On Tuesday, February 26, 2008, Nova Scotia conquered Wall Street. That morning a chartered plane left Halifax International for New York City. On board were eight passengers---premier Rodney MacDonald, chief of staff Bob Chisholm, communications director Wade Keller and minister of economic development Angus MacIsaac. From Nova Scotia Business Inc., the province's economic development agency, were vice president Lisa Bugden and public affairs adviser Sarah Levy. Representing the Chamber of Commerce was president Valerie Payn. Photographer Robert MacDonald was on board as well, to record that afternoon's triumph.
Wall Street executives had been softened up by NSBI's president, Stephen Lund, who had earlier arrived with underlings Robert Daigle, J.P. Robicheau, Joseph Alviani and Erik Nobbe, Communications Nova Scotia rep Shawn Hirtle and another PR person from the premier's office, Joe Gillis.
As well, at their own expense, about two dozen Nova Scotian "industry leaders," calling themselves "Team Nova Scotia," had joined the NYC trip. NSBI won't release the names of those businesspeople, but included in the group was Joe Ramia of Rank Inc. Today, Ramia is known as the developer of what he calls "Nova Centre"---a convention centre, hotel and office tower complex proposed for downtown Halifax.
That afternoon in 2008, the entire Nova Scotia entourage gathered on the floor of the New York Stock Exchange. At 4pm Eastern Time, 10 of the group mounted the podium, and Rodney MacDonald ceremoniously pressed the button that rang the exchange's four bells, announcing the close of trading. Cheers erupted in the room---"130 million people watched Nova Scotia representatives ring closing bell on the NYSE," announced NSBI, claiming an audience bigger than the Super Bowl's---and the group made its way to a reception at 1 Wall Street, hosted by Bob Kelly, a Nova Scotian who made good on Wall Street, becoming CEO of Bank of New York Mellon and who is now chancellor of Saint Mary's University. Nova Scotia was triumphant, the toast of the Big Apple.
But Nova Scotia's moment in the spotlight was short-lived; the next morning the cast of Guiding Light pushed the button for the opening bell of the stock exchange, and capitalism marched on. Well, for awhile anyway; the financial collapse lay months ahead.
At the very moment---literally the same minute, 5pm Atlantic Time---that Rodney MacDonald was ringing the bell on Wall Street, back at Halifax City Hall regional council was voting to approve The Downtown Halifax Vision that had come out of the fourth public forum held to shape HRM By Design, the set of downtown planning guidelines beginning to come to fruition.
The desire for a distinct plan for downtown had been expressed for many years, and explicitly so in the documents leading to the creation of the city's regional plan. In March, 2006, council awarded a contract to a Toronto planning consulting firm called Office For Urbanism, which was charged with initiating the process and proposing various bylaws and regulations based on feedback acquired through the public forums, and to work with a new committee called the Urban Design Task Force.
"We came up with the name HRM By Design," says Jennifer Keesmaat, a partner with Office For Urbanism, now called Dialog. "First, we were to look at the urban centre, then specifically downtown." The point of HRM By Design was to streamline the development process, in part by setting specific allowable heights for new buildings; this would avoid what some called an interminable debate over what was or was not allowed under rules adopted in the 1970s meant to preserve harbour views from Citadel Hill.
HRM By Design also hoped to create pedestrian-friendly neighbourhoods with interesting streetscapes and with protection for heritage buildings. Conceptual maps show the Barrington Street historic district with relatively low height limits, bookmarked on the south by Cornwallis Park and on the north by a new neighbourhood, with a park surrounded by tall buildings, where the Cogswell Interchange now sits. The Cogswell land was important because the height limits were very high---in the 30- to 40-storey range.
"In the context of that work we really advocated," explains Keesmaat, "we made one of our 10 Big Moves the revitalization of that land---taking out the highway infrastructure and integrating the Cogswell Interchange as a place in the city---extending the pedestrian realm and putting in new buildings. And in the context of HRM By Design, of what that might look like."
The motion council approved on February 26, 2008, had three parts. First, the 10 Big Moves suggested at the forum---a set of "aspirations" for downtown that would later be refined into the bylaws and administrative rules that make up HRM By Design---were approved in principle. Second, council asked the province to streamline the development application process for downtown. Third, council directed staff to start the process that would lead to the removal of the Cogswell Interchange.
"Repeatedly throughout project consultations the community has been nearly unanimous in requesting that the Cogswell Interchange be removed and a grid of city blocks and new development parcels be restored," explains the staff report for the meeting, written by Andy Filmore, the city staffer overseeing HRM By Design. "It is therefore recommended that as part of the Downtown Vision, Council initiate planning and design work related to the redevelopment of the Cogswell Interchange lands consistent with, and concurrent with, HRM By Design. This approach will capitalize on the momentum of the Downtown Vision, and will enable good decision-making on the future use of those lands."
Council approved the motion on a voice vote, including an allocation of $100,000 for "planning and design work" necessary to remove the Cogswell Interchange.
But a curious interplay of events would unfold in the following months, bringing the province's Wall Street ambitions and the city's desire to pull down the Cogswell Interchange head-to-head. At the middle of that conflict sat the proposal for a new convention centre in downtown Halifax.
Over the past decade or so, the American financial industry had invented ways to take boring old traditional home loans and sell them to investors. Loans were packaged together and sold as mortgage bonds, which were in turn chopped apart, repackaged and resold repeatedly on the market. Fraud and deceit were introduced at every stage---from salespeople who lied to homebuyers and misrepresented customers' ability to pay on mortgage documents, to rating agencies that failed to honestly rate the loans for fear of losing banks as customers, to banks selling investors loans that the banks didn't even own and misrepresenting the ones they did own, to bond traders using robo-signers who forged hundreds of titles daily. "It's pretty close to 100 percent," a Florida attorney told journalist Matt Taibbi, who was investigating criminality in the finance industry; "fraud is the norm," said another.
But so long as the market was in upswing, nobody much cared. Pension fund managers, municipal bureaucrats, unions and everyday people dumped hundreds of billions and then trillions of dollars into the market, which fuelled explosive speculation around the globe. Tiny Iceland put its claws into the banking machine and boomed. In Ireland, a real-estate boom churning through easy credit resulted in that once-poor country being dubbed The Celtic Tiger. A thousand kilometres of condos were built on Spain's Mediterranean coast. Greece financed construction of its 2008 Olympics venues. And Nova Scotia wanted some of the action.
By 2006, the wealthiest Americans were depositing their unprecedented profits in banks and hedge funds headquartered in the island nations of the Atlantic, where Americans were sheltered from US taxes. Nova Scotia, in turn, offered big tax rebates to some of those firms to put their back offices in Halifax.
Pursuing the financial industry made sense in 2006 and still makes sense today, says NSBI's Stephen Lund. "We need to raise the bar for everybody. We need to take university grads that are working in Tim Hortons and Wendy's and get them better- paying jobs, and have everybody move up the food chain. The reason I'm saying financial services is, if we had new jobs that are below a certain level, then we're not really growing the economy. We have to grow the top line of the economy---we really do. We've got to create more tax revenues, we've got to create more high-paying jobs, and we've got to be able to move everybody up the chain."
This is, in a nutshell, the trickle-down theory of economics: Get enough high-income people, and the rest of the economy benefits. Whether this actually ever happens in the real world is an open question.
A series of NSBI press releases in November, 2006, trumpeted the successes: Butterfield Bank, in Bermuda, was promised $9.1 million in payroll rebates in return for 400 "full- and part-time jobs" coming to Halifax over seven years. Olympia Capital, a hedge fund administrator also based in Bermuda, would establish a local office with 150 workers over five years, in return for $1.5 million.
One of the big scores was Citco Fund Services, a Cayman Island-based firm that became a financial industry giant by developing, as The Hedge Fund Journal explains, "the 'hedge fund model' of using leverage and shorting securities which was prohibited under the US Securities Act." NSBI promised Citco $7.35 million in return for 350 jobs over seven years.
At the same time, Lund was publicly underscoring the need for more high-end office space downtown to accommodate more financial firms.
"International companies like to go to Class A space, they like to be clustered in the same area in a downtown, with a city where young people are living and working downtown," said Lund last week. "Citco could not find two consecutive floors of Class A office space downtown today."
Lund acknowledges that Ramia's Nova Centre proposal is attractive because it includes a financial tower with Class A office space. "I'm a proponent of the convention centre," he says. "I'm excited for more development downtown. I support that project, but I'd also like to see some of the other projects go up, too. I don't care who does it; I just want to see it done."
The pursuit of the financial industry went into high drive on July 31, 2007, when Lund and Halifax mayor Peter Kelly hosted a luncheon in City Hall's Halifax Hall, with guest speaker Robert Gavin, a Citco manager. The entire Halifax city council was invited, and present were most of the Greater Halifax Partnership and NSBI.
"The room was really crowded," recalls Halifax councillor Linda Mosher.
Halifax could be the "'next Dublin,' referencing the Irish capital's emergence as an international financial servers centre and one of the strongest economies in Europe," wrote Lund in the invitation to the luncheon. "Mr. Gavin's experience in leading centres around the world has helped shape [Nova Scotia's] strategy to grow the sector here and to maximize opportunities for businesses in many different industry sectors."
Dublin, Lund later explained, went from being the "basket case of Europe to the number-one-performing city," implying that Halifax could do the same. Thanks in part to the luncheon, politicians from across the spectrum accepted that courting financial service firms was a worthy pursuit.
From Lund's perspective, the junket to Wall Street the next February made sense. The point of the trip, explains NSBI's Sarah Levy, was to meet with executives with firms that might be convinced to move operations to Halifax. "We also signed a new agreement with Citco Technology Management, bringing its second operation to Nova Scotia."
As Rodney MacDonald was flying to New York, two orders in council were released by his staff. Citco would be provided with more tax incentives: The first gave Citco $500,000, immediately, simply for moving to Halifax, and another $975,000 for "training personnel"; the second promised Citco up to $7 million in payroll rebates, should 325 new positions be created over the next six years.
Ramia says he wasn't involved specifically with the Citco discussion on the New York trip. "We got the opportunity to meet some financial people," says Ramia. "Bob Kelly held a reception and invited a lot of financial people, and we got introduced to them. It opened the door to talk to people."
Asked about Ramia's presence on the trip, Lund expresses surprise. "Was Joe on that trip? I don't remember. There were a lot of people there."
It's clear that NSBI very much wants a financial centre to be built in downtown Halifax, and Joe Ramia wants to build one. Ramia's Argyle Developments was negotiating as early as November, 2006, to buy a large contiguous block of property downtown from both the Charles Keating estate, which owned the block holding the former Chronicle-Herald and much of the block up the hill, and from the owners of the Midtown Tavern, which was situated on the rest of the second block. Ramia bought the Keating property in March, 2007, but a potential Midtown sale got bogged down.
Ramia insists he didn't envision the convention centre complex until 2008, and that in 2006 he was thinking of building a mixed-use development on the two blocks, with mostly residential buildings. Certainly the economics of office space construction in downtown Halifax aren't favourable---over a million square feet of new office space has been approved by the city, but developers find the finances don't work out, so none of it has been constructed. The problem, in a nutshell, is that unlike for condos, potential lease income from office space doesn't cover construction costs.
One way to solve that problem would be to subsidize the construction of an office tower, as the Nova Centre proposes: anchor the building with a publicly funded $159- million convention centre and allow the private developer to exceed the downtown height limits for the tower above, and the numbers begin to make sense. That would certainly explain why Ramia can now move forward while other developments languish. And the converse is true as well; asked if he would proceed with the office tower without the convention centre, Ramia says such a project wouldn't be viable.
A joint convention centre/office tower would satisfy the desires of executives with offices in the World Trade and Convention Centre building on Argyle Street. On the seventh floor, NSBI president Lund thought an office tower would kickstart Halifax into becoming an "international financial centre"; three floors below, Trade Centre Limited president Scott Ferguson had long been saying that a new, expanded convention centre was essential if Halifax was to attract large conventions. Why not bring the two together?
On April 2, 2008, just four weeks after the Nova Scotia delegation returned from Wall Street, the city and province issued what's known as an Expression of Interest for the convention centre---basically, a call for developers to offer up suggestions for how a convention centre might be built. An evaluation team was put together---three from the city, including HRM By Design manager Andy Filmore, three from the province, and Scott Ferguson from Trade Centre Limited. The team would judge the convention centre proposals based on criteria spelled out in the EOI, and the developers who passed this hurdle would be asked to submit more detailed proposals via a Request for Proposals.
The timeline in the EOI was extremely short. Developers had just six weeks---until May 16---to draw up and submit proposals. The evaluation team would then judge the proposals the week of May 18 and issue the RFP on June 2.
"The financial tower only came after the EOI," says Ramia. "When they put out the Expression of Interest back in 2008, we visited five or six cities and got an idea of how they're doing convention centres, and that's when we put the whole package, as a mixed-use together."
But despite the tight timeline, and despite research trips, Ramia's Rank Inc. would submit his Nova Centre proposal in response to the EOI, including a "fully developed site plan and architectural renderings showing in precise terms how a mixed-use development with a convention centre as key element can be developed on the site," according to a secret report later written for city council by Filmore. The Coast obtained the report through a Freedom of Information Act request.
But, Ramia's Nova Centre proposal faced a couple of obstacles.
The first was a property issue. The EOI required that potential developers give a "description of the proposed site and the current ownership as a minimum as well as details of how site ownership relate to the proponent team or the nature of the partnership agreement." But the former Keating property alone wouldn't work for Ramia's Nova Centre proposal, because while HRM By Design height restrictions could be amended for the lower block, Citadel Hill viewplane protections that trump HRM By Design apply to the portion of the upper block that Ramia owned.
For the Nova Centre proposal to work, Ramia would need to also acquire the Midtown Tavern property, which falls outside of the most stringent viewplane protections; it was therefore the Midtown site where Ramia planned to put the financial tower. The Midtown property, however, was embroiled in a family dispute. Midtown owner Doug Grant, in his 80s, was in failing health; some of his children wanted to keep the tavern going, while others wanted to sell it. The matter ended up in court, and accountant Paul Goodman was appointed Grant's financial guardian.
According to court documents filed by Goodman, Arlene Naugler, Doug Grant's daughter, said the family had been approached by "the Ramia Group" about a potential sale of the Midtown tavern and the land it sat on, for $1.5 million, as early as November, 2006. But her brothers Eric and Robert Grant rejected that offer, preferring instead what they considered a superior offer from dentist Gordon Rudolph, for less money but which would have left the brothers running the tavern in a new building built on the site.
In an affidavit filed on May 9, 2008---just one week before the convention centre EOI submission deadline---Goodman detailed the competing offers and asked the court to give him the authority to sell the tavern and land to Ramia's Argyle Developments Limited, because Goodman thought the Ramia offer better provided for Doug Grant's needs.
"I understand that there is urgency to the acceptance of an offer as Halifax Regional Municipality approval is required and Argyle Developments Limited needs to be able to file its application within the next few days after the hearing of this matter," wrote Goodman in the affidavit.
Six days later, on May 15, 2008, one day before the EOI deadline, Judge Suzanne Hood ordered the sale of the Midtown property to Ramia. Presumably, the court order for the sale satisfied the ownership requirement of the EOI, even though the sale wasn't registered with the property office until June 27, 2008.
The second obstacle for Ramia's Nova Centre proposal was that, despite the short timeline of the EOI, five other proposals were submitted. Four were rejected as inadequate, but one, from the Hardman Group, had submitted a proposal that also met the terms of the EOI.
The EOI said the convention centre had to be in the downtown core, which it defined as bound by Cornwallis Street on the north, Brunswick Street on the west, and a line following Spring Garden Road, Barrington Street and Inglis Street extended to the harbour on the south. The Hardman proposal was well within that area---it called for tearing down the Cogswell Interchange, recreating a city-street grid, building a convention centre and hotel and selling off the rest of the land for private development.
Hardman had collected an impressive team of a dozen firms to work on the proposal---it included Lydon Lynch Architects; real estate consultants Colliers International, which had some years before conducted a study on how to tear down the Cogswell; the Hilton Hotels Corporation for work on the hotel; Toronto transportation consultant BA Group, which worked up plans for new traffic patterns; and, notably, Jennifer Keesmaat, the consultant who had initiated HRM By Design.
"I spent three years working on HRM By Design," says Keesmaat. "It was a huge part of my life. So when the Hardman Group called me up and said this would be a good idea, would I be interested in being a part of their proposal, I said, 'Absolutely!' At that point we were done our work on HRM By Design, and my feeling was that [Hardman's] proposal was a brilliant way of responding to a whole variety of city-building objectives, and a brilliant way of providing that impetus for the redevelopment of that interchange. And I think the risk is that the interchange sits there for an extended period of time, and the city keeps throwing money at maintaining it, when really it ought to be removed."
Keesmaat was so excited about the idea that she volunteered her time to work on the Hardman proposal, flying to Halifax on her own dime to give a presentation to the EOI evaluation team.
But Keesmaat wasn't the only one excited about the Hardman proposal. In fact, when the evaluation team compared the Rank and Hardman proposals, Hardman's came up on top. "The Hardman proposal has easier access to the existing Pedway system, potentially greater opportunity for future expansion, somewhat better approach to public consultation and slightly better quality of submission and innovation resulting in a marginally higher score than the Rank proposal," wrote Filmore in the secret report to council.
But Hardman's proposal did not include an office tower.
"We thought that was the fairest way to do it," says Bill Hardman of the Hardman Group. "We put the convention centre and hotel on city land, and we weren't competing against office buildings---we heard from every big office landlord in town, Crombie and the rest, worried that we were going to include an office building and we said, 'No, we're not building any office space.' It would've opened up more land for office buildings, but that would be true competition, not subsidized competition."
The secret report to council reveals that the EOI evaluation team did in fact evaluate the proposals, and Hardman scored higher. But no announcement of that scoring was made, and the RFP wasn't issued in June, as the EOI called for. Summer turned to fall, and December came along, with still no public action on the EOI, and no public explanation for the delay.
The EOI explicitly stated that "any attempt on the part of the [developer]...to contact any of the following persons with respect to this EOI or the Project may lead to disqualification." The no-contact list that followed included "any member of the Provincial Government or HRM Council and any member of Provincial or HRM staff." But over this period Ramia met with Halifax mayor Peter Kelly three times, Kelly admitted to The Coast in October.
Kelly said his meetings with Ramia were not improper because they did not discuss the convention centre. "One meeting was about the National Portrait Gallery, because he is on the board of a group that was looking to bring that to Halifax," he said. The other two meetings involved other potential Halifax developments that Ramia was involved with but, citing confidentiality concerns, Kelly wouldn't say what those developments were. Ramia says he has had no knowledge of the Hardman proposal, beyond what has been in the press.
The Coast has asked for the dates of the Kelly/Ramia meetings as recorded on City Hall entry logs and in the mayoral guest book and calendar. Nancy Dempsey, the city's Freedom of Information officer, first promised to provide the information November 19, then again by this past Monday, but as of press time Wednesday the information still had not been provided.
Neither Kelly nor Ramia recall the exact dates of their meetings. But a councillor who claims knowledge of the meetings says one occurred on December 8, 2008.
The next day, December 9, during a secret session of its weekly meeting, council made a profound reversal in policy. Contradicting the public vote of February 26, which called for the quick removal of the Cogswell Interchange, council voted instead to not make the Cogswell land available for the Hardman proposal. The discussion had been agendized cryptically as "downtown development opportunities," but no details of that discussion were made public, and council did not repeat its secret vote in public, as is usually the case after council returns from a closed session. Minutes from the meeting make no mention of the Cogswell Interchange or any convention centre issues, and no councillor has publicly discussed the issue until contacted for this article.
In the secret report to council, Filmore explained that the Cogswell lands should serve as a "land bank" for downtown. Last week, he elaborated: "Yes, the Cogswell Interchange is an underused piece of suburban highway infrastructure on the edge of a dense downtown. However, there's so much densification to be done in the central downtown before we open up other areas for development that it simply doesn't make sense" to tear down the interchange.
"The Cogswell Interchange lands are north of the central downtown," continued Filmore, "and if developed, a few things would happen, I believe, and council ultimately felt so, too. You would create a competing centre of gravity north of the existing downtown that would not help the newspapered windows on Barrington Street, and would not help to fill in the vacant lots. You would dilute the rather modest pace of development downtown. We'd have vacant lands in the central downtown for a longer period of time, and businesses struggling for a longer period time. So, HRM By Design and the Urban Design Task Force said, 'Think of the Cogswell Interchange as a land bank---it's there waiting for us.'"
One problem with that explanation is that the Urban Design Task Force never voted to use the Cogswell land as a land bank. According to the task force's minutes, Cogswell was discussed just twice, once on March 5, 2008, when the task force was told of the council resolution to tear down the Cogswell and initiate the planning and design work for doing so, and again on September 10, 2008, when Filmore told the group that the planning and design work would be delayed "about a month." To the present, according to the minutes, the task force has never again discussed Cogswell, and work on the planning and design has not commenced.
Moreover, two task force members--- Bernard Smith of the Spring Garden Road Area Merchants Association and Paul MacKinnon of the Downtown Halifax Business Commission---are taken aback by the notion of using Cogswell as a "land bank."
"DHBC has long been an advocate of doing something with Cogswell," writes MacKinnon via email, saying he speaks for Smith as well. "It's fair to say that we were disappointed that the Hardman proposal didn't get more (public) discussion, simply because it would have been an opportunity to talk about what in the world to do with Cogswell. For over a decade it has been an identified priority any time there are public discussions or visioning sessions, etc. about downtown. Sixteen acres of developable land, where height would be universally acceptable (even Heritage Trust has not spoken against this), is a huge asset. But nothing has ever really been done.
"The idea," continues MacKinnon, "of it being a land bank for future development only, after the rest of downtown is filled in, was discussed (as a theory) at the Urban Design Task Force, but the idea that that would be its only purpose is news to me, as a committee member. I don't recall that being a consensus. In fact, it makes no sense, because there are only limited places where significant height can be achieved outside of Cogswell. The idea is that if someone wanted to do a 27-storey building, Cogswell is where it would go. Most of the opportunity sites elsewhere downtown have lower heights."
Filmore flatly rejects the notion that a political agenda was playing out behind the scenes, or that the Cogswell land was being withheld from Hardman so that Ramia's proposal could move forward.
"I understand how anyone could look at the trail, all the breadcrumbs, all the decisions that had been made, the key turning points in this whole process, and really you could make almost any story out of this that you want to, and that's everyone's prerogative to do," says Filmore. "But I have to say, it bums me out, because the decisions that were made to get this thing to the part of downtown where I believe it belongs were done with the best of intent, and the purest of intentions that have to do with saving taxpayer dollars, reducing greenhouse gas emissions by having to build very expensive and resource-intensive new infrastructure outside of the downtown, that would help to create a centre of gravity, of activity, a venue for cultural events, streetscape improvements on eight streets in the core of the downtown---that's why this building is going ahead there. There's no sinister agenda at work here."
Councillor Jackie Barkhouse begs to differ. "To me it looked like Rank had already made it to first base," says Barkhouse, reading from her notes of the secret December 9, 2008 meeting when council voted not to make the Cogswell land available to Hardman. "I felt like it was really positioned for Rank to stand out on it; it looked like it was slanted towards favouring Ramia. There seemed to be some bias about how it was going to go." She was also concerned at the time that "it was moving too quickly without public consultation."
"Absolutely the fix was in," says another councillor. "I got the sense that Peter [Kelly] had already told the province we were pulling the Cogswell lands, and this was a done deal." This councillor asks for anonymity because he needs Kelly's cooperation on another project.
Council does not record votes in its secret meetings, but a majority went along with the decision to not make the Cogswell land available to Hardman, and to "inform the province they should conclude the [convention centre] EOI as they see fit." Ramia's convention centre proposal was the only one left standing.
Two months later, on February 10, 2009, council voted to approve a $435,000 maintenance program for the Cogswell Interchange.
In April, 2009, language was inserted into the HRM By Design's bylaws specific to the Rank site. If a convention centre was built as part of the project, it allowed Ramia to construct a 14-storey building on the Midtown site and a 18-storey building on the Chronicle-Herald site; otherwise the limits would have been six- and eight-storeys, respectively. Council approved those changes in June.
Through 2008, Joe Ramia had a fortunate run of luck with his Nova Centre proposal. A judge ordered the sale of the Midtown property to Ramia the day before he had to demonstrate ownership. The EOI evaluation team scored the competing Hardman proposal for a convention centre on the Cogswell Interchange higher, but failed to notify anyone about the scoring and didn't move on to the next step in the process. The concept of using the Cogswell property as a land bank for downtown was adopted by bureaucrats without first being tested in the realm of public opinion. And, contradicting its public vote of just 10 months before, Halifax council secretly voted to deny Hardman the use of the Cogswell land for a convention centre, leaving Ramia with the sole viable convention centre proposal.
The global economy fared less well. The American housing bubble popped, and one bank after another found it couldn't make good on the instruments sold to investors. The global financial industry has been in perpetual crisis ever since, with governments bailing out banks at the cost of many trillions of dollars, with recession put at bay only with the help of enormous stimulus programs now being ended in the name of "austerity"---despite the warnings from Keynesian economists such as Nobel Prize winner Paul Krugman that this will inevitably throw the economy back into recession.
This week, Dublin's banks are in freefall, and Ireland is talking of lowering its minimum wage, slashing social spending and raising income and property taxes on individuals. (But, heeding warnings from Google, Inc. and the business establishment, taxes on corporations won't be raised; trickle-down works in reverse, too---the suffering is limited to the lower classes.)
Is Lund now embarrassed with his 2007 claim that Halifax could be "the next Dublin?" "Absolutely not," he answers. "I'd love to be Dublin where they were a few years ago, and learn from what they did right, and also learn from what they did wrong. There's no question that Ireland was the gold standard, but they let things get totally out of control, and I'm hoping that we take a good look at that and realize what they did right and what they did wrong."
It is now becoming clear that the mortgage industry in the US is facing a potentially larger crisis than the housing collapse of 2008; the fraud and criminality related to the sale of mortgage securities is rocking the very foundation of the economy, as investors like pension funds are suing the banks that sold bogus instruments. Relatedly, last weekend the Wall Street Journal revealed that the largest insider trading investigation in history is in the works, and "could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation."
Lund says that the collapse of 2008, and the ongoing crises, is just a blip in the long march of history.
"The economy's always going to go up and down," he says. "We're always going to face opportunities and challenges. The financial industry is not going away." NSBI will continue to pursue financial services, he says.
But the success of past recruitment is nowhere near as rosy as was previously announced. NSBI had claimed that Citco would create up to 675 new jobs; to date, it has created 76, for which it has been awarded $944,212 in payroll rebates. Butterfield Bank was to create up to 400 jobs; to date it has 50 people working locally, at a provincial cost of $664,722. Olympia Capital, which had promised 150 jobs, actually created 26 local positions, for which it was awarded $202,500, but then the company closed its Halifax office completely, and moved the local operation to Ontario. For the three financial firms NSBI had targeted with payroll rebates, just 10 percent of the lofty job numbers celebrated in press releases have actually materialized.
The biggest loss involved Citco, the firm whose executive, Robert Gavin, had in 2007 wooed the establishment in Halifax Hall with the prospect of Halifax becoming an "international financial centre," and which had signed deals suggesting 675 high-paying jobs would come to town. In June of this year, however, the Charlotte, North Carolina Chamber of Commerce announced that Citco would be bringing 200 new jobs to Charlotte.
"Citco will serve as an administrator for hedge funds from its new office in the Charlotte Plaza office tower," reports the Charlotte Business Observer. "The international firm with about 4,000 employees picked the Queen City over competing bids from the Syracuse and Rochester areas in New York and the cities of Halifax and Montreal in Canada."
"This was a tough one for us because we were being hounded," Citco's Robert Gavin told the Business Observer. "But Charlotte had its act together." Gavin is the very same Citco exec who feasted in Halifax Hall back in 2007.
Lund maintains that Halifax was not competing with Charlotte. "I knew about that deal before it happened," he says. "We were not in competition."
But Charlotte Chamber vice-president Kati Hynes flatly contradicts that assertion. "Citco told us that Halifax was competing against us," she tells The Coast. "I don't know the particulars of the bid, but they were definitely in the running."
Did Citco's Gavin play Halifax for chumps? Did he get local elites worked up about the prospect of becoming an international financial centre, merely to get the best possible incentive package offered for Citco to locate here, which he then shopped around to get better offers from other cities?
"I don't discuss anything with reporters, I'm sorry," he said last week when reached on his cellphone in New York City. "Without my corporate counsellor on the line, I can't talk to you."
Then he hung up.
Tim Bousquet is news editor at The Coast.
- Chris Foster (www.chrisfoster.ca)