Amid media and opposition calls for openness, Irving Shipbuilding Inc., released new details about its $260-million loan from the province Tuesday.
Irving had initially blocked the release of several details around the shipbuilding aid, but on Tuesday the province directed the company to release more information.
Irving’s loan will be forgiven at a rate of 8.5 per cent of the salaries it pays out during the life of the shipbuilding program.
So for every $100 Irving pays out in salary to local workers, it will be forgiven $8.50 from the loan.
At first glance, that means Irving would have to pay out over $3 billion in salaries by the time the loan matures in 2041 to earn full forgiveness.
However, there is also 4.5 per cent interest being charged on the loan. The interest is also forgivable if Irving hits enough hiring targets.
Interest will begin accruing and compounding when Irving starts drawing on the loan, said company spokeswoman Mary Keith.
That has not happened yet, but it should soon. The province expects the whole $260 million to be spent over the next three years, as Irving gears up to cut steel on the next generation of Canadian warships in 2015.
As an added bonus for Irving, the company can earn forgiveness on five per cent of its loan just for spending the money it has borrowed.
Under the contract, Irving’s capital costs count toward its industrial benefit targets.
Irving said Tuesday it will earn forgiveness for about five per cent of the loan based on capital costs, which is equal to the incremental provincial tax benefits derived from Irving’s capital spending.
Critics have questioned whether Irving could have paid for the shipyard upgrades with its own money. The province says the loan is a good investment compared to the projected $145 million the shipbuilding contract will bring in added tax revenue every year.
Progressive Conservative Leader Jamie Baillie and Liberal Leader Stephen McNeil said the government needs to reveal the full details of the loan and how it came to be.
While Nova Scotia’s loan covers about 85 per cent of Irving’s shipyard upgrade costs, Seaspan Marine, which won the smaller $8-billion federal shipbuilding contract, is funding the $200-million upgrade of its Vancouver shipyard entirely with its own money.
“What was the basis that government used to make that loan?” said McNeil.
“Why is it that the government of Nova Scotia had to lay out a $260-million grant when the government of British Columbia didn’t have to do that?”
Premier Darrell Dexter and Irving have said the support was vital to winning the $25-billion shipbuilding contract.
The province offered Irving the $260 million in support, whether it won either the $8-billion or $25-billion contract, in July of 2011.
In an interview Tuesday, Jeff Larson, executive director of investment and trade with the Department of Economic and Rural Development and Tourism, said at the time the province was eager to maximize Irving’s chances.
“You look at Irving Shipbuilding and this opportunity it had in Nova Scotia to really be a game changer for 30 years. And you have the risk of not knowing whether this was going to be something that Nova Scotia and the company will be successful in,” said Larson.
“When you calculate the overwhelming benefits for the amount of the investment that would be made, a decision was made that this was something that the province should support.”
In order to earn full loan repayment, Irving must hit yearly employment targets, which vary over the course of the program. The province projects Irving will create 4,100 direct shipbuilding jobs at its peak.
Original Article
Source: thechronicleherald.ca
Author: PAUL McLEOD
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