McGuinty’s economic legacy in Ottawa

Peter
Peter Kovessy
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Dalton McGuinty was slinging sausages and pancakes at The Westin Hotel the first time I interviewed him in December 2004.

(Photo by Joël Côté-Cright)

I was a CFRA radio intern, and he was a celebrity server at the annual Christmas Cheer breakfast. Then-CFRA reporter Brian Lilley asked the premier to record a holiday greeting for supporters of the charitable event. Mr. McGuinty agreed, adding he also had some important news to share.

With our microphones recording, the premier said in a serious tone that his government - a little more than one year old at the time - would soon be introducing important legislation: a bill mandating the Ottawa Senators to play the Toronto Maple Leafs every Saturday night.

Recording the premier of Ontario cracking a joke on tape - or minidisc, as was the style at the time - was a priceless takeaway for a journalism student.

The few times I’ve scrummed with the premier since, I’ve asked him about transit vehicle procurement, corporate subsidies and other topics. Unlike most politicians I’ve spoken to, Mr. McGuinty - who announced this week he would step down as leader - consistently provided coherent answers of substance.

That meant I never went back to the office empty-handed after speaking to Mr. McGuinty, which is also something many Ottawa businesspeople can say.

 

ECONOMIC DEVELOPMENT

Cisco Systems Inc. invited the media to its Innovation Drive lab last month to show off the 96 new employees hired by the San Jose-based networking gear maker within the last year.

The headcount growth on Innovation Drive was fuelled in part by a $25 million government grant that committed Cisco to hiring 300 new employees - most of whom are expected to be in Ottawa - in the province and investing hundreds of millions of dollars in its Ontario operations.

Elsewhere in Kanata, Avaya received $5 million in provincial tax dollars as part of its plan to spend $170 million and preserve 353 “highly skilled jobs” in Ontario. Ciena promised to spend $900 million and hire 350 new employees across the province after receiving $25 million from Ontario taxpayers.

There’s also Huawei - recently labelled a security risk by a U.S. intelligence committee - which pocketed $6.5 million in provincial tax dollars as part of its plan to spend $67 million locally and create 167 new jobs.

Far from one-off grants, business subsidies appeared to be part of the premier’s economic development vision.

“(Those jurisdictions) that are most successful at competing and winning are those that get the workers involved, get the private sector involved and get the government involved,” he said during an Ottawa campaign stop during last year’s election.

While some dismiss such grants as costly corporate welfare, others say subsidizing multinational corporations is a necessity.

“This is a significant commitment to a large multinational corporation that has a choice where it is going to conduct its R&D,” said Kim Devooght, an Ottawa-based Cisco Canada vice-president, last year.

To Mr. McGuinty, the government should be an active and direct investor in key business sectors. He also believed entire industries could be created through public policy.

 

GREEN ENERGY

The Liberal’s Green Energy Act created a modern day gold rush as companies raced to cash in on the generous premiums offered to producers of power generated from renewable sources.

Along with increasing the supply of “clean” electricity in Ontario - power that the province now has to occasionally pay other jurisdictions to take off its hands - the goal was to kick-off a nascent renewable energy sector.

Ottawa lacks a sizable industrial base and understandably didn’t get any of the manufacturing jobs that were to be created in the province through made-in-Ontario rules. However, the city did see a surge in companies specializing in the financing and installation of renewable power generation products, particularly solar panels.

Local companies such as Ottawa Solar Powered, SolPowered Energy Corp. and Clearly Solar profited from the program, and say they were prepared for the rates paid to producers to eventually be lowered. That was always part of the plan, as government officials believed a more mature industry would achieve economies of scale and be less dependent on subsidies.

While these larger players say their outlook remains bright in spite of the lower prices introduced earlier this year, they are also hearing of local companies that have lost millions of dollars and folded after the government suspended the processing of applications for small-scale installations amid a review of the program.

Mr. McGuinty’s energy policies may have transferred significant sums of money from hydro customers to the renewable power sector in Ottawa and other cities, but the reliance on favourable government policies creates questions about its long-term sustainability.

 

MAJOR INFRASTRUCTURE

Both the provincial and the federal government provided $50 million towards construction of the new Ottawa Convention Centre, a critical addition to the city’s tourism landscape. Likewise, both senior levels of government are committing $600 million towards construction of Ottawa’s $2.1 billion light-rail project.

However, some have questioned whether Mr. McGuinty - who is also the MPP for Ottawa South - gave his hometown its fair share. In 2007, the provincial government offered to pay 65 per cent, or $11.5 billion, of a massive proposed transit expansion in the Greater Toronto Area. In Waterloo Region, the provincial government is paying for more than a third of that municipality’s rail project, according to media reports.

Along with shouldering Ottawa taxpayers with a proportionately higher transit bill, Mr. McGuinty is also accused of inflating the cost of constructing the light-rail line by refusing to relax domestic content requirements in provincially funded transit vehicle procurement.

Such protectionist policies generally create jobs at home. However, changing the rules would have saved the city money, according to Siemens, which had lobbied the province on the issue and had convinced Infrastructure Minister Bob Chiarelli to consider the idea.

Economic growth in Ottawa-Gatineau is forecast to trail all other major Canadian metropolitan areas in the coming years. This makes the high-paying tech jobs in Kanata, economic spinoffs from light-rail construction and the additional conference business stemming from the new convention centre all the more valuable.

In the short term, Mr. McGuinty’s significant local spending will soften the blow of the federal government’s austerity in Ottawa. However, this stimulus comes at a cost, as Mr. McGuinty prepares to leave a $14.4 billion deficit and a downgraded debt rating to his successor.

This city - like the rest of the province - will long be paying the price for Mr. McGuinty’s unsustainable generosity.

Organizations: Cisco, Ottawa Senators, Toronto Maple Leafs DEVELOPMENTCisco Systems Avaya Green Energy SolPowered Energy Ottawa Convention Centre

Geographic location: Ottawa, Ontario, Kanata U.S. Ottawa South Greater Toronto Area Waterloo Region Gatineau

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  • Watchdog
    October 17, 2012 - 09:10

    HUH? I read your article and say whopping amounts of tax dollars given to companies for promises to hire people, or develope business in Ontario. Would you please give us more factual data in what we as taxpayers spent vs how much we got back! Did these businesses do what they said they would do? Neither of these companies are in need of my tax dollars especially Huawei! Enough of the insanity... good bye Dalton, you cost me too much money.