d like to ask you a question regarding your role as Minister of Trade. I can appreciate that you wear a lot of different hats here, you have quite a few portfolios. My hat is off to you for managing all of that.
I am struggling a little bit to find in the budget how budgetary items are actually attributed to your role as Minister of Trade.
MR. MACLELLAN: Just a clarification, so you’re going to come back to Business, though, but is it Tourism-specific, for the member? I can answer anything but I just wanted to know in terms of . . .
MADAM CHAIRMAN: Excuse me, are you closing out Business? We would have to have a resolution for you to close out Business and switch to Trade. Ms. Paon.
MS. PAON: Madam Chairman, I do have two other members here from the PC caucus who would like to ask questions regarding Business.
MADAM CHAIRMAN: Do you want to switch off to them?
MS. PAON: I will switch off to them at the moment.
MADAM CHAIRMAN: The honourable member for Sydney River-Mira- Louisbourg.
HON. ALFIE MACLEOD: Thank you, Madam Chairman. My question to the minister actually has to do with tourism. The question I’d like to share with you, minister, is about Synergy Louisbourg. I know you are aware of the project, it has been on the go now for a bit of time. Louisbourg itself as a community and as a destination for tourism is a hot item, as I love to say.
There have been some challenges getting the Synergy project off the ground. There has been a commitment by the municipality and there has been a commitment by the federal government in some aspects of it but there still seems to be some question as to what the position is of the provincial government when it comes to the Synergy Louisbourg project. I’m just wondering if you can give us an update as to what it is or, if you’re not sure, if you could provide one down the road.
MR. MACLELLAN: Thank you to the member for that question. Quite frankly, I know that Dorothy Payne and the team at Synergy Louisbourg have a number of interactions, conversations, with Marcel and the folks at CCH. I know that’s a live discussion.
Quite frankly, I’ve had several conversations with Dorothy. The member has been at some and some have been outside of other MLAs and just myself with some community stakeholders. The reality is that everything I see about Synergy Louisbourg it looks to be a very good project. I think that for the value of what it would be with respect to the capital cost, I think it would certainly add to Louisbourg, I have no doubt about that.
I can’t attest to the operational costs moving forward. I don’t have a specific feel or a comfort level, I guess, with how they would cover their operational costs but I think if the group is saying that they would be okay, then I’m sure they would be.
Quite frankly, member, and I’ll say this honestly, I’ve got so many pressing demands in Glace Bay and in Cape Breton, I tried to relay to Dorothy and the team that I can’t have the expectation of being the one for the province to carry it across the goal line, quite frankly. There’s so many requests that we’re having now, there’s a number of different projects that are lined up: the Bayplex, which will be a couple of million for sure; The Miners Museum will need another phase of work. Savoy Theatre is looking at a $6 million renovation to keep the doors open.
There’s another similar project in Louisbourg which has sort of come to our attention recently and I think that Synergy Louisbourg is a great project. I don’t necessarily think that it should be a “no” from the province but what I tried to express to the group was, I just don’t have the capacity to sort of champion that funding allocation because the money is tough to come by and there are things that really, from my own perspective, I’ve already committed to.
I talked to the local councillor, Amanda McDougall about this very thing a couple of times but the last conversation was Sunday, at an event at the Savoy, which you attended as well, and I told her the same thing. It isn’t that I don’t think the project is a good one. It’s just that there are so many requests that I have. I don’t want to build the expectation that I’m going to take the business plan and I’m going to move it along and it’s going to be a certain time frame before I get back to them. I just want them to know that fundamentally I don’t think there are any holes in the plan, but for Cape Breton there is a lot of investment that has to take place and I don’t want to build that expectation that I’m going to do it if I can’t commit to actually getting it done.
MR. MACLEOD: I guess what I would ask from you is if we could actually have the department’s stance on where this project is at. As you say, there have been a number of discussions with Marcel and others, and we do have the federal government on side as a funding partner. We have the municipality as a funding partner. I hear you list a number of projects that I think are important, but you are the Minister responsible for Tourism Nova Scotia and that goes right across the board, not just the three projects you named in Glace Bay.
[5:15 p.m.]
I am concerned as to where the project is and the fact that we don’t seem to have a definitive line from the department, from the staff that are working on it. From my perspective - and I’m sure you’ll correct me if you think I’m wrong - it seems like the goal line keeps moving. We were told, you need to get this, this and this, and when that’s put in place then it’s this, that and that.
I respect that you can only do so much, I really do respect that, but again, for the people that have put so much time and energy into this I would love to have some kind of definite defined position from the department, more so than what the minister can or cannot push through.
MR. MACLELLAN: From a department perspective - and this really doesn’t change the conversation that we’re having here - this would be more of a CCH request than it would be as Tourism. I’m connected to this, this is a conversation I’ve had many times. I don’t mind fielding it, but just technically speaking from Marcel McKeough and his team at CCH - I’ve had conversations with Marcel about it and I don’t think he’s in a different place than I am.
Again, no one has poked holes in the concept. I think it’s a great thing. Not only would it really attract people and lift the experience of people who are coming to Louisbourg to see the fortress and to get to the great community that Louisbourg is. I’d have to follow up with Marcel to see technically where the department is.
Let me say this on the record, honourable member - and I think that you would know this about me. It causes me great frustration - and this is one of a number of projects that we go down this road. Everybody says they’re committed, but they’re waiting for the other person. So the feds and the municipality have told Dorothy and the group many times that they’re all in with both feet - they’re just waiting on the province. Quite frankly, the discussions I have, they’re sort of waiting for us to back out so they’re not too sure about it - so this gives them an exit. So it has been very frustrating for me to have these discussions.
Dorothy has been fighting this one for a very long time. She has been great. So this is going back a year - probably every bit of it that she was here in the Legislature and had the conversation with us. I said at that time - if we were the third partner in, then I could advance it like we advanced all these other projects, but my problem was I couldn’t be the one to take it to the Treasury Board and the Cabinet Table.
So I would say if the feds and the municipality were already on board then we would be the third party in and I would advance that request. The municipality it seems with some of the land issues and some of the zoning and some other taxation maybe - whatever they’re being asked to do, it seems like they’re fulfilling that, and you could confirm that or not, but it seems like the mayor and council are going to do basically what has been asked of them.
I haven’t had any definitive idea from the federal government, from ACOA, that they’re directly in for sure. I haven’t talked to Tom Plumridge from ACOA about this so I don’t know exactly where they are, and I don’t know if any other federal players are there - Heritage Canada, Parks Canada - because of the great boost it would give to the Fortress of Louisbourg, quite frankly.
So it seems like there is a suggestion that we’re holding this up and I don’t want to be the person holding it up. If there’s a specific number on the table from the municipality and the federal government, then we would take that number and we could advance the request through the Department of Communities, Culture and Heritage and see what happens from there. But I’ve never seen an actual specific number from ACOA, and when I say that, their response is, “Well, we’re waiting for a number from the province so that we can fill in the blanks.” It’s no wonder Dorothy and her team and you and the community are frustrated.
Now, again, my concern - I know that you’re aware of the potential project that could happen in Louisbourg. There’s some talk about some commercialization of research on the fisheries side, and there are some other community aspects that may tie into a different facility there. I also don’t want to give the impression of “Hey, look, Synergy was on our radar but now we’re moving the money to the other one.” That just creates a division in the community that nobody needs.
From my perspective, I have no issue whatsoever with talking to CCH. I just don’t want to raise expectations here - for you or for Dorothy and the team - that I’m going to be the one who’s going to carry this. There are some big ones in Glace Bay, but there are others across industrial Cape Breton as well. We’ve had some luck. The second berth was a good one, and we’ve made some investments in the Cabot Trail. Again, you were supportive of all of those.
For me, giving some kind of economic boost to our downtown core in Sydney - conversations around moving the NSCC, partnering with a new library down there and having that as the central hub of economic activity - that’s a priority for us. It’s not going to be a cheap one. With all these conversations taking place, again, I don’t want to be the one to commit to Synergy Louisbourg and have their expectations not met. I’d rather be up front about it. I’ve tried to be up front about it with Dorothy and her team.
Again, I’m happy to have the discussion. If ACOA is going to come back with a specific number and they’ve got a guaranteed targeted number that they want from the province, then the conversation can continue. I just don’t want to tell you that I’m going to go back through and look at it again, and then six weeks from now you and Dorothy and the others are going to say, “Well, the minister promised us at Estimates that he was going to take a look.” I don’t want to build up that anticipation and then fail that group.
That’s where I’m at, but I’m happy to advance it and have that conversation with CCH.
MR. MACLEOD: Thank you, Madam Chairman. I want to thank the minister for his frankness. I think that’s part of what’s been missing in this whole conversation all along, is people understanding exactly where they sit and where they stand.
Some of the projects you listed are quite important to moving the economy of Cape Breton forward. I would just make a point of clarification: the Synergy project is not just about the fortress. It’s about trying to get that community reactivated. It’s a community that has been dying on the vine for quite a while. Coming from Glace Bay, you would understand how that impacts the area.
I do appreciate your frankness. The only thing I would ask, minister, is if you could indeed try your best to get an idea of where we are and what the best steps might be for Synergy Louisbourg to take as they try to move the project forward. I don’t want you to make commitments you can’t keep, and I know you don’t want to, in my experiences with you. But I do want to try and get to a move-forward place, or if there’s not a move-forward place, I think the committee needs to know that too. There’s a lot of time and energy and volunteer hours that have been put into this project, as you know. You’ve been very good - in my mind, anyway - at coming to the meetings and doing what you can. But I think it’s time. I think we owe it to the committee to find out if this is the end of it. If not, great. Your idea about trying to find a definitive number from the federal government is understood. Message taken. But that would be my request of you.
Again, I certainly do appreciate the frankness, because I think that’s something that’s been missing in the conversation for a while.
MR. MACLELLAN: Obviously, this is all on the record, but for you, you can obviously take this conversation, these remarks from both of us, back to the committee and to the federal representatives there. Once and for all, they are now very - as you say, no one knew where the others were positioned, so now they can at least know where - I don’t want to say “the province,” but at least from my perspective, this is where it is.
If the federal representatives, the ACOA funders, have a specific number in mind, at least get that to us so then we know that if there’s a shortfall, if we were identifying a shortfall of X number of dollars that’s one thing and then the committee could figure out whether or not it’s worth the effort to make that up. But they can’t get a number because the chicken is saying the egg has to tell us and the egg is saying the opposite. So we’ve got to find out if there’s one remaining funding partner that has not come to the table, then what does that number look like and then we can have that discussion from there.
MR. MACLEOD: I guess what I would say to you, minister, is I think we will develop the package that needs to go back to the community together, in conjunction, so that indeed the message is consistent and, at the same time, the message that the community needs to hear. It’s more important than anything else that the message is clear and concise and that we can deliver as a team - even if you are sitting on the wrong team.
I think you know where I’m coming from, minister, and it’s that important that people get the right message from the right places, sooner than later.
MR. MACLELLAN: Fair enough.
MR. MACLEOD: Thank you for that and thank you, Madam Chairman, I’ll now turn it over to my colleague for Cumberland North.
MADAM CHAIRMAN: The honourable member for Cumberland North.
MS. ELIZABETH SMITH-MCCROSSIN: I’ll try to make it quick because I know we have a couple of other members who want to speak. A couple of comments specific to my area, Cumberland North. We didn’t follow the traditional REN model and I’m wondering if you feel that is an effective mechanism throughout the province. I do believe - and I’m not just trying to pat your back - but I do believe your Department of Business is probably one of the most important when we’re looking at driving our economy and growing Nova Scotia. Do you think the REN model has worked?
I’m not sure if you are aware of our model in Cumberland, we developed the Cumberland Business Connector which was developed by about 10 local business owners. We got municipal funding for our own CEO, so I’m just curious about your comments about the REN model.
MR. MACLELLAN: Thanks for the question. From a technical perspective, the RENs don’t fall under Business, they’re under Municipal Affairs but that’s okay. Having said that, I will have general comments because your question is timely. I had some level of discussion with the Minister of Municipal Affairs as to whether it belongs under MA or under the Department of Business. I think the answer to that probably depends on where you live. I know the model in Cumberland North is different than the model that’s in Cape Breton. So the model in Cape Breton that existed has experienced a number of ebbs and flows and it has changed. The funding partners have changed, the decision-makers have changed and there has been a whole host of sort of variations of that.
I think the REN model overall and technically is a good one. I think there isn’t enough consistency on exactly what they’re trying to accomplish and I think with absolute honesty and appreciation of what’s happening in Cumberland North, I’m sure it’s much different than what’s happening in Cape Breton. I can’t speak to what’s happening on the South Shore and Yarmouth way.
I think there has to be a bit of consistency. What the conversation entailed with the Minister of Municipal Affairs was, are we going to put more of a business lens on it? If you are a regional economic enterprise network tasked to build business, find opportunities, then what really is the affinity with Municipal Affairs, other than the governance piece of funding a municipality? I don’t know if that makes a whole lot of sense.
The conversation we had with Municipal Affairs officials was, why don’t we try to figure out what this model should look like, in terms of the governance and in terms of the mandate. I think that when you look at - and yours is a prime example of how the Cumberland model intertwines with Colchester and how the Digby region works with the Annapolis region - they’re very distinct and different, 20 kilometres apart. In that 20 kilometre range there’s got to be affinities that businesses and NGOs would benefit from that they may be getting in this REN but not this REN.
[5:30 p.m.]
The whole system, I think, is out of order. It isn’t the people involved, though, at least from my perspective. Again, I don’t know the Cumberland North officials, but I can tell you the Cape Breton folks are great. They’re experienced in economic development, and they’re dedicated.
I just don’t think we’re doing them justice in terms of what their mandate is. I think that they’re trying, and they’re doing their best to participate in economic development and job creation. But what is their role? Is their role to look at the environment of economic development, taxation, property, doing some of that business navigation? Or is it to go out and be external and source new businesses that would be a fit for the core competencies of Cumberland?
I think that’s the missing piece, and if we’re going to do the RENs justice and, quite frankly, continue to do the investments, I think we have to give them a clearer mandate. That’s probably the biggest issue.
MS. SMITH-MCCROSSIN: I would be happy to show you our model in Cumberland. It was actually developed by our business leaders. I just assumed it was under the Department of Business.
Moving on, I realize that sometimes NSBI can be under the microscope as well as Innovacorp. But I do have to ask this question. I look at the budget line, and I see $55 million for NSBI. One of the biggest pieces of feedback I get from our business leaders in Cumberland is, is that a good investment? I’m wondering, are there any financials available that actually show real return on investment? For example, can we show that there has been an increase in economic development specifically because of NSBI and Innovacorp? Are we seeing an increase in our corporate tax revenues? Are there any real financials available showing ROI?
MS. SMITH-MCCROSSIN: Minister, I don’t mind if you wanted to share that information with me at a future date, if it’s not available easily.
MR. MACLELLAN: Thanks for your patience on that. I just wanted to get some of the numbers that fall under that $55 million. Obviously the Film and Television Production Incentive Fund is $22.8 million of that and the payroll rebates are $15 million, so that’s certainly a big portion and obviously there’s a number of smaller line items with respect to that.
What we’re going to do is get some detail for the honourable member on some of the specifics of the breakdown. The payroll rebates have been around for a long time and they are a success in the sense that you are getting something back in return, so the return on those are good. There’s no sort of lost funding on payroll rebate - when you spend it, you get it back.
The big one certainly hits many facets of your area, that would be the export side. Just one statistic here, NSBI has had a 40 per cent increase in client-reported export sales from ICTC, food and agri-food, and ocean sectors. So they are the ones, as we discussed at length here, with our conversations today through Estimates, on the export growth side.
When you look at some of the major components of what’s going to be our core competencies, as an economy here in Nova Scotia, export is huge, from fisheries, obviously the agri-food side, textiles, Michelin which has no longer received any government money but certainly that was part of the incentive to get them here and we’d be in trouble without their operations and the number of people that they employ.
Really the export development piece is a big one outside, of course, the film fund and the payroll rebates but we do have a number of the specific stats and sort of the breakdowns so we’ll certainly get those for you in the next day.
MS. SMITH-MCCROSSIN: I don’t know if you are familiar with Maritime Pride Eggs, minister. It’s a very successful business in Cumberland. They are part of a much larger corporation that has recently opened an egg hatchery and a chicken farm. One of the things they’ve expressed to me is the concern that there are no longer loans available through the government. When they first set up they accessed a government business loan and actually not only paid it off in full but actually paid it off early.
As they were growing their enterprise in Cumberland, they went to access a similar program and were told that there’s no such thing available any more. I’m just wondering if the government, if your department would consider expanding and making those available again, knowing that they are helpful for some businesses that are looking for large capital?
MR. MACLELLAN: Mr. Chairman, I guess first and foremost - and part of the challenge, and it’s unfortunate, and your example is one of many where there have been companies that have accessed these loan programs and grant programs and they have made them work and have never looked back. Some were repeat customers, in terms of the loans they would take and they would pay them on the obvious required amount of interest points that they would have, and they would repay in full. Obviously that would build up their credibility and their access the next time they would do it and it would be great.
At the same time, we’ve had staggering losses of tax dollars through these same programs. We always labelled it as picking winners and losers and the challenge is that there was so much hemorrhaging of dollars in the last decade, prior to 2013, with those choices.
However, having said that, there are a number of options. I’m not sure if the Farm Loan Board was an option for your constituent. There is the Credit Union loan program, so there are a few different things and there are some innovation rebates.
If we can maybe follow up, we can get the contact for your operation there in your homeland and we’ll do the direct contact and just see what’s out there. Obviously it sounds like a pretty valuable operation for the region, so if we can help we certainly will, so maybe we’ll follow up with some contacts.
MS. SMITH-MCCROSSIN: Thank you. They’ve actually gone ahead without - they’re part of a group, WESCO. I don’t know if you’ve heard of that, it’s a pretty large corporation. The chicken hatchery was a $9.5 million investment and it’s already built and up and running. That was just one of the comments, he was disappointed that that wasn’t available any longer.
I’ll ask one last, quick question and then leave it to my colleague. This is more specific to tourism. I know this was a hot potato a couple of years ago but the Visitor Information Centre at our border, which we’re so proud of - and I realize that’s to do with Tourism Nova Scotia - I’m just curious what the future plans are. It’s very important to our area.
I noticed that you underspent your marketing budget by around $1.5 million. I just wanted to let you know that we’d love to use that money in Cumberland to promote our area. I wanted to just make sure your department knew how important the Visitor Information Centre is to the entrance to our province and wanted to know if we could get a commitment that it is planning on staying.
MR. MACLELLAN: Thank you for that. The idea of the VICs was certainly a hot topic and this predates my time at the Department of Business and, sort of, the direct affiliation with tourism, but we heard it loud and clear. I think that in terms of volume, I can’t imagine that the VIC in your constituency, your region, is not the most frequented - obviously the one on the Halifax waterfront would be as well - but in terms of traffic coming in and out of the province.
The one at the mouth of the Canso Causeway, for us, was a big one. The day that that information was released, our tourism operators and stakeholders were contacting me consistently.
In a nutshell, I’ll answer it in this way; when you look at the changing avenues by which we market and the way people reach out - I mean obviously it’s a foregone conclusion that people use websites and social media and their phones to do a lot of the stuff that the VICs used to do, so that’s the reality of it. So when you see the drop in visits and hits to these sites, that creates the conversation about, you know, do we need them? To what extent do we need them?
It is a significant outlay of the Tourism Nova Scotia budget, so from their perspective - again, take away the politics and the human impact of these - from a management and operational perspective, Tourism Nova Scotia sees that there could be probably more efficient ways to spend those dollars, in some instances, and again, not all. But quite frankly, I don’t think we can ever advance on these until we have a sound transition plan.
[5:45 p.m.]
I can tell you there’s no specific plan to eliminate them at this point. The conversation - and again this could be something that you could provide me and our department with insight on - is there a private sector model that would work just as well? Is there a profitability to be made at these? Again, you would have to look at individual sites.
I can’t imagine that you couldn’t do something different with Halifax. I mean the Cape Breton one is perfectly positioned but in no better position than yours. So I think that if there is a private model to take it away from government operation, we would look at that. That’s still an ongoing conversation. That’s one that Tourism Nova Scotia wants us to have but, quite frankly, as we heard loud and clear when these deliberations were taking place, the communities that they exist in, and the local stakeholders and tourism operators have no time for even the consideration that they would be removed. It’s not on our radar at this point that we would do that.
We’ll continue to have the discussions but we’re not going to pull out the carpet on any of them, in particular the one that you represent.
MS. SMITH-MCCROSSIN: Thank you very much.
MR. CHAIRMAN: Mr. Houston, with about 12 minutes remaining.
MR. TIM HOUSTON: Thank you, minister. Just a couple of questions on the Yarmouth ferry - I’m just kidding. Just a couple of questions, first on rural Internet service. Does the department have a definition for what adequate high-speed Internet means? Maybe they can give us a number, in terms of upload and download speeds. What would the department define as adequate, high-speed Internet?
MR. MACLELLAN: As the member would probably know, and he would field these calls in his constituency as well, the initial standard from CRTC was five megabytes per second. They’ve just recently released new standards, that’s 50 megabytes per second as a download and 10 per second as an upload. They are the standards set by CRTC so on a broad scale, that’s what we’re going to aspire to achieve.
MR. HOUSTON: Okay, I appreciate that. How many Nova Scotians do not have adequate high-speed Internet by those standards? Does the department have a sense of how many Nova Scotians do not have adequate high-speed Internet? You may want to stay up here. (Laughter) Get her a chair.
MR. MACLELLAN: Thanks for the question, honourable member. At the antiquated level of expectation of five megabytes, there were about 40,000. Now at the current CRTC anticipated or target level it’s abut 75,000.
I just want to, real quick to the member, I know he would sort of appreciate these numbers, so they are the actual numbers and they are published by the CRTC. Just to give a sense as to sort of what the challenge is, roughly speaking, our issue, our shortfall to get to the current standards is in probably the $300 to $400 million range, as a province. So the federal government’s program is about $0.5 billion over a number of years, I don’t know if it’s five, maybe 10, so do the math on $0.5 billion over 10 years to Nova Scotia, if you break it down per capita.
If you’re looking at - let’s take the lowest number, $300 million, as a province is our shortfall, we’ll get a couple of million per year from the feds. We’ve committed in this budget $14.5 million, so with a big investment and, as I mentioned in Question Period earlier today, I spoke to Minister Bains about this very issue and we’re among the highest provinces sort of committing to broadband and increasing our Internet access and speeds.
Again, looking at the numbers, $14.5 million, it’s going to take a long time. So having that sort of middle mile technology advance and coupling in with the last mile, the focus of our work is going to be on fibre op and then we’re going to back up as much as we can with the satellite options and the wireless options. That’s kind of the plan right now.
I think that while $14.5 million is a good investment, we’re going to have to keep it at that rate and certainly increase. I anticipate that you’ll see an increased demand on the federal government to up that pot because again, any investment is helpful but if you see that using the old standard we’ve got 40,000 people, using the new standard we’ve got 75,000. We’ve got to figure out a better way to collectively close that gap.
The municipalities are doing tremendous work, spending what they can but they are so cash-strapped there’s not much they can do. They’ll do a little bit on the Internet side, some of the hard wiring work but when it comes to broadband, they’re not going to be able to put much of a dent in it either. It’s going to be a big project and a big expenditure over the next couple of years.
MR. HOUSTON: As people are added, I guess, to the grid, for lack of a better expression, they’re being added at speeds that are much higher than the CRTC standard - is that a fair assessment?
MR. MACLELLAN: Obviously it will depend on the technology of the area. If they are hard-wired then certainly they’re well above even the CRTC’s current standard and level. If it’s fixed wireless, then they probably wouldn’t be, for the most part. However, obviously with the technologies improving and advancing, there will be some instances where that will increase in a hurry and it’ll get up to that standard.
MR. HOUSTON: Is there a plan to - if we talk about the 75,000 Nova Scotians, we probably pretty much know geographically where they’re at, is there a master plan that’s being worked along? Basically if I’m blunt, are we adding communities for political reasons or do we have a plan as to how we’re adding communities?
MR. MACLELLAN: First and foremost, I want to assure the member that it’s definitely not driven by politics. I know for sure because in my own neck of the woods, Seaside did a tremendous amount of work and made a huge investment in their portion of the development of broadband and connecting people. Other than a few pockets on the Island in particular, we’re in pretty good shape.
I didn’t realize that Pictou County and down in the Annapolis Valley region are among the worst. When you look at the regional breakdown, there are certainly massive gaps that cover pretty wide swaths of the regions. Brightstar is doing the work now, and I know that there has been some frustration because it has taken a little bit longer.
Basically the first questions that we put to them in terms of their report were where are these gaps, what the worst places are, and what investment is required to do some of that middle mile connection, going from the places where it’s solid and stable and getting out into these rural areas. Secondly, once we get into the rural areas, what’s the best approach and where’s the best spend to actually connect the homes? We’re going to identify that.
I would absolutely assure you and your Party and the Opposition and all Nova Scotians that there’s no room for politics because if you did, it would be so glaringly obvious that there’s no way you would be able to do it. This is about connecting people. The politics of growing an economy like in Pictou, the Valley, and the South Shore is valuable everywhere.
The fact is that broadband adds a dimension not only for personal entertainment. We have heard stories today about safety and the fact that in rural areas in Cape Breton, there’s no service at all. These things are problematic. It’s safety first. Then you get into those aspects of personal sort of use, then of course economic development. You can’t have a remote economy that’s operating from Internet technology and broadband if you don’t have the services.
MR. CHAIRMAN: Order, please. The time has elapsed for the PC caucus. We’ll now move over to the NDP. Ms. Chender, please.
MS. CLAUDIA CHENDER: I think I will just continue on Internet and broadband since we’re there - it’s musical chairs - and then we can shift. Just to follow up on that question, my understanding just to backtrack, and I’m sorry if I’m repeating here, is that the government has committed $14.5 million a year over the next four years. Is that correct?
MR. MACLELLAN: We will look at it year over year. One thing I can assure the honourable member is that it will never go below $14.5 million. We made that commitment at the very least. But as fiscal health is stabilized, I think that any dollars we can glean and add to this broadband conversation, we will. There’s no way we’re going to experience a drop in the investment that we make in the idea of broadband and connecting Nova Scotians. The more help we can get from the federal government to leverage even more of that, we will. The commitment is a minimum of $14 million for this year and out years. The more we can put in, the better.
MS. CHENDER: I understand, especially given the makeup around this table and the issue as a whole that rural communities are of paramount importance in this conversation. However, they’re not the only folks. I guess my question is, is this investment reserved solely for rural communities, or are there other ways that it might be used?
[6:00 p.m.]
MR. MACLELLAN: No, not at all. I mean, obviously that is the focal point for a lot of the public discussion, but the purpose of the Brightstar report is exactly to tell us this. I know it gets frustrating, because you get mired down in “well, we’re waiting on a consultant’s report,” but we’re asking Brightstar to do this independent dive into the issue and tell us where the money is best spent, where the focal points are.
To your point, when you talk about broadband and the idea of lack of connectivity, or lack of megabyte-per-second access to a reasonable amount, everyone assumes - people never think of metro. They never think of the downtown core, and they certainly don’t think that there would be any gaps in the service between here and Truro.
The reality is that this isn’t just a rural problem. Again, across the board, rural communities are hit very hard by this shortfall, but Brightstar is looking everywhere. If it’s a metro issue, they’re going to prioritize that as well.
MS. CHENDER: Just a little bit of context for my next question: we’re seeing more and more consultation, such as it is - and education, frankly - happening mostly or exclusively online. That exacerbates this issue somewhat, particularly for marginalized folks, and also for people in rural areas. But I would argue that there is a socioeconomic component. Some folks have the ability, or know where to seek out Internet access, or have a friend, and others don’t.
To that end, our caucus has heard from folks around the lack of Internet access in public housing. I’m wondering whether you know if that is something that is contemplated by this report, or something that has been considered in the plans?
MR. MACLELLAN: No, it hasn’t been. The focal points for Brightstar - so therefore, our department - have been about the infrastructure itself.
Connected to the cost - and I think this becomes part of the discussion and how we apply the investments moving forward - the hard-wiring, the fibre-op options and what we’re doing with the bigger players in this game, are clearly more expensive in terms of the infrastructure than satellite options. I think that as these technologies emerge - I mean, what has happened over the conversation in the last couple of years, with respect to these wireless options and the use of towers, really changes the conversation.
You could talk to one of your big players that are doing the hard-wiring, and they’ll say that the price is going to be this for so long, but then you talk to some of these satellite companies that are using that wireless technology and they’re saying, we can do it for half the cost. Like everything else, what you spend in the infrastructure buildup has to be recovered through the payer, the customer. I think even that conversation will evolve, and I think the technology is going to change so that maybe there will be options through the satellite providers, if it isn’t the fibre-op, that may be more cost-effective for some people.
Again, to answer your question, there’s no socioeconomic focus on this. This has all been about what infrastructure we need to service areas.
MS. CHENDER: Thank you, Madam Chairman. Through you to the minister, I’ll turn now to a couple of general budget questions.
The first is about Waterfront Development. Again, I apologize if this has been asked. I see that the Waterfront Development corporation’s budget has been significantly increased this year. We’ve heard a lot of talk about that. It looks like $18.6 million. I’m wondering if you can provide some explanation for this, and in particular, whether you can speak to how much or if the extra money that we know has gone to the Queen’s Marque project is captured in this increase.
MR. MACLELLAN: Thank you for your patience. That amount, the additional funding on their waterfront development works out as such: COVE - the Centre for Ocean Ventures and Entrepreneurship - they are familiar in your neck of the woods, is $10.4 million. There’s a project at the Cunard space which is down on our side of the waterfront, over here, that’s $1 million which is going to be a mixed-use development. The total project looks to be in the range of about $85 million for that so our contribution is $1 million. Queens Marque is pegged at $7.7 million, which I’m sure you are aware of but that’s a $200 million mixed-use development as well. That will include 75,000 square feet of public space that will be managed by Waterfront Development, so that’s kind of the tie-in there.
MS. CHENDER: Thank you to the minister. Moving on with the budget, last year there was $317,000 spent on corporate policy, even though there had been no money budgeted originally and this year there is $657,000 budgeted for corporate policy. I’m wondering if you could explain those numbers.
MR. MACLELLAN: We had this question earlier so I’m going to try to make some notes and keep it consistent so I say the same things twice. Basically what this is, when the Department of Business was created from the former ERDT there were a number of different functions and it certainly changed in many ways. For all intents and purposes the Department of Business largely became a policy shop.
We pulled in positions, FTEs from other aspects and other branches of the Department of Business to create this policy shop. The big policy pieces are the very extensive Cabinet submissions that we have. The work that’s done for the Cabinet submissions on policy are part of that. Of course, the strategic planning for the department is under that policy shop. On the corporate management side, things like occupational health and safety, records information, and records management fall under the corporate management piece as well.
This wasn’t new money. It was positions that were sort of pulled from other aspects of the Department of Business to create it. We really needed some measure of policy framework. That’s why it didn’t exist in the budget before, and it turns into this number as part of the new budget.
MS. CHENDER: This is probably self-explanatory, but my next question was about the increase in FTEs in the department. I’m assuming based on that answer that that might be connected to that. It went from three in the 2016-17 budget to a forecast of 4.1, and now we have 5. If it is that, great. If not, could you just let me know why that climbing number of FTEs at senior management?
MR. MACLELLAN: Yes, that’s exactly what it is. It was just realignment. There were some additions of FTEs, but there was a lot of realignment as well in terms of supporting the Crown Corporations and making sure that we had the policy pieces that supported their mandates to have the right people in place and make sure that we are conducting that work efficiently and adding to their operations. So yes, it’s just basically a reorganization of some key FTEs.
MS. CHENDER: Moving on to small business, I’m curious if the minister can tell me how many businesses will benefit from the decision to increase the small business threshold to $0.5 million.
MR. MACLELLAN: The number is 1,800.
MS. CHENDER: Are there common characteristics of businesses that have that active business income between $350,000 and $500,000? Or are we sort of changing scope entirely? Can you tell us anything about what those businesses look like, who they are?
MR. MACLELLAN: I will follow up for confirmation, but it’s just across the board. Basically, that number is just their income threshold, so they would be able to keep that additional $150,000 at that 3 per cent tax rate. In all the discussions about the taxation piece, I have never had any specifics about industries or sectors or regions or anything like that. I think it’s just any business that meets that reported income that’s above $350,000 that would then get into this tax reduction.
MS. CHENDER: For clarification, I think what I’m pointing to is that presumably more businesses will now fall into this basket. I’m just curious if you have any sense just qualitatively if those are different in scale, if we’re capturing a new level of businesses or not. I appreciate if you can’t speak to that.
That is sort of pointing to my real question, which is, why this change in particular? What are the merits of this threshold aside from, it’s good for business, and they keep more money in their pocket? Is there anything beyond that?
MR. MACLELLAN: The answer to that is the pretty standard economics. It’s the fact that if we can allow these small and medium enterprises to keep more money, they will reinvest, and they will hire more people. There was a great discussion on the PC Opposition bill last night about small businesses and the impact. It was actually the Leader of the Opposition who alluded to the fact that 70 per cent of Nova Scotians are employed by small businesses that would fit into this category. In general terms, this is about putting more money back into these businesses. They do what they think is best with it, whether that be equipment or investing in technology or hiring more people - which is obviously a goal for us - however they see fit. They know their business operations, and they’ll know how to spend it. It’s getting money back in their pockets to hopefully reinvest and keep the economy rolling.
[6:15 p.m.]
MS. CHENDER: That’s really helpful. I think what I was pointing to - and there may not be anything to say about this - is just, were other initiatives considered that might achieve the same impact? And where this one was chosen - were other things considered, or was this always the goal, that we knew this was the most efficient way to maximize the income and investment capacity?
MR. MACLELLAN: No, I think it’s one of those sort of walking backward when you’re looking at the fiscal framework of the province. You identify that there’s a particular pocket of money and there’s an envelope and an investment that you want to make. Then it becomes about talking to the financial analysts and the people who know this best, who say, okay, so if we’ve got $14 million to spend on small businesses, what’s the best hit? What’s the best way - is it the tax rate? Is it equipment? Is it an innovation fund? Is it somehow getting the money directly to them? Is it some kind of rebate?
At this point, it certainly isn’t politicians who should decide those things. It’s the people who have a real sense for the financials and how this would have the best impact. So we turned it over to the experts to tell us what the best investment would be, and this is where we landed.
MS. CHENDER: Thank you, Madam Chairman. Through you to the minister: so all these smart people told you, which is a good answer.
Moving on to the Department of Business, the department is said to lead and align all government efforts toward business and social enterprise growth in Nova Scotia. That is laudable. But we also know, from the voluminous documentation we have and all these good folks in the room, that we have five agencies - Innovacorp, NSBI, Tourism Nova Scotia, Events East, and Waterfront Development - operating under the department, as well as Invest Nova Scotia as an independent board.
I’m wondering how that leadership and alignment happens at the top of this chain, and why this bureaucratic makeup makes sense.
MR. MACLELLAN: If I could - and again, I’m just going to freestyle here on the way that I see it. Just to qualify it, this isn’t a political kind of answer. I’m not talking about Parties and previous governments - or I am talking about every previous government to this point.
In absolute fairness, I believe that our current government made some good decisions on changing the direction, but I think that over time and what transpired in the province with respect to investments and winners and losers, all Parties and all governments in the last 20 years have, to a certain extent, gotten it wrong. I think this change was largely overdue. Having what was referred to as a slush fund - and again, all three Parties had this IEF fund, and the ability to have the Jobs Fund that would just say, okay, we’ve got $25 million. How are we going to spend it this year? Pick a company in this region versus that region, cut them a cheque, and hopefully it works out.
From my perspective, that’s not the way to do it. I fully support, to your earlier question about the fact that we’ve largely become a policy shop - that’s what we do on the policy front, so these questions on taxation and small businesses, leaning in on youth employment and what the best mechanism for that is - quite frankly, the five Crown Corporations that we oversee - we have to trust their ability, trust their experience, trust their intelligence. I would say this in any avenue: our relationship with them has been extremely strong. We need them to perform, because if there’s a big issue, a mistake, a scandal, or a controversy, it isn’t those people answering the questions. It’s me. It’s our government.
So for us, first of all, we’ve got to make good decisions on who’s responsible and who’s in charge - following hiring practices and the proper procedures for putting people in place, of course. But when they get there, there’s a level of oversight and a level of interest that has to take place at the department level. It’s great to trust Waterfront, Innovacorp, and NSBI, but they have to have feedback. They have to have direction, and they have to have a relationship with us as a provincial department.
The structure in place now, there is a level of arm’s length and independence with accountability back to government. I think that is the best structure. The reality is some of the changes, and I would think of NSBI as probably the best example although I think all five of the Crown Corporations fit into this - we’re still in a place of transition, the way NSBI used to do business versus the way it works now.
Again, I think you can go down Waterfront, Tourism, and Innovacorp. They all experience the fact that it’s a new direction. That has been taking place over the last couple of years, I think, with the change from ERDT and the way the funding worked there to the policy shop that is the Department of Business now. There is a sort of growing period. I think that over the course of time - and again, this will transcend who is in government and what the mandate is. I think it will be well established that the Crown Corporations do what they do with oversight and with some direction from government, of course.
At the end of the day, we need smart, experienced, dedicated people to be at the helm in particularly these Crown Corporations. Quite honestly, I feel like we have those people in place now. I trust them, and they have to trust us to craft policy, both as a department and overall as a government.
Undoubtedly, politics does come into that sometimes. It becomes about the external messaging and the image and perception you provide to Nova Scotians. But at the end of the day, I like the structure as it is now. I think that you give Crown Corporations freedom, but you have to pay attention to what’s happening there, and you have to give them sound advice and sound support as they try to fulfill their own mandates.
MS. CHENDER: I’m going to share the remainder of my time with my colleague the member for Dartmouth North.
MADAM CHAIRMAN: Ms. Leblanc.
MS. SUSAN LEBLANC: Just finishing on what the member for Dartmouth South was saying, how do you measure the performance of your department and the agencies under your umbrella?
MR. MACLELLAN: There is a formal mechanism. Each of the Crown Corporations has a clearly established and published business plan. That’s for public consumption. They have outcome agreements signed with the Department of Business that are in place. The department, working with the provincial government, the Cabinet, and Treasury Board, establishes the mandate for each of these respective Crown Corporations. Then they fulfill those. There’s a number of deliverables.
Again, they have a business plan. They have a mandate, each of the Crown Corporations. They do have areas that they’re responsible for. Again, I think there is a formal relationship with respect to how they deliver on that mandate and fulfill what we expect from them.
But look, I think that the more practical answer is the everyday application of their work. Your colleague mentioned a project, the Queen’s Marque. The Queen’s Marque is a massive development that is private sector led but will have a significant amount of public use and public space incorporated. There were issues with the soil, for example. So a project that was supposed to cost just a few million changed and became exponentially higher because of contaminated soil.
When we’re going through that project of prepping the site for the developer to move in, we have to have a fair amount of diligence. We have to explain why the costs have increased, and we rely entirely on Jennifer and her team at Waterfront to give us that information, to explain it to us, and to ensure that we’re giving a reasonable answer. There’s bad news any time there’s cost overruns or problems with projects. Again, it’s up to us to explain it, so we have to have that relationship and understanding between the government and the Department of Business and, in that case, Waterfront Development so that we’re all on the same page, and we’re giving each other true reflections of the information, and we’re giving that in turn to the public.
Take NSBI with the Film and Television Production Incentive Fund, which is something that’s very close to you. While they administer it, clearly there have to be those discussions. When they’re looking at the program or potentially looking at changes to the policy or the program or at least suggestions, clearly they have to have the discussions with our department, with our team here. If I’m talking to Mike and Erika at Screen Nova Scotia, they have to be aware of those conversations as well, what I am committing to and what I am adding as a mandate for them to make alterations, for example, if that was the case.
There is a formal agreement and a formal relationship between the department and the Crown Corporations. Really, it just comes down to practical sense. By and large, they are project managers, and each of them has a number of aspects of managing requirements that we have. Tourism Nova Scotia is pegged to double tourism revenues by 2024. How we’re ushering that in, how we’re communicating about their progress and results, and how we’re judging their performance is all critical to how we ultimately fulfill our mandate that we have committed to the people of Nova Scotia, and they fulfill their mandate that they have committed to us.
MS. LEBLANC: I’m going to move on to tourism for a minute. Last Fall, the Auditor General called out Tourism Nova Scotia for failing to deliver its financial statements to the Minister of Business on time and in accordance with the Tourism Nova Scotia Act. Can you explain why this was the case and how the situation has been rectified so it doesn’t happen again?
MR. MACLELLAN: Last year, really the cause of that delay was based on a couple of things. All things told, it was the fact that we were transitioning to a new department and for the first time they were submitting financials to the province. The transition of what the mechanism would be, what the structure of that financial reporting would be, was extremely complicated.
Quite frankly, Tourism had to rely on our direction on some things, some of the critical tourism assets and who would maintain ownership. Would they stay with the government? Would they be assets of Tourism Nova Scotia? There was a lot of uncertainty there, and Tourism certainly endeavoured to get those financials completed on time. They didn’t, and those were the reasons why. Really, it was that transformation.
I think that was allowable in one year, but it couldn’t happen year over year. Tourism has rectified that, so their financials were fully completed on time. That was a one-shot deal, so to speak, because of the transition.
Again, they were waiting on us for direction and information, and now they have things put together properly, as they should. We certainly anticipate that that will happen this year and every year moving forward.
[6:30 p.m.]
MS. LEBLANC: I understand that Tourism Nova Scotia is currently reviewing Airbnb. What does the government hope to accomplish by performing that review? From your perspective, if you can speak to this yet, who are the sharpest critics of Airbnb?
MR. MACLELLAN: With respect to Airbnb, Tourism certainly looks at it as an opportunity. The reality is that it is acquiring a growing amount of the market. It’s here to stay. It’s increasing in popularity. People are getting increasingly comfortable with the options that Airbnb provides.
As a tourism entity and as a province, obviously we have to figure out a way to utilize that in our current system and quite frankly capitalize on it. If it’s one tool that we have to increase visitor traffic here, again, with the mandate of doubling tourism revenues as of 2024, then we will certainly do that.
With respect to critics, we’re not there yet in terms of open criticism. Certainly the industry, the players who have built this tourism ecosystem - TIANS and associated stakeholders - have questions. They have questions about what the mechanism is going to be, how it’s going to be applied to the tourism sector, and what sort of opportunities and challenges or disadvantages may be presented with the emergence of Airbnb. There are questions.
As an entity, Tourism Nova Scotia is doing an assessment of how Airbnb is going to impact our overall tourism environment. We are not there yet in terms of knowing exactly the impact and to what extent. It’s going to be an ongoing discussion, and I think that through the natural evolution of this technology and this option for people, it will answer a lot of questions.
But there’s no question about it, in practical terms, some traditional tourism operators will have a lot of consternation, concern, or fear about how it’s going to impact their businesses. I think that if there’s a way to tie in to the Airbnb concept and help sort of support them, that obviously is the optimal position for the province and for Tourism Nova Scotia.
MS. LEBLANC: When will the review be complete and made public?
MR. MACLELLAN: There isn’t a formal assessment being done. It’s a sort of moving, living, breathing conversation that we’re having at the department with the operators that exist. There are some operators across the province that are using Airbnb as a marketing platform now. Some are concerned about the impact, and others are using it to their advantage. It’s a discussion that’s going to be ongoing, and I think the conversations will continue via TIANS and other outlets for these operators to express their thoughts on how Airbnb is going to impact Nova Scotia as a whole.
MS. LEBLANC: I’m going to ask one last question, and then I’m going to turn my time over to my colleagues over here.
As I understand it, tourism numbers are often extrapolated based on nights in rooms sold. How has the rise in Airbnb affected how you calculate tourism numbers?
MR. MACLELLAN: We’re certainly still working to understand the impact. Part of that conversation is with Airbnb directly about what their revenue calculations are and how we kind of determine how it impacts Nova Scotia, the exit surveys from tourists to figure out sort of how they got here, where they went, what they spent, where they stayed, looking at things like vacancy rates and particular reasons to see kind of how it has all impacted and what role Airbnb has played and just generally looking at the whole sort of accommodations complement and looking at the performance year over year and certainly for last year trying to figure out what impact Airbnb has had. Again, it certainly is a moving target so I think it’ll start to take shape over the next couple of seasons.
Just as a final thought, we just completed a study with ACOA with respect to our accommodations, what the fit is for Nova Scotia, what the complement is, what’s going to be required moving forward and sort of what the focal points should be for the industry and sector to take advantage of visitors.
MADAM CHAIRMAN: We’re going to turn it over to the PC caucus. Before you start, Mr. Houston, I understand that this will be the end of Business. How many minutes would you need for closing remarks and your resolution?
MR. MACLELLAN: None - the resolution, that’s it.
MADAM CHAIRMAN: Okay, thank you. Mr. Houston.
MR. TIM HOUSTON: We’ll try to go through a couple of questions quickly so we can kind of wrap it up. If there’s 75,000 Nova Scotians who don’t have what we call adequate, or what the CRTC called adequate high-speed Internet, how many Nova Scotians would you say don’t have adequate cell service?
MR. MACLELLAN: Our sort of focal point at this point is the broadband conversation so we don’t have any of the specific statistics for you, honourable member, on that but we could double back with CRTC, I’m sure they would have it.
MR. HOUSTON: Does fixing the Internet aspect usually bring cellphone with it? Do they go hand in hand together, or no?
The next questions are going to be on films, so for anyone in the room.
MR. MACLELLAN: There will be, with the Middle Mile technology, depending on what’s applied, there could be some overlap with cellular service and broadband but not necessarily, and certainly not in all areas. There will be some but we can’t measure at this point exactly what the overlap would be for cell.
MR. HOUSTON: Okay. I don’t want to recreate the history on the film and we had lots of discussion about that whole decision, but I do hear from people in the industry who are just a little worried about how long it takes for files to be administered. So they’d make an application and there’s a long wait time before they hear back on it. Do we have an average time for how long it takes a file to be processed?
MR. MACLELLAN: At this point, from the date of the completed application received to when the offer is made is 18 days. That’s kind of the number now. One of the earlier conversations that I don’t think you were here for - correct me if I’m wrong - we discussed that there is a 0.5 per cent administrative fee and that is completely cost recoverable for the resources that we expend as NSBI to get these applications processed and filed because one of the criticisms of the old tax credit was that it took far too long. In an effort to accelerate the process at least, that’s where that 0.5 per cent administrative fee helps. So yes, the official answer is 18 days.
MR. HOUSTON: I’ve heard from people who have said they’re waiting two months, so they would be outliers, I guess?
MR. MACLELLAN: The 18 days is average so there are a lot that are considerably less, and there are some that are more. The completed application is the key piece, so it usually falls in very close to that 18-day range. Once the completed application - sometimes it may sit for a while where we’re still waiting for information and the communication may not take place, which obviously adds to the timeline, but generally speaking it’s 18 days - on either side of 18 days.
MR HOUSTON: Are there still some old tax credit applications that are going through the system?
MR. MACLELLAN: Yes, there are about 10 remaining that are still part of the old tax credit system and they’re just queued up and waiting to be disbursed.
MR. HOUSTON: I think at the time the tax credit was cancelled it was about $25 million a year. Now we’re back up to $23 million a year. Would you like to take this opportunity to admit your government was wrong? (Laughter)
The change was made to go to the Alberta model - in all seriousness. Just yesterday or two days ago Alberta changed their model and admitted a little bit that they needed to make some changes to it. Are there any changes contemplated to how we’re doing things here in Nova Scotia?
MR. MACLELLAN: The short answer is yes. We had an in-depth discussion earlier with a member from the NDP. Basically the way we’ve approached this - both from NSBI’s perspective and myself and the function as minister and with the department - NSBI is tasked to get this right. If there are any jurisdictions - and clearly the Alberta conversation, the Alberta investment, is duly noted and the NSBI folks think it’s an interesting model and they’re going to take a little bit of time to have a deeper dive, see what the value is, see where it’s applicable to Nova Scotia, and there may be some tweaks that we could look at as part of that conversation with Alberta and that’s sort of the NSBI and the official Department of Business role here, but probably more importantly, we’ve established a real positive relationship with Mike Volpe and Erika Beatty from Screen Nova Scotia and from my perspective it’s going to be their advice and feedback and their position on how we invest these monies moving forward.
[6:45 p.m.]
It’s not lost on anyone that the total investments are similar and, if there are ways that we can be more responsive, more innovative, and we can change the current structure that better accommodates the industry and, quite frankly, brings productions here and keeps productions here, we’re going to do that. So, I’ve made that personal assurance to Mike and Erika and by extension to Screen Nova Scotia that if there’s things we can do better within this existing envelope we’d be happy to do it.
So, there are a number of specific things that they’ve requested but, again, I think that looking at some of the changes Alberta made just makes sense for us and, if there’s something we could do moving forward, there wouldn’t be a reason why we wouldn’t consider those.
MR. HOUSTON: Thank you. Just probably my final question on this. Does the department have an estimate of how big the film industry in Nova Scotia is today? I know this was a big topic of discussion a year ago but how big does the department think the industry is in Nova Scotia today?
MR. MACLELLAN: NSBI doesn’t track the overall sort of value of the industry, itself. What we track is connected to what our investment has been. So, in the $22.8 million, the anticipated Nova Scotia spend associated with that would be about $80 million and that’s just for the Film and Television Production Incentive Fund, that’s not for some of the other film credits that we have, so with the Digital Animation Tax Credit and others. So, we don’t keep an official track of, you know, our estimate of what the industry is worth but we just track based on the relative nature of what we spend versus what’s associated with it.
MR. HOUSTON: That’s $80 million?
MR. MACLELLAN: Yes, $79 million and change, so, close to $80 million.
MR. HOUSTON: Thanks.
MADAM CHAIRMAN: Ms. Paon.
MS. ALANA PAON: Mr. Minister. I actually have one question or maybe a few questions related to the same topic regarding to tourism. Do we need to do a switcheroo or are you ready to go? Okay. Fantastic.
A local issue, so I guess I’ll start it with this. We were told in Cape Breton-Richmond that there had been some money earmarked in the tune of $2.2 million for a Richmond tourism strategy that was going to roll out, I think, over the course of a few years and I think that money had been earmarked perhaps a few years back, maybe even prior to the previous election and my predecessor and also your predecessor for your portfolios made a commitment prior to, I think, this election process for that $2.2 million again. As we all know, there was a bit of an issue on a municipal level as far as financing and what had happened from my understanding is that because the estimates had gone on for a few years the document was really, it was stale. So, the estimates basically in the document were probably going to end up being overages and the municipality was somewhat concerned that they were going to have to absorb some of the extra costs.
I guess my question first of all is, was there ever a $2.2 million in fact officially earmarked for the Richmond tourism strategy? It’s very unclear to many people in Richmond County on whether or not that is the case.
MR. MACLELLAN: From the recollection from the department, this would have been certainly during a transitional period vis-à-vis ERDT to Tourism. From the organizational knowledge there wasn’t $2 million that was budgeted. If my memory serves me correctly, it was $6 million, give or take total, so it was a three-way split.
The former Department of ERDT dedicated $100,000, I think it sounded like to do some preliminary work so I think each of the levels put $100,000 up and started that process and that’s as far as it got, so I can certainly say there’s no line item or budget coming out of the ERDT transformation over to the Department of Business and certainly there’s nothing on the books at this point.
MS. PAON: Just to be clear again, so there has never been a $2.2 million line item budgeted for the Richmond tourism strategy, that you know of?
MR. MACLELLAN: No, there’s certainly nothing official. Again, I wasn’t privy to any of the commitments that were made at that point. I do remember some of the public discussions in the Richmond area about where that $6 million would be applied and I remember the initial conversations about the $300,000 that was going to sort of do the prep work to get to that $6 million expenditure, but certainly officially and formally on the departmental books there’s nothing that was earmarked.
There was maybe an expectation that after that preliminary work was done there could be an application into Invest Nova Scotia for that provincial portion. Now that was the conversation at the time but obviously that didn’t materialize. To answer your question, there’s certainly nothing that was identified and sort of earmarked for that.
MS. PAON: May I ask the minister, since there has been so much work and money obviously invested by the municipality, as well as by the province, in order to have this study done - and it was a great study, I’ve taken a look at it. Unfortunately it has been taken down from the municipality website since then but I was able to snatch a copy before it disappeared.
I’m curious to know if the minister is open to working with Richmond County and Cape Breton-Richmond to be able to revisit the tourism strategy for which the province obviously has put a lot of money into, as well as the people of this area. We have an extraordinary resource at our doorstep, being at the mouth of the Bras d’Or Lakes - you know the area very well, being from Cape Breton yourself. I would just ask the minister if he is open to basically coming to the table and revisiting not just that original plan because I think that probably a portion of it or a few portions of it need to be revisited or revised, from what I understand from the Tourism Association there.
I’d like to know and I’m basically asking for a commitment on whether or not you’d be willing to come to the table and take a look at - not committing obviously funds right now - but revisiting the plan and opening up a conversation again about making certain that that area is not left behind, from a tourism perspective. As we all know, it’s very important that all of Cape Breton Island is taken into consideration as a tourism destination.
MR. MACLELLAN: Thank you and you made an egregious omission there, you didn’t mention about Richmond County that the biggest value is that it’s only an hour from Glace Bay. You missed that part.
The only thing I would say to the honourable member is that I wouldn’t - and I know you’re not asking me to do this - set an expectation. I think that if there’s a study then that’s the ground level anyway. So we’d be happy to take a look, I’d be happy to take a look at it.
I don’t know where and maybe you can answer this in your supplement but I don’t know if the municipality still has those funds earmarked. I know that the federal contribution was the former ECBC so I don’t know if that’s carried over to sort of ACOA Nova Scotia or not, so I don’t know. But in any event, to your point, it wouldn’t be about committing the funds again, it would be about this is the study, what can we do now and what can be applied immediately and sort of looked as by way of investment.
I know I would have no problem asking Tourism Nova Scotia to take a look at that and I would certainly take a review of it myself, just to sort of see where we’re at and I’d be happy to talk to you about it.
MS. PAON: I’m going to say that that is the end of my questions for this evening, Minister MacLellan. Thank you very much.
MADAM CHAIRMAN: Minister, you have about two minutes. You have under two minutes. Mr. Gordon Wilson.
MR. GORDON WILSON: Just quickly, one thing I don’t think you had a chance to touch on was the Tall Ships this summer. A tremendous event, thank you very much to the staff that put a lot of work into that happening. I know it was federal money also.
Any thoughts on an opportunity to re-host that in a couple of years?
MR. MACLELLAN: Certainly that was quite a successful event, no question about it. Jennifer was fully engaged in that at Waterfront Development and she scurried up here so I know she has something really enlightening to put in my ear as a closing comment.
It’s an international organization so we’ll continue to do that work and make sure we get lots of attractions and great events here. That’s it.
MADAM CHAIRMAN: Shall Resolution E2 stand?
The resolution stands.
Resolution E45 - Resolved that the business plans of Tourism Nova Scotia, the Nova Scotia Innovation Corporation (Innovacorp), Nova Scotia Business Incorporated, the Trade Centre Limited and the Waterfront Development Corporation Limited be approved.
MADAM CHAIRMAN: Shall Resolution E45 carry?
The resolution is carried.
Thank you Minister MacLellan, thank you members for your participation.
[The subcommittee adjourned at 6:59 p.m.]
