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City s $100M fund yet to land big fish one year in, but board believes OCIF investments will pay off

City s $100M fund yet to land  big fish  one year in, but board believes OCIF investments will pay off
Business
But while grant recipients have promised to create more than 1,500 jobs and training spaces in desirable sectors like digital technology and health sciences, the Opportunity Calgary Investment Fund has yet to reel in a truly big fish, Mayor Naheed Nenshi acknowledged recently.

“I might have thought that by now we would have made one or two blockbuster investments … these (we have made) have been relatively smaller ones,” Nenshi said in an interview. “I’m not disappointed, just a little bit surprised.”

Nenshi, who sits on the independent board that weighs every grant application, said he is pleased with the choices made so far and believes every one will result in something “transformative” for the city. But he said none of them on their own will make a significant dent into Calgary’s unemployment rate or its sky-high downtown office vacancy rate.

“But as I’ve been saying to a lot of folks, we’re not going to fill the downtown a million square feet at a time. We’re going to fill it 30 or 50 or 60,000 square feet at a time,” Nenshi said. “OCIF is also about going out and having a tool in our toolbox for when we try to land those bigger investments … and we continue to work on those.”

The fund, which was created by city council in the spring of 2018 and administered by Calgary Economic Development, is open to applicants who propose projects that will create jobs, help diversify the economy and expand the property tax assessment base. The recipients of the $23 million handed out so far have been mostly private companies, with the exception of one non-profit and the University of Calgary, and the size of the individual grants has varied from $300,000 to $8.5 million.

But recipients don’t get the money upfront. They must deliver on their promises and meet job targets over time before any cheques are actually issued. Since most of the recipients have proposed projects that ramp up over time (U of C’s Life Sciences Innovation Hub, for example, has set a 20-year time frame for its job creation targets), only about $6.5 million in total has been disbursed so far.

The fund seeks projects operating in key industries and “emerging sectors” that will not only bring direct economic benefit to Calgary but contribute to broader growth for other businesses in Calgary. Several of the successful applicants so far have been incubator-type programs aimed at fostering other companies while others have been training programs aimed at boosting the city’s tech talent.

Some, like Parkland Fuels and Finger Food Advanced Technology Group, are companies that have pledged to consolidate jobs from other locations in Calgary or to expand into Calgary from out of province. Others, like ATTAbotics and MobSquad, are locally based startups that have been deemed to be promising.

But after a year of operation, the program has its critics.

Maxwell Bracey, co-founder and CEO of Calgary-based startup Sure Fuel Inc., said some people in the local tech community are frustrated that some of the money has gone to help out-of-town companies, like B.C.-based Finger Food, set up shop here. Bracey said while he believes the fund is a good idea in principle, it should be used to support Calgary companies only.

“If you want to support tech in this community, don’t try to attract tech, try to grow tech,” Bracey said.

There are also those who believe the city simply shouldn’t be in the business of picking winners and losers. Richard Truscott, vice-president, B.C. and Alberta, of the Canadian Federation of Independent Business, said he has heard from many small business owners who feel it’s not fair for the city to use municipal money to play favourites.

Truscott, who called the fund a “classic case of corporate welfare,” added he’s not sure the city is even getting a reasonable payoff. He said if you divide the amount of money pledged so far by the number of jobs promised by recipients, the program appears to be funding economic activity at the rate of $15,000 per job.

“It’s pretty pricey,” Truscott said. “At the end of the day, it’s questionable whether we’re getting good bang for our buck or whether it would have made more sense just to leave more money in the pockets of business owners through some kind of tax relief.”

Mary Moran, president and CEO of Calgary Economic Development and CEO of the program, said calculating the value on solely a per-job basis misses the point. In addition to job creation, the successful applicants will be taking up more than half a million square feet of real estate in the city’s downtown and elsewhere. And perhaps most importantly, proponents of the fund believe these companies will serve as attractors for skilled professionals, other outside companies and private investors.

“We have to look at what the leverage dollars are,” Moran said. “Take, for example, (recipient) ATTAbotics. We invested in it, and now they’ve just done a $25-million raise of venture capital money, which is a big deal for Calgary.”

While the fund , including the aggregate amount of money committed thus far and the expected return on investment for the fund, it does not make public the individual milestone targets each company has pledged to reach or disclose whether those targets are being reached. CED said those figures are confidential and proprietary company information.

Irfhan Rawji, CEO of MobSquad, acknowledged in an interview his company is taking longer than expected to meet its targets. The company has hired approximately 30 employees, mainly software engineers, since it was named the first recipient just over a year ago. At the time of that announcement , Rawji had said he expected to be able to create up to 150 jobs within 18 to 24 months.

“I think the market opportunity is probably even larger than we originally thought, but it might take three or even four years to fill our office and hit the higher ends of those targets,” Rawji said.

Rawji, who also received support from other levels of government as well as venture capital funding for his startup, said Calgary needs a funding program if it’s serious about diversifying its economy.

“There are so many jurisdictions across North America that have incentive companies to try to get technology companies to locate there,” he said. “I live in Calgary, and that’s part of why we located here, but there were other jurisdictions that would have been happy to have us. OCIF is not just about the money, it’s also about a community making the commitment and saying, ‘We’re serious about this, and we’re serious about putting money behind it.’”

Being tasked with making economic investments using public money is a weighty responsibility, said fund board chair Barry Munro. While he said the board takes that responsibility seriously and has made every effort to develop a rigorous selection process, he acknowledged there is no way to guarantee that every investment the fund makes will be a success. However, he said that given the current state of Calgary’s economy, the status quo is not an option.

“I can’t tell you that what we are doing is the perfect solution. All I can tell you is that if I just go and stand on the sidelines, that won’t be helpful,” Munro said. “I know that the current state doesn’t feel tenable. We have to do something … and I’m excited about all of the choices we’ve made.”
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