09/24/2012 01:40 EDT | Updated 11/24/2012 05:12 EST

Observers say revamped bid to save paper mill could hurt Nova Scotia government

HALIFAX - The sudden death and resurrection on the weekend of a multimillion-dollar deal aimed at saving jobs at the idle NewPage Port Hawkesbury paper mill could hurt the credibility of Nova Scotia's NDP government, political observers and opposition critics say.

Political science professor Doug Brown said Monday the back-and-forth has probably sown a degree of doubt among voters assessing the government's competency.

"I don't believe the weekend's events show an incompetent government, but I can understand how it can look bad for the government," he said in an interview from St. Francis Xavier University in Antigonish.

"It makes it tougher for the government to defend themselves because there are more openings for criticism."

On Friday, a plan by Vancouver's Pacific West Commercial Corp. to buy the paper mill for $33 million was declared dead, but it was suddenly revived Saturday when a new agreement emerged, complete with a revamped tax arrangement.

On Monday evening, the small municipal government where the mill is located also approved a deal to lower the property tax rate for the mill.

A spokesman for the municipality of Richmond County wasn't available to provide details on the extent of the tax concession. However, Marc Dube, a spokesman for Pacific West Commercial, said that the new deal has sliced the company's annual municipal taxes from $2.5 million to about $1.4 million.

Brown said there's a political price to be paid when a government appears to be engaged in last-minute changes or brinkmanship. However, he said it would be unrealistic to think the government could simply walk away from the mill.

"No politician in Nova Scotia can afford to be so sanguine or cold-blooded," he said. "You can't be a politician in Nova Scotia and be neutral as to where jobs occur."

Tom Urbaniak, a political science professor at Cape Breton University, said the government faces few political risks in the short term because Premier Darrell Dexter is likely to win praise from Cape Bretoners for working so hard to save the mill — a key cog in the island's economy.

However, Urbaniak said the opposition parties could reap a political windfall if the complex details of the latest deal prove to be flawed.

"This issue can be exploited by the opposition parties ... and presented as an example of the province not driving a hard deal, of corporate welfare when other essential public services are suffering," he said. "The opposition parties do have fertile soil here."

As well, Urbaniak said the government is vulnerable when it comes to the fact that the deal appears to have no firm job guarantees.

"That is the risk to the government over time," he said. "The more of these sorts of details might emerge and some might take the form of an Achilles heel."

Meanwhile, Nova Scotia's opposition parties are not letting up in their criticism of the deal, which requires regulatory approval.

Both the Liberals and Progressive Conservatives are betting public sentiment outside Cape Breton will turn against the bailout package — pegged at $124.5 million.

Conservative Leader Jamie Baillie said the new deal was overly sweetened to persuade Pacific West Commercial to reopen the mill. More importantly, it provides no job guarantees, he said.

"The NDP is gaining a reputation for throwing money at big corporations with little regard for the risk to taxpayer," he said in an interview.

"These guys are very bad at this kind of corporate deal-making. They give away the store every time and have very little to show for it in return."

Baillie said the province should instead be investing in schools, lowering taxes and working to reduce electricity rates. He said it would be better to help "jobs be created, one, two, three at a time in a competitive modern economy, versus the massive cost of this bailout."

Dexter has defended the altered aid package, saying it is necessary to save 300 direct jobs and hundreds of other forestry and service jobs in southern Cape Breton.

Natural Resources Minister Charlie Parker said Monday that the deal is an improvement over the original plan because it calls for more tax dollars to be shunted the government's way.

"(Pacific West Commercial) offered some concessions that's going to make it better for Nova Scotia taxpayers," he said in an interview. "In effect, we're going to get millions of dollars in new taxes. Every penny that we've invested in the mill ... all that will be recovered over the next 12 years or so."

On Saturday, the government said a previously repayable loan of $40 million to Pacific West Commercial would be forgiven if Nova Scotia Power paid the same amount in taxes as a result of energy purchases under a proposed new tariff.

Under the deal, Pacific West Commercial will also be able to incorporate other mills and related assets into the mill, saving taxes in other provinces. Those tax savings will now be split with Nova Scotia, with 32 per cent coming as direct cash payments and 18 per cent put back into the mill's productivity in provincially approved investments.

Liberal Leader Stephen McNeil said Dexter has a dismal record when it comes to signing big deals with big business.

Nova Scotians haven't forgotten that Dexter offered $50 million to Resolute Forest Products to keep the Bowater Mersey mill open in Liverpool, only to see it close in June after the province spent $23.75 million buying forestry land, he said.

"What we have here is the government writing large cheques to companies without any guarantees that Nova Scotia workers will be protected," he said in an interview.

"The government should not be taking a deep sigh of relief. ... We'll see this resurface again."

In 2010, the province announced it would spend $60 million to support plans by a subsidiary of Daewoo Shipbuilding and Marine Engineering to build a plant capable of manufacturing wind turbine components — creating up to 500 jobs in three years.

Last month, the Liberals pointed out the plant in Trenton, N.S., has only 66 workers on staff.