I first heard the argument decades ago, when I was a business reporter. I was asking why one of Newfoundland’s most successful businessmen, a guy who was able to finance almost any project he wanted with ease, had instead taken a whole bunch of federal money to build a building he was going to build anyway.
The businessman’s rationale?
“If the government gives you a cookie, you take it.”
You can understand why the government wanted to be involved: their “investment” would be pretty well protected, because it was infrastructure for a strong and existing business, and the government money would let them argue that they’d “created” jobs, when really, they were piggybacking on something that was happening anyway.
You could understand why the businessman wanted it: free money, with no strings attached other than the ones his business had already agreed to anyway.
Win-win — except for the taxpayers, who were going to wind up paying, when all they were really buying was business cred for the government.
That’s the problem with deals between two already-interested parties — and that brings us to the Newfoundland government, currently trying to woo a business called Rentech to build a wood-pellet plant in Botwood.
Rentech is in the midst of converting two Ontario facilities — one at Wawa, the other at Atikokan — into wood pelletization plants, with support from the Ontario government. (No one seems to be saying what the support entails, other than rights to wood fibre in the area.)
But pellets are a bit of a change; Rentech was originally looking at a larger labour force, especially at Wawa, to convert wood fibre into biodegradable jet fuel. Now, the two plants are set to produce more than 490,000 tons of wood pellets, with a combined total of something like 65 employees.
And that’s not the only change. When Rentech went into the Ontario pellet business, it was a joint venture with Graanul Invest, one of the largest wood pellet producers in the world. The two have since gone their separate ways, following Graanul’s review of the project.
Here’s how it’s described in Rentech’s financial filings: “After the joint venture (JV) with Graanul Invest (Graanul) was formed in May of this year, Graanul reviewed the engineering and project plans. Rentech and Graanul then jointly decided that … the resources of the JV and Graanul would be focused on other projects under development. Since Graanul would not be providing (engineering, procurement and construction) services, the Wawa and Atikokan projects would not be financed and owned by the JV. Rentech will continue to own the projects outright and be responsible for construction.”
Now, Rentech’s coming here as well, looking for additional wood fibre and, according to the CBC, a fair amount of money to build yet another wood pellet plant.
In other words, a whole plate of cookies.
Problem is, just like the businessman I mentioned earlier, both Rentech and the provincial government want the project to go ahead — Rentech, because it is trying to corner a part of the industrial wood pellet market and, face it, Botwood is cheaper and closer to Rentech’s current customers in Britain. The provincial government?
Well, it wants to be seen as doing something in the depressed forestry industry in central Newfoundland — and it’s not spending its own money anyway.
That’s why the cookie business ends up being such a fiscal sham. The provincial government is not looking for an investment — their return is not fiscal, it’s political, and the money ends up being secondary.
Sometimes, it all works in spite of itself.
Other times, we do things like trade cookies for cucumbers. Or build buildings that would have been built anyway.
Russell Wangersky is The Telegram’s news editor. He can be reached by email at firstname.lastname@example.org.