Bas-Caraquet shipyard silent on use of millions from government

The New Brunswick government is pinning its hopes for economic revival in the Caraquet area on a corporation that says it doesn't have to reveal how it spends taxpayer dollars despite being set up by two municipal governments.

The New Brunswick Naval Centre, a shipyard in the village of Bas-Caraquet, recently received $4 million from the Gallant government.

The money will help pay for upgrades that will allow the yard to work on ships for Quebec-based Groupe Ocan, which is getting an additional $3.8 million from the province in payroll rebates.

Ocan says it will invest $29 million itself and create 77 jobs over five years.

The provincial governmentsays it has checked out the Naval Centre and is confident the expense will yield jobs and economic growth.

But the centre itself is under no obligation to report to the public about how it operates, according to Michel Beaudry, the company's chief executive officer.

"It's a private corporation," he says.

While the centre is a private, non-profit entity, it was incorporated by two municipalities, the Town of Caraquet and the adjacent Village of Bas-Caraquet.

The mayor and municipal managers of the two communities sit on the board of directors along with other prominent community members.

And the centre itself is putting $4 million of its own money into upgrades for the Groupe Ocan work.

But the two mayors were reluctant to speak to CBC News about how their municipalities fund the centre and how the centre spends the money it receives.

Caraquet Mayor Kevin Hach did not respond to an interview request. An official at the town hall in Caraquet referred CBC's request to Beaudry.

And Bas-Caraquet Mayor Agns Doiron brushed off the questions.

"I'm not going to discuss it," she says.

"The citizens are aware of it. Everyone has confidence in the system and we're doing it in a very democratic way."

Beaudry says the transparency rules that apply to municipalities do not apply to the centre.

"We are audited regularly on everything we do. Everything's in order," he says.

The Gallant government wouldn't comment on the lack of transparency, other than to say in a written statement that the naval centre is "self-governed by the board."

Beaudry, a management consultant from Quebec, is also defending the provincial subsidies handed out over the last two weeks.

He says it's the only way to compete in the shipyard market.

"The question is as follows," he says.

"Does New Brunswick want to be competitive with shipbuilding in Newfoundland, in Prince Edward Island, in Quebec? Every time a boat is built in Newfoundland or in Quebec, it's subsidized."

The Naval Centre has two yards. One is manufacturing a new type of 13.7-metre-long [45-foot-long] fishing boat. The second will be used by Groupe Ocan, a Quebec shipping company with 750 employees. The centre also stores fishermen's boats during the winter.

Jacques Dugas, a Caraquet businessman who was involved in the early push to revive the shipyard, says Ocan will be the facility's anchor customer. The company has about 400 barges, he says.

Dugas says he was the one who made the initial call to Ocan about having their ships fixed in Caraquet.

In 2013, he saw Ocan's CEO on television saying that the company had 20 years worth of work it needed done on its boats, with no yard and no employees to do it. The company had recently failed in an attempt to buy a closed shipyard in Quebec's Gasp region.

Dugas contacted him. "I said, 'You have a problem and we have a solution.'

"That's the beauty of Groupe Ocan," he adds. "They don't need the work. They bring the work."

But Groupe Ocan which will pay yard rental costs and other fees to the naval centre said it did need government money.

"They asked us if we could provide the equivalent of what they get in Quebec," Beaudry says, repeating for emphasis, "the equivalent."

We don't see anything else that's so natural for this area.-Jacques Dugas, Caraquet businessman

The ProgressiveConservative government of David Alward first announced the agreement with Ocan last August, just days before the start of the provincial election campaign. At the time, the provincial governmentsaid it would "consider" investing up to $13 million in the project.

This year's provincial spending of $7.8 million isn't the first time taxpayer dollars have been provided. In 2010, the federal government's Atlantic Canada Opportunities Agency gave $1.3 million after the newly-created Naval Centre corporation bought the shipyard.

The provincial governmentgave the centre a $300,000 loan guarantee at the same time.

"It was essential to rebuild and upgrade the yards" to meet standards, Beaudry says.

"We don't see anything else that's so natural for this area," he says.Dugas says a KPMG study in 2006 suggested the dormant shipyard, once privately owned, represented the best opportunity for reviving the economy in the Caraquet area.

"I still think it's a fantastic idea."

Even so, it was difficult to convince a private company to take over the yard and start from scratch, which was why the two municipalities decided to get involved.

Dugas says despite the centre not having any obligation to report publicly on its books, the province has done its due diligence, including being allowed to look at Groupe Ocan's books.

In the Gallant government's written statement, spokesperson Bruce MacFarlane says the province "takes very seriously its responsibility" to conduct due diligence on recipients of taxpayer subsidies to ensure the public gets a return on the investment.