Cisco news good for Liberals

Grant works out to $111,764 per job in first phase

After Premier Kathleen Wynne announced a $220-million jobs subsidy for Cisco, the company’s president of development and sales took a few moments to wax eloquent about Ontario.

“The president of Poland or the governor of North Carolina — they are visiting us every day,” Cisco’s Robert Lloyd said Friday in Toronto. “We look at those investments or opportunities to partner with a very clear filter.”

What the company looks for, he said, are “rich capabilities in the university system,” predictable government, competitive tax rates, loyal employees.

“We get all that in Ontario,” said Lloyd.

Well, if it’s so great to do business in this province, why does the multinational corporation need $220 million from us?

Because also among the questions Cisco asks itself when deciding where to do business is, “Do we see the support of government?”

The company saw that support in spades Friday, with a 10-year agreement that will see the provincial government give Cisco as much as $220 million if it meets requirements to create specific numbers of “high-value” jobs, most of them at the company’s Kanata-based research and development facility.

The deal, which goes into effect in August of next year, could see Cisco’s Ottawa workforce balloon from a mere 380 today to more than 3,300 by 2023.

In order to receive the money, the company has to meet certain criteria, according to Mike Ansley, Cisco’s VP of sales for Canada, who spoke with reporters at the company’s Kanata facilities after watching the announcement video-broadcast from Toronto.

“There are performance metrics — not just the numbers of jobs, but the salaries associated with that job — milestones before there are any payouts,” said Ansley.

If those measures aren’t met, the province doesn’t hand over any money. The scheme is divided into two major parts. During the first phase, the company is to receive $190 million for creating 1,700 in the first six years of the agreement. And if it creates an additional 2,000 over the rest of the decade, Cisco will see the remaining $30 million promised this week. (Cisco estimates that about 80 per cent of the new jobs will be based in Kanata.)

Add those potential new hires to the existing 1,300 Cisco workers in Ontario and the company says it could have a provincewide workforce of 5,000 when all is said and done.

At first blush, the deal seems quite generous. The first phase is particularly eyebrow-raising: 1,700 jobs for a $190 million grant, for example, comes out to a whopping $111,764 subsidy for each new job. Should the company create an additional 2,000 jobs — and receive the additional $30 million — the per-job subsidy would be a mere $59,459.

Of course, there are other ways to look at this. Cisco says it will “invest” $4 billion in Ontario over the next decade, including up to $2.2 billion on salaries. In that context, Ontario’s $220 million subsidy amounts to about 10 per cent of total spent on salaries. Is that too much to keep socalled good jobs in Ontario?

Hard to say. As we don’t have the details of the agreement, we don’t know exactly what a “high-value” job pays (other than it will be postsecondary school grads), or whether there are any sorts of rules for how long that job has to exist. The investment may well be worth it if it means thousands of people steadily employed for a decade or more contributing to the tax base and the economy in general.

Perhaps the more germane question is whether Cisco would have upped and gone without this cash incentive. That was certainly the suggestion of Cisco executives Friday who spoke of having obligations to get the best value for their shareholders who don’t care two bits about where workers are located.

“Ontario was truly competing (with) India, with China, with Texas and with San Jose for these jobs,” said Ansley. “It’s all about a business case.”

And this deal, said Ansley, “helped us cross the line on that business case.”

Energy Minister and local MPP Bob Chiarelli — who’s had better weeks — was blunt: “If we didn’t make that investment, Cisco would not be here. We’re competing with other jurisdictions who put money on the table, put resources on the table, in order to attract. In a sense it’s a bidding war and Ontario won the bidding war.”

So it’s too early to tell whether this was a wise investment of taxpayer dollars or an unnecessary incentive to a multinational that posted a $10-billion profit in the last fiscal year. But that’s the least of this government’s worries. After seeing two manufacturing companies shut down in as many months — putting more than 1,200 people out of work — the Liberals are thrilled to be talking job creation, even if they have to pay millions to help create them.

Certainly people in Ottawa will be happy to see this investment in local high-tech jobs, but politically, this sole announcement isn’t likely to change the perception that our rather broke government keeps spending our money.

Energy rates are set rise 42 per cent over the next five years. There’s a recommendation afoot to raise gas taxes, and the HST, to pay for transit infrastructure. Boondoggles and scandals abound: This week alone revealed massively bloated salaries at Ontario Power Generation (leading to the immediate firing of a number of executives) and the fact that ousted Ornge CEO Chris Mazza collected $9.3 million over six years at the province’s publicly funded air ambulance service.

The government is being sued by Trillium Power to the tune of $500 million. And, of course, there’s the $1-billion cost of cancelling and moving the gas plants that we’re on the hook for.

Actually, when you consider all this waste, the $220 million the Liberals are committing for a couple of thousand jobs starts to sound like a pretty good deal.