The NWT Development Corp. has weathered years of red ink and business failures to create jobs for Northerners
Jack Danylchuk
Northern News Services
Yellowknife (May 28/01) - What is a job?
That $50 million question landed in Fred Koe's lap last fall as the legislature's standing committee on accountability and oversight sought answers about the cost of the NWT Development Corp. and its job-creation efforts.
"The issue of what is a job ... is something that has been outstanding now for 10 years," replied Koe, an accountant with broad experience in government as an MLA and assistant deputy minister.
The fourth president to guide the corporation since its birth in 1990, Koe explained his struggle to find an answer that would appear obvious to anyone with access to the financial statements of its heavily-subsidized subsidiaries.
"It is a much broader issue than just defining a job ... we have committees, guidelines, standards, we are measuring subsidiaries on a monthly basis, but it is not all perfect yet," Koe said.
Social policy or investment?
After a decade of losses that have consumed $50 million in subsidies paid to 18 subsidiaries scattered across the territory, the question raised issues that go to the heart of the corporation's mandate and its future.
Is it a venture capital company or a workfare program? Should the government end the subsidies and let the subsidiaries sink in puddles of red ink? That option was considered when the corporation took over a handful of government make-work projects and called them investments.
"We had a number of operations that were consuming money - stores, meat and fish plants, the canvas factory - and the thinking was that maybe we should close them," recalled Gordon Wray, the former economic development minister who set up the corporation.
"That would have meant putting people on welfare, which in the long run is far more expensive."
Wray said "there had been too much political interference" in the way government allocated money to the job-creation projects. "We had just been throwing money at them. I wanted to bring a business ethic to them."
The development corporation would be "a stand-alone entity at arms length from government. It wasn't set up to buy into no-win situations. The hope was that, eventually, these would be stand-alone businesses that would pay their own way."
The corporation would also act as the government's investment arm. It would give the GNWT "a stake and a seat at the board table" in large resource developments.
"But that wasn't followed," Wray said.
Business losses mounted
Instead. the corporation focused on small businesses that demanded annual cash infusions to stay afloat in small, remote communities.
In 1993, the corporation paid $260,000 for a foundering sawmill in Fort Resolution. Before it was shut down six years later, the mill piled up $2 million in losses.
There were other disasters: A $2 million abattoir in Hay River closed less than two years after it opened; a factory in Lutsel K'e with sewing machines but no business plan; stores and service stations that made work, but no money.
It added up to a bottom line awash in red ink.
In 1995 and 1996 the corporation paid out $2.8 million in salaries and wages through the subsidiaries. The companies ran up combined losses in excess of $20 million and absorbed almost $10 million in government subsidies.
It was more of the same in 1997: An $11.2 million loss on operations and a $12.8 million government subsidy. In 1998, the operating loss and government subsidy dipped to $6.2 million. The wage package rose to $3.2 million in 1997, but fell back in 1998 to $2.9 million.
In 1999, the most recent year for which an annual report is available, the operating loss fell to $7.4 million and government contributions dropped to $5.4 million.
Koe comes on board
The corporation was going through some major changes when Koe moved into the corner office on the seventh floor of the NorthwestTel Tower in downtown Yellowknife. Corporate assets were divvied up with Nunavut. Head office staff was cut from 12 to eight and the GNWT's annual contribution was frozen at $2.7 million.
The legislature will see the corporation's next annual report in June. It will not show a profit, even though the corporation received cash from Nunavut for the transfer of assets to the new territory.
But for the first time, the report will tell the public how many jobs their tax dollars finance.
So how many jobs are there? Koe won't preempt his report.
According to Glenn Soloy, the man Koe succeeded as president, the subsidiaries had as many as 1,300 full- and part-time jobs before division of the assets with Nunavut.
Many of the jobs are seasonal, part-time, or piecework; sculptors and print-makers, artisans sewing moccasins and beadwork at home; trappers, hunters and fishers supplying furs and game to fashion houses and food processing plants.
Telephone calls by News/North and the corporation's own Web site indicate that its remaining seven subsidiaries have 34 full-time employees, six on part-time and provide income for another 140 piece-workers, hunters, artisans and artists.
According to guidelines set out for the corporation, subsidies were to be limited to $10,000 a year per job. Simple math says the corporation is at least $5,000 over the limit, but Koe offered no apology.
"Part of our mandate is to provide jobs and there is a cost to doing that in smaller remote communities. It's an acceptable cost of doing business. It would be a major accomplishment to break even."
After two years spent getting the corporation back on track, Koe said it is again open for business.
"We're expanding; we're promoting that we have money, and we're getting significant applications.
"We've made an investment in oil and gas, we're looking at reindeer; we have some new things coming up," Koe said, and allowed himself a small smile of satisfaction.
"We have the support of the auditor general; we're not viewed as a negative, as a drain on the government. Things are looking up."
