Premier finds good fortune with Portage pea plant

Hey there, time traveller!
This article was published 18/01/2017 (3209 days ago), so information in it may no longer be current.

In government, it’s good to be lucky. And that’s just what Premier Brian Pallister was on Wednesday.

Pallister convened a news conference in the grand rotunda of the Manitoba Legislative Building — easily one of the most beautiful institutional rooms anywhere in the country — to confirm that France-based Roquette would invest $400 million in a pea-processing plant to be built near Portage la Prairie. Roquette is a global giant in food processing, with more than 8,000 employees in over 100 countries.

It’s a good economic news story for a premier who could desperately use some good news as he stares down an extremely difficult spring budget.

It’s not the first time the Pallister government has benefitted from good economic luck. Back in November 2016, we learned that Canadian Kraft Paper Industries would purchase the former Tolko paper mill in The Pas, saving 300 jobs. The prospect of closing the mill hung around the new government’s neck like a millstone, opening it up to all sorts of criticism that it was tone deaf to northern issues.

In the end, the new owners of the mill only wanted a respite from pension obligations to complete the deal. Pallister crowed about how his government was able to save the paper mill without millions of dollars in taxpayer-supported subsidies, a nasty habit that he said afflicted the former NDP government.

The fact the paper mill deal closed without any demand or expectation of government handouts was more lucky than good. Still, Pallister deserves a dash of good luck to go with all the bad luck he’s going to suffer at the hands of our perpetually anemic economy.

In this most recent case, it seemed that Pallister hit paydirt once again. Here was a $400-million investment coming our way with only modest government support.

The news release issued by the province did not contain any mention of taxpayer support. In a post-announcement news conference, Agriculture Minister Ralph Eichler was asked about what, if any, taxpayer support was necessary to get the French food processor here. He said there was only a bit of support to help acquire the land, but offered no other specifics.

In fact, it turns out there is a small but notable contribution of government money. Additional inquiries with the premier’s office revealed that there is $6.8 million in Tax Increment Financing (TIF) from the province and the RM of Portage la Prairie, and another $2.5 million from a federal-provincial fund that supports development in the agricultural industries.

Why these details were left out is a bit hard to determine. It’s basic information and, in many respects, it is a reasonable investment from taxpayers to secure a nine-figure investment by a successful multi-national company that intends to employ 150 people with an annual payroll of $9 million.

Three possible explanations arise about the lack of disclosure. First, this is a government that desperately wants to show it conducts its business differently than the previous government. This was a key takeaway from the Canadian Kraft Paper deal: Manitoba’s new government can prime the economy without seeding every deal with taxpayer largesse. It mattered little that the company involved did not ever ask for financial assistance. It was a best-possible-scenario deal and everyone should be happy about it.

The second reason the Pallister government may have withheld some of the details of its financial support — “investment attraction package” in government parlance — is that big industrial investments like this have a questionable economic impact.

The construction of the plant itself will pay major dividends in terms of increased government tax revenues and employment. However, those are one-off economic benefits that will not dig the province out of its deficit hole.

In the long term, this is a very big plant with a very modest number of employees, typical of large industrial operations in Manitoba. Companies like this are ultimately attracted by the promise of extremely cheap electricity, which was most definitely the case with Roquette. However, the very nature of highly automated or mechanized industrial processing means that the companies involved do not need a lot of people to keep the machines humming.

It was this very fact that caused Manitoba Hydro some years ago to recommend that the electricity rates charged to the largest industrial consumers be increased significantly to account for the fact that they did not make an economic contribution that was commensurate with the amount of power they consumed. Hydro’s big industrial customers fought back and ultimately the crown utility backed down.

Finally, industry sources confirmed that the investment attraction package helped Manitoba “outbid” Saskatchewan for the opportunity to host the Roquette plant. The fact that Manitoba, the most recent signatory to the much-ballyhooed New West Partnership trade pact, used government money to outbid Saskatchewan, its NWP ally, is an awkward story. One that the premier likely wished to avoid having to discuss.

None of those facts make this a bad deal for Manitoba. In keeping with the premier’s comments Wednesday, this is a net positive for the provincial economy, even though it does not represent a seismic bump in the province’s GDP, something Pallister desperately needs to help ease his fiscal pain.

It’s good to be lucky, and we should all wish the premier all the luck in the world as he attempts to stabilize the province’s finances. However, it’s never a good idea to massage the truth in a bid to appear more lucky than you really are. That will lead to some very unlucky outcomes.

dan.lett@freepress.mb.ca